Right, but what people miss is that some people (usually not academic economists) are able to predict the economy with good levels of accuracy. It is not hard, there is a ton of data, the problem is that you have to drop your own personal interest in politics...for 99.99% of people feeling politically validated is more important than being right on the economy.
Isn't there reams of data on weather patterns too? I thought that like the weather, economic systems are fundamentally chaotic and thus demonstrably unpredictable. There's a whole field of math where we can create these mathematical models that simulate chaos and are fundamentally unpredictable. I was under the impression that Economics falls under the purview of this mathematical theory in terms of unpredictability.
If I may ask, who are the people that do these predictions? What is there methodology and how do you know it's not luck?
The titles have rolled. The prediction in Q1 last year was specifically that by this time, the US would be in a deep recession due to tariffs.
I can understand that most people do not actually stay with these forecasts. The story hits NBC, you are completely outraged about this forecast made by these economists, the thing never happens, NBC has moved onto next disaster coming round the corner, next outrage.
If you work in markets, you are confronted with the relentless inability of talking head economists to just say mildly rational things. It is constant, almost every year now we have this latest economic disaster by economists in the periphery of political parties...no-one pays attention to these people, they have tenure, they make money from cashing in their political contacts not through actual correct forecasts (and yes, they always say that the thing they predicted will definitely happen next year now).
Stopped clock is eventually right. But there was literally zero information in the insane claims made in Q1. If you did not see this immediately, don't pay attention to these forecasts.
That's a really nice comment but does not bear in any way on what I wrote. The Trump administration has now completed its first year. There are three to go.
Yes, i am saying very directly that the prediction made was made by many (which is the comment you replied to) that tariffs WOULD HAVE ALREADY caused the economy to fall into a deep recession. These predictions were wrong, they were obviously wrong at the time they were made but that didn't stop the breathless coverage about a coming Great Depression.
Whatever happens next is irrelevant, it won't make that prediction correct.
There are multiple research papers that indicate that this result (in terms of what you think the paper says) is not obvious. Indeed, to think this is the case, you need an extremely superficial understanding of economics based around "rules" that only exist in theory.
And, if you read the paper, you will find that evidence. How these work depends on initial conditions that vary and exporters will not react in a consistent way.
As a specific example, theoretical research in this area tends to make assumptions around the stationarity of margins that are obviously ludicrous in the context of reality in the US. It is quite easy to justify almost any policy with theoretical research in economics so people who have no understanding of economics will find evidence for whatever position they choose. Reality is quite different.
The authors ask “who bears the cost of these tariffs?” and use S&P Panijiva data from Jan 2024 to Nov 2025 for their 96% pass through rate to conclude tariffs function “as a consumption tax on Americans.” However, Panjiva is limited to FOIA requests for bill of lading data for 22 countries (Brazil, China, India, Mexico) and excludes major US trading partners, such as the EU, UK, and Canada[1].
The limitations of the data are highlighted by the authors’ somewhat bizarre claim that “a 10 percentage point increase in tariffs leads to only a 0.39% reduction in export prices.” Yet the luxury industry, a major component of European exporters, reduced prices in 35-40% of all products in 2025 and registered a drop in operating margins from 20% in 2023 to 15% in 2025[2]. European car manufacturers also had to adjust. Porsche reported a billion euro 3Q25 loss and a 99% drop in operating profit through 2025, leading to its removal from the DAX and the CEO’s ouster.[3]
The short answer to who pays: too early to tell. Many consumers balk at price increases and reduce consumption, while many foreign exporters seem to be waiting and seeing for the Supreme Court to rule against the administration’s IEEPA claims or the midterm elections before deciding permanent price changes. But exporters are experienced navigators of multiple tariff layers, both internal and external. Many economists have noted the “value-added tax (VAT) system, a tax on final consumption, which the US administration views as similar to a tariff.”[4]
I would argue tariffs are inherently easier to deal with than NTBs. I will never understand the absolute hate that is leveled at countries that use tariffs vs. the very noisy, tariff-hating countries that use NTBs.
