Trade War

Discussion of current events
User avatar
Sertorio
Posts: 2660
Joined: Fri Dec 16, 2016 3:12 am

Re: Trade War

Post by Sertorio » Sat Jun 15, 2019 2:08 am

cassowary wrote:
Fri Jun 14, 2019 10:09 pm

All the standard economic textbooks say tariffs are bad for you. Keep this up and I will throw them away.
Like everything else in economics, tariffs sometimes are bad and sometimes are good. It all depends on the circumstances. Ideological positions in economics - as in everything else - do more harm than good...

User avatar
cassowary
Posts: 3066
Joined: Thu Dec 15, 2016 11:30 pm

Re: Trade War

Post by cassowary » Sat Jun 15, 2019 5:34 am

Milo wrote:
Fri Jun 14, 2019 10:18 pm
cassowary wrote:
Fri Jun 14, 2019 10:09 pm
Milo wrote:
Fri Jun 14, 2019 11:26 am
Doc wrote:
Fri Jun 14, 2019 11:19 am
https://www.breitbart.com/asia/2019/06/ ... roduction/

U.S. Factory Production Ramps Up While China Industrial Output Grinds to Slowest Since 2002

U.S. factory production bounced back in May after a four-month slump while the growth of industrial output in China fell to its slowest pace since 2002.

Manufacturing output rose 0.2 percent after a 0.5 percent decline in April, according to data from the Federal Reserve released Friday. Manufacturing makes up around 75 percent of total industrial production and accounts for about 12 percent of the U.S. economy.

Overall industrial production, which adds mining and utilities to factories, increased 0.4 percent in May, better than expected. April’s contraction was revised to an improved 0.4 percent decrease.

Data from China Friday showed that growth in industrial output had slowed to the weakest pace since 2002, indicating that U.S. tariffs are taking a toll on the world’s second-largest economy.

The U.S. factory data is an important sign that the U.S. manufacturing sector is more resilient to trade stress than many economists had forecast. Bolstering the case for a stronger U.S. economy was a separate report Friday on U.S. retail sales that showed better than expected gains in May and revised April and March higher.

Consumer durable goods production rose by 2 percent and overall consumer goods production rose 0.5 percent, reflecting the ongoing strength of the U.S. consumers. Automotive production grew 3.4 percent, partially reversing a series of declines earlier this year. Machinery production rose 1.1 percent. Business equipment production was up 0.2 percent. High tech production, including semiconductors and communication equipment, rose.

Capacity utilization rose by more than expected to 78.1 percent from 77.9 percent.
If this keeps up I might even support Trump!
All the standard economic textbooks say tariffs are bad for you. Keep this up and I will throw them away.
You would know better than me but I have the impression that's largely based on the Great Depression. Perhaps there was more correlation than causation?

I thought I started a thread asking if perhaps tariffs work after all but I can't find it now.
It started out that way. The Smoot Hawley Act was thought to be the trigger that caused the Great Depression. But as time went on, its importance as a cause decline in the opinion of economists. Other causes increased in significance.

This is my thoughts on tariffs.

The prevailing idea is that when a country, say the US imposes tariffs on another, say China, there will be retaliation. So there will be job losses on both sides leading to a recession at least. I recall many economists saying Trump's trade war will lead to a Depression.

Instead, the reverse seems to be happening. Companies decide to invest in US to avoid the tariffs. That's why you see manufacturing rising as reported in your link. To me, tariff is another way of wealth redistribution.

With tariffs, US manufacturers are forced to manufacture in the US and employ US workers, thus boosting their wages. That is what happened. Of course this means that consumers have to pay more for made in USA products. So you have a transfer of wealth from consumers to the workers.

Who are the biggest spenders among consumers? It is the rich of course. The chief beneficiaries are the low skilled US workers whose wages stagnated for many years because their jobs got outsourced to low wage countries. So you have a wealth transfer from the rich to the poor via the MARKET.

This is better than the traditional leftist tax and spend policies where wealth transfer went through the government. Low skilled workers now get a living wage instead of Third World Wage but living in an expensive First World Country.

Who are the biggest losers? It is the global corporations and their (rich) shareholders. These can't manufacture in a cheap third world country any more and sell in a rich first world country at high prices. With tariffs they are now forced to manufacture and pay high wages in first world countries. Their profits will go down and so will their dividends and stock prices.
The Imp :D

neverfail
Posts: 3660
Joined: Sun Dec 18, 2016 3:47 am

Re: Trade War

Post by neverfail » Sat Jun 15, 2019 7:03 am

cassowary wrote:
Sat Jun 15, 2019 5:34 am


.

This is my thoughts on tariffs.

