“From knitting needles to garment fabric to bottles of paint, American crafters work with many materials produced abroad. That has left them particularly vulnerable to Trump’s trade war. Imports from Europe currently face tariffs of 15 percent, and while sky-high tariffs on China are currently subject to a 90-day pause, they still stand at 57.6 percent, according to the Peterson Institute for International Economics. Worse still, Trump has done away with the de minimis exemption, which allowed goods valued at under $800 to enter the U.S. tariff-free.
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Exclusively stocking U.S.-produced materials isn’t an option for most craft stores. “Tariffs impact American-made yarns as well,” pointed out Fibre Space, a yarn store in Alexandria, Virginia. That’s because “American-made goods still rely on materials made in other countries.” Yarn “is an agricultural product,” observes Chadwell, “so certain crops and certain livestock produce the best fiber in very specific climates that aren’t necessarily” found in the United States. Meanwhile, “needles, notions, doodads, [and] bags…can only be produced at much higher prices” here.
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Tariffs prevent all sorts of voluntary transactions that shape lives and culture in big—and often inconspicuous—ways. That means shops that won’t be started, gifts that won’t be made by hand, and hobbies that won’t be taken up. And more immediately, tariffs are punishing business owners who want to help Americans fill their lives with more creativity.”
Tariffs degrade long run efficiency, but uncertainty caused by Trump’s erratic use of tariffs has a greater negative effect on the economy in the short term.
Russia’s privatization after the Cold War, failed partially because the Russian government was too weak. It could not enforce property rights and the rule of law. Instead, the government was corrupted by the oligarchs. When Putin took over, he exchanged many oligarchs for one–himself.
When the U.S. tries to deregulate for potentially good reasons, and avoids taxes, we need to be careful that we are not setting up our own oligarchs who avoid helpful taxes and regulations at the expense of the people.
The wisdom of the crowds and the efficient market hypothesis require an amount of independence of the people in the crowd. With the internet and social media, people are much more connected and therefore much less independent. The same fads, cults, and appeals that warp people’s political views may also warp their market views. So, markets may have gotten dumber.
Trump’s Saudi Arabia deal may be a lie. Multiple countries have promised to invest big money in the U.S. in deals with Trump, and many have not materialized. Is this a real deal, or a misleading press release?
Economists have simplified models that are very simple compared to the complexity of the real world. This means a model will inevitably leave out parts of the economic world. But, trying to fit too much in, makes the model unreadable and it’s hard to tell what’s happening in the model and therefore it doesn’t teach us much. A good model helps explain something that is happening, even if it is flawed and doesn’t explain everything.
In places where wealthy people want to be and are not just there for tax advantages, higher taxes often don’t make many wealthy people leave. Keeping high-skilled professionals is more important to a city than keeping super wealthy people.
“Trump is carving out his own brand of capitalism — launching extraordinary federal interventions in the economy through ownership stakes in private companies alongside sweeping tariffs, tax cuts and deregulation. But the way he’s using these tools isn’t really guided by a discernable economic strategy
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Trump’s policies, taken together, are more like “an idiosyncratic hodgepodge.””