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Tag Archives: Tariffs

Tariffs: A Threat to America’s GDP, by Bob Luddy

You don’t make people better off by taking money out of their pockets, which is, like taxes, what tariffs do. From Bob Luddy at spectator.org:

Faraways/Shutterstock.com

Tariffs are a popular remedy to maintain a favorable balance of trade and create domestic jobs. Some believe tariffs will foster a renaissance of American manufacturing, but let’s consider the facts.

America has six million unfilled jobs, with almost every industry desperately trying to hire qualified personnel. Our trade surplus is widening as these trade wars progress, and international relations are very stressed.

Free trade allows buyers and sellers to be winners and facilitates comparative advantage and the division of labor. For example, iPhones are designed and engineered in the United States, manufactured in China, and sold worldwide. China assembles the iPhone, but many countries provide the components, software, and technologies for this amazing computer.

Apple is now enduring tariffs imposed on China and restrictions on the sale of technologies to Chinese companies such as Huawei. Chinese buyers have reduced their purchases of iPhones because of American tariffs. If the U.S. imposes tariffs on the importing of iPhones, it will have a very adverse impact on Apple and its suppliers. More importantly, Americans rely on iPhone technology in every industry to operate their businesses; for example, chefs store their recipes, contact their users, and order food from this small device.

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The Old World is Dying, by Michael Krieger

Michael Krieger correctly identifies what will be the defining global issue for at least the next several decades: decentralization versus centralization. From Krieger at libertyblitzkrieg.com:

Yesterday, Trump took to Twitter and unexpectedly threatened to raise tariffs on Chinese goods this coming Friday. This caught most people by surprise given incessant commentary over the past several months about how good trade talks were going and how close both sides were to signing a monumental deal. Although Trump’s tweet led to immediate turmoil in global financial markets, U.S. equities have gone up in a straight line since the market opened and are barely down as I write this. Investors appear to assume this is just theater meant make the U.S. public think he’s being tough, so that when he ultimately signs a largely meaningless sham deal with no teeth he can talk it up and pat himself on the back for being a brilliant negotiator. I’m not convinced this is correct, but it’s what markets seem to be pricing in. Either way, we’ll have answers soon enough.

More importantly, I continue to think the U.S. and China are on a major collision course irrespective of what happens with the trade deal. This charade will likely resolve either with no deal and an immediate dangerous ratcheting up of tensions, or we’ll get a deal so weak and irrelevant it’ll fail to fundamentally alter the U.S.-China economic relationship in any meaningful way, which was supposedly the whole point.

Many people still assume the “trade war” is actually about trade, when in reality it’s about geopolitical power. The Trump administration wants to knock China down a notch and consolidate global hegemony, which is why it’s been pressuring China on a variety of fronts. This pressure will not cease until China either rolls over and becomes a client state of a U.S. unipolar empire, or it fights back. My view is China will fight back.

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18,927 Ways Chinese Exporters Dodge US Tariffs, by Tyler Durden

The Chinese, a clever people, are figuring out ways around US trade restrictions. Imagine that! From Tyler Durden at zerohedge.com:

Always an industrious people when it comes to maximizing profit and cash flow, especially if it means breaking the law, it didn’t take long for Chinese exporters to find a way to dodge hundreds of billions in US tariffs. Take the case of David Visse, a wood importers from Oregon, who this past June got a call from a supplier asking if he would like to get some Chinese plywood tariff-free. “How would that work”, asked importer David Visse. The products carry an identification code that is checked by U.S. Customs agents.

“Don’t worry about it,” the supplier said. The plywood would be stripped of its Chinese markings, and “we’ll ship it under some other code.”

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Protectionism Abroad and Socialism at Home, by Ron Paul

Government gets bigger and more powerful at home and abroad. From Ron Paul at ronpaulinstitute.org:

One of the most insidious ways politicians expand government is by creating new programs to “solve” problems created by politicians. For example, government interference in health care increased health care costs, making it difficult or even impossible for many to obtain affordable, quality care. The effects of these prior interventions were used to justify Obamacare.

Now, the failures of Obamacare are being used to justify further government intervention in health care. This does not just include the renewed push for socialized medicine. It also includes supporting new laws mandating price transparency. The lack of transparency in health care pricing is a direct result of government policies encouraging overreliance on third-party payers.

This phenomenon is also observed in foreign policy. American military interventions result in blowback that is used to justify more military intervention. The result is an ever-expanding warfare state and curtailments on our liberty in the name of security.

Another example of this is related to the reaction to President Trump’s tariffs. Many of America’s leading trading partners have imposed “retaliatory” tariffs on US goods. Many of these tariffs target agriculture exports. These tariffs could be devastating for American farmers, since exports compose as much as 20 percent of the average farmer’s income.

President Trump has responded to the hardships imposed on farmers by these retaliatory tariffs with a 12 billion dollars farm bailout program. The program has three elements: direct payments to farmers, use of federal funds to buy surplus crops and distribute them to food banks and nutrition programs, and a new federal effort to promote American agriculture overseas.

This program will not fix the problems caused by Tramp’s tariffs. For one thing, the payments are unlikely to equal the money farmers will lose from this trade war. Also, government marketing programs benefit large agribusiness but do nothing to help small farmers. In fact, by giving another advantage to large agribusiness, the program may make it more difficult for small farmers to compete in the global marketplace.

