Trump's tariff theories forget timing and that voters are also consumers

Trump's tariff theories forget timing, and that voters are also consumers. Even if Trump's theory that tariff wars will eventually benefit the economy, a timing problem will backfire on the GOP politically. Even if manufacturing comes back to the US, it takes years to build up domestic production facilities and capacity, well past the 2026 midterms and into 2028. Trump's tariff war will have an outsized impact on politics because all voters are also consumers, as tariff "taxes" price hikes will begin at once, some not until after pre-tariff inventory is eaten through. The tariff impact on higher prices will be felt by consumers well before the 2026 midterms.

Without cheaper competition from imports, domestic producers will be tempted to raise their prices to get higher profit margins (the difference between what the market will bear if consumers buy at the price, and what it costs to produce and sell). Products with imported parts will see some prices rise immediately.

I am no economist, but I do follow the impact public policy has on consumers, the focus of my 30-year career in public and government relations as both a regulator and an advocate for consumer rights. 

70 percent of the US economy is consumer-related. Sticker shock will be voter shock, especially for those who thought Trump cared about the prices and inflation. You can count on Democrats to chant we told you so and Trump himself is the one who caused the pain through his "tariff taxes". Those sensitive to prices for everyday consumer goods like clothes and electronics will be the most affected. Those who benefit, such as steel and auto manufacturing, in job creation and salaries, are far outnumbered by the number of price-sensitive consumers who are also voters. It will be even painful for the middle class if the Trump tariff war causes a recession with layoffs and 401 (k) s tanking.The result will be a decline in consumer buying as consumers adjust to the new reality. That, in turn, can also discourage investments in manufacturing and lead to layoffs.

Trump's trumpeting that manufacturing will "come roaring back to the US" has a timing problem. It takes years to construct new manufacturing facilities, and those facilities will be far more automated, far less employing human workers, so this will generate far fewer jobs than this would have been a decade ago. It will take several years for those facilities to be built, and by that time, both the 2026 and 2028 election seasons will be in the rear view mirror.

Update: 4/4/2025 Federal reserves did not lower interest rates because of uncertainties of labor shortage (immigration) and tariff policies length and amount with unknown specifics which could increase inflation. Interest rates are the only tool to cool inflation, so it is not the time to lower interest rates now. Inflation, then, still lurks in the future, it appears. The Trump administration had pressured the Federal Reserve to lower interest rates. Instead, 4/4/2025, the Fed made no changes. ( Trump had threatened to take over the central bank fed decisions to suit his policies and political interests. It is a move that the dictator of Turkey, Erdogan, used to consolidate his power and now the value of the currency dropped from about 2 to one to the US dollar to 30 to one...The same disastrous policies of dropping interest rates for political reasons plagued he economies of South America for years. ) Turkey’s Erdogan sacks central bank governor after rate hike | Recep Tayyip Erdogan News | Al Jazeera      Why Turkey's currency is crashing after Erdogan got reelected | AP News

So is it the economy? Updated August 26, 2024 for Harris plan

 For the MAGA meme screamers, update your data or produce your alternative facts. Economist Steve Rattner adjusted his data to remove the COVID impact on the economy for which Trump was not responsible nor does he deserve credit for low prices and border crossings that happened during COVID. FYI: Scream all you want about prices (now stabilizing), but no president, Trump, Fiden, or Harris can edict or control or set grocery prices, nor can they, with any executive action, roll them back to December 2019. Get real.. (We closed the border because of the COVID crisis, remember?)). The growth of the economy and job creation were worse under Trump than under Biden. Violent crime was lower under Biden (and illegal migrants' crime rates were much less than others). Oil? Under Biden, the USA is now energy independent. Inflation? rate was down to near-normal levels under Biden. The Federal Reserve will reduce interest rates in September because of the threat of increased unemployment and that the inflation rate is close to the target of 2% .Here are my facts : (We closed the border because of the COVID crisis, remember? No wonder illegal crossings were down. duh). Once the COVID close was lifted. Illegal border crossings are now down from 8K to 2 K in spite of Trump torpedoing the bipartisan bill that included funding for building the rest of the Wall and enough border guards, and judges to screen for actual trafficked victims and proof of persecution to be accepted for asylum. Those seeking only economic opportunity do not get asylum under our current law. So, instead of whining about Biden's recovery success.. what does Trump plan? So far, goose eggs, except for inflation causing tariffs and national debt busting more tax relief for billionaires that never trickled down and drill baby drill when we have so much oil, we do not have a shortage to be fixed, and we are exporting our energy already. The only high taxes Biden had proposed is to reverse the low taxes on the ultra-rich Tump passed. Harris proposes restoring child tax credit and aid to families with new babies. Free stuff? That is because consumers are being screwed by expensive stuff by price-gouging business greed( which Harris plans to stop.) Trump has no plan to reduce prices, but he only plans to make it worse;, slapping high tariffs on all imports, costs passed on to all consumers, ending Obamacare, ending free lunches for poor kids, rolling back the big pharma controls, and deals Biden made for low-cost meds for seniors., Here's Kamala Harris' one: Kamala Harris released her economic platform: https://www.cbsnews.com/news/kamala-harris-economic-plan-presidential-candidate/

