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The Dictatorship

What Trump’s tariffs mean for the price of your shirts

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What Trump’s tariffs mean for the price of your shirts

On Saturday, President Donald Trump is expected to announce new tariffs on three of our biggest trading partners: 25% on all imports from Canada and Mexico and 10% on China. The exact timeline for implementation is up in the air. But if — or when — they go into effect, what will that mean for you?

Given the amount of misinformation flying around, any article about tariffs should start with the basic facts of the case. Only then can we talk about what the Trump administration might be about to do in this space, perhaps as soon as this weekend, along with the economic and political implications.

The first person to pay the tax is not necessarily the last

Tariffs are a tax on imports (and if there’s any doubt whether tariffs are really taxes, note that Trump wants to change the nameof these import-tax collectors to the “External Revenue Service”). That tax is paid by the company importing the good when that good enters the country. So, when an American retailer imports shirts from China, under Trump’s tariffs that company pays a tax that could be as high as 35% when that container of shirts hits the U.S. port. The tariff is collected by the U.S. Customs and Border Protection agents at over 300 ports of entry across the land.

What happens next is a matter of empirical economics. A fundamental concept in taxation — and tariffs, again, are a tax — is that the first person to pay the tax is not necessarily the last.

Let’s start by thinking through whocouldultimately pay the tax. That would be a) the importing company, b) the exporting company, c) the consumer who ultimately buys the shirt, which, due to the tariff, is now more expensive (a fourth channel can occur through exchange rates, wherein a stronger dollar can offset part of the tax, but this effect tends to be small).

So, who eats the tariff: the importer, the exporter, or…you (the consumer)? I’m sorry to report that the research suggests it’s you. Most of the tariff gets passed through into higher consumer prices. Perhaps the clearest example of this was when Trump imposed one of his first tariffs back in 2018 on imported washing machines. The price of both imported and domestic washing machines subsequently increased, by about $86 per unit according to one estimate. Even the price of dryers, which weren’t tariffed but are often sold with washers, also rose!

Trump claims that the exporter pays the tariff, by lowering the price they charge to the importer. But a moment’s thought shows this argument to be both empirically unfounded and, well, weird. The whole point of Trump’s tariffs is to rebuild domestic manufacturing by making imports more expensive. But if the exporter eats the cost, then the U.S. price doesn’t change, and MAGA’s mission is decidedlynotaccomplished!

At this point, you must be thinking, ‘Why would any country ever impose a tariff?’

How much might consumers get dinged by these tariffs? That depends on details that are still dribbling out (e.g., will Canadian oil exports be exempted?). A widely cited studyfrom the Peterson Institute predicts that Trump’s most sweeping plans would cost households an average of $2,600. My own estimate is that 25% tariffs on all imports out of Canada and Mexico and 10% on China would cost the average household $1,500-$2,000.

There’s yet another reason why tariffs won’t help American producers: about 45% of what we import are inputs, called “intermediate goods,” that go into American products. In Trump’s first term, for example, his administration introduced a tariff on imported aluminum, purportedly to protect U.S. aluminum producers. But the biggest U.S. producer of aluminum, Alcoa, which one might expect would be excited about the new policy, asked for (and received) an exemption from the tariff! It turns out that they import inputs from Canada.

The last reason Trumpian tariffs don’t work is because countries retaliate, raising their own tariff on their imports from the U.S. That’s one reason tariffs tend not to have much impact on the trade balance. They reduce both importsandexports.

At this point, you must be thinking, “why would any country ever impose a tariff?” In fact, narrowly targeted tariffs can be a fast and effective tool to block unfair trade in a particular product, especially when a trading partner is “dumping” a product (i.e., selling below cost to grab market share). We’ve successfully used these sorts of tariffs on everything from chicken parts to tires.

So, if I and every other economist, and now you, know all of this, what the heck is Trump and his team thinking?

That’s a trick question—who knows what these folks are thinking? But let’s just say, for the point of argument, that especially since Trump ran on lowering prices, making things more expensive isn’t really his top goal. And even if he doesn’t know or believe the price effects documented above, his economists do.

I strongly suspect that what’s probably going on here has a lot more to do with politics than economics.

One conclusion is that this is all theatre: threats to extract other goals from trading partners. We saw a microcosm of this last weekend in a dustup with Colombia. But in the cases of Canada and Mexico, this explanation is confusing, because it’s not clear what he’d wants from them. Yes, Trump claims he wants them to stop immigrant and fentanyl flows, but both countries have already successfully intervened to reduce these flows.

I strongly suspect that what’s probably going on here has a lot more to do with politics than economics. The president has an extremely acute radar for policies that resonate with his voters and he believes tariffs are one of those policies. He may be right: one studyof the trade war between U.S. and China during Trump’s first term concluded that people “more exposed to import tariffs became less likely to identify as Democrats, more likely to vote to reelect Donald Trump in 2020, and more likely to elect Republicans to Congress.”

On the other hand, the president may be underestimating the extent to which people have had more than enough of inflation. A new Quinnipiac pollfinds that more voters (48%) believe tariffs will hurt the economy, than the 42% that think they’ll help.

