When I first heard the idea of using import tariffs to subsidize export tariffs, it seemed so blindingly obvious that it has astonished me how seldom I have seen it again. It eliminates the greed factor of government for ever more revenue, it lays claim to the high moral ground of simply undoing an injustice, and it sends a real clear signal to trading partners. It also seems to me relatively simple to calculate -- just tote up the tariff bills paid by American exporters to each country, tote up the total imports from those same countries, and there's your rate. It does assume imports and exports are close enough to be relevant, which is probably not always true. Maybe that makes it unworkable. But it comes up so seldom that I don't know if it is unworkable, if government bureaucrats don't want to forgo that revenue, or if it just doesn't satisfy that urge to meddle and manipulate.
The two biggest problems I see (quickly, haven't heard this argument before just now) are:
1: This would require a whole new government bureaucracy to oversee not just tariffs in but collect data on tariffs paid and distribute money appropriately. If I sell some stuff as a small business or individual to a guy across the Atlantic and have to pay very small import rates, is it worth it to register to get that back? If not, do larger companies get a transfer from me and those like me because they sell enough to be worth registering and getting that %?
2: The real killer seems to be the fact that exports and imports are not 1:1 by country. That is, Americans might pay 1 million in tariffs on imports from Country A but ship little enough that tariffs collected by Country A on US imports are just 0.25 million, while Country B collects 0.5 million in tariffs while we tax their imports to a tune of 0.5 million. So... now what? Do we use the 1.5 million in tariffs collected by US gov to give 0.25MM to exporters to Country A and 0.5MM to those for B, leaving 0.75 MM left over, or give all the tariff revenue back in a ratio, so 0.5 to exporters to A and 1 to B?
It matters because (unlike my quick example) if there are odd ratios the incentives get wonky fast. If it is by ratio sent to a country, maybe I want to do all my exporting there then re-export to other countries. Maybe I don't want to export to a country we don't import from at all, since the tariff revenue I would be entitled to would be X% of 0 dollars. On the other hand if it isn't a ratio of tariffs collected but tariffs paid, maybe the ideal move is to export to the highest tariff country I can find with the lowest exports to the US.
It still might not be a terrible idea, but it does seem like the base model is assuming there is the US and the Rest as the only two parts, and ignores the questions of how that revenue gets divided up.
I hadn't thought about your second point. The obvious solution is to pool tariffs collected from all countries, allocate from the pool to reimburse exporters for tariffs they paid. If there isn't enough give every exporter the same proportional refund. If there is more than enough, treat the excess as revenue.
I'm in over my head here, still don't always manage to think like an economist. Thus my interest in automatic tit-for-tat tariffs which assumes every country's imports and exports balance.
So my ignorant question -- wouldn't this pooling eliminate the tit-for-tat aspect which is supposed to encourage other countries to lower their tariffs?
Yea, I would have to do the math for a bit, but I think you are on the right track. A country with high tariffs would have fewer imports because of the tax on their citizens, but exporters could mitigate that by lowering prices and getting their revenue through the tariff pay back. It seems like domestic importers, whether of finished or intermediate goods, would really take the biggest hit if their imports far exceed their exports. I suppose that's kind of the point in the end. The shenanigans people would try to mess with the payment scheme would be interesting to see.
1. I hadn't thought about the bureaucracy problem, which is funny considering how much I (claim to) hate government bureaucracy. I suppose I assumed government collects all that information anyway just from the customs people checking all imports and exports, but now that you mention it, I don't know.
2. Yes, like Don Boudreaux likes to say, my trade balance with my employer is huge in one direction, and the multiple balances with every store I shop at are smaller and the opposite direction. Trade balances with individual countries are meaningless in any global economy with more than two countries. I remember someone breaking down all the trade balances involved in making an iPhone, all the chips made in different countries and imported by China or Vietnam or wherever it was assembled at the time, then imported at the end by the US.
I can only say that it's the kind of idea which has great surface appeal. Surely there must be some way to aggregate them all! Except then you're punishing all countries for the high tariffs of a few. I'd give Trump the same benefit of doubt except he thinks he can grow foreign investment while reducing the trade deficit.
I have no difficulty interacting with transexuals. I do have difficulty with any who insist on policing my speech or thoughts. I strive to be polite to all, but no one has a right to force me to adopt their beliefs.
You're answer to "This raises the question of whether a tariff is more costly per dollar raised than, say, an income tax." kind of misses the point. Yes, tariffs aren't going to replace all income taxes; but the question is if the marginal dollar of tariffs is more or less economically distortionary then the marginal dollar of income tax or the marginal dollar of debt (those being the most likely tradeoffs). It is quite unlikely that all of these are perfectly balanced in their impact.
