USA Import tariffs: why not put 10.000% import tariffs on the world?
Today I read that President Trump put import tariffs on the Netherlands, Denmark and other European countries, because thesent troops to Greenland.
Why not put 10.000% import tariffs on the world? Lets go max. Stop imports completely. All imports from the whole world. Zero imports!!
It would kill the USA economy instantly. You would lose your job. It would have secondary effects you could not image.
When you put tariffs the people who pay these are USA businesses and citizens.
These tariffs are paid at the border, by the one who ships the stuff.
If I am a USA importer of say a German car of 100.000 usd, I, the USA importer have to pay 25% or 25.000 usd more. At the border. After it has been shipped.
So what will happen is that :
I either sell it and increase my price with 25.000 usd to sell it to wealthy US citizens or businesses.
Or I take that 25.000 usd and my profit would be 25.000 usd less.
I could pass 10.000 usd in the price to my consumer and hit my profit with15.000 usd.
Whatever I do, my customers will demand less German cars and only THEN the German economy might be hit. Less demand of German cars.
But I, a USA importee, pay the tariffs. Lets not kid ourselves about this!
Now if my profits go down, do you think I will invest more in the USA?
No way. I postpone all investments. So that new car dealer I was going to open in the USA to sellGerman cars is gone! All those USA employees I was going to hire in that dealership, the sales reps, the HR, the marketing, the accounting all USA citizens: gone.
The electricity, the office equipment, the construction workers to build that car dealership are gone! I was planning to invest 5 million USD this year. I had my business plan ready with all my expenses after that investment. I was just about to signnthat mortgage of 5 million USD at a local USD bank.
That bank was gling to get interest payments on that 15 year mortgage. 5%. Gone!
I called the bank and closed everything.
Do you start to see the indirect effects of that tariff? Looks great. But who is it hurting?
The German car manufacturer is already looking at the BRICS to sell its cars.
So less investments, less consumption, less imports.
Y = C + I + G + E - M
This is an economic identity, meaning it is true for all economies.
Now suppose C declines, I declines and M also declines. But C and I decline more than M.
The Y the economic growth will go down.
So tariffs make the economy go down. If I go 10.000% on the world I am in a deep recession.
So now suppose the USA economy has no imports.
Nothimg produced outside enters the USA economy. Ever.
10.000% on all imports of the world.
M is zero.
Y = C + I + G + E
How do you think the USA economy is going to look like?
Imagine you have no cloths, no fruit, no oil, no machinery, no iphones. Nothimg imported.
And you have wall street with all that debt, those stocks all financial services.
Can you imagine a USA without any foreign imports?
The reason USA imports all those stuff is that you can not make them yourself or the world can make it cheaper, faster or better than you.
Put 10.000% of tariffs on everything and see how your economy crashes.
Runy
Island Wealth