As is characteristic of this moment, we’re left with a lot of uncertainty about a presidential fixation that even he may know is a bad idea right now. We’ll soon know whether he’s willing to hit Americans with a painful tax increase, whether this is all just transactional Trumpian noise, or some combination of both.

Jared Bernstein

Jared Bernstein was chair of President Joe Biden’s Council of Economic Advisers.

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The Dictatorship

NEXT: MAGA VOWS TO SILENCE FOES

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NEXT: MAGA VOWS TO SILENCE FOES

WASHINGTON (AP) — President Donald Trump is escalating threats to crack down on what he describes as the “radical left” following Charlie Kirk’s assassinationstirring fears that his administration is trying to harness outrage over the killing to suppress political opposition.

Without establishing any link to last week’s shooting, the Republican president and members of his administration have discussed classifying some groups as domestic terrorists, ordering racketeering investigations and revoking tax-exempt status for progressive nonprofits. The White House pointed to Indivisible, a progressive activist network, and the Open Society Foundations, founded by George Soros, as potential subjects of scrutiny.

Although administration officials insist that their focus is preventing violence, critics see an extension of Trump’s campaign of retribution against his political enemies and an erosion of free speech rights. Any moves to weaken liberal groups could also shift the political landscape ahead of next year’s midterm elections, which will determine control of Congress and statehouses across the country.

“The radical left has done tremendous damage to the country,” Trump told reporters on Tuesday morning when leaving for a state visit to the United Kingdom. “But we’re fixing it.”

Trump has sometimes made similar threats without following through. But now there’s renewed interest fueled by anger over the killing of Kirk, a conservative activist who was a prominent supporter of Trump and friends with many of his advisers.

More than 100 nonprofit leaders, representing organizations including the Ford Foundation, the Omidyar Network and the MacArthur Foundation, released a joint letter saying “we reject attempts to exploit political violence to mischaracterize our good work or restrict our fundamental freedoms.”

“Attempts to silence speech, criminalize opposing viewpoints, and misrepresent and limit charitable giving undermine our democracy and harm all Americans,” they wrote.

White House blames ‘terrorist networks’

Authorities said they believe the suspect in Kirk’s assassination acted alone, and they charged him with murder on Tuesday.

However, administration officials have repeatedly made sweeping statements about the need for broader investigations and punishments related to Kirk’s death.

Attorney General Pam Bondi blamed “left-wing radicals” for the shooting and said “they will be held accountable.” Stephen Miller, a top policy adviser, said there was an “organized campaign that led to this assassination.”

Miller’s comments came during a conversation with Vice President JD Vance, who was guest-hosting Kirk’s talk show from his ceremonial office in the White House on Monday.

Miller said he was feeling “focused, righteous anger,” and “we are going to channel all of the anger” as they work to “uproot and dismantle these terrorist networks” by using “every resource we have.”

Vance blamed “crazies on the far left” for saying the White House would “go after constitutionally protected speech.” Instead, he said, “We’re going to go after the NGO network that foments, facilitates and engages in violence.”

Asked for examples, the White House pointed to demonstrations where police officers and federal agents have been injured, as well as the distribution of goggles and face masks during protests over immigration enforcement in Los Angeles.

There was also a report that Indivisible offered to reimburse people who gathered at Tesla dealerships to oppose Elon Musk’s leadership of the Department of Government Efficiency. Sometimes cars were later vandalized.

Indivisible’s leadership has said “political violence is a cancer on democracy” and said that their own organization has “been threatened by right-wingers all year.”

Nonprofits brace for impact

Trump’s executive actions have rattled nonprofit groups with attempts to limit their work or freeze federal funding, but more aggressive proposals to revoke tax-exempt status never materialized.

Now the mood has darkened as nonprofits recruit lawyers and bolster the security of their offices and staff.

“It’s a heightened atmosphere in the wake of political violence, and organizations who fear they might be unjustly targeted in its wake are making sure that they are ready,” said Lisa Gilbert, co-president of the government watchdog group Public Citizen.

Trump made retribution against political enemies a cornerstone of his comeback campaign, and he’s mobilized the federal government to reshape law firms, universities and other traditionally independent institutions. He also ordered an investigation into ActBluean online liberal fundraising platform.

Some nonprofits expect the administration to focus on prominent funders like Soros, a liberal billionaire who has been a conservative target for years, to send a chill through the donor community.

Trump recently said Soros should face a racketeering investigation, though he didn’t make any specific allegations. The Open Society Foundations condemned violence and Kirk’s assassination in a statement and said “it is disgraceful to use this tragedy for political ends to dangerously divide Americans and attack the First Amendment.”

Sen. Chris Murphy, a Democrat from Connecticut, wrote on social media that “the murder of Charlie Kirk could have united Americans to confront political violence” but “Trump and his anti-democratic radicals look to be readying a campaign to destroy dissent.”

White House spokeswoman Abigail Jackson said “it is disingenuous and false for Democrats to say administration actions are about political speech.” She said the goal is to “target those committing criminal acts and hold them accountable.”

