To my mind, a lot of securities analysis is about making up stories and then testing to see if they have any obvious explanatory value. So…
US GDP was $28.3 trillion in 2024. Imported stuff amounted to $3.4 trillion, or about 12% of GDP. GDP grew by 2.8% real in 2024 and–ex-tariffs–had been expected to do the same in 2025.
GDP growth
The internet tells me the workforce is about 168 million (pre-deportations by ICE, which intends to shave that figure by around one million per year). About one third of the people of working age in the US are either not working or not seeking work, so the number of people with actual jobs is more like 110 million. Ex immigrants, which make up about 20% of workers, the workforce is expanding by about 0.4% per annum as children born to citizens begin to work. That total is something under half a million.
So…
–if ICE is effective in deporting a million people a year, its activity appears to me to effectively shrink the number of workers in domestic industry by about 0.5% yearly
–this leaves productivity gains as the sole source of GDP growth. These come from better tools or better-educated employees. Given the administration attack on science teaching at the school level and its threats to major research universities (three prominent fascism researchers from Yale have already fled to Canada–plus more academics I’m unaware of?), I’d need long odds to bet on it either.
The conclusion I come to is that the government book-burning and its attack on Pride and intellectuals/ artists of all stripes is worse for the overall economy than tariffs.
tariffs
If we assume that everything that’s imported is subject to a 10% tariff, then total annual tariff collections will be initially about $340 billion (which amounts to about 5% of what the federal government spends yearly).
Who pays the tariff?
In the broadest terms, the parties to any tariff-generating transaction are: the foreign raw material supplier, the foreign maker/exporter, the domestic importer (who may also be a branch of the foreign maker), the domestic manufacturer of the final product (if the import is a component/ingredient), the retailer and the final domestic buyer.
In theory, and in practice, the parties with the most market power pay the least amount and the parties with the least market power pay the most. The Iron Law of Microeconomics is another way of putting this: the key determinant of price is the availability of substitutes.
Take cocoa, for example. Over the past few years, the price has quadrupled, due to unfavorable weather in the African countries where the beans are growth (yes, it’s a little more complicated, but I see no sense in laying out all the twists and turns). Early on, I noticed that one of my favorite candy bars went up in price by $.25. Then the packaging stayed the same size, but the bar inside had more nougat, less chocolate. Then they were hard to find. When they reappeared, the bar had shrunk. Then the price went up again. Then the nougat changed, too. Then I moved to gummy worms.
This is what I think will happen with many consumer products. Makers will depend on the brand name to carry them while the products become somewhat more expensive and items are made with cheaper materials. Smaller, older brands will likely disappear, because consumers won’t accept the new product/cost proposition. The stronger party will push more risk into the arms of the weaker–say, Amazon having foreign manufacturers pay the costs of carrying inventory and of absorbing returns. Companies with weak brand names, so-so products and poor distribution chains may well disappear.