I agree and I came to the same conclusions re. the tariffs and USD/fx. Honestly, you do not need a huge "study". It's just logic. Why would you, an exporter, "eat the costs" if a tariff gets put on your goods?
As a vendor or importer you can front-run, a natural behavior of stockpiling so you can enjoy higher margins (massive capital investment though and it can go very wrong); or you can say: c'est la vie - let em have it and increase prices and maybe if you are in a competitive market and need to protect your market share, you eat a bit of the tariffs but will likely to other tricks like reducing quality/sizes depending on your product. That's just me putting my "industrial company" hat on and pulling out my "selling stuff" playbook.
It'll be bad for the currency (devaluation through potentially runaway inflation because of the price hikes through tariffs - you have "more tax receipts" but the deficit piles up in consumer's and industry's books); it'll be bad for GDP (money printing, debt) and it's bad for industry (price fighting, instability, very high policy uncertainty stifle innovation and decisions).
And in regards to the "shoot the messengers" or "dis the scientist":
It's always the same throughout history.
- first they ignore you.
- when it's too evident you were right, they'll try to discredit (ad hominem phase - this is where we are now) - aka "they fight you"
- then you and society lose in most cases, because most of society usually does not back you up until whatever it is you warned them about hits their doorsteps, hard, way later.
- if you're lucky you still see redemption or you live like Diogenes, in a barrel somewhere far away, telling people to get out of your sun
- in extremely rare cases, you'll get retroactively famous and if you're still alive you might even get a medal or something?
@Monty Carlo, this is a better comment than most articles I've read on the topic.
The "industrial company hat" breakdown is exactly right. If you're an exporter and a tariff lands on your goods, why would you eat the cost? You pass it through or you front-run and stockpile. And if you're a domestic competitor, the tariff just handed you a price umbrella, you don't undercut, you raise your own margins. That's not some academic theory, that's just how people who actually sell things behave.
Your point about the currency and GDP feedback loop is the part most commentary misses. Everyone debates whether tariffs "work" as if it's a one-variable problem. But the second-order effects — devaluation pressure, deficit accumulation on consumer and industry books, policy uncertainty killing capital allocation decisions that's where the real damage compounds. You end up with more tax receipts on paper and a weaker economy underneath.
And the Diogenes progression made me laugh because it's painfully accurate. We're firmly in the "ad hominem phase" right now. The data is too clear to ignore, so the play is to discredit the people who produced it. History says society catches up eventually — but usually after the damage is already done and the messengers have moved on.
Appreciate you reading and taking the time to write this out. This is the kind of engagement that makes the writing worth it.
I remember that some people in the current administration were blaming the EU for talking about free speech while censoring the free speakers they don't like (rightfully so). It looks like it's the same on both sides of the Atlantic.
You're completely right. The US called out the EU for preaching free speech while silencing voices they didn't like and they weren't wrong. But then the same administration goes after NY Fed researchers for publishing inconvenient tariff data. Same playbook, different jersey.
It's never really about free speech. It's about who gets to control which information reaches the public. When the data supports your position, it's rigorous research. When it doesn't, suddenly the researchers need to be "reviewed." That pattern doesn't have a political home, it lives comfortably on both sides of the Atlantic.
But the whole point of tariffs is to make the consumer pay. The consumer sees a higher price and wants to switch to a presumably available and lower price domestically made good.
You're not wrong @John Doe. That is the textbook logic, and in a perfect world it works exactly like that. Consumer sees a higher price on the import, switches to the domestic option, everybody wins.
But here's where I think it falls apart in practice. The NY Fed study and Yale Budget Lab both found that the domestic alternative either doesn't exist at scale, or and this is the part that frustrated me, domestic producers just raise their own prices under the tariff umbrella instead of competing. Why undercut when the government just eliminated your cheaper competition for you?
So the consumer ends up paying more with nowhere to go. No cheaper domestic option waiting for them. The tariff stops being an incentive to switch and starts being a straight tax on your groceries and goods.
I'm not anti-tariff as a tool. But the way these were implemented, the data says consumers got the bill without getting the alternative. And when the NY Fed published exactly that, Hassett went after the researchers instead of addressing the findings. That part should bother everyone regardless of where you sit politically.
Right so the real argument here is the infrastructure surrounding the tariffs. But the the actual tariffing objective is always to make the consumer pay as a pain signal. Currently the tariffs are behaving like a tax on people helping the United States finances.
You said it yourself, John — "behaving like a tax." That's the whole point. Without domestic infrastructure in place, the tariff can only function as a consumption tax, not a trade tool.
Whether the capacity gets built to back it up or consumers just keep footing the bill will tell us if this was real policy or just politics. That's the part I'll keep watching.
Thank you and take care
Great write-up.