To continue reading: Protectionism Abroad and Socialism at Home

Trump’s Fake Fix for a Bad Policy, by Walter E. Block

In classic government fashion, Trump’s “fixing” one mistake with a bigger mistake. From Walter E. Block at lewrockwell.com:

As an economist who shares President Trump’s belief that we should be cutting taxes and shrinking government, one might expect me to be enthralled by his policies. But that is not the sentiment I and many other libertarians feel when it comes to his decision to impose tariffs on steel, aluminum and a host of other products made overseas, particularly in China.

On Wednesday, Mr. Trump and the president of the European Commission, Jean-Claude Juncker, said they had reached an agreement to step back from a trade war and discuss ways to lower tariffs and other trade barriers. But the outcome of those talks are far from certain, and trade tensions between the United States and China remain very high.

What is driving the president’s apparent eagerness to impose tariffs is a simple and wrongheaded idea that plays to a large part of his base: That a trade war will spur job growth in America. He is trying to use tariffs to give a leg up to American industries against countries that manufacture the same products that we do — whether steel, aluminum or cars — but more efficiently. And who could be against that if it creates more jobs?

But in reality simply creating jobs alone does not make for a strong economy. What we really want is to increase production. And to achieve that, we need to allocate labor as efficiently as possible. One way to do that is to make sure that if there are other countries that can create certain goods more efficiently than we can, it is to our advantage to trade with them for these items, rather than manufacture them ourselves. The result is cheaper goods.

But tariffs do nothing to improve this efficient allocation of labor. They also do not increase or decrease employment. They just shift jobs around, and almost always in a manner that hurts the economy.

To continue reading: Trump’s Fake Fix for a Bad Policy

Why Trump Won’t Start a Real Trade War, by Bill Bonner

Another take on the “trade war” with China, and why it really happen. From Bill Bonner at bonnerandpartners.com:

The New York Times reports:

President Trump escalated his trade war with China on Wednesday, ordering his administration to consider more than doubling proposed tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent, as talks between Washington and Beijing remain at a standstill.

Mr. Trump instructed the United States trade representative to look into increasing tariffs on Chinese imports like fish, petroleum, chemicals, handbags, and other goods to 25 percent, a significant escalation in a dispute that is beginning to take a toll on industries and consumers in both countries. A final decision on the size and scope of the tariffs is not expected before September.

Fake Wars

The Deep State welcomes war. But, especially in the case of a trade war with China, it must be a phony war.

And here is a good test. We’ll see how well, or badly, we have connected the dots.

According to the picture we see, the Deep State – the more or less permanent, but fluid and schismatic, group of insiders that controls U.S. public policies – uses war to gain public support for policies that actually serve only one purpose… to shift power, wealth, and status from the public to itself.

That’s why the trade war has to be fake.

Real wars threaten the Deep State’s survival. The wars in the Middle East (now also in Africa), for example, help justify trillions of dollars of wealth transfers to the military/industrial/surveillance complex.

But the U.S. has nothing really at stake in these fights; no matter what happens, it will not be invaded, bombed, or humiliated.

Likewise, the wars at home – against poor people and drug users – go on for decades. And no one is better off – except the Deep State industries engaged in the wars themselves (welfare agencies, prisons, police, drug pushers, etc.).

The Donald’s new trade war is a delight, too; already, the sidewalks are slick with greasy swamp water; lobbyists line up around the block to ask for special favors and dispensations. The insiders gain power and money by controlling crony trade deals.

But neither the president nor his crackpot advisors may realize the danger. And here is where it gets interesting: They mustn’t allow this war to get out of hand.

To continue reading: Why Trump Won’t Start a Real Trade War

Here’s Why Trump Is Hiking Chinese Tariffs To 25%, by Tyler Durden

China is counteracting Trump’s tariffs by allowing the its currency, the yuan, to depreciate. So Trump is raising tariffs some more. From Tyler Durden at zerohedge.com:

One of the cited reasons behind today’s market slide which started in Asia and promptly swept the rest of the globe, is a belated appreciation of Tuesday’s news that the Trump administration is now considering more than doubling proposed tariffs on a further $200 billion worth of Chinese goods to 25%, up from an original 10%.

But what exactly prompted Trump to push for the sharp reset in Chinese tariffs?

The answer was actually first given by Trump himself three weeks ago, when in a candid CNBC interview the president said that he was not only watching the US trade deficit with China, but also its currency, which was “dropping like a rock”, suggesting that trade war was morphing into currency war after he berated the Fed for hiking rates and pushing the dollar higher (when, as we explain below, Trump should be commending Powell for doing just that).

Fast forward to today, when the WSJ gives some further color, noting that while “the administration didn’t spell out a particular rationale for increasing the tariff…. the reasons include anger over the Chinese government’s failure to approve the merger of U.S.-based Qualcomm Inc. and Dutch chip maker NXP Semiconductors, which forced the companies to scrap a deal aimed at boosting Qualcomm’s reach into new markets.”

The WSJ also cites “industry officials who have discussed the move with the White House” and who said that another, perhaps far more important reason for the tariff increase “is to compensate for the decline in the value of the yuan by about 6% over the past two months.

“It’s important countries refrain from devaluing currencies for competitive purposes,” a senior administration official said, and although he didn’t accuse China of acting in that fashion, the implication was clear.

Yet another reason that forced Trump’s hand is that as several banks have recently pointed out, the Yuan devaluation to date has effectively offset the adverse impact to Beijing from the $34 billion in tariffs enacted on Chinese goods, mainly machinery and components (to which China retaliated with tariffs on the same amount of U.S. exports, especially farm products).

To continue reading: Here’s Why Trump Is Hiking Chinese Tariffs To 25%

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