Tariffs

[Cyclotron]

I guess China and the US are still making progress, as they have both agreed to extend the pause for 90 more days.
https://www.bbc.com/news/articles/cg7jjkvzmkxo

I'm sure this delay will be characterized as TACO by some. If Trump and Jinping chicken out, is that TACO and JACO?

The data coming in for the US inflation numbers indicate things are stable and will likely lead to a lowering of interest rates.
https://www.bbc.com/news/articles/c24zzj0y3mmo

The underlying rise in prices is likely due to tariffs. If so, we may have to wait for some time to see the actual results, given that the trade deals need to kick in and the negotiated tariffs are applied.

[TimFox]

It will be interesting to see the time-scale for the effects of tariff changes and interest rate adjustments.
Besides the ongoing negotiations that have not yet been settled, the earlier increase in imports to build inventories before the new rates is a further delay of the effects.
It all boils down to the effects of different possible changes.
1.  A tariff on an imported good obviously will increase the price to the consumer.  The duty paid to the US Treasury will, by itself, reduce the budget deficit, and that fiscal effect should be deflationary.
2.  Reducing the interest rate, by itself, is inflationary, which is why it is used in times of unemployment and low economic growth.
The devil is in the details, which is why this is a quantitative question, not governed by handwaving.  Politicians, in general, are better at waving hands than at evaluating quantitative data.

[vad]

The underlying rise in prices is likely due to tariffs. If so, we may have to wait for some time to see the actual results, given that the trade deals need to kick in and the negotiated tariffs are applied.

… and old stocks are depleted, and the distributors start pushing prices to retailers, and the retailers pass the price hikes on to consumers.

[vad]

The duty paid to the US Treasury will, by itself, reduce the budget deficit, and that fiscal effect should be deflationary.

Not necessarily true. In macroeconomics, reducing the budget deficit by cutting government spending is deflationary, because it removes demand from the economy. However, reducing the deficit solely by increasing revenue without cutting spending does not directly affect inflation. It can have indirect effects, such as raising the cost of imported goods, but not in the direct deflationary way you suggested.

[TimFox]

The duty paid to the US Treasury will, by itself, reduce the budget deficit, and that fiscal effect should be deflationary.

Not necessarily true. In macroeconomics, reducing the budget deficit by cutting government spending is deflationary, because it removes demand from the economy. However, reducing the deficit solely by increasing revenue without cutting spending does not directly affect inflation. It can have indirect effects, such as raising the cost of imported goods, but not in the direct deflationary way you suggested.

An interesting question.  This detailed article points out that the multiplier for decrease in government spending is greater than that for increased taxation, so the tax increase has less effect on inflation (and may increase prices when the tax is added to prices).  Of course, the effect of a tariff directly increases the price (although that may be attenuated by market pressure).

My apology:  I could not cite the IMF working paper here. 

[vad]

The duty paid to the US Treasury will, by itself, reduce the budget deficit, and that fiscal effect should be deflationary.

Not necessarily true. In macroeconomics, reducing the budget deficit by cutting government spending is deflationary, because it removes demand from the economy. However, reducing the deficit solely by increasing revenue without cutting spending does not directly affect inflation. It can have indirect effects, such as raising the cost of imported goods, but not in the direct deflationary way you suggested.

An interesting question.  This detailed article points out that the multiplier for decrease in government spending is greater than that for increased taxation, so the tax increase has less effect on inflation (and may increase prices when the tax is added to prices).  Of course, the effect of a tariff directly increases the price (although that may be attenuated by market pressure).

My apology:  I could not cite the IMF working paper here.

Yes, but my point was that there has been no decrease in government spending. The government continues to spend as it did before Liberation Day.

[TimFox]

The duty paid to the US Treasury will, by itself, reduce the budget deficit, and that fiscal effect should be deflationary.

Not necessarily true. In macroeconomics, reducing the budget deficit by cutting government spending is deflationary, because it removes demand from the economy. However, reducing the deficit solely by increasing revenue without cutting spending does not directly affect inflation. It can have indirect effects, such as raising the cost of imported goods, but not in the direct deflationary way you suggested.

