to you know what (apologies to Abrahams and the Zuckers).
In one day, US taxes roughly $2.4 trn worth of goods (2023 amounts). Biggest one year tax increase in dollar terms since… ever, at $364 bn (if Trump goes through with plans). Automatic escalation clauses if the target countries retaliate (Canada already has declared).
My $364 billion tax revenue increase is based on a constant import levels. Assuming a (generously high) elasticity of one yields a $290 billion tax increase. The former is 1.2% of 2024Q4 GDP, the latter is 1%.
Estimates of the impact, given the reality, from PIIE. The authors of that study did not believe Canada and Mexico would retaliate. I think, for the former, that assumption has been OBE.
Must say I did not expect the trade war to begin in earnest so quickly. And I did not expect Canada and Mexico would be the primary targets, when I first wrote up the syllabus. What happened to China as the most egregious trade policy offender (a view I actually shared)?
This might entail re-arranging my Econ 442 teaching plan.
Thanks, Trump!
PS: Can I freeze avocados and tomatoes? Asking for a friend.