New trade routes and spinning up local production will take time (likely longer five years) so the consumer will pay a price.
Trade deficit is effectively a migration of capital inflow, so tariffs should reduce not increase investments.
> Trade deficit is effectively a migration of capital inflow, so tariffs should reduce not increase investments.
That seems backwards. A trade deficit (more goods coming into the country) should be balanced by a capital outflow (money leaving the country). We've sustained that for decades by printing more money and sending it around the world.
Some people think that's a good deal, because we get real stuff in exchange for money we create for nothing. But what will have left when other countries no longer want our money?
Edit: As the comment below points out, I should technically ask what happens when they no longer want U.S. government debt?
Money in this context is just a representation of value. You presume the money for foreign goods is leaving the USA when we import the goods, but that is actually not necessarily the case.
Make no mistake, these countries are getting something in return for the extra goods and services they give to us. It is not for free. One of the big things trade to China to make up this deficit is an investment in the US government (treasury notes) or assets. That is, they are taking the dollars they get and then parking it in the US as investment . The deficit is they're choosing us to invest in rather than themselves!
>The U.S. trade balance has been in a deficit position since the 1970s. This means that the total value of imported goods has been greater than the total value of exported goods. This means the U.S. is a “debtor” nation, running a merchandise trade deficit. However, the merchandise trade deficit refers only to imports and exports of goods and services. It shows that imports are greater than exports, hence the “deficit.” But, think about it for a minute, why does the world keep giving us goods, without getting goods from us in return? Is this a good deal or what? Well, clearly, this can’t be the whole story.
>What is happening is that the people from whom we buy goods abroad are taking our dollars investing in the U.S. economy. They may buy U.S. government debt (securities issued by the U.S. government to finance past federal budget deficits) or other assets in the U.S. For example, they may invest in U.S. companies.
https://www.csun.edu/sites/default/files/macro10_0.pdf
If an investment is profitable with 30% tariffs, but not at 10% tariffs, the risk of changing policy means your profitable investment has a risk of being unprofitable, and thus you are less likely to invest in it.
The current administration does not understand that. I think of American mask producers as an example of how you cloud get really screwed
If Biden is anything to go by, it's not really a given that a Dem president will necessarily undo Trump's international policy. He didn't get back in the negotiation room with Iran, he didn't back out of the Afghanistan pull-out, he made zero progress on climate change, he didn't undo much of the immigration policy changes that occurred... One of the few things that he DID pull back on were Trump's first-term tariffs (EDIT: Wait, he did pull back, didn't in he? I thought he did, I might be wrong.), and come 2028, if there's been substantial domestic change taken with the assumption of their longevity, I personally don't trust Democrats to back off on them.
> The main issue I see is that in 3.5 or possible 1.5 years, a new president ( or laws passed through congress ) will just vacate all Trump executive orders, tariffs in included. So that $100 million you invested in a new factory that is 3/4 built? Sorry, tariffs are gone and now you are out $100 mil. Why would any corp assume that risk?
If I were to be as generous as possible, I might say that's why Trump is being so chaotic with the tariffs? If you turn everyone against us and no one is willing to trade with us, it may force people's hand to build locally and then 4 years from now, there's still no appetite to resume our normal trade patterns.
Trump is ha-ha-only-serious joking about a third term and has said that, if people voted for him, they'd never have to vote again. So... in case of Emperor Trump, the tariffs wouldn't go away. I wonder if somebody is already working out how to tell "the economy" about that without being too obvious about the seriousness of his third term plan.
Biden kept Trump’s first term tariffs, so there is no guarantee they will go away.
And many other countries, e.g. Canada, won’t just make up with the US after Trump is gone.