In this particular instance, tariffs are deflationary (and not in a good way.)
Last year Taiwan imported
$4.3b of sedans in the 1st six months,
(mostly from Germany and Japan)
including $498m from the USA
This year, only
$3.34b total
including $311m from the USA
The fact is, we don’t have may examples of suffen big tariffs to now which way it will go in the long term. Inflation, deflation or something in between.
.
.
.
.
By Focus Taiwan
(Kinda like the NPR of Taiwan)
Sedan import value down 22% in Taiwan amid tariff uncertainty
Taipei, July 19 (CNA) The value of imported sedans in the first half of the year plunged more than 22 percent from a year earlier, as many consumers put their purchase plans on hold in hopes of a tariff reduction for Taiwan during the ongoing negotiations between Taipei and Washington, according to the Ministry of Finance (MOF).
. . . the value of sedan imports totaled US$3.34 billion in the period January to June, down 22.2 percent from a year earlier . . .
Sedan imports from the United States suffered the largest year-on-year drop, falling 37.5 percent to US$311 million . . .
On April 2, the administration of U.S. President Donald Trump unveiled sweeping “reciprocal” tariffs on imports, including a 32 percent levy on Taiwan goods, before announcing a 90-day pause on April 9 to allow the U.S.’ trading partners to negotiate for lower rates. . . .
If trade levels stay the same, those products will experience inflation, if trade levels drop, those products will experience deflation…I think?
IOW, it’s going to be sector by sector. Things that we can’t really I’ve without and we will continue to buy, will go up, and discretionary spending likely slack off, and maybe prices go down…maybe?
It has to do with increasing marginal costs
(aka diminishing marginal returns.)
But it is sometimes easier to picture it in other ways.
In a rough thumbnail, Taiwan imported about 35,000 fewer autos Jan-June 2025 vs Jan-June2024.
Automakers now have 35,000 unsold autos sitting around, automakers will now be willing to sell those autos at rock bottom prices. (More likely they have —>the capacity to produce 35,000 autos<—
and —>that capacity<— is just sitting around idle, but it works out to something similar.)
Well the US is still a grain exporter.
We recently lost our status as a net agriculture exporter, but, in subcategory grain, we still export over 48 million metric tons per year.
Still your point is a valid one.
Some products operate one way where tariffs tend to be inflationary,
and with others tariffs are likely to be deflationary.
We import a lot of electronics & other household appliances.
To a degree, (especialy the alstest most hihg tech models) function like cars and oil and a few other products do.
An oil “pipeline” puts out a relatively fixed quantity, a maximum capacity.
If appliances function the same way, then we can say China is gonna produce max 100 million units, period.
That’s the total. After that the “pipeline” is at full capacity.
When demand is high, buyers bid against each other and the price of those100 million units goes up.
When demand is low, there is not much bidding and the price of those 100 million units is low.
My point?
Some things operate like cars (discretionary) and oil in a pipeline (fixed quantity) —> Those things will respond in a deflationary manner.
Other things operate in an inflationary manner.
While I would not rule out tariffs leading to higher prices, that is cetainly not the case wiht all things and it is not clear which force, inflation or deflation, will prevail.
You are playing monopoly.
You and three other players are bidding on Park Place.
The high bid is $1,000 and so that player gets it.
Now change one thing:
Before the bidding begins, the bank pays each player $500.
Now the high bid will be $1,500 —> Inflation.
Instead of that, let’s change another thing:
The house adopts a rule that 20% of any succssful bid will be paid into the bank as a form of “tax.”
In this case, will the winning bid now be higher, lower or that same the original $1,000 winning bid?
(Not so clear is it? Depends on the circumstances and, the most likely answer is probably “unchanged.”)
Whether ths tax leads to higher prices really depends on a few other factors, the tax itself is not inherently inflationary
Every dollar in increased expense, reduces the deficit by one dollar. There is (so far) no net increase nor decrease in overall “harm.” The harm is simply shifted around.
The increase in prices of imports increases demand for domestic labor and domestic products. That is, not only good for the hardest-hit working classes, it leads to a net decrease in the deficit incl the SS deficit.