One of the parts of the Harris economic plan is to go after grocery store price gougers and monopolistic, greedy price setters.  Is there price gouging going on?  A federal case brought by the DOJ against the merger of two grocery store giants, Kroger and Albertson's, resulted in a confirmation by a store executive that, yes, they had gouged some prices. https://www.newsweek.com/kroger-executive-admits-company-gouged-prices-above-inflation-1945742  Why is this merger such a issue? Because when there is a monopoly, an inhouse memo can set prices without fear of a competitor starting a price war.

Good question: We have had tax hikes and tariff hikes, but we still have inflation. Why? Tax policy has little to do with it. COVID and recovery are why. tax policy is not the reason for current inflation. It was the impact of COVID's on the economy and the recovery from it. . https://credit.org/.../what-is-causing-inflation-in-2024.... " according to Fortune, economists generally agree on some of the causes behind the high inflation that has defined the economy over the last several months:

"The pandemic shifted consumer demand away from services toward goods, which left producers unable to keep up with demand.

Factory closures from early in the pandemic reduced supply just as demand was rising, which sent prices up even further.

Russia’s invasion of Ukraine caused a spike in oil prices, which increased the cost of both manufacturing and shipping, while also forcing up the price of wheat and other commodities.

On top of that, the U.S. was dealing with a labor shortage, leaving many businesses that had been shuttered for months unable to meet rising demand — much of which was due to stimulus payments — when they were finally able to open.” (yahoo.com)"

CREDIT.ORG

What is Causing Inflation in 2024? Understanding Transitory

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Trump's proposal to raise tariffs is considered by economists to be one of the highest tax increases in history. Both Biden and Trump have already raised tariffs with a negative impact on the US economy. , costing 684K jobs, $524 more in taxes, and shrink the GDP  

Per   https://taxfoundation.org/research/all/federal/trump-tariffs-biden-tariffs/

• Candidate Trump has proposed significant tariff hikes as part of his presidential campaign; we estimate that if imposed, his proposed tariff increases would hike taxes by another $524 billion annually and shrink GDP by at least 0.8 percent, the capital stock by 0.7 percent, and employment by 684,000 full-time equivalent jobs. Our estimates do not capture the effects of retaliation, nor the additional harms that would stem from starting a global trade war.
• Academic and governmental studies find the Trump-Biden tariffs have raised prices and reduced output and employment, producing a net negative impact on the US economy.

.https://www.msnbc.com/morning-joe/watch/crime-down-under-biden-steve-rattner-fact-checks-trump-s-latest-claims-217215557519

https://www.forbes.com/sites/alisondurkee/2024/08/16/kamala-harris-releases-economic-agenda-heres-what-to-know/

https://www.youtube.com/watch?v=4iTn_fxQijU

A short response to social media posts griping about high prices:

   https://www.cnbc.com/2024/08/16/kamala-harris-economic-policy.html

-oil.. USA .first time since 1950 energy independent...producing more from all sources than we import. we are now exporting oil. (note: we do not have an energy shortage, so drill baby drill to increase supply as a solution is BS) Under Trump, imported lots of Venezuela oil; nearly 0 under Biden)

-Biden is responsible for inflation?. He dramatically decreased the rate. Trump would increase it. Under Biden, the rate of increase fell from 9% Covid end, caused by pent-up demand and supply chain problems, to under 3%...much due to the Federal Reserve raising interest rates.. Goal: 2% inflation normal rate. As expected in September, the Fed will lower interest rates. Trump plans to put a 10% tariff on all imports. Every top world economist says this would cause inflation to rise.

