Tariffs will not liberate the USA. Most people will be a lot worse off. Their taxes will have risen. So too will inflation. Yesterday was madness day.
This is the audio version:
This is the transcript:
Tariffs only liberate the rich.
They do not, as Donald Trump would have it, liberate the USA from the burden of international competition. Nor do they provide it with a free source of revenue, which will reduce the tax burden in the USA. They don't do anything like that at all. In fact, tariffs will increase the price of a great many consumer goods inside the USA and in those countries who retaliate by imposing tariffs on products from the USA as well.
Why is that? Because tariffs are a charge made on an importer of goods, which they will inevitably have to recover by increasing their retail prices for whatever the product that they import is. It is as simple and straightforward as that.
So why do these tariffs only liberate the rich? That's for another very simple and straightforward reason. The rich spend less on consumption goods out of their total available net income after tax than do those who are on lower income. This is obviously true.
There's a reason why the rich are rich, and that is that they have money left over at the end of week, month, or year.
Those who are on lower incomes, by and large don't. That's because they spend everything that they have on consumption, and if the rate of tax on consumption goes up, they will therefore suffer the highest overall rate of increase in tax as a consequence of the imposition of tariffs and the rich will suffer the lowest overall rate of increase in tax as a result of those tariffs, and therefore we will have a pure regressive tax as a result inside the USA, which is of course exactly what Trump and Musk and all his cohort want. They are passing the tax burden of the very richest in the USA onto the mass of people in that country.
And that is not by chance. I suggest that is entirely by design.
So, tariffs are not about liberation.
Tariffs are about putting impediments in the way of trade. You can argue that's a good thing if you want to reduce the volume of world trade.
You can argue that's a bad thing if you think that actually having access to goods and services at the lowest possible price, which is what trade theory suggests we should do, is a good thing.
But whichever way you look at it, tariffs are always going to be imposed most heavily on those with lowest incomes because they consume not only more out of their total income, but more goods out of their total income as well. And tariffs only apply to goods, and not services.
So, what is Trump doing by imposing tariffs? He is declaring war not on the other countries of the world, but on the poorest people in the USA - who include most of the US middle classes by the way, because right now the gap between the wealthiest in the US and everybody else is so big that this will also hit middle class America very hard indeed.
Is this what those who voted for Trump wanted? I very much doubt it.
Did they understand that this was the consequence of tariffs when he said that tariff was the most exciting word in the dictionary? I doubt it very much indeed.
Did they realise that the price of their cars would go up? I suspect not.
Did they realise that they will pay more for their computers? I doubt it, and that will be true of so many other things as well.
So, Liberation Day for the USA as a result of tariffs? Pull the other one, Donald. This is only Liberation Day for the very wealthiest who won't be paying the taxes that they should be paying to support the state that they are utterly dependent upon if they are to continue to generate the wealth that keeps them in the luxury to which they have become accustomed, because they need everybody else to spend because the spending of the other people in the USA is the source of their wealth and tariffs are actually going to reduce their wellbeing.
As a consequence, if anybody could get something wrong, Donald Trump can.
He's got tariffs very wrong indeed.
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I hope this gets the penetration into the U.S. it deserves – clear stuff in a swamp flooded with shit.
He is doing what has become an all too regular thing in the U.S. – to promote the interests of the rich under the banner of the Stars & Stripes or more simply, nationalism.
[…] tariffs will not benefit the people of the USA. I very much doubt that they are designed to. I explain my logic for that in today's video. They will most likely hit those on the lowest incomes in the USA […]
The Madness of King Don is most likely to result in a recession with a real risk of a deep one.
The non rich will get poorer. To compete US wages will go down, the aim of the Heritage Foundation.
Does not bode well for the rest of the world.
True – but you don’t engage with Trump’s argument that Americans will buy home-grown alternatives, and investment in domestic production will be incentivised – thus creating jobs etc in the US. Obviously, these potential benefits are generally long-term, might not off-set the regressive effects of tariffs anyway, and don’t alter the immediate negative of higher prices – but I’d be interested in your thoughts on this argument.
In the world we live in this will be very slow to happen – and may not happen at all. The US cannot grow the salad crops it imports from Mexico. The claim is just another Trump fantasy.