EU is, obviously, one of the worst offenders here. Tariffs are a great evil...there are still massive barriers to trade within the EU. Let me repeat: WITHIN the EU, a bloc of countries that share a supra-national political system. Like Wymoing putting up a barrier to trade with Iowa (which, btw, do exist in the US too...but are significantly lower than in the EU where there isn't harmonization in even basic products like financial services due to the problems with competition in so many European countries).
Agreed. Never understood all NTB and tariff distinctions, except one suspects the pajandrums in Brussels and Geneva didn't quite believe companies could compete on price or product, and therefore needed a way to keep quotas and subsidies.
I'm not alone in this confusion. During oral argument, several Supreme Court justices asked repeatedly about the distinctions between quotas, tariffs, revenue-raising taxes, non-revenue taxes, etc. in IEEPA's statutory language and precedents like FEA v. Algonquin SNG, Inc., 426 U.S. 548 (1976).
Great points. This paper is a static, partial-equilibrium analysis that knows the price of everything and the value of nothing, which I suspect the NYT will happily run as gospel.
The most glaring, disqualifying omission is the disregard for FX adjustments. We have not seen the CNY/USD crash yet , but that is because of MASSIVE currency intervention from China to the tune of $200B+ per month: https://x.com/Brad_Setser/status/2012021712012145030
The other wonky thing is they call $200 billion in tariff revenue "a tax" and they also call it a "deadweight loss." Are the authors not the Keynesians I thought they were? At any rate, tariff revenue is not a new tax, but merely a shift in the tax base - since it is $200B that the government does not need to collect elsewhere.
Lastly the collapse of trade volumes from Brazil and India is not a bug it's a feature. Yes supply chains are sticky. The POINT of tariffs is to force supply chain decoupling and reshoring. To "unstuck" the supply chain. Does disruption come with temporary supply shocks? Of course.
The European export growth model is not working for Europe. They are not far behind the US in doing what we are attempting. Canada cozying up to China is not what they wanted for themselves, lol. Etc.
Static analysis in trade is very dangerous. I have never understood why these models are used. These had massive political consequence in the UK during Brexit, close to 100% of the predictions made by these models failed, and they were taken as truth (in the sense that: a prediction was made, and that was reported in the same way as an economic release). There was no real examination of why these known bad models were used.
Calling it a "deadweight loss" also doesn't seem justified by the evidence. It is extremely unclear whether there is a total economic loss because tariffs, if maintained, will have long-term economic consequences. You can point to countries where that went very badly (South American import substitution in the 50/60s, leading to economic free fall by the 80s) and ones where it went very well. It has always seemed quite unclear to me.
The stuff with Europe is also very odd because what do they think sanctions on Russia are? Not just a tariff, a blockade with no revenue raise. But the people who tell you that tariffs are a tax will tell you that sanctions have no issues.
I don't think that tariffs are good either btw. It just seems to a policy choice that is made in a context that can be either good or bad. Europe has massive barriers to trade internally (despite being in a political and economic union) that has been very expensive and harmful because it reduces competition/competitiveness. At least some of the protectionist measures of Trump and Biden are likely to work because the US is fundamentally quite competitive.
Below is the #1 paper, extraordinarily widely cited. They found that countries with significant market power systematically set higher tariffs on goods with inelastic supply, and in these cases the exporter lowers their price to absorb the tariff, improving the importer's terms of trade.
There was a paper, that i am not going to dig out, on the first set of China tariffs by Trump that found that exporters reduced margins. You don't have to look far, you just need to look a few years ago. For some reason, the claims made earlier last year were apocalyptic despite there being clear evidence from the very recent past that this wasn't the case (making money in equities last year was terribly easy).
Btw, you can find papers where tariffs are paid by consumer, where they aren't, where there is no effect. The thing that is being measured is completely different to the actual tariffs. The impact, like everything in economics, depends on the context in which the tool is used. That context is typically hard to model, so we end up with a lot of shitty papers claiming that it is about the tariff when it is about the context/implementation/etc.