- violent crime? increased a bit under Trump and dropped 26% under Biden...legal immigrants and, even more dramatically, illegal ones rates much lower than native-born American crime rates.

- Illegal border crossings per day are down dramatically. 8k last December; 4K in May. 2K now. Biden exec order to refuse to hear asylum cases if crossings exceeded 2400 helped. , but Trump sabotaged even measures to build the rest of the wall and to fund increased staffing to hear and screen border crossers to separate actual asylum seekers (allowed by law)from those looking for economic refugees. (not a reason for asylum granting)

Trump yesterday gave no clear answers of how he could reduce prices to consumers and decrease housing costs except drill baby drill BS and give us the real inflation raiser, tariffs.

. Friday, Harris will give her plan.

Where were those Save Obamacare activists last year? Asleep ? Fooled?

Originally posted 2/11/17: updated 2/22/17 and 2/25/17  Sky Hi News 3/1/17 print edition (in part)

Crowd chanting and party platforms cheered on  GOP candidates  to  support repeal of  Obamacare. in 2016. Now that the GOP controls both the White House and Congress, they are finding themselves on the receiving end of a consumer revolt.  Twenty million  are suddenly  realizing they may lose high quality  health insurance they can afford for the first time in years. The chants of audiences at the  rowdy town halls are instead " don't take away my insurance ".

Donald Trump calls the town hall attendees a small, noisy minority  of paid  activists. The GOP and he are fooling themselves.  Take a look at the polls. Those angry attendees represent the majority opinion. Obamacare  for the first time is polling more popular than not.

Where were these defenders  of Obamacare last November? They were lulled and fooled. They awoke in January/February. thanks to the marches and rowdy town halls. They had been  soothed by promises of some in the GOP, and especially  Donald Trump, that the health care law would be replaced with something “better”.  Others were dreaming for single payer systems.   Ignorance also shaped public opinion.   35% of Americans  polled did not know Obamacare and the ACA were one in the same and are just learning their newly acquired insurance they may lose was indeed Obamacare.

Many of GOP plans in formation now would  eliminate subsidies that make the plans affordable for those in the lower middle class, and  even eliminate medicaid expansion , taking away insurance from those who cannot afford to pay even minimum premiums.

What polls do show is that "mandates" are what most voters want repealed. "Mandate " is a  turn -off  term.  For most that means to eliminate requirements all must carry heatlh insurance or face a penalty.   But "benefit" is a nicer word and the GOP wants to call "benefits" mandates, too.   Those nasty mandates are  benefits are required by  the ACA to be included in all insurance plans, whether individually bought, employer provided, subsidized through the exchanges,and  Medicare, Medicaid. They include: low co-pay annual physicals , and cancer screenings for both sexes such as mammograms and colonoscopies, pink and prescription blue pills, banning life time limits, and providing pre-natal care. The GOP wants to make these benefits optional in the name of being "patient centered".

Unfortunately those "mandates/benefits" are what makes the ACA affordable because it keeps the "pool" large enough so that those who do not use or need all of  benefits now or in the future  pay for those who do. The larger the pool, the lower the cost for all, an actuarial  fact.

The GOP has challenges replacing the ACA.  They will have to show that the costs to the federal budget will be less than is the ACA.  Cutting benefits and to take away insurance from many who have it now will be an unpopular political option.  The hottest  political backfire will happen in the states Trump carried in 2016. 64% of the 2017 ACA subscribers are in those states. GOP governors are protesting repeal, too, since abandoning Medicaid expansion would seriously dent their budgets. Rural hospitals would lose paying customers and close their doors. Miners would lose black lung coverage.  Jobs would be lost in the health care sector. The GOP has grabbed a political tiger by its tail.

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Some more thoughts:

The complaint about Obamacare  most received in my inbox is that  the premiums are too high for those who make too much income to qualify for subsidies. That can be fixed without throwing all of the ACA babies out with the bathwater. IThe most unpopular part about the ACA, per the polls, is the mandate that requires adults to have health insurance, but unfortunately that is element that keeps the cost and premiums low.

Not on the radar of the polls either are complaints that the ACA contains benefits  some customers would never use, such as pre natal care or prostate exams. While the GOP dangles the lure of letting consumer cherry pick  if  any and what kind of benefits they want to pay for  (they call that "patient centered choice") instead of the Obamacare required minimum eight benefits , they overlook the fundamental truth of insurance financing : the size of the pool and the mix of the  number of those they forecast who would make claims vs those who do not.   

