Normal reader Alan Goldenmer wrote:
You fully understand how tariffs work and know that mutual tariff calculations are submissions drawn from hats (or sub-malfunction AI tools). However, it is not clear how many additional imports models the US economy. Small businesses sold by BRS of Chinese products add value by creating jobs, and the money generated from sales is sent to federal, state and local governments in the form of taxes. Why shouldn’t this added value be restricted from the trade deficit? Has this been added to US GDP? Maybe these are just naive questions, but you know, I’m not an economist.
I emailed to Alan that it was not a naive question, there was an answer.
We will not focus on the role of AI in calculating “mutual tariffs.” As is clear from his question, that’s not what Alan wants.
Here is his important sentence:
Small businesses sold by BRS of Chinese products add value by creating jobs, and the money generated from sales is sent to federal, state and local governments in the form of taxes.
That’s almost true. A sub of money from the sale of these products is sent to the government. Most of it goes to the seller, and they don’t chopped liver. We measure their profits by their revival and cost differences, assuming that all costs are taken into consideration, not just the cost of Chinese input.
And yes, sales create jobs, but the way our economists measure the profits of those jobs to the world is not in their own right. Wages, salaries, and even profits do not even exaggerate profits by counting wages, salaries, and benefits. They have the opportunity. So, if they’re not in their current job, it’s the next best job they’ve weaved in. So their profit is to get the next good job, minus wages, pay and benefits, with the exception of wages, pay and benefits.
So far, I have ruled out various important groups: the ultimate consumer of those products. We economists call their profits “consumer surplus.” Consumer surplus is the maximum amount that consumers are willing to pay from the amount they pay.
Now, to Alan’s two questions:
Why shouldn’t this added value be restricted from the trade deficit? Has this been added to US GDP?
Value is not sold from the trade deficit, as the trade deficit was not intended to measure value. The US trade deficit with China is the difference between what the US spends on Chinese goods and services and what Chinese people spend on goods and services. It says nothing about the amount of value that can be obtained from products and services from China. We must either exceed what we spend, except for value, or in short, we have come from trade.
In a sense, Alan’s “naive” questions point to one of the important issues, even talking about the trade deficit. How bad is the trade deficit if the value of these imports exceeds the amount we spend for consumers, producers and governments?
In other words, Alan is right, “What’s the big deal?” he wonders.
Now, in his second question: “Not this.” [value] Has it been added to US GDP? “The increase in wages, benefits and salaries from imports is part of GDP and consumers.
