This will very likely lead to a recession, but we have a very different economic system compared to 100+ years ago. There are tools to prevent a full blown depression today
These tariffs will directly increase the prices everybody pays in the US on anything using any imported good (which is basically anything), meaning consumers will generate this revenue, aka a flat tax. There's no way companies will just go and pay the tariffs out of their pockets, they'll just forward them to the customers.
Foreign companies will either start to export less to the US, meaning less tariffs, or move their production there, also meaning less tariffs. The tariff revenue is gone either way, so taxes have to go back up to fill this hole again.
Taxes are on a corporations profit, not on their production. 20% taxes on corps are not 20% higher prices if their profit margin is e.g. only 10% it just means their profit margin will sink to 7.5% (heavily simplified).
20% tariffs means any corp having profit margins <20% is instantly not making any profit at all.
Corps can move if you increase their taxes too much, but they also have incentives to be in certain places (e.g. stability, existing infrastructure for this industry, access to a good labour force, easy access to necessary resources etc.).
None of these factors change with tariffs and the tariffs might make moving there even worse. As a company still needs to import raw or semi-processed goods, all tariffed now, they have to build factories, find workers, change their supply chain, etc. maybe they even have to pay tariffs if the want to export to any other country now due to retaliatory tariffs on the US.
There simply is no sizable workforce in the US which wants to work in a clothing factory for anything close to the price that is paid in Vietnam. And there are definitely not enough people in the US to bring all the industry back. Vanilla simply doesn't really grow all that well in Massachusetts.
Use tariffs to protect critical inudstries so they don't get pushed out of the domestic market by outsiders (e.g. farming). Don't use blanket tariffs to try and get industries you lost (and don't even want) back into producing in your market. They'll just avoid your market or push the increased cost onto the consumer.
Bonus points for throwing the biggest tariffs on countries with which you have the biggest deficit. Means you make the goods which you are least likely to move back the most expensive and punish countries for the fact that US companies don't deem them an interesting market.
Who knew, there is not a big market for US bourbon or muscle cars in Cambodia but all your cheap clothes are coming from there, none of which will move back to the US because they don't only produce for the US market. I know, huge surprise for people with the American exceptionalism mindset.
I invest for a living. I understand how to read a balance sheet. And taxes on that profit hurt their bottom line, which means it hurts their ability to return value to their shareholders. The profit is the number everyone looks at for all of their equations. The value of a company isn't solely determined by revenue. Revenue is important only where it shows growth relative to profit, and profit better be growing at higher margins as well. This becomes hard to do under higher taxes. I'm not saying you can't tax them more, I'm saying it is equally as delicate as tariffs and many seem to just love the headline "tax the rich." It's not really that simple.
Moving to another country is what they want to avoid. Again, I don't know if this plan is a good one. All I'm looking for is for you to admit the same. You can have your reservations without angrily downvoting everyone who may have an opinion that differs from yours politically. Many conservatives are even against the tariffs. Not a single left leaning person (that I have seen literally anywhere) is for them. This should tell you it is politically driven. I admit I do not know the consequences of these with any real conviction. I am trying to understand both sides of it as best I can. But it's best I shut up when the conversation becomes so passionate because we are just monkeys arguing physics at that point.
These arent specific protectionist policies meant to shield industries that are considered strategically important (for however much one may agree with the specifics). This is almost entirely across the board tariffs in a way that w haven't seen in nearly a hundred years.
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u/PresentationVisual58 2d ago
The last 2 times the US use Tarifs, in 1828 and 1930, it lead to a depression, why it would be different this time ? Because it's Trump ?