That is going to be where the GOP's plans are going to run smackdab into reality.  When the Congressional Budget Office scores the costs of whatever GOP plans that have been rumored so far, the deficit hawks are going to get their scissors out and the temptation would be to cut the numbers of voters who would be able to get affordable insurance. that will contain benefits consumers want

To deal with the cost problem, the GOP's panacea are permitting  cross state purchases, which the CBO itself earlier said it would have minimal impact. High risk insurance pools have been less than successful  in covering pre-existing conditions because of costs. Systemic problems keep multi state risk pools from succeeding.

Not only would taking away insurance from voters have a politiacl backlash, there could be some unintended consequences. It would result in job loss and rural hospital closings.  A significant number of jobs added to the economy since 2009 have been in the healthcare sector. Over 20 million new paying customers have entered hospitals and doctors doors thanks to the ACA. Hospitals and doctors can count on getting paid instead of writing it off as charity or losing payments for services in bankruptcy court.

To deal with the cost problem, the GOP's panacea are permitting  cross state purchases, which the CBO itself earlier said it would have minimal impact. High risk insurance pools have been less than successful  in covering pre-existing conditions because of costs. Systemic problems keep multi state risk pools from succeeding.

That Obamacare will implode because insurance rates have gone up and it is a "disaster", the Trump and GOP mantra, is very misleading and those 12 million plus who signed up for it in the exchanges do not see it as a disaster, but a necessity . They just would like to see premiums cheaper and deductions or out of pocket expenses less.
That GOP claim is based on the knowledge that major insurance companies have not made as much of a profit as they hoped and left only one plan in some states's exchanges and that premiums have increased 600%. or doubled. (not in every state). Those getting subsidized or Medicaid insurance have seen increases in premiums and up front deductions. It has especially increased in the individual market but the facts are that the "cost curve" has been reduced...that is, premiums have not gone up as much as projected without Obamacare.Repeal Obamacare, and we would really see premiums soar. The real disaster will be dumped on those who lose insurance they have just now been able to afford. The other disaster: block grants on Medicaid to states which are really federal aid reduced and leaving the states holding the bag. That is not "better"by any definition.

Addendum: Feb. 27, 2017:

Ali Velshi  on CNN interviews person from Columbia U. Half of the 20K covered by Obamacare get Medicaid Expansion (11 mil).. 31 states did Medicaid expansion; half have GOP governors. A total of 75million are now on Medicaid.   Right now states and federal government split costs and GOP proposals floated would give the states a block grant, but no guarantee in future would be enough or would the block grants be the same. 

Currently subsidies for those on Exchanges based upon sliding scale of income. GOP proposals would change that to one based on age and young people would get $2K credit (enough for catastrophic, but not much more) and older people would get $4K credit. However, cost of older people 5x younger so not enough for the older, sicker. 

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For more about how GOP "patient centered" proposals would discriminate against women's health,
see my blog posting below of 2/3/17 "GOP and Trump planning to discriminate against women's health access"

http://www.usnews.com/news/data-mine/articles/2016-12-01/poll-americans-want-to-see-changes-to-obamacare

http://thehill.com/policy/healthcare/314610-obamacare-reaches-new-popularity-heights-poll

http://www.chicagotribune.com/news/nationworld/politics/ct-paul-ryan-healthcare-plan-20170214-story.html

http://fortune.com/2017/02/07/obamacare-affordable-care-act-repeal-poll/

http://www.cbsnews.com/.../millions-sign-up-for-obamacare-de...?

http://www.forbes.com/sites/brucejapsen/2016/10/10/sorry-trump-selling-health-insurance-across-state-lines-wouldnt-lower-costs/#841bf005f015

http://money.cnn.com/2017/01/02/news/economy/repealing-obamacare-health-insurance/

http://www.politico.com/agenda/story/2016/07/what-is-the-effect-of-obamacare-economy-000164

http://canadajournal.net/world/kaiser-family-foundation-poll-one-five-want-obamacare-repeal-without-replace

http://kff.org/health-reform/issue-brief/high-risk-pools-for-uninsurable-individuals/

http://www.newsweek.com/obamacare-repeal-threatens-rural-hospitals-and-trump-voters-who-depend-them-538627

http://www.forbes.com/sites/brucejapsen/2017/01/08/as-obamacare-repeal-looms-hospitals-brace-for-job

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