Trump tariffs based on massive error, conservative think tank says

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Let It Burn!




Source: United States Trade Representative; Graphic: Kavya Beheraj/Axios
The formula used by the Trump administration to levy reciprocal tariffs contains a serious math error that over-inflates the impact by about a factor of four, economists at the American Enterprise Institute said.

Why it matters: The conservative think tank says the error led to tariff rates massively higher than they should have been to achieve the goals the administration sought.

Catch up quick: After announcing the tariffs last Wednesday the Trump administration released a complicated-looking formula, which it said was developed with the Council of Economic Advisers, used to determine how to set the rates.

  • It turns out the formula is simply the U.S. trade deficit with each country, divided by the value of the goods the U.S. imports from that country.
  • Two other variables in the equation cancel each other out, rendering them effectively meaningless.
Yes, but: AEI's economists Kevin Corinth and Stan Veuger say they shouldn't cancel each other out, because Trump's team used the wrong level for one of them.

How it works: One of the variables relates to the "elasticity of import prices with respect to tariffs," which is to say, how much import prices move as tariffs are applied.

  • The administration's calculation assigns a value of 0.25 to that variable, which in the math of price elasticity suggests most of the tariff impact does not hit the import price of an item as it enters the country.
  • But the AEI paper says they used the wrong value for import prices, and instead used the value for a retail price, or what happens to the final consumer price after the good is imported and distributed.
  • They argue, instead, that the right value is 0.945 — in other words, almost all of the tariff hits the import price of a good as it's brought into the country.
  • "It is inconsistent to multiply the elasticity of import demand with respect to import prices by the elasticity of retail prices with respect to tariffs," the authors write.



For example: Corinth and Veuger write that if the tariffs had been calculated correctly, with the same ultimate goals in mind but using the right kind of elasticity figure, the levy on a country like Vietnam would have been 12.2% and not 46%.

The intrigue: In making the case for their approach, including their formula, the Office of the U.S. Trade Representative cites research on price elasticity by the Harvard Business School professor Alberto Cavallo.

  • Cavallo himself says it's not clear the USTR used his findings properly.
For the record: The White House did not immediately return a request for comment on AEI's assertion.

The bottom line: "Now, our view is that the formula the administration relied on has no foundation in either economic theory or trade law," Corinth and Veuger write.

  • "But if we are going to pretend that it is a sound basis for US trade policy, we should at least be allowed to expect that the relevant White House officials do their calculations carefully."
 

Trump tariffs based on massive error, conservative think tank says​


I'm beginning to detect an element of fear in the posts by ardent Trumpists- as if they're preparing a safe haven for themselves should the antics of their Orange Orator result in the worst man-made catastrophe in the , short, history of the United States.
 




Source: United States Trade Representative; Graphic: Kavya Beheraj/Axios
The formula used by the Trump administration to levy reciprocal tariffs contains a serious math error that over-inflates the impact by about a factor of four, economists at the American Enterprise Institute said.

Why it matters: The conservative think tank says the error led to tariff rates massively higher than they should have been to achieve the goals the administration sought.

Catch up quick: After announcing the tariffs last Wednesday the Trump administration released a complicated-looking formula, which it said was developed with the Council of Economic Advisers, used to determine how to set the rates.

  • It turns out the formula is simply the U.S. trade deficit with each country, divided by the value of the goods the U.S. imports from that country.
  • Two other variables in the equation cancel each other out, rendering them effectively meaningless.
Yes, but: AEI's economists Kevin Corinth and Stan Veuger say they shouldn't cancel each other out, because Trump's team used the wrong level for one of them.

How it works: One of the variables relates to the "elasticity of import prices with respect to tariffs," which is to say, how much import prices move as tariffs are applied.

  • The administration's calculation assigns a value of 0.25 to that variable, which in the math of price elasticity suggests most of the tariff impact does not hit the import price of an item as it enters the country.
  • But the AEI paper says they used the wrong value for import prices, and instead used the value for a retail price, or what happens to the final consumer price after the good is imported and distributed.
  • They argue, instead, that the right value is 0.945 — in other words, almost all of the tariff hits the import price of a good as it's brought into the country.
  • "It is inconsistent to multiply the elasticity of import demand with respect to import prices by the elasticity of retail prices with respect to tariffs," the authors write.



For example: Corinth and Veuger write that if the tariffs had been calculated correctly, with the same ultimate goals in mind but using the right kind of elasticity figure, the levy on a country like Vietnam would have been 12.2% and not 46%.

The intrigue: In making the case for their approach, including their formula, the Office of the U.S. Trade Representative cites research on price elasticity by the Harvard Business School professor Alberto Cavallo.

  • Cavallo himself says it's not clear the USTR used his findings properly.
For the record: The White House did not immediately return a request for comment on AEI's assertion.

The bottom line: "Now, our view is that the formula the administration relied on has no foundation in either economic theory or trade law," Corinth and Veuger write.

  • "But if we are going to pretend that it is a sound basis for US trade policy, we should at least be allowed to expect that the relevant White House officials do their calculations carefully."
you mean 'globalist dumb tank'.

:truestory:
 
Given that the claimed goal of reshoring manufacturing would if it could be done take a good half a century, and likely cant be done because the people suck, so that is not the point......so what is the point?

