Tariffman vs Moslertron

We should write a detailed chapter on the concept and imp-act of tariffs. However, they are not hard to grok.

The bottom line is they are stupid and pretty bad, for everyone. But with an MMT lens we can see they are often the worst for the country imposing them! How?

How can the current era (c. 2025) USA regime be so wrong? (And who would’ve thought??? 🤣)

Snappy Version

Michael Green posted a piece at YIGAF that exposed some sort of “celebrity chef” figure who was touting himself as enthusiastic about the Trump tariffs. For the life of me I could not tell if it was deeply sarcastic or plain stupid, nor whether Green was also stupid or just so Σ for getting the sarcasm.

I hazarded a guess at “plain stupid”. So posted this comment as an antidote:

One ought not be excited by tariffs from any angle? (I would say yeeaah.) It is all madness. But if a government knows their monetary system and their full available policy space they can always afford to give Trumpistas their metaphorical middle finger. The tragedy of these tariff-wars is that governments do not understand, so will likely hurt themselves (or their people), unaided by Mr Trump. It is all about the policy response, not what the other guy does in such matters. US manufacturers want to sell you more of their stuff? You can buy. They do not want your stuff? You get to keep it (or sell to someone else). All the better for the someone else.
      Just like the sanctions placed on Russia back-fired, the USA “leadership” have this backward too, yet so do the governments Trump is targeting. They aught to realize they can win big from Trump’s insane trade policies.

Note: I am not an active academic researcher in this area nor econ journo who thinks about tariffs all day long. But you do not need to in order to appreciate the mainstream economists have things backwards as usual, and so the government policy responses on both sides will likely be all screwed up too, since for some godforsaken unknown reason politicians and policy wonks still seem to think credentialed economists have useful things to say which a 12 year old does not intuitively comprehend.

In trying to hurt Trump country you will end up hurting your home country.

Retaliation is for war and Prisoner’s Dilemma, not for Trade.

OK, that was the Moslertron version.

The Long Winded Version

Here’s a sober MMT breakdown of some of the arguments around and implications of tariffs.

Government Revenue and Sovereignty

MMT posits that a currency-sovereign government, like the USA, which issues its own fiat currency (USD), does not need to generate revenue through taxes or tariffs to fund spending. Instead, it can create money as needed, constrained only by inflation risks.

From this perspective, the argument that tariffs “raise revenue” for the U.S. government is economically irrelevant under MMT because the government does not require external funding to operate. Instead, tariffs act as a policy tool with other effects, such as influencing trade flows or domestic production .

Impact on Importers and Consumers

Tariffs are effectively taxes on imports, which are paid by U.S. businesses importing goods, not foreign exporters. This raises costs for U.S. importers, who often pass these costs onto consumers in the form of higher prices. This can lead to inflationary pressures and reduced purchasing power for households .

Foreign exporters may respond by raising prices or diverting sales to other markets, minimizing their own economic harm . Thus, the burden of tariffs could disproportionately fall on U.S. entities. How disproportionate? Entirely depends on the other country’s government policy response level of MMT awareness. But you know… it could just end up in misery all around.

HHow can I write that? Because the whole idea is to “increase government savings”! An inapplicable notion when your government is the issuer of the currency. It amounts to demand withdrawal elsewhere. The key question is where is that else? Again, that’ll be a foreing governemtn policy response determination.

Some economics think Canada and Mexico will feel most of the burden, but this is false. An MMT perspective would say that’d be true only if the Mexican and Canadian government “retaliate” instead of using the more appropriate MMT recommended fiscal adjustments. If a foreign entity marks prices upwards, the domestic currency can always be re-gauged. This is not inflation. It is a one-time adjustment in domestic prices that hurts no one. The wage has to go up too, all prices. One-time adjustment. In fact, it is a good excuse for a wise government to boost low-end wages more. Pushing all prices upwards but from the base.

(If a general price re-gauging is desired, this is always the better way to implement the gauging. Just you try stopping the trickle-up! You’d need to euthanize the rentiers — which is a much longer term project.)

There are other policy responses too, such as seeking other buyers for your exports, and the governments of Mexico and Canada can use some light subsidies to help the firms dependent on exporting if they so choose. (This can also help the one-time price adjustment in a well-targeted fashion.) But the real terms of trade are what are more important, the imports! Thus retaliation against the USA by making U.S. imports more expensive for your own economy is the stupid policy response.

Unfortunately this does not mean Canada and Mexico will not go down the stupid path.

Remember: it is not about jobs!

Tariffs are never about jobs. If the Tariffman (resp. Tariffwoman) wanted more jobs created in the USA (resp. Mexico), they could employ idle workers. Almost in any industry, probably even with some executive orders, if not, Congressional approval only is needed. The Treasury and FED (resp. Central Bank) take marching orders from Congress (resp. Parliament).

They could even construct houses and whole ghost cities for no one to live in. The sophisticated Chinese version of Keynes’ “digging ditches and fill them in again”. They at least had something to show for the construction company grift.

The central government can always employ anyone not employed by the private sector, without incurring inflationary pressures. This is simply a policy choice. After first expanding public services if desired, the policy choice is then whether to run an unemployed labour buffer or a fully employed labour buffer.

Trade Deficits and Real Goods

MMT views imports as a net benefit because they provide real goods and services in exchange for financial claims (currency) that the U.S., as a sovereign issuer of dollars, can create at will . Conversely, exports are seen as a cost because they involve sending real resources abroad.

Imposing tariffs reduces imports, which MMT proponents argue harms the U.S. by limiting access to these real goods while doing little to benefit exporters who can find alternative markets . This aligns with the critique that tariffs hurt the U.S. economy more than they help.

Economic Costs of Tariffs

Most empirical analyses shows that tariffs reduce GDP growth, employment, and investment in the long run. For example:

• The proposed Trump-era tariffs could shrink U.S. GDP by up to 1.3% and cost over a million full-time jobs if fully implemented.
• Tariffs also lead to dollar appreciation, making U.S. exports less competitive globally and further harming domestic producers reliant on international markets (see “A global economist’s take on tariffs” ).
• Without complementary industrial policies to boost domestic production, tariffs alone fail to achieve meaningful economic benefits while imposing significant costs on consumers and businesses Ibid. .

Conclusion

Recognize most of the Tumpo doctrines are just designed to cause havoc. No other rhyme nor reason is needed for them. But you have ways to avoid the havoc if you have the pleasure of living somewhere else and have government powers.

From an MMT perspective, tariffs are counterproductive for a currency-sovereign nation like the U.S., as they harm domestic consumers and businesses while reducing access to beneficial imports. Empirical data supports this view, showing that tariffs depress economic growth and employment without significantly benefiting domestic industries unless paired with broader industrial strategies.

The appropriate policy response of a government feeling it’s exporters are going to be hurt by the tariffs imposed by Tariffman is to;
(a) recognize your exporters have no place at any trade negotiation table on your end, their interest is in the wealth of the foreign buyers, and the suppression of your domestic workers. (b) You can always ensure full non-ꕗꖹꝆꝆꕷꖾꕯꖡ employment and have a great standard of living. (c) There is always a buyer for your stuff. Judicious fiscal adjustment can avoid all the pain, can avoid 100% of the pain.