This argument gives support to dropping the 2% inflation target and instead use a NGDP target. This would result in a much lower Fed funds rate, I suspect.

Absolutely correct analysis of how production will ultimately settle

The big question about tariffs concerns whether companies really alter supply sources geographically or just bear the immediate burden and wait out the US mercantilism? Now the US is going after India as a trade competitor. Next southeast Asia? There will not be any place geographically to go to jump the tariff wall.

That's when the pain is really felt by the US consumer.

Tariffs on China, on Mexico, on Canada, o EU cars.

Will Powell have any choice then?.

The more important issue is : what is China doing with US$ is amasses every year from its trade surplus?. Does it buy more UST or does it buy US private assets? The US$ must be re-cycled as they come in--- this is independent of the existing stockpile of US$ in the form of UST.

For all that took place with the Plaza Accord in the late 1980s, Japan continued to run large trade deficits with the US and continue to amass US$.

Gary, a lot of good arguments on the injury to Americans from the tariffs. You are right about the nonsense from Blinder. That macro number tells you nothing about the structural impact of trade ( just ask farmers or specialty steel users)--- I am surprised that Blinder said that.

Turning to the Chinese side, one thing to consider is : China jumps the tariff wall by moving production to other Asian countries and collecting the profits and economic rents from moving offshore. Vietnam and Laos can and would love to have more exported production. Another bigger issue is the restructuring of the Chinese economy. Now China has high savings rates--around 25%. It is pursuing policies to increase domestic consumption and that shift would divert more production from the export market to domestic buyers while maintaining national output growth at the same rate. There are still about a 1 billion Chinese who do not live in the richest 10 biggest cities. These people are ripe for more consumer goods made domestically.

Last thing: Xi Jinping will be in power for life--at least 25 years. He will wait out Trump and any future misguided presidents

It is starting dawn on many that these tariffs are here for the long haul. Yet govts have not introduced measures to ease the adjustment e.g. how are farmers to be compensated for permanent market loss. The US govt does not understand the need for an adjustment mechanism has to go hand in hand with a permanent shift in trade patterns,

You would never know that is the case reading their statement and answers at their press conference. Every monthly report on jobs gets the most attention from average hourly wages and work week-- all geared to detect any inflationary pressures from the labour side. This obsession needs to go away

Arthur the 100 hours capacity for work makes little sense for the denominator... 18 hour days?

Governments would like higher, not lower inflation. Higher inflation means greater tax revenues--- taxes are based on nominal income, not real income. So, higher inflation would reduce deficits.