An interesting question.  This detailed article points out that the multiplier for decrease in government spending is greater than that for increased taxation, so the tax increase has less effect on inflation (and may increase prices when the tax is added to prices).  Of course, the effect of a tariff directly increases the price (although that may be attenuated by market pressure).

My apology:  I could not cite the IMF working paper here.

Yes, but my point was that there has been no decrease in government spending. The government continues to spend as it did before Liberation Day.

That seems to be true:  shifts in spending are planned, along with reductions in total tax revenue, only partially offset by tariff revenue.

[Cyclotron]

I would be suspect of anyone trying to sound authoritative on the impacts of tariffs on the price of goods.

Due to the chaotic means the administration has used its pretty difficult to understand what tariff applied at a point to some product from a country/source.
We can suspect there's impact as there's been uptick in tariff revenue.  We also hear that companies are absorbing the vast majority of the tariffs. What is the true impact to retail/customer pricing?  Good luck!

We know that the threat of tariffs has generated some trade deals, I haven't seen a lot of negativity on the deals themselves. I have seen others say "Well these were easy" to which I say, "Well why wasn't it done before?."

[TimFox]

Expected effect of tariff on prices:  see  https://www.atlantafed.org/-/media/documents/research/publications/policy-hub/2025/02/28/01--tariffs-and-consumer-prices.pdf  which contains more math than you may want.
A crucial parameter in these calculations is the "pass-through" rate, which is how much of the tariff is added to the consumer price by the importer.
This is unknown, but the authors estimate between 50% and 100%, based on earlier trade wars.

[Analog Kid]

Ah, they call it "the dismal science" for a good reason.

[TimFox]

The traditional name for it is "Political Economy", just as my degrees are in Natural Philosophy.
What goes around, comes around.

[wilfred]

We know that the threat of tariffs has generated some trade deals, I haven't seen a lot of negativity on the deals themselves. I have seen others say "Well these were easy" to which I say, "Well why wasn't it done before?."

Are they really deals? Historically trade deals take at least 18months to iron out and get a signature inked. None of these seem to be deals in the traditional sense trade deals used to be done and none of them are ratified by congress and passed into law. That just erodes confidence that they are permanent and can be relied upon for future investment planning.

Some of the comment from the white house suggests a concern about foreign VAT (Value added tax) or here in Australia we call it a GST at 10% (Goods and Services Tax) I think New Zealand it is 15% and they are applied to nearly everything bought and sold in Australia for example. Regardless of whether it was imported or made locally.

For political reasons when the GST was introduced a few exemptions were made to appease critical voting blocks.

Anyway my point is that I think the tariffs are being introduced by as yet unsettled legality of the use of executive emergency powers when they would be better introduced by congress after all the politics have been ironed out and they can then be relied on to make future decisions. Of course that is not easy and in the current US political climate may be impossible.

I think they'll ultimately prove to be disastrous to the US economy and most that are not well targeted national security tools will be heavily wound back. But the US debt problem won't be solved until the US stops spending borrowed money. The tariffs were never going to solve that particular problem.

[tautech]

..............

Some of the comment from the white house suggests a concern about foreign VAT (Value added tax) or here in Australia we call it a GST at 10% (Goods and Services Tax) I think New Zealand it is 15% and they are applied to nearly everything bought and sold in Australia for example. Regardless of whether it was imported or made locally.

For political reasons when the GST was introduced a few exemptions were made to appease critical voting blocks.

Not in NZ where nothing is exempt from our 15% GST, nothing.

What riles many of us is the 15% GST applied to land rates which is a tax on a tax ! 

[Analog Kid]

Anyway my point is that I think the tariffs are being introduced by as yet unsettled legality of the use of executive emergency powers when they would be better introduced by congress after all the politics have been ironed out and they can then be relied on to make future decisions.