No, completely wrong. Deep markets are not more accurate.
People who are unfamiliar with how regulated gamblings works assume that the "market" is just lots of informed people rationally trading with each other. This is not how it works. Bookmakers post lines to a small group of syndicates up to a limit, they will often do this non-publicly, and this is how prices are set. They are not set by the "wisdom of crowds", they are set by people who have invested hundreds of millions of dollars in predicting the outcome because bookmakers have an economic need for accurate lines.
When lines open to the public, there is often no significant movement after opening prices set by syndicates. That is because the public has no idea what the actual price should be, they are just uninformed noise traders clicking buttons randomly...that is the product too, the purpose of the product is entertainment not economic efficiency.
It is true that some lines are set incorrectly but the public is not able to benefit from this, because they do not have the information. I would guess that 95% of money made from gambling has been made by under 50 people. And, perhaps counter-intuitively, most of the time these people trading does not have an impact on price because they deliberately trade in a way that does not impact price. Again, the purpose is the same: they trade to make money, not produce economic efficiency.
The people who think prediction markets are useful in any way are people who never traded any markets and couldn't predict if the sun is going to come up tomorrow. If gamblers are noise traders, these people are noise speakers. These markets are completely pointless, gambling is economically pointless outside of the pleasure that people get from entertainment.
Noise traders ultimately create an even greater incentive for accurate prediction. The fact that the odds are set at the start and never change just proves that there's very little change in relevant information about upcoming sport games, races etc. where regulated bets happen. That's totally normal. Bets about real-world events are a rather different matter though.
No, they don't. If you have a line that is beatable, that line has been open for a long time, and you have informed people profiting from that line, it will usually not move. People who have information will disguise their flow, they won't bet with places that will move the line against them when they bet (if you bet this with Pinnacle, for example, they will work out you are beating their line immediately, they have quants who can work out how you are beating their line, and you have permanently destroyed your edge) so you put money down at soft book somehow and they will likely not move line against you...meaning the line doesn't move.
Again, it is fairly common assumption that people make that it must be noise traders who are incentivizing syndicates. This is the case at open but not after, and there is a significant distinction between noise traders and noise traders through retail books. Retail books do not set the lines, they do not post lines early to syndicates, their product is completely different. There is literally no incentive for accurate prediction because the economic gain from noise trading does not accrue to anyone who has information. 95% accrues to firms with the greatest marketing advantage, again...this is entertainment, it is not about accurate prediction, you are misunderstanding at a very fundamental level what is going on here. It is like going to see the Minecraft Movie and thinking this is artistic expression on the level of Tokyo Story.
This would all be different if there were real markets underpinned by economic demand for this risk but there isn't. This is why Betfair failed. This is why these "prices" you see aren't actually real prices.
> People who are unfamiliar with how regulated gamblings works assume that
I work in the regulated gambling industry. Prediction markets like Kalshi and Polymarket do not work like the regulated gambling industry. You don't know what you're talking about.
There is a certain kind of person who thinks that all the news they disagree with is being faked by people who will spend multiple millions on Polymarket just to get a news story on CNN.
This person does not realise that most people do not pay attention to the news, that people in power are not glued to the news waiting for journalists to tell them what to say, or that the news is generally not very important...except to people like them who play out these fantasies about wealthy people mind-controlling them through CNN.
It isn't impossible to police. Players and referees are under supervision...I am not sure why you think this isn't the case. Regulated gambling companies i.e. not Polymarket, maintain lists of people who are connected to sports inc. through family. And they maintain systems that monitor unusual betting activity that is shared across the industry, it is quite easy to detect this activity because most of the flow that bookmakers see is uninformed. So if you see a customer that doesn't bet regularly put down $10k, line moves in their favour...that is obviously extremely suspicious because that won't happen with 95% of the volume you take.