I need that question answered before I can proceed.
 
The formula used by the Trump administration to levy reciprocal tariffs contains a serious math error that over-inflates the impact by about a factor of four, economists at the American Enterprise Institute said.
Post the formula. Let's see.

It is like taxing people on the number of vowels in their name.
How do you know? What's the formula and what is the specific error that makes it like taxing people on the number of vowels in their name.

I'm beginning to detect an element of fear in the posts by ardent Trumpists-
Really? I detecting a massive EVASION of posting this error-laden formula that I'm hearing so much about. Will you post the formula?

I also notice that you've been remaining silent on Global Warming as well. Good move.
 
Given that the claimed goal of reshoring manufacturing would if it could be done take a good half a century, and likely cant be done because the people suck, so that is not the point......so what is the point?

I need that question answered before I can proceed.

The point is the exercise of power. Trump is no economist and the American economy was not in need of the radical imposition of tariffs. Only Trump is in need and he has the platform for satisfying it.
 
How do you know? What's the formula and what is the specific error that makes it like taxing people on the number of vowels in their name.
I already posted the formula. They took the bi-lateral trade deficit as a percent of overall bi-lateral trade, and cut it in half. If that number was less than 10%, it was upped to 10%. These are not retaliatory tariffs. They are somewhat randomly created tariffs.


I detecting a massive EVASION of posting this error-laden formula that I'm hearing so much about.
I just posted it for the third time.
 
The point is the exercise of power. Trump is no economist and the American economy was not in need of the radical imposition of tariffs. Only Trump is in need and he has the platform for satisfying it.
He needs to feel powerful.

His lie about leaders begging “please, please Sir, make a deal, I’ll do anything”, was pathetic. What leader would talk that way?
 
I already posted the formula.
Nope, you did not. Just post the formula here.

They took the bi-lateral trade deficit as a percent of overall bi-lateral trade, and cut it in half.
Totally ambiguous. I could provide this vague description to 100 different people and get 100 different equations.

Post the formal, unambiguous mathematical formula. Did you notice that Albert Einstein wrote E = m*c^2 instead of writing a poem in German? Post the math, not some informal English text that is open to interpretation.
 
(Bi-lateral trade deficit)/(bi-lateral trade)/2
Is it your contention that if I ask 100 people for the respective values BI-LAT-DEF and BI-LAT-TRADE that all 100 will give me the same answers, and that I won't get 100 different values?

I don't know if you have been paying attention but Trump is being inundated with requests to renegotiate tariffs. What error in the formula are you saying caused this?
 
Is it your contention that if I ask 100 people for the respective values BI-LAT-DEF and BI-LAT-TRADE that all 100 will give me the same answers, and that I won't get 100 different values?
A lot of people cannot do simple math, so I will not guess what 100 people will do. I will say that economists were able to reverse engineer what equation trump's people used within an hour. It has nothing to do with reciprocating tariffs, and just uses random numbers.

I don't know if you have been paying attention but Trump is being inundated with requests to renegotiate tariffs. What error in the formula are you saying caused this?
trump has been inundates with a combination of threats, and offers to pay bribes. This is what you would expect when vastly increasing tariffs.

What has also happened is the people have been backing away from investment. Volatility is the enemy of investment. No one is going to invest in a 30 year factory, knowing that trump is changing his mind every few days.
 
A lot of people cannot do simple math, so I will not guess what 100 people will do.
No, no, no. Many people cannot make unambiguous statements, and apparently you are among them. If 100 people will give different answers then your "formula" is ambiguous and is invalid. You posted a formula with terms that you have not unambiguously defined.

I know, I know, you want to blame everybody else for your fuck up; you want to say that everybody should be able to read your mind and know what definition for those terms you had in mind, except the joke is on them because you never knew what you meant in the first place.

If you were honest, you would have provided a legend explaining how your variables are defined, their individual components and the kicker ... you would have provided the values for those variables with reference links to where you got the values, leaving your JPP audience to merely check your math.

Guess what. I'll give you a do-over. That's just the kind of guy I am.

I will say that [desperate, brain-dead political hacks and spin-doctors] were able to [fabricate yet another dishonesty] for what equation trump's people used within an hour.
FTFY. This explains why you have no idea what you are talking about.

It has nothing to do with reciprocating tariffs, and just uses random numbers.
At least what your desperate spin-doctors fabricated had nothing to do with any economics and instead just used random crap for the consumption of the mostly economics-defunct leftist base.

trump has been inundates with a combination of threats, and offers to pay bribes.
Spoken like you believe you are the White House Chief of Staff. How do you know all this?

This is what you would expect when vastly increasing tariffs.
You have no understanding of diplomatic negotiations. Ask me how I know.

What has also happened is the people have been backing away from investment.
Meaningless statement. Actually, you did specify that "people" acted and that part is probably correct.

Volatility is the enemy of investment.
Volatility is the key to massive wealth in a very short period of time. You suck at economics. Ask me how I know.

No one is going to invest in a 30 year factory, knowing that trump is changing his mind every few days.
Subjunctive fallacy. You don't get to claim that no one would do what many people are, in fact doing. Many companies are jumping out of the woodwork to invest in building factories in the US, based on Trump's agenda and on his tariffs.

This comment of yours is totally stupid.
 
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