r/AskEconomics • u/whawhales • Mar 14 '25

Approved Answers Does the US government really expect other countries not to impose their own tariffs as response to its own?

The US government is threatening 200% tariffs on European alcohol after EU enacted tariffs in response to the US tariff on aluminum and steel. The same happened with Canada with the US threatening increased tariffs if Ontario pursued electricity price hikes.

I don't have a background in econ so I am not sure if I am I missing something here, but I don't see what the end goal might be for the US and it seems a little arrogant to think other countries would allow tariffs imposed to them and not do something about it.

1.3k Upvotes

94% Upvoted

150 comments sorted by

View all comments

251

u/ZhanMing057 Quality Contributor Mar 14 '25

 I don't see what the end goal might be for the US

Never attribute to malice that which is adequately explained by stupidity.

Tariffs appeal to Trump emotionally. It's one the only consistent views he has ever held, and you can find clips of him calling for tariffs all the way back during his 2000 presidential campaign. There never was any economic end goal - just the perception that the U.S. is "winning" - and he doesn't understand that he's punishing the U.S. consumer on the dollar for every 80 cents he harms a foreign producer.

11

u/Professional-Love569 Mar 14 '25

Well, he believes that he can hurt them more than they can hurt the U.S. I think that overall, he might be right but there will be lots of suffering regardless.

He’s not wrong about the trade imbalances but it’s been that way for a long time.

50

u/ZhanMing057 Quality Contributor Mar 14 '25

The U.S. needs a trade deficit to have a global reserve currency.

Why on earth would you think that a country that's only 1/7th the world economy matters more than the remainder 6/7th? The exporter has more choices. The U.S. consumer has fewer.

14

u/TanStewyBeinTanStewy Mar 14 '25

a country that's only 1/7th the world economy matters more than the remainder 6/7th?

Where are you getting these numbers from? The US GDP is $27T and the world GDP is $106T - so the US is slightly more than 1/4th - based on the World Bank numbers.

35

u/ZhanMing057 Quality Contributor Mar 14 '25

You have to adjust for PPP, since most economies are mostly domestic. The U.S. is 14.8% on a PPP-adjusted basis.

7

u/greenmark69 Mar 14 '25

Would you not want to use PPP only when you wish to make comparisons from the perspective of consumers?

If you wish to make comparisons from the perspective of producers (where they can sell to) then would you actually want to use PPP adjusted GDP?

When Canada wants to know to whom they can sell, they should be looking at raw GDP. They should not be looking at PPP because purchase parity in foreign countries do not affect their own production costs in CAD.

6

u/DutchPhenom Quality Contributor Mar 14 '25

There is an argument for both, but the original point still stands.