They could introduce some new GAAP rules like...

Add 10% of the value of all inventory sourced outside North America as a "risk liability". Same for 10% of yearly labor that's outsourced.

Basically find ways to make short term thinking visible in their financial reports, since that's what's measured and rewarded.

Not really an accounting issue & messing with those numbers to highlight a risk is just asking for trouble.

Companies are required to disclose significant risks, but the quality of that disclosure...varies.

I suppose this is a useful way to use tariffs. Make production abroad slightly more expensive, or significantly more expensive for vital goods.

Base those premiums on verified actuarially based underwriting risk and you might be on to something.

Companies are free to add them to their accounting already.

Mostly these kinds of risk factors are mentioned verbally in their reports at the moment.

Entities tend strongly to externalise risks unless compelled to do otherwise.

Insurance obligations -- auto, health, life, C&L, bonding, mortgage and title -- are generally required by or offered via third. parties. Sometimes governments, but often creditors, counterparties, employers, or other entities.

There are true externalities in a car accident.

If you have to shut down your business, that's mostly impacting your business in a very direct way.

> Tariffs have been hated on economically, in part because the analysis values the generic profit creation over the risk; but it seems like one way to balance wage differentials to encourage de-risking our supply chain. I'm sure there are other maybe better methods?

What do you mean by 'balancing wage differentials'?

Global trade is on of the best ways to balance wage differentials. That's how China had crazy catch-up growth in the last few decades.

(Another great way to help poor people get more productive and thus richer is open borders.)

If downstream customers want to de-risk, they should pay for it. Either by setting up their supply chains differently, or by outright purchasing insurance, etc.

If they choose not to engage in this expense, perhaps they are right, and just bearing the risk is overall a better trade-off? Who are we to tell other people what level of risk aversion they should have?

Of course, once the calamity hits everyone wishes they would have bought prepared or bought insurance. But that doesn't mean we should all go out and make our roofs asteroid impact proof, or never ever go out because we might break a leg.

that's also where i've landed on the tariffs issue. theoretically a bad idea, but has practical uses beyond purely economic considerations.

good tariff policy is hard to achieve in divisive political environments however. for instance, in many cases, you'd want them to go away dynamically as conditions improve, but lawmakers hate giving away their levers of power.

I am convinced a low tariff of ~3% on all goods and services to every country is a good idea. But that’s never what happens, you get a huge mix of zero to insanity based on which industries have political power. As such a blanket ban on tariffs became a rallying cry.

Food is often used as the counter example, but IMO domestic production is less valuable than a multi year stockpile.

> domestic production is less valuable than a multi year stockpile

nobody is going to stockpile food or consumer goods when you're demonized for charging more for them when the demand goes up. there's no way to do anything but lose money on it.

that's why stockpiles should be kept by government. they don't need to make money on it. should be easy enough, have 6 months worth in a warehouse, ship the oldest out the front of the warehouse to the supply chain while topping up with new product at the back. rotating it like this acts like a buffer,rather than something that is only accessed in dire emergencies and would be out of date or less effective due to age. the relatively small costs of a warehouse would be negligible

Governments used to maintain grain stockpiles in case of famine. A modern equivalent could be run for vastly less than current farm subsidies. Especially if stocks where rotated and mostly refilled in years of massive surplus.

PS: At the extreme end Honey can be stored for thousands of years at room temperature.

Such a tariff could be made more economically neutral if the tariff proceeds were distributed to citizens as a dividend too.

You'd still get deadweight losses.

Easier to image with a 1,000,000% tariff: nobody would actually pay the tariff, so there's no dividend to distribute. Yet, you get an economic impact.

no one is suggesting that tariff level though so it's a pretty much unrealistic value to work throuh.

Well, that's the tariff level that corresponds to a ban on imports, basically.

You still get deadweight losses from lower tariff levels.

why 3%? to overcome inflation? and why on everything instead of grossly disadvantaged industries? i haven't spent much time thinking about such details, so curious about the rationale.

It’s extremely expensive to grow bananas’s in Canada, so the correct response is to import them not add a huge subsidy. The point is to encourage domestic production, but not to the point of stupidity.

Further, unlike a direct subsidy it’s adding tax revenue.

Not the person you're asking, but I could see doing it to "internalize" the risk of rare events like what we're seeing right now. Basically it applies an incentive towards regionalization over globalization, that can make the system more resilient to distant events.

grossly disadvantaged industries = industries labeled as grossly disadvantaged = industries that managed to talk politicians in to giving them a huge advantage

Really the risk sounds more like a job for insurance and warranties tied to product specs than tarrifs.

I don't see a connection between tarrifs and risk in a supply chain. Infamously US autos which refused to adopt Tailorism or other cousin methodologies for reliability wound up being expensive crap compared to Japanese car makers. It is a peripheral variable at best or an irrelevant one at worst.

Tarriffs as a solutio resemble opportunistic timing to not let a crisis go to waste rather than addressing a root cause.