Trump's "move fast and break stuff" methods don't include getting Congress to pass legislation (or do so only as an afterthought).
Which of course will leave a lot of unwinding and rescinding to be done by the next administration, assuming there is one.
But you'll be surprised at the continuity between administrations. Just as Biden continued a lot of Trump I's policies (and Trump II did the same), you'll see a lot of carryover to TrumpII[n+1].

I think his planning horizon must be about 3 months, max.

[Cyclotron]

We know that the threat of tariffs has generated some trade deals, I haven't seen a lot of negativity on the deals themselves. I have seen others say "Well these were easy" to which I say, "Well why wasn't it done before?."

Are they really deals? Historically trade deals take at least 18months to iron out and get a signature inked. None of these seem to be deals in the traditional sense trade deals used to be done and none of them are ratified by congress and passed into law. That just erodes confidence that they are permanent and can be relied upon for future investment planning.

Some of the comment from the white house suggests a concern about foreign VAT (Value added tax) or here in Australia we call it a GST at 10% (Goods and Services Tax) I think New Zealand it is 15% and they are applied to nearly everything bought and sold in Australia for example. Regardless of whether it was imported or made locally.

For political reasons when the GST was introduced a few exemptions were made to appease critical voting blocks.

Anyway my point is that I think the tariffs are being introduced by as yet unsettled legality of the use of executive emergency powers when they would be better introduced by congress after all the politics have been ironed out and they can then be relied on to make future decisions. Of course that is not easy and in the current US political climate may be impossible.

I think they'll ultimately prove to be disastrous to the US economy and most that are not well targeted national security tools will be heavily wound back. But the US debt problem won't be solved until the US stops spending borrowed money. The tariffs were never going to solve that particular problem.

I'm not aware of any issues with the president's setting Tariffs. He did it in the first term, and the Biden administration kept most of them, as far as I know, even though it could have changed them.

The biggest things to target cuts would have to be social programs, given their enormous percentage of the budget. Next up would be defense, which includes massive costs for ourselves, friends, and neighbors.
https://taxpolicycenter.org/briefing-book/how-does-federal-government-spend-its-money#:~:text=Unlike%20mandatory%20spending%2C%20both%20the,Updated%20January%202024

Trump has gone after countries not doing their part in NATO and a lot of people have given him crap about it. Merz of Germany admitted that the EU has been on a free ride.
https://www.politico.eu/article/europe-free-rider-us-defense-germany-friedrich-merz-donald-trump-nato/

I know many Americans who feel resentful about the burden we pay for shared defense, only to be sneered and jeered at. At least that's a wide perception that I've heard described.

[m k]

Tariffs and under $800 items.

Gift and document shipments to USA are also stopping tomorrow, says the local post here.
(earlier it was only freight transport)
US customs authorities have not yet announced how the payment will be made in practice.

Postal companies in different countries do not have systems in place to collect customs duties.
(excluding EU, I guess)

[1audio]

I have a $5 shipment of PCB's from JLCPCB that arrived in LA today. I purposly sent it the cheap way ($25 shipping on $5 seems obscene). It any case I'm not sure what will happen next. Will they want 45% or $100 and how will it be collected? I just read that the de minimis shipments to the US were in the billions of transactions. This will be interesting. . .

I'll report back once it gets here.

[tggzzz]

I have a $5 shipment of PCB's from JLCPCB that arrived in LA today. I purposly sent it the cheap way ($25 shipping on $5 seems obscene). It any case I'm not sure what will happen next. Will they want 45% or $100 and how will it be collected? I just read that the de minimis shipments to the US were in the billions of transactions. This will be interesting. . .

I'll report back once it gets here.

Many postal services are suspending services to the USA https://www.bbc.co.uk/news/articles/cx2p17xypgko

Don't forget the processing fees on top of any tariffs, and you may like to consider simply refusing to pay. It will be interesting to see what happens if many people do that.

Please do report back, but don't worry: I have it on god[sic] authority that the tariffs will be paid by China.

[nctnico]

Tariffs and under $800 items.

Gift and document shipments to USA are also stopping tomorrow, says the local post here.
(earlier it was only freight transport)
US customs authorities have not yet announced how the payment will be made in practice.