I agree and I came to the same conclusions re. the tariffs and USD/fx. Honestly, you do not need a huge "study". It's just logic. Why would you, an exporter, "eat the costs" if a tariff gets put on your goods?
As a vendor or importer you can front-run, a natural behavior of stockpiling so you can enjoy higher margins (massive capital investment though and it can go very wrong); or you can say: c'est la vie - let em have it and increase prices and maybe if you are in a competitive market and need to protect your market share, you eat a bit of the tariffs but will likely to other tricks like reducing quality/sizes depending on your product. That's just me putting my "industrial company" hat on and pulling out my "selling stuff" playbook.
It'll be bad for the currency (devaluation through potentially runaway inflation because of the price hikes through tariffs - you have "more tax receipts" but the deficit piles up in consumer's and industry's books); it'll be bad for GDP (money printing, debt) and it's bad for industry (price fighting, instability, very high policy uncertainty stifle innovation and decisions).
And in regards to the "shoot the messengers" or "dis the scientist":
It's always the same throughout history.
- first they ignore you.
- when it's too evident you were right, they'll try to discredit (ad hominem phase - this is where we are now) - aka "they fight you"
- then you and society lose in most cases, because most of society usually does not back you up until whatever it is you warned them about hits their doorsteps, hard, way later.
- if you're lucky you still see redemption or you live like Diogenes, in a barrel somewhere far away, telling people to get out of your sun
- in extremely rare cases, you'll get retroactively famous and if you're still alive you might even get a medal or something?
@Monty Carlo, this is a better comment than most articles I've read on the topic.
The "industrial company hat" breakdown is exactly right. If you're an exporter and a tariff lands on your goods, why would you eat the cost? You pass it through or you front-run and stockpile. And if you're a domestic competitor, the tariff just handed you a price umbrella, you don't undercut, you raise your own margins. That's not some academic theory, that's just how people who actually sell things behave.
Your point about the currency and GDP feedback loop is the part most commentary misses. Everyone debates whether tariffs "work" as if it's a one-variable problem. But the second-order effects — devaluation pressure, deficit accumulation on consumer and industry books, policy uncertainty killing capital allocation decisions that's where the real damage compounds. You end up with more tax receipts on paper and a weaker economy underneath.
And the Diogenes progression made me laugh because it's painfully accurate. We're firmly in the "ad hominem phase" right now. The data is too clear to ignore, so the play is to discredit the people who produced it. History says society catches up eventually — but usually after the damage is already done and the messengers have moved on.
Appreciate you reading and taking the time to write this out. This is the kind of engagement that makes the writing worth it.
Great post. Thanks Riko.
I remember that some people in the current administration were blaming the EU for talking about free speech while censoring the free speakers they don't like (rightfully so). It looks like it's the same on both sides of the Atlantic.
Thanks @Julien Pervillé, appreciate it.
You're completely right. The US called out the EU for preaching free speech while silencing voices they didn't like and they weren't wrong. But then the same administration goes after NY Fed researchers for publishing inconvenient tariff data. Same playbook, different jersey.
It's never really about free speech. It's about who gets to control which information reaches the public. When the data supports your position, it's rigorous research. When it doesn't, suddenly the researchers need to be "reviewed." That pattern doesn't have a political home, it lives comfortably on both sides of the Atlantic.
Good work, Riko. Good perceptions/observations. Keep it up. Victor
Thank you, Victor. I really appreciate the support and the time you take to read.
But the whole point of tariffs is to make the consumer pay. The consumer sees a higher price and wants to switch to a presumably available and lower price domestically made good.
You're not wrong @John Doe. That is the textbook logic, and in a perfect world it works exactly like that. Consumer sees a higher price on the import, switches to the domestic option, everybody wins.
But here's where I think it falls apart in practice. The NY Fed study and Yale Budget Lab both found that the domestic alternative either doesn't exist at scale, or and this is the part that frustrated me, domestic producers just raise their own prices under the tariff umbrella instead of competing. Why undercut when the government just eliminated your cheaper competition for you?
So the consumer ends up paying more with nowhere to go. No cheaper domestic option waiting for them. The tariff stops being an incentive to switch and starts being a straight tax on your groceries and goods.
I'm not anti-tariff as a tool. But the way these were implemented, the data says consumers got the bill without getting the alternative. And when the NY Fed published exactly that, Hassett went after the researchers instead of addressing the findings. That part should bother everyone regardless of where you sit politically.
Right so the real argument here is the infrastructure surrounding the tariffs. But the the actual tariffing objective is always to make the consumer pay as a pain signal. Currently the tariffs are behaving like a tax on people helping the United States finances.
You said it yourself, John — "behaving like a tax." That's the whole point. Without domestic infrastructure in place, the tariff can only function as a consumption tax, not a trade tool.
Whether the capacity gets built to back it up or consumers just keep footing the bill will tell us if this was real policy or just politics. That's the part I'll keep watching.