Tariff Tantrum Scenario
The situation is unusual in that it’s entirely in Trump’s hands. The president can usually influence, but rarely control, economic challenges — a bank collapse, a housing bubble, a pandemic. In the current market rout, Trump is the cause. He imposed the tariffs, and he decides when they go.
…
Unlike other complex pieces of policy — income tax changes
... See moreA recent paper by two economists at the Federal Reserve found that Mr Trump’s targeted tariffs did not work as intended. Looking at manufacturing industries such as household appliances and car parts, they found a small jobs boost from the import protection conferred by tariffs. But this was more than offset by drags from both retaliatory tariffs a... See more
The Economist • How America Learned to Love Tariffs
These tariffs would still come with domestic risks. But for economists to suggest that the effect of tariffs in 1930 must be the same as today only shows how muddled most economists are about trade. The real lesson of Smoot-Hawley is not that the United States cannot benefit from tariffs, but rather that persistent surplus economies should not impl
... See moreMichael Pettis • How Tariffs Can Help America
countries and even regions are subject to market-related risks and shocks that can disrupt their behavior, just as companies are, and these risks are transmitted in the same way: through their capital structures. In fact any economic entity’s capital structure can be seen as a sort of volatility machine, one of whose main functions is precisely to
... See moreMichael Pettis • The Volatility Machine
They occur instead for two other, related, reasons. First, emerging market borrowers and investors have consistently underestimated the source and magnitude of volatility in emerging financial markets. Second, perhaps as a consequence, borrowers and investors have permitted and even encouraged sovereigns to put into place capital structures that sy
... See more