Sure the marginal dollar of spending is almost certainly less valuable (and perhaps there are other extant taxes that are worse or potential taxes that are better) but those three are probably what's in the range of politically feasible (DOGE seems unlikely to balance the budget).
It seems the only real answer to stop the damage taxes cause is to reduce government spending. It's frustrating to read reports about how government spending is saving babies but no mention of the real economic harm and thus lives lost from taxation.
Is "carellizes" in your third paragraph a typo? I can't find any other instances of that spelling in google, but I'm not sure what you might have intended instead.
One example of the dehomogenizing effect of political issues that don't fit neatly into the existing political landscape is how anti-immigration sentiment (where both right- and left-wing parties were pro-immigration) lead to the previously marginal Sverigedemokraterna becoming one of the major parties in Sweden, with members and voters coming from different parties and having diverse opinions on the issues that had previously divided left and right, ranging from laissez-faire liberals to social democrats, only united by the one issue that drew them to the party. This resulted in less ideological polarization, as the new party was largely centrist, but greater affective polarization, as the new party was seen as unclean (racist).
Interesting. But it gave existing left and right a common enemy.
Do you think the result was a more or less polarized society? Did people become more or less likely to avoid interacting with people whose politics, left/right or pro/anti immigration, disagreed with theirs?
Yes, and the common enemy did even lead to a formal left–right alliance, but that broke down after a couple of elections during which the new party continued to grow stronger, and then that party ended up becoming a peripheral part of the right bloc, with one formerly right-bloc party moving to the left bloc as a result, so now the left bloc contains both the party that until the fall of the USSR referred to itself as communist and the party most closely associated with libertarianism – an uneasy alliance if there ever was one.
I think many would describe it as increased polarization, but I think ostracism is a better word, as it has largely been one-sided, people shunning those associated with Sverigedemokraterna. And it has been much more about association with the party than about actual political positions, as now all three major parties profess to being in favour of strict policies on immigration.
Throwing an apple in with your tariff/income tax oranges; Applying Sturgeon's Law, 90% of every thing is crud; Hence assuming, not at all unreasonably that 90% of the income tax we pay is misused, misappropriated, stolen, lost, wasted or pocketed each time it changes hands, thus giving graft the shaft would drop a zero off both the funds needed for government to run and the tax paid to do so.
Drop a zero and tariff's might not be so terrible. ;-)
& my assumption of at least 90% wasted is not completely facetious.
"One answer is to have government focus more on issues that don’t fit the left/right pattern, giving parties an incentive to sort membership on different criteria."
Could you explain on which issues you would have government put more focus?
But it seems to me there is an asymmetry (albeit no a perfect one) that people on the broad left want government to do more, while at least a big chunk of us on the broad right just want government to do less.
And even a decent chunk of the MAGA populist right that wants government to do more *mostly* wants it to undo what the left has done by means of government.
Meaning that even when they are not with we libertarian-type philosophically, they are indeed with us practically.
"The third, and to me most interesting, point raised was the idea of setting tariffs collected equal to tariffs paid for each country, which I had offered as a possible definition of retaliatory tariffs, and then transferring the money collected from foreign exporters to US exporters to compensate them for the money they paid in that country’s tariffs. The result, from the standpoint of the US exporters, would be to eliminate the tariff they were being charged."
This is interesting indeed. On its own, such a policy makes the country pursuing it worse off: Both sides have market power. So, as discussed before, an unretaliated against not too large tariff makes us better off. Now, we give the cash -- paid for by domestic residents and foreign residents -- to our exporters. That reduces our terms-of-trade and makes us worse off.
But now let foreigners employ the same policy. That reduces their terms of trade and makes them just as well off as in the absence of their tariffs, and makes us just as well off as without anybody's tariffs. You have just discovered a novel way of getting to world wide free trade!
Of course the real distributional consequences of free trade remain, so the political obstacles to such a policy remain in principle. The rhetoric of the trade policy discussion may cover that up, however.
Travel was slower. City to city within Greece wouldn't change those things much. Few ancient Greeks got farther than that, and many who did traveled to Greek colonies.
Interesting thesis ... but culture and society were much simpler then too. They didn't have iPhone and Android debates, worry about eating pizza with knife and fork, or have to recycle glass and plastic separately.
Religion, food, and clothing didn't change much at all over the short distances people traveled on foot. I bet 95% or 99% of people never traveled more than they could walk in half a day, unless they were going to war. Merchant sailors probably saw some changes, but they expected them, that was why they were sailing to foreign places, to trade. No point in trading for what you already have.
