A very short post on an important scenario.
Let us say that Trump’s end game with tariffs is simply this. Force countries around the world to open up their markets as much as possible. As their competitors get their tariffs reduced to the baseline of 10 per cent which Trump seems to be maintaining, those without the baseline rate are forced to make a deal. Result: a lot of markets suddenly become available to US business which were hitherto closed.
But the 10 per cent tariff remains. With 100 per cent depreciation and no tariff at all, if you build in US. Companies to beat or stay competitive will still be highly incentivized to build production facilities in the US.
If you take the 2024 figure of 3.36 trillion for US imports in 2024, and it has been higher other years, at 10 per cent that still gives you for the External Revenue Service 336 billion in revenue. Which is no less than about 5 per cent of the US budget or a little over 18 per cent of the yearly budget deficit. Not insignificant numbers.
All of this together is a potential game changer for the US economy and once the 10 per cent tariff is simply in place globally and the high tariffs eliminated does not have a negative effect on the global economy either especially if the US is booming economically and everyone is making money. The US has always indirectly taxed the rest of the world with the dollar system but now this is simply increased by 10 per cent and made explicit.
Could all this be Trump’s end game. It’s too soon to know for sure but its increasingly looking like it.
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