11 Ways I Look at Emperor Donodus' Tariffs.

This week, reports have circulated that Emperor Donodus is considering either a 5% or 10% tariff on imports in order to boost domestic production. There are at least eleven ways I look at this:

1. Foreign producers could absorb the tariff into their prices (10% is well within normal currency valuation fluctuations) resulting in no net effect on domestic production.
2. A trade war could erupt, where other countries enact a matching tariff on American products, thus, canceling out the intended rebalancing of trade through the unilateral increase in domestic manufacturing.
3. Assuming Donodus did not apply this tariff to countries where the US has a net surplus trade balance with, countries affected by the tariff could thus ship products through those countries into the US, minimizing their tariff costs while still underpricing domestics.
4. Along with the withdrawal from the TPP, China -- the intended target of an import tariff -- has already signaled trade rapprochement with the other members of the TPP, such that the net effect would be a gain for China even as its exports to the US are decreased, and a decline for the US.
5. Eventually, the tariffs would be challenged at the WTO and they would toss out the tariffs, leading to the usual alt-reality bullshittery from Emperor Donodus about how he succeeded in something.
6. Assume that the Donodus Economic Model is correct and there is a big boost of domestic manufacturing. It would tend to strengthen the dollar and lower US exports while increasing imports, and since Total GDP = Public GDP + Private GDP + Net Foreign Trade, the offset means no net increase in GDP...or worse...
7. Assume that the Donodus Economic Model is correct and there is a big boost of domestic manufacturing. This means that prices shot up. Now, think about what happens if your boss won't give you a big pay raise even as prices have gone up. You substitute your purchases and delay others. That would tend to lead to a recession.
8. A tariff is nothing more than a discriminatory tax, but whose effects are meant to be no less than a widespread tax. Thus, the hypocrisy of someone who proclaims that lower corporate taxes will lead to greater job creation, then tells us that increasing taxes on the poor and middle class will also lead to greater job creation. Also, congratulations to those unemployed blue collar workers whose tax burdens will now increase under the Donodus Economic Model.
9. In general, the last thing you want to do when you're at or near full employment is to throw a wrench in the system; if anything, you want to keep things humming exactly where they are right now. If you throw a wrench into the system near full employment, you risk an acceleration of inflation or a recession. That's probably why most countries reflexively assert tariffs in an economic downturn and not at full employment.
10. America's international trade, as a percentage of total GDP, ranks among the lowest in the OECD at roughly 17%. A 10% tariff would likely do very little to boost total GDP, even in the rosiest of scenarios that one could possibly come up with.
11. Manufacturing is rapidly changing and those jobs just aren't coming back, period. They're being lost to automation and to geographies with even lower labor costs. If China is the intended target of a tariff, China's exporters will move their manufacturing bases to other countries or provinces with even lower labor costs in order to compete.

Essentially, the Donodus Economic Model relies on fairy tales and wishful thinking.

There are other points to make on this (gov't spending, corporate taxes, etc.), but they depend on Donodus sticking around long enough to effect wide-ranging policy changes elsewhere. I still maintain the expectation that Emperor Donodus will be out before the end of his term. His life has been documented with a long list of criminal and civil violations, including this past year. His proclivity towards impulsive behavior is what gets him into trouble and it's what will earn him infamy, surpassing Nixon.