Trump said the US had been ‘pillaged ‘by other countries who had taken advantage of the US and they had only been able to do it because of the people in the White House. Obviously trying to create his legend.
It is hard to believe the world’s most powerful economy could not negotiate decent trade arrangements.
But surely the off -shoring of much production was by American capitalists seeking maximum profit for themselves?
And, as Richard says, these are the people who gain most this time.
Who is the real enemy of the American working class?
The US has pillaged the world, not vice versa
How? The acceotability of the dollar has meant it ha never really paid for what it has acquired by running trade deficits
Trump is very, very wrong
The American banking and finance people have particularly exploited the developing world. Zambia now has to pay more on its foreign debt than it spends on health and education.
The US does do some good things around the world e.g. USAID but it is undermined by the effects of the finance sector. Hence the rise of the BRICS
Indeed. America can for example, buy all the oil it wants on the global market because it is paid for in Dollars, and uniquely America can create as many Dollars as it wants out of thin air.
But it is not just the poor/middle class in America that will suffer. Most underdeveloped countries have loans denominated in Dollars. Trump says for example, that Bangladesh imposes 74% tariff on imported US goods, but that tariff is used by their Government to pay back the huge Dollar loan they have, perhaps mostly to American financial institutions that underwrite the loan.
If Bangladesh reduce their tariff as Trump suggests he is trying to achieve, they will have fewer Dollars so will probably have to default. What impact will that have on Wall Street?
A completely incoherent policy, and wars have been started over less!
Exactly right
Thanks Richard. This was a really excellent video. Very eye opening. I appreciate you sharing your expert views on this subject. I hadn’t appreciated just how cynical this move by Trump and Co. Was.
Thanks
I’ve been awake since 4am, so brain may not be functioning fully, but… Didn’t Trump via Musk shut US down himself? Sacked more or less everybody? Stopped paying Medicaid, stopped payments to veterans, I’m sure there’s a load more people he stopped paying but I can’t remember it all right now. I think he also stopped paying USAID. I don’t know how people who do such things can live with themselves, but they seem to revel in it. As I’m constantly saying to Husband, “Pass the sick bucket, please!”. Some days I really do despair.
We all do
As a novice with L plates in MMT, I offer up the following to Trump’s Tariffs. Any mistakes are my own and I apologise upfront.
Tariffs disrupt the foreign sector’s financial balance, artificially inflating domestic prices without addressing the core imbalance: insufficient public sector investment to absorb excess savings. MMT posits that sustainable trade equilibrium requires managing domestic demand through fiscal policy, not punitive trade barriers. Tariffs misdiagnose leakage of demand as a foreign problem, ignoring the government’s capacity to offset it via direct spending.
Under MMT’s functional finance framework, policies must prioritize full employment and price stability. Tariffs fail both: they inflate prices for essentials (harming stability) and destabilize industries reliant on global supply chains (undermining employment). A functional alternative: channeling deficits into targeted subsidies for critical sectors, bypassing the need for trade wars.
Modern supply chains are monetary ecosystems. Tariffs fracture these networks, creating bottlenecks that raise costs and scarcity. MMT advocates for “supply chain resilience” through fiscal investments in domestic production and strategic international partnerships, funded via sovereign currency, rather than zero-sum trade barriers.
Tariffs weaponize currency sovereignty against trading partners, pressuring nations reliant on dollar reserves. This contradicts MMT’s emphasis on cooperative monetary systems. Instead, the U.S. could leverage its currency issuer status to fund global green transitions or infrastructure, fostering demand for U.S. goods without coercion.
MMT reframes “protectionism” as a failure to mobilize public resources. Rather than taxing imports, a sovereign government can directly create jobs in undervalued sectors (e.g., renewable energy, care work), organically reducing import dependency while advancing public purpose.
Trump’s Tariffs are a 19th-century remedy for 21st-century challenges. MMT’s innovation lies in rejecting scarcity logic: currency sovereignty allows governments to build rather than block. The path to economic resilience isn’t walling off trade—it’s deploying fiscal tools to transform productive capacity, rendering tariffs obsolete.
There seems a lot of sense in that.
But, remember MMT says the exchange rate is not a major issue of concern. It always ends up reflecting relative productivity rates.
The problem with tariffs is they disrupt the fundamentals of economics.