The prevailing idea is that when a country, say the US imposes tariffs on another, say China, there will be retaliation. So there will be job losses on both sides leading to a recession at least. I recall many economists saying Trump's trade war will lead to a Depression.

Instead, the reverse seems to be happening. Companies decide to invest in US to avoid the tariffs. That's why you see manufacturing rising as reported in your link.
Temporary fillip!

cassowary wrote:
Sat Jun 15, 2019 5:34 am
With tariffs, US manufacturers are forced to manufacture in the US and employ US workers, thus boosting their wages. That is what happened. Of course this means that consumers have to pay more for made in USA products. So you have a transfer of wealth from consumers to the workers.
The cost of living goes up for everyone so the workers get no real benefit from any boost to their money wages. costs also goes up for businesses that rely on imported components and/or other tariff-taxed imports. These days that means a lot of them.
cassowary wrote:
Sat Jun 15, 2019 5:34 am
Who are the biggest spenders among consumers? It is the rich of course.
Wrong! The rich are few in number and tend in any case tend to hoard their money. It is mass spending by members of the gainfully employed middle and working classes that sustains the economy. Per capita the rich might spend a bit more but the lesser per capita spending by the others multiplied by their sheer numbers that have many times a bigger impact. A valid case for a periodic redistribution of wealth (or at least of money income) to empower the heroic spenders.
............................................................................................................................................

I live in a country where during my lifetime I witnessed its transformation from a high tariff-protection country to a low tariff one. True that in the era of high protection there were a lot more low skilled jobs in assembly line manufacturing than there are now and the gap between rich and poor was narrower than it is now. But my country paid the cost in the following ways:

1. It gave a lot more power to the trade unions and there was a lot of costly industrial disputation.

2. It raised the cost of living for all including the workers - hence the propensity for union militancy as workers combined to chase higher money incomes in compensation for their enhanced living costs.

3. We suffered decades of slower economic growth than we have done since the implementation the round of free market reforms inaugurated in the 1980's.

4. In encouraged slack quality controls and general inefficiency - along with rackets by producers. Australian consumers paid the price in shoddy products of inferior design and workmanship as well as costly ones.

5. It renders us globally uncompetitive. Not only in overseas markets but after years of economic stagflation in the 1970's Australian made manufactured products were even losing market share in their home market to imported competing products - despite the highest level of tariff protection ever.

6. Distortion of politics. In the long run you cannot have selective tariff protection for a limited number of targeted industries. Other industries and firms that do not initially benefit become involved in political lobbying until they get what they want. Indeed, who gets tariff protection and who has to do without becomes an instrument of pork barreling for incumbent governments so resources are squandered because of this element of politicization.

Beware America! Based on our experience out here you are likely opening a Pandora's box which you will be sorry for afterward.

Jim the Moron
Posts: 1446
Joined: Thu Dec 15, 2016 9:51 pm

Re: Trade War

Post by Jim the Moron » Sat Jun 15, 2019 7:33 am

I'll drop POTUS a memo advising him to check out how they did things in Australia. I'm sure he will change up all of his policies in response. Marsupials rule!

User avatar
cassowary
Posts: 3066
Joined: Thu Dec 15, 2016 11:30 pm

Re: Trade War

Post by cassowary » Sat Jun 15, 2019 8:43 am

neverfail wrote:
Sat Jun 15, 2019 7:03 am
cassowary wrote:
Sat Jun 15, 2019 5:34 am


.

This is my thoughts on tariffs.

The prevailing idea is that when a country, say the US imposes tariffs on another, say China, there will be retaliation. So there will be job losses on both sides leading to a recession at least. I recall many economists saying Trump's trade war will lead to a Depression.

Instead, the reverse seems to be happening. Companies decide to invest in US to avoid the tariffs. That's why you see manufacturing rising as reported in your link.
Temporary fillip!
you could be right. I won't throw away my economics textbooks yet. Let's stick to free trade for the time being.
The Imp :D

neverfail
Posts: 3660
Joined: Sun Dec 18, 2016 3:47 am

Re: Trade War

Post by neverfail » Sat Jun 15, 2019 11:20 pm

Jim the Moron wrote:
Sat Jun 15, 2019 7:33 am
I'll drop POTUS a memo advising him to check out how they did things in Australia. I'm sure he will change up all of his policies in response. Marsupials rule!
:lol:

I realize that you wrote that tongue-in-cheek Jim but seriously:

I wish that nations and governments could learn second-hand from others but while it occasionally happens it still happens all so rarely. I doubt whether Trump would honor us with a second glance and not just because of ignorance. Very likely Trump is under the impression that America, being so powerful and important, has nothing more to learn - just like himself.