Republicans back Trump’s calls for investigations

Trump’s concerns about political violence are noticeably partisan. He described people who rioted at the U.S. Capitol on Jan. 6, 2021, as “hostages” and “patriots,” and he pardoned 1,500 of them on his first day back in the Oval Office. He also mocked House Speaker Emerita Nancy Pelosi after an attack on her husband.

When Trump condemned Kirk’s killing in a video message last week, he mentioned several examples of “radical left political violence” but ignored attacks on Democrats.

Asked on Monday about the killing of Minnesota state Rep. Melissa Hortman over the summer, Trump said “I’m not familiar” with the case.

“Trump shrugs at right-wing political violence,” said Ezra Levin, the co-executive director of Indivisible, in a newsletter.

Some conservative commentators have cheered on a potential crackdown. Laura Loomer, a conspiracy theorist with a long record of bigoted comments, said “let’s shut the left down.” She also said that she wants Trump “to be the ‘dictator’ the left thinks he is.”

Katie Miller, the wife of Stephen Miller and a former administration spokeswoman, asked Bondi whether there would be “more law enforcement going after these groups” and “putting cuffs on people.”

“We will absolutely target you, go after you, if you are targeting anyone with hate speech,” Bondi said. “And that’s across the aisle.”

Her comments sparked a backlash from across the political spectrum, since even hate speech is generally considered to be protected under the First Amendment. Bondi was more circumspect on social media on Tuesday morning, saying they would focus on “hate speech that crosses the line into threats of violence.”

Trump is getting more support from Republicans in Congress. Sen. Ted Cruz of Texas and others proposed legislation that would enable the Justice Department to use racketeering laws, originally envisioned to combat organized crime, to prosecute violent protesters and the groups that support them.

Rep. Chip Roy of Texas wants the House to create a special committee to investigate the nonprofit groups, saying “we must follow the money to identify the perpetrators of the coordinated anti-American assaults being carried out against us.”

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Associated Press writer Bill Barrow in Atlanta contributed to this report.

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The Dictatorship

Japan’s exports to the US continue to fall, hit by Trump’s tariffs

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Japan’s exports to the US continue to fall, hit by Trump’s tariffs

TOKYO (AP) — Japan’s exports to the United States plummeted 13.8% in August compared to the same month the previous year, marking the fifth straight month of declines, as auto exports were hit by President Donald Trump’s tariffs.

The Finance Ministry data released Wednesday showed the rate of the drop in exports to the U.S. compared to the previous year worsened from a 10.1% slip in July.

U.S. tariffs on Japanese automobiles and auto parts decreased from 27.5%, the amount Trump initially levied, to 15% this week, but that’s still higher than the original 2.5%.

Wednesday’s data reflect the month of August, when the tariffs were higher. Japan’s overall exports were little changed, slipping 0.1%, as exports grew to Europe and the Middle East.

The provisional data for August showed Japan’s imports from the world fell 5.2% from a year ago. Imports from China grew 2.1%, while exports to China fell 0.5%. Imports from the U.S. grew 11.6%.

Exports to the world grew in food, gaining 18%, as well as in ships, growing by nearly 25%. Imports grew in computers, adding nearly 35% on-year, while aircraft rose 21%.

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Yuri Kageyama is on Threads: https://www.threads.com/@yurikageyama

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The Dictatorship

The Fed cuts interest rates by quarter-point after Trump’s pressure campaign

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The Fed cuts interest rates by quarter-point after Trump’s pressure campaign

The Federal Reserve on Wednesday cut interest rates for the first time this yearwith policymakers opting for an expected quarter-point cut to the Fed’s benchmark rate.

The announcement comes as President Donald Trump has been pushing for rate cuts while attempting to assert more control over the historically independent central bank. He has sought to fire Biden appointee Lisa Cook from the Federal Reserve Board of Governors, a move that an appeals court temporarily blocked Monday night but could ultimately be resolved soon at the Supreme Court. The Trump administration had argued for kicking her off the board ahead of the Federal Open Market Committee’s two-day meeting that started Tuesday, at which rates and other important matters were discussed.

The Republican-led Senate just this week confirmed a new board governor appointed by Trump, Stephen Miran, who has said he would not resign from his economic adviser position in the Trump White House. Miran replaced Biden appointee Adriana Kugler, who abruptly resigned last month before her term’s expiration in January.

Another”https://www.federalreserve.gov/newsevents/pressreleases/monetary20250917a.htm” target=”_blank”>disagreed with Wednesday’s actionas he preferred a larger cut.

The New York Times previously reported that the projected quarter-point rate cut “won’t have a significant effect on consumers’ financial lives, but it may provide a tiny bit of relief for people carrying credit card debt, while savers may see slightly less generous yields.”

This is a developing story. Check back for updates.

Jordan Rubin

Jordan Rubin is the Deadline: Legal Blog writer. He was a prosecutor for the New York County District Attorney’s Office in Manhattan and is the author of “Bizarro,” a book about the secret war on synthetic drugs. Before he joined BLN, he was a legal reporter for Bloomberg Law.

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