Postal companies in different countries do not have systems in place to collect customs duties.

They can collect duties for sure. However, nothing has been put in place at the US side. Last week I read in an article the Dutch post office stops sending parcels to the US because USPS can't tell them how to deal with the new situation.

[pope]

Tariffs and under $800 items.

Gift and document shipments to USA are also stopping tomorrow, says the local post here.
(earlier it was only freight transport)
US customs authorities have not yet announced how the payment will be made in practice.

Postal companies in different countries do not have systems in place to collect customs duties.

They can collect duties for sure. However, nothing has been put in place at the US side. Last week I read in an article the Dutch post office stops sending parcels to the US because USPS can't tell them how to deal with the new situation.

Not only Dutch post office. Many EU countries stoped and I'm pretty sure that more (if not all) will follow.

[Psi]

..............

Some of the comment from the white house suggests a concern about foreign VAT (Value added tax) or here in Australia we call it a GST at 10% (Goods and Services Tax) I think New Zealand it is 15% and they are applied to nearly everything bought and sold in Australia for example. Regardless of whether it was imported or made locally.

For political reasons when the GST was introduced a few exemptions were made to appease critical voting blocks.

Not in NZ where nothing is exempt from our 15% GST, nothing.

What riles many of us is the 15% GST applied to land rates which is a tax on a tax ! 

It used to make sense to keep things simple. Apply GST to everything and you eliminate all the paperwork and ongoing bureaucracy to manager what is / is not GST exempt.
But that was back when finance and accounting was done by hand. Everything is computer based now, so having clearly defined things exempt is much easier.
And there are some things that are exempt already, bank fees for one, and international shipping.
So rates not being exempt is stupid, it's simply because the government is not motivated to pass a law change that takes money away from them.

I do kind of agree with the governments view that removing GST from fruits and veg would be a nightmare to implement. It costs so much to manage and enforce exactly where the threshold is. With producers always tying to get their food item reclassified as exempt. You end up with stupid things. Like where a cut up banana has GST and a non-cut banana has no GST.  Or a cucumber without plastic wrap has no GST but one that does has GST.

[themadhippy]

Rather sneaky making the shipping side pay the tariffs, almost makes it look like the sender is paying the tax

[kite31]

Rather sneaky making the shipping side pay the tariffs, almost makes it look like the sender is paying the tax

That process occurs in Australia too. If an overseas company sells more than an annual threshhold value into Australia then they are supposed to collect GST to remit here, rather than the buyer paying it on arrival, saving customs some work. It can be useful to buy directly from small suppliers or companies rather than via marketplaces; not applicable in the USA case where there are no exceptions as I understand it.

[Psi]

Rather sneaky making the shipping side pay the tariffs, almost makes it look like the sender is paying the tax

That process occurs in Australia too. If an overseas company sells more than an annual threshhold value into Australia then they are supposed to collect GST to remit here, rather than the buyer paying it on arrival, saving customs some work. It can be useful to buy directly from small suppliers or companies rather than via marketplaces; not applicable in the USA case where there are no exceptions as I understand it.

Yep, NZ has the same system.
Its really intended for large market places like aliexpress/ebay etc.. but has the same annual threshold where foreign companies are supposed to register for NZ GST and pre-pay it.
Most smaller company's just fly under the radar while almost definitely exceeding the annual threshold

[Tadas]

https://olimex.wordpress.com/2025/08/26/we-regret-but-have-to-temporary-suspend-the-shipments-to-usa/

We regret but have to temporary suspend the shipments to USA

The interesting part:

The issue is that we are now required to collect all taxes and tariffs on U.S. shipments in advance. However, there is no functioning calculator for this, which has created chaos. Parcels are being held in customs for weeks due to unreasonable requirements. For example, importers must declare the exact amount of steel, copper, and aluminum in products, with a 100% tariff applied to these materials. This makes little sense—PCBs, for instance, contain copper traces, but the quantity is nearly impossible to estimate.