At the Continental Telegraph, Tim Worstall explains how even the financial journalists at Fortune are misunderstanding what the changes in stock market values mean during Trump’s ongoing trade disputes with China:
… how stock markets react is not a good guide to the positive effects of tariffs. Quite the opposite in fact. It’s a much better guide to how we’re all getting screwed by tariffs. That is, the better the US stock market does the more evidence we’ve got of the bad effects of tariffs and a trade war.
Think on it. Why is Trump imposing tariffs? To protect American business from competition by those dastardly foreigners. Who loses in the absence of competition from the Yellow Peril? Those American consumers who would have bought those better/cheaper Chinese goods if they were able to. Who gains from tariffs? American businesses who can now gouge the American consumer a little more in the absence of those items imported from East Asia.
So, a rise in the US stock market is a guide to how much more profit American business can screw out of the American public. It’s a measure, a reasonably good and precise one too, of how much we the people are losing from the trade war and tariffs. More exactly, it’s the capitalised value of the ongoing losses we’re suffering from this restriction of our choices, the competition those who supply us face.
That is, the better the stock market performance the higher those costs and the more we’re losing the trade war. That is, as long as you accept that it is consumers, not producers, that matter, but then that’s the standard economic assumption ever since Adam Smith even if it gets lost in Washington DC often enough.
The US stock market rising in response to US tariffs is evidence of the losses from tariffs, not the gains.
