The analysis of Donald Trump's tariff policies is closer to shooting at a moving goal. After saying confidently at the beginning of the weekend, there was “”nothing“Mexico, Canada and China can do to prevent definitions, and Mexico and Canada were able to negotiate on Monday.
This is a rare time for pity economists. Sufficiently enough to predict the effects of the US President's policies but more difficult when many people are surprised at one time, including Trump himself.
We do not know the following: If the American definitions will happen; Whether it is temporary or permanent; Whether it is a bargaining or penalty slice. We do not know what other countries will impose. All of these things are very important, even before you enter into cases of deep uncertainty that fall into the models of economists.
Economists should not feel the individual for poor treatment in particular. Announcing the customs tariff at the weekend, the US President humiliated the Treasury Secretary, who was promoting a more moderate version of definitions Just two days ago. Scott Bessin also had no idea.
By Sunday, Trump justified a tariff based on the guilt of the three countries in United States addiction to fentanel, dirty border securityand trade deficit And Regional ambitions on Canadian soil. Of course, his appreciation for A Canadian commercial deficit of $ 200 billion It was almost Four times very high. Trump is also ignorant.
In a world where no one knows anything with certainty, here is an attempt to give you some context. One thing that I will not live is the small price that Trump extracted to pull the threat of immediate tariff. Mexico seems to have promised to send forces to its northern borders, where they are already stationed and Canada promised to create Caesar Ventanil.
What is the size of the proposed definitions?
After Trump's ads, there were some great commercial numbers that fly around, such as the fact that 90 percent of avocado The consumer in the United States came from Mexico. But what we really want to know is the percentage of imports that will face a new tariff.
It is clear that this number will change over time because importers will search for other suppliers, but it is a good starting point.
The graph below is used for the latest US Statistics Office for 12 months until November 2024, indicating that nearly 40 percent of the total imports of the United States came from Mexico, Canada and China. With crude oil imports from Canada during the same period of about $ 100 billion (assuming that a specified price in Western Canada of $ 60 a barrel), a little more than half of these imports will attract a new tariff by 25 percent and the rest 10 percent.
These numbers allow another account to the back level. With approximately 40 percent of imports facing an additional 20 percent tariff on average, we can determine the total tariff rates of the United States. If it is fully imposed, and with fixed commercial patterns, the average weighted tariff rate in the United States will increase slightly lower than 8 degrees Celsius.
When putting this in the historical context below, Trump's weekend advertisement was huge.
The customs duties were greater than the decline in the duties associated with the signing of the original general agreement on customs tariffs and trade (GATT) after the Second World War and the definitions that came with the great depression in the thirties of the twentieth century.
Trump loves to compare the definitions with those of the twenty -fifth US President, his Republican colleague William McKinley, who imposed a 49.5 percent tariff in 1890. Comparisons with the effects of McKinley's tariff show important facts.
we International Trade Committee data The average US tariff weighted after imposing in October 1890 shows that the percentage of income US goods decreased from 55 percent in 1891 to 41 percent by 1894.
Do not tell the president, who believes that the customs tariff is a cash cow, but the revenues of the collective tariff also decreased because trade in well -known goods decreased sharply.
The fact that trade patterns are sensitive to the big definitions that clarify a major problem in the line dotted in the plan below, which does not assume any change in trade patterns. So it is wrong if it is used as an expectation, but it is still a useful number as an explanation of the scale. These definitions are great.
Once again in the nineties of the nineteenth century, what McKinley also found was that the support of his Republican party was almost quickly decreased like customs tariff revenues. Surprise, surprise, people hate higher prices.
McKinley party Nearly half of their seats In the 1890 elections for the House of Representatives, just one month after the definitions. Does Trump care? who knows. Do you know? It does not seem as it does.
What is the size of economic effects?
Now we know that on the assumption of continuous trade patterns, a terrible basis for prediction, I will adhere to it because it is useful to show the range. Goods imports are Almost 10 percent of GDPAnd if the price of these goods increases by 8 percent (the total volume of customs tariffs), the US price level will rise about 0.8 percent. That is why economists suggest an enlargement Between 0.5 percent and 1 percent.
This is a reasonable number, but again terrible expectations. Why? Because we do not know how much companies that will use customs tariffs as an excuse to raise prices raise or whether customs tariffs will be absorbed into margins or by some exporters to the United States.
The broader economic impact of Trump's definitions is widely shocking the supply to the United States and shocking the demand for other economies. My colleagues in the FT monetary policy radar have He wrote a wonderful piece on this.
However, the scaling of economic effects is very difficult. We know that the customs tariffs and supply chain shocks are very important for growth and inflation, and also that the effects are always difficult to see in global economic models that tend to significant turmoil because they have been estimated on very small changes.
In other words, it is wise to listen more to Ngozi Okonjo-Eyala, General Manager of the World Trade Organization, when she says that a global trade war with tariffs of definitions can be born. “DisastrousThe outcome. The International Monetary Fund model indicated in the plan below indicates
Are we really smart?
The spending of American consumers was significantly strong in national accounts in the fourth quarter Last week by the US Economic Analysis Office. The most interesting is that a lot of real growth in spending came from strong commodities. This contributed 0.85 percentage of annual growth by 2.3 percent recorded in the fourth quarter.
Were American consumers expecting definitions and purchase before prices rose? maybe. The data indicates that this is a reasonable story and may be followed by a blow to buyers if the sharp tariff continues.
What I was reading and watching
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A former Federal Reserve official was arrested and accused of passing economic secrets to China. As Lisa Tobin says in Wonderful writing: “If someone from a Chinese university offers you $ 450,000 for a part -time function, then run away.”
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No, the FT position on Trump's trade war will surprise many people: the newspaper It is believed that it is ridiculous
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One group of Europeans Requesting more definitions They are fertilizer producers. They want to apply duties to dumping to Russia
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Martin Wolf is Depression about the United Kingdom's long -term growth Horizons
A plan that matters
Before the weekend on the customs tariff, you had planned to make you happy with an in -depth examination of housing and its contribution to inflation in the UK. This is a story on wonderful data measurement issues, comparison of rental price trends with the United States and the important issue in stocks and flows. Blame on Trump that you have missed you now.
While the Monetary Policy Committee at the Bank of England is concerned that the UK has more stability in inflation of services more than other economies, many of the UK problem in services prices is due to inflation in rent. The graph below shows that the UK's inflation, with the exception of rent, was less in the latest data from the United States or the euro.
It is difficult to see the UK suffering from a special inflation problem that others do not share. We will see the interpretation of the Bank of England when it decides interest rates on Thursday.