When I first heard the idea of using import tariffs to subsidize export tariffs, it seemed so blindingly obvious that it has astonished me how seldom I have seen it again. It eliminates the greed factor of government for ever more revenue, it lays claim to the high moral ground of simply undoing an injustice, and it sends a real clear signal to trading partners. It also seems to me relatively simple to calculate -- just tote up the tariff bills paid by American exporters to each country, tote up the total imports from those same countries, and there's your rate. It does assume imports and exports are close enough to be relevant, which is probably not always true. Maybe that makes it unworkable. But it comes up so seldom that I don't know if it is unworkable, if government bureaucrats don't want to forgo that revenue, or if it just doesn't satisfy that urge to meddle and manipulate.
The two biggest problems I see (quickly, haven't heard this argument before just now) are:
1: This would require a whole new government bureaucracy to oversee not just tariffs in but collect data on tariffs paid and distribute money appropriately. If I sell some stuff as a small business or individual to a guy across the Atlantic and have to pay very small import rates, is it worth it to register to get that back? If not, do larger companies get a transfer from me and those like me because they sell enough to be worth registering and getting that %?
2: The real killer seems to be the fact that exports and imports are not 1:1 by country. That is, Americans might pay 1 million in tariffs on imports from Country A but ship little enough that tariffs collected by Country A on US imports are just 0.25 million, while Country B collects 0.5 million in tariffs while we tax their imports to a tune of 0.5 million. So... now what? Do we use the 1.5 million in tariffs collected by US gov to give 0.25MM to exporters to Country A and 0.5MM to those for B, leaving 0.75 MM left over, or give all the tariff revenue back in a ratio, so 0.5 to exporters to A and 1 to B?
It matters because (unlike my quick example) if there are odd ratios the incentives get wonky fast. If it is by ratio sent to a country, maybe I want to do all my exporting there then re-export to other countries. Maybe I don't want to export to a country we don't import from at all, since the tariff revenue I would be entitled to would be X% of 0 dollars. On the other hand if it isn't a ratio of tariffs collected but tariffs paid, maybe the ideal move is to export to the highest tariff country I can find with the lowest exports to the US.
It still might not be a terrible idea, but it does seem like the base model is assuming there is the US and the Rest as the only two parts, and ignores the questions of how that revenue gets divided up.
I hadn't thought about your second point. The obvious solution is to pool tariffs collected from all countries, allocate from the pool to reimburse exporters for tariffs they paid. If there isn't enough give every exporter the same proportional refund. If there is more than enough, treat the excess as revenue.
I'm in over my head here, still don't always manage to think like an economist. Thus my interest in automatic tit-for-tat tariffs which assumes every country's imports and exports balance.
So my ignorant question -- wouldn't this pooling eliminate the tit-for-tat aspect which is supposed to encourage other countries to lower their tariffs?
I wasn't thinking through the implications of the initial proposal, which would result in the same amount collected from and paid by each country.
Yea, I would have to do the math for a bit, but I think you are on the right track. A country with high tariffs would have fewer imports because of the tax on their citizens, but exporters could mitigate that by lowering prices and getting their revenue through the tariff pay back. It seems like domestic importers, whether of finished or intermediate goods, would really take the biggest hit if their imports far exceed their exports. I suppose that's kind of the point in the end. The shenanigans people would try to mess with the payment scheme would be interesting to see.
1. I hadn't thought about the bureaucracy problem, which is funny considering how much I (claim to) hate government bureaucracy. I suppose I assumed government collects all that information anyway just from the customs people checking all imports and exports, but now that you mention it, I don't know.
2. Yes, like Don Boudreaux likes to say, my trade balance with my employer is huge in one direction, and the multiple balances with every store I shop at are smaller and the opposite direction. Trade balances with individual countries are meaningless in any global economy with more than two countries. I remember someone breaking down all the trade balances involved in making an iPhone, all the chips made in different countries and imported by China or Vietnam or wherever it was assembled at the time, then imported at the end by the US.
I can only say that it's the kind of idea which has great surface appeal. Surely there must be some way to aggregate them all! Except then you're punishing all countries for the high tariffs of a few. I'd give Trump the same benefit of doubt except he thinks he can grow foreign investment while reducing the trade deficit.
I hope it is obvious that I was not recommending the policy, just argued that if Trump's views were what they appear to be he should like it.
I have no difficulty interacting with transexuals. I do have difficulty with any who insist on policing my speech or thoughts. I strive to be polite to all, but no one has a right to force me to adopt their beliefs.
You're answer to "This raises the question of whether a tariff is more costly per dollar raised than, say, an income tax." kind of misses the point. Yes, tariffs aren't going to replace all income taxes; but the question is if the marginal dollar of tariffs is more or less economically distortionary then the marginal dollar of income tax or the marginal dollar of debt (those being the most likely tradeoffs). It is quite unlikely that all of these are perfectly balanced in their impact.
Sure the marginal dollar of spending is almost certainly less valuable (and perhaps there are other extant taxes that are worse or potential taxes that are better) but those three are probably what's in the range of politically feasible (DOGE seems unlikely to balance the budget).
