Recently published tariffs were calculated using formulas that are almost universally seen by economists.
Even if this equation seemed reasonable, we found that certain calculations were based on incorrect elasticity estimates. Below is from an AEI report by Kevin Corinth and Stan Veuger.
The idea is that as tariffs rise, changes in trade deficits depend on the response to import demand for tariffs. This means that import demand depends on how import prices respond to import prices and how import prices respond to tariffs. The Trump administration assumes elasticity of import demand for import prices for 4 and elasticity of import prices for tariffs of 0.25.
However, the elasticity of import prices on tariffs should be around 1 (actually 0.945) rather than 0.25, as the Trump administration has stated. Their mistake is that they are based on their response to retail price tariffs, as opposed to import prices, as Shroud did. The articles they cited by Alberto Cavallo and his co-authors make this distinction clear. The author states, “Tax Tariffs [are] It has passed almost entirely at import prices, “finding” more complicated evidence of repeated rises in retail prices. “The elasticity of retail prices with regard to tariffs makes it contradictory to increase the elasticity of import demand with respect to imports.
Correcting the Trump administration’s mistakes will reduce tariffs that countries expect to apply to the United States by about a quarter of the level they deserve, resulting in the reduction of tariffs announced by President Trump on Wednesday with the same fractional tariffs. As shown in Table 1, tariff rates do not exceed 14% in any country. For everyone except a few countries, tariffs are exactly 10, and the floor is hampered by the Trump administration.
Cavallo’s research was gated, but tweets by Cavallo Seams confirmed their interpretations.
Unless I was misleading, the stock market rose temporarily at the start of the tariff announcement. First, because 10% tariffs appear to be uniform in all countries (there will be bailouts in the market). Stock the crash when it becomes clear that our major trading partners will face a much higher rate. So it appears that $5.4 trillion in wealth has been destroyed by mathematical errors from low-level government officials. (To be clear, there is an MSAY OHER problem with the formula, but this mistake is particularly important.)
Of course, it is likely that the administration had already decided on a high liff, and this equation was reverse engineered to provide cover. Nevertheless, this equation was used to computerize the sparse of each country, so Probablay explains why the EU was hit with a 20% tariff, China was 34% tariff, and Vietnam was hit with a 46% tariff. Mistakes have imagination!
All this reminds me of the Chinese cultural revolution in 1966-76, when adult professionals were expelled into the countryside and a key part of the economy was handed over to students.
You might argue that anyone can make math errors, and that’s true. However, in a regime that includes skilled economists, Sumone is more likely to catch a mistake when the end result appears “like a fish.” To be fair, even previous administrations had a shortage in this area. Larry Summers warned Biden people that financial overload could lead to high inflation. The current administration is even more anti-elite than the Biden administration and is particularly hostile to the views of economists. Most talented people are lying low to either Aisher has left the government or avoid being involved in the current chaos.
The administration has three options:
They can accept that the wrong numbers were used and correct the customs duties. They can admit that the wrong numbers were used, and that the formula was not the current justification of tariffs. In other words, they can admit that they lied. They can deny that the wrong numbers are used in the formula.
In the past, choice #3 would have never been possible. But we are in a new world. For just a few weeks, the administration responded to the signal chat scandal by claiming that the sophisticated spectral plans leaked to Atlantic reporters did not constitute “classified information.” Yes, the sky is green.
My wife lived through the cultural revolution. She hesitated that when she moved to America she had left all of it.
Poem Chinee When I think about the Cultural Revolution, I often remember living this scene from the 1994 Chinee film.
Then, during the epidemic and osmotic birth, her parents and husband accompany her to the county hospital. All doctors are dispatched to do hard work due to being too educated, and students remain as the only UNE in charge. Wan Erxi is able to find a doctor who oversees the birth and leaves him from confinement, but he is weak from starvation. Fugui buys seven steamed breads (Mantou) for him and his family. However, Fengxia begins to bleed and the nurse panics and admits that she doesn’t know what to do. The family and nurses seek medical advice, but he finds he eats too much and is semi-conscious. The family is helpless and the lineage dies from postpartum bleeding (severe blood loss).