As an example, there was a football player in England who had a friend that bet on a transfer market (a market that is extremely prone to inside information). It was detected immediately (despite being a relatively small bet of $10k, I have heard anecdotally that insiders have been detected in this market down to $500 bets), the player was banned, fined $500k, etc.
Btw, the reason these systems exist is because there are certain sports that are too lucrative not to make a market in but the economics/nature of the game mean that matches are easily fixed: 99.99% of this activity is low-ranked professional tennis, and surveillance has been very effective (all of this is funded, not by professional tennis, but by gambling companies). Generally, this isn't as prevalent with US sports because none of those preconditions exist for the major sports.
NFTs have zero value but people seem to derive non-monetary value from them. Naked option trading is a form of gambling (as well as risk management) and, as a result, it is regulated.
Polymarket is a "financial investment" for regulatory purposes but is gambling, there is no legitimate risk management reason. As a result, there is massive scope for harm because it is gambling without any of the gambling regulations that exist in the US.
People on this site appear to be unaware that gambling is regulated where legal. I will give you an example: Polymarket do not comply with state regulator's exclusion/no market lists. This is immoral. Gambling companies should not take bets from users who have gambling problems, they should not market to them.
Offshore unregulated books will often market themselves to addicts saying that they do not comply with regulator's exclusion lists...this is an onshore book operating in Lexington Avenue New York, not out of a shed with a pig sty in Curaco. It is unbelievable at many levels.
Correct, this is the problem that the Tories failed to identify when they started to reduce fossil fuel usage. It was a political decision taken to shore up support with people who ended up moving to the Lib Dems anyway (and everything unravelled anyway with Brexit for Cameron, who was probably the biggest proponent of this...Lib Dems incidentally also played a key role in blocking nuclear).
Comparing the prices of these two things does not tell you what the eventual cost is going to be.
To explain the context: the UK had to cap electricity prices because costs have risen so much, government is paying huge subsidies to providers, minister made bombastic claims in the last election that he could fix everything, nothing has worked out, he has now set up a range of quangos to employ his friends (reducing quangos was one of the promises in the election) who are now briefing the press aggressively with other lobbyists that costs are going to drop...despite the government having no political ability to do anything that will reduce costs (the latest briefing is that new gas plants are too expensive, an obviously misleading comparison on many levels).
UK electricity prices are extraordinarily high, the political context is that you have to say this will reduce them. This is obviously not going to lead prices to fall but the context has to be the same.
The other question is why we are doing this if this isn't going to actually cause prices to fall? As with many similar problems in the UK: too many people making too much money. Government is now subsidizing retail electricity prices to pay for private sector investment in high-cost technology that guarantees a high ROI. Most of the people quoted in the government's presser are lobbyists, as I said above a cottage industry of quangos has now sprung up surrounding Miliband. There is no way back.
In terms of macro, it is definitely quite interesting because the last few years of this have essentially made it impossible for the UK to operate as a modern industrial economy. How do you maintain employment with essentially no industrial function? Energy prices are so high commercially that some services businesses are actually struggling too. It is incredible employment and wages are so high in the UK (although the level of economic support the government is providing, particularly in services, is huge).
The cult members will say whatever but you can measure cost. Wind is expensive, this project is expensive, and it won't lead to lower bills.
I am also not sure what you mean by "the Conservatives"...they started this about ten years ago. The issue was, something that was pointed out at the time, that they went into as a primarily political decision without any regard for the costs or trade-offs. The result has been much higher electricity prices. The position that Labour are taking is almost identical: anyone who disagrees with us a loon, pressers that are simultaneously obviously misleading and bombastic in the claims made (the presser for this has the head of a quango saying what a "stonking" job he is doing), and massive lobbyist intervention because of the need for subsidies (subsidies are now 4x the size of industry profits, almost all of the people quoted in the presser for this are lobbyists). Unfortunately, the reality of cult members is that they believe their cult is unique and special, and every other cult is wrong. This happened with the Tories ten years ago, it is happening with Labour now, in ten years it will be another party doing the same thing...it is how cults work.
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