It seems the only real answer to stop the damage taxes cause is to reduce government spending. It's frustrating to read reports about how government spending is saving babies but no mention of the real economic harm and thus lives lost from taxation.
Is "carellizes" in your third paragraph a typo? I can't find any other instances of that spelling in google, but I'm not sure what you might have intended instead.
One example of the dehomogenizing effect of political issues that don't fit neatly into the existing political landscape is how anti-immigration sentiment (where both right- and left-wing parties were pro-immigration) lead to the previously marginal Sverigedemokraterna becoming one of the major parties in Sweden, with members and voters coming from different parties and having diverse opinions on the issues that had previously divided left and right, ranging from laissez-faire liberals to social democrats, only united by the one issue that drew them to the party. This resulted in less ideological polarization, as the new party was largely centrist, but greater affective polarization, as the new party was seen as unclean (racist).
Interesting. But it gave existing left and right a common enemy.
Do you think the result was a more or less polarized society? Did people become more or less likely to avoid interacting with people whose politics, left/right or pro/anti immigration, disagreed with theirs?
Yes, and the common enemy did even lead to a formal left–right alliance, but that broke down after a couple of elections during which the new party continued to grow stronger, and then that party ended up becoming a peripheral part of the right bloc, with one formerly right-bloc party moving to the left bloc as a result, so now the left bloc contains both the party that until the fall of the USSR referred to itself as communist and the party most closely associated with libertarianism – an uneasy alliance if there ever was one.
I think many would describe it as increased polarization, but I think ostracism is a better word, as it has largely been one-sided, people shunning those associated with Sverigedemokraterna. And it has been much more about association with the party than about actual political positions, as now all three major parties profess to being in favour of strict policies on immigration.
Thank you
Throwing an apple in with your tariff/income tax oranges; Applying Sturgeon's Law, 90% of every thing is crud; Hence assuming, not at all unreasonably that 90% of the income tax we pay is misused, misappropriated, stolen, lost, wasted or pocketed each time it changes hands, thus giving graft the shaft would drop a zero off both the funds needed for government to run and the tax paid to do so.
Drop a zero and tariff's might not be so terrible. ;-)
& my assumption of at least 90% wasted is not completely facetious.
It sounds as though you assume that the net effect of a dollar of government spending is positive, even if only $.10.
"One answer is to have government focus more on issues that don’t fit the left/right pattern, giving parties an incentive to sort membership on different criteria."
Could you explain on which issues you would have government put more focus?
But it seems to me there is an asymmetry (albeit no a perfect one) that people on the broad left want government to do more, while at least a big chunk of us on the broad right just want government to do less.
And even a decent chunk of the MAGA populist right that wants government to do more *mostly* wants it to undo what the left has done by means of government.
Meaning that even when they are not with we libertarian-type philosophically, they are indeed with us practically.
I don't want government to exist, but it does. I was speculating about ways of making political parties less ideologically homogeneous.
"The third, and to me most interesting, point raised was the idea of setting tariffs collected equal to tariffs paid for each country, which I had offered as a possible definition of retaliatory tariffs, and then transferring the money collected from foreign exporters to US exporters to compensate them for the money they paid in that country’s tariffs. The result, from the standpoint of the US exporters, would be to eliminate the tariff they were being charged."
This is interesting indeed. On its own, such a policy makes the country pursuing it worse off: Both sides have market power. So, as discussed before, an unretaliated against not too large tariff makes us better off. Now, we give the cash -- paid for by domestic residents and foreign residents -- to our exporters. That reduces our terms-of-trade and makes us worse off.
But now let foreigners employ the same policy. That reduces their terms of trade and makes them just as well off as in the absence of their tariffs, and makes us just as well off as without anybody's tariffs. You have just discovered a novel way of getting to world wide free trade!
Of course the real distributional consequences of free trade remain, so the political obstacles to such a policy remain in principle. The rhetoric of the trade policy discussion may cover that up, however.
If anything, cultural differences were even larger in the past.
What makes you say that?
Going from city to city in the ancient world was changing religions, food, clothing, everything... nowadays it isn't.
Travel was slower. City to city within Greece wouldn't change those things much. Few ancient Greeks got farther than that, and many who did traveled to Greek colonies.
That might be true, not well read enough on the ancient world to comment
I suspect that the populations in each region would be more homogeneous than the populations today.
Interesting thesis ... but culture and society were much simpler then too. They didn't have iPhone and Android debates, worry about eating pizza with knife and fork, or have to recycle glass and plastic separately.
Religion, food, and clothing didn't change much at all over the short distances people traveled on foot. I bet 95% or 99% of people never traveled more than they could walk in half a day, unless they were going to war. Merchant sailors probably saw some changes, but they expected them, that was why they were sailing to foreign places, to trade. No point in trading for what you already have.