Trump's crazy guy is really

"Trump's crazy guy is really in a tariff war. People in the U.S. who took a picture of Trump should be caught in a high price." The sentiment is so strong that I have no choice but to use it.

Trump also had a history of waging an unusual tariff war against China during the first term of his presidency. Since that was already a few years ago, research on him was conducted. The results are somewhat surprising when looking at a paper published in October 2019 by the National Economic Research Institute (NBER). Trump's tariff war did not have a significant impact on the prices of imported goods.

According to the study, tariffs imposed by the U.S. on Chinese products from 2018 to 2019 were almost completely reflected by U.S. importers. In other words, the cost of tariffs has been passed on to importers. (Important: Chinese exporters have not lowered their prices.)

For example, large retailers in the United States responded by reducing margins rather than reflecting the increased costs of tariffs on consumer prices. According to the study, for products with 20% tariffs, the retail price increase rate was only around 1% on average.

Nor was it a one-sided loss. U.S. retailers avoided the effects of tariffs by sourcing products from countries other than China, and possible items were minimized by pre-purchasing. And because consumer prices were much more affected by exchange rate fluctuations than tariffs, they were simply buried.

Then is this really not adversely affected? It is not. According to another study by the Fed, if the government implements random policies such as imposing high tariffs, it has the effect of temporarily suspending corporate investment in the industry. Because of the high uncertainty, investment dries up.

So, in the long run, companies in the industry will not make money, and investment will be delayed, causing them to naturally fall into a recession. However, as many expect, it is rather unlikely that US prices will skyrocket. (Very few investment experts point out the possibility of deflation if the tariff war is prolonged, and I think that's more likely. Trump does not want to use that as an excuse to lower interest rates. Of course, he does not agree with the premise that the tariff war will be prolonged.)

Then why are economists predicting high prices when it comes to newspapers and broadcasts? Everyone says that, and what is that? Because it fits a little cognitive logic. Even from a person who doesn't know the economy, I think it's somehow like that. It's "safe" to express that opinion at the moment. In reality, however, even the Fed, which governs U.S. prices, does not assert that. Austin Goolsbee, president of the Federal Reserve Bank of Chicago, has explained on several occasions that tariffs raise prices, but their effects are temporary and do not cause sustained inflation. He is the governor of the Federal Reserve of Chicago, the region most protected by Trump's tariffs. He has a very good understanding of the automobile industry.

Of course, the pattern of the 2018 tariff war against China and the 25% tariff on Mexico and Canada that Trump triggered today may be slightly different. Compared to China, the trade distance is shorter, and because of that, it is much less likely to detour procurement to other countries. However, I think that two countries, especially Mexico, will be hit harder by it than the United States. Mexico and Canada will probably lower their export prices, even though it wasn't China.

What matters is not the people who took pictures of Trump being overheard. It will be what Trump gets out of this mess. If he gets something, the next country that will take care of similar loot will be Korea.

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