User avatar
cassowary
Posts: 3066
Joined: Thu Dec 15, 2016 11:30 pm

Re: Trade War

Post by cassowary » Sun Jun 16, 2019 1:06 pm

neverfail wrote:
Sat Jun 15, 2019 7:03 am

cassowary wrote:
Sat Jun 15, 2019 5:34 am
With tariffs, US manufacturers are forced to manufacture in the US and employ US workers, thus boosting their wages. That is what happened. Of course this means that consumers have to pay more for made in USA products. So you have a transfer of wealth from consumers to the workers.
The cost of living goes up for everyone so the workers get no real benefit from any boost to their money wages. costs also goes up for businesses that rely on imported components and/or other tariff-taxed imports. These days that means a lot of them.

If their wages rise more than inflation, it will be ok. I too expected inflation to pick up with the tariffs. But it did not happen.

‘Experts’ wrong again: Trump tariffs have not penalized American consumers
The latest set of statistics from the Bureau of Economic Analysis (BEA) shows all of the professional pundit claims of higher prices on imported goods due to Trump tariffs are simply disconnected from reality. In actuality the year-over-year prices of import products are actually dropping:
Trump seems to have the magic touch.
Economic theory is great in the abstract, using unassailable logic and fundamental principles grounded in reality. But human beings and their collectivities are complex, and often intervene in the economic sphere for reasons unrelated to the logic of economics.
The standard economic theory is this:

1)Trading partners will retaliate with tariffs of their own and put your workers out of work.
2)Tariffs will boost import prices, stoking inflation.

None of the above happened.
The Imp :D

neverfail
Posts: 3660
Joined: Sun Dec 18, 2016 3:47 am

Re: Trade War

Post by neverfail » Sun Jun 16, 2019 5:07 pm

neverfail wrote:
Sat Jun 15, 2019 7:03 am

cassowary wrote:
Sat Jun 15, 2019 5:34 am
With tariffs, US manufacturers are forced to manufacture in the US and employ US workers, thus boosting their wages. That is what happened. Of course this means that consumers have to pay more for made in USA products. So you have a transfer of wealth from consumers to the workers.
The cost of living goes up for everyone so the workers get no real benefit from any boost to their money wages. costs also goes up for businesses that rely on imported components and/or other tariff-taxed imports. These days that means a lot of them.
cassowary wrote:
Sun Jun 16, 2019 1:06 pm
If their wages rise more than inflation, it will be ok. I too expected inflation to pick up with the tariffs. But it did not happen.
Well, good luck to the USA if it managed to defy the force of economic gravity but frankly I remain skeptical. You are right about wages rising faster than inflation though - but that is only for workers. Business costs rise as well. In that I can only pass on to you our long experience here in Australia where the cumulative effect of too much tariff protection over a long period of time made us non-competitive internationally in all but farm produce and minerals. It was the bulk and dynamic of these two that arguably saved us from national bankruptcy but I doubt whether this option is open to the United States.

‘Experts’ wrong again: Trump tariffs have not penalized American consumers
cassowary wrote:
Sun Jun 16, 2019 1:06 pm
The latest set of statistics from the Bureau of Economic Analysis (BEA) shows all of the professional pundit claims of higher prices on imported goods due to Trump tariffs are simply disconnected from reality. In actuality the year-over-year prices of import products are actually dropping:
Weasel words based upon short term observation Cass. The USA imports from a lot more countries than just the PRC. So imagine that the price of goods imported from the PRC are now priced higher due to the increased tariff impost but the cost of other imported goods from elsewhere is falling; due (say) the the combined effects of a strengthening dollar and an economy experiencing slowdown in growth. In aggregate, would you not seriously expect the year-over-year prices of imported products to fall?

It cannot keep going on forever. The music stops eventually!
cassowary wrote:
Sun Jun 16, 2019 1:06 pm
Economic theory is great in the abstract, using unassailable logic and fundamental principles grounded in reality. But human beings and their collectivities are complex, and often intervene in the economic sphere for reasons unrelated to the logic of economics.
The standard economic theory is this:

1)Trading partners will retaliate with tariffs of their own and put your workers out of work.
2)Tariffs will boost import prices, stoking inflation.

None of the above happened.
Early days yet. Watch this space!

User avatar
Milo
Posts: 1966
Joined: Thu Dec 15, 2016 10:14 pm

Re: Trade War

Post by Milo » Sun Jun 16, 2019 5:11 pm

cassowary wrote:
Sun Jun 16, 2019 1:06 pm
neverfail wrote:
Sat Jun 15, 2019 7:03 am

cassowary wrote:
Sat Jun 15, 2019 5:34 am
With tariffs, US manufacturers are forced to manufacture in the US and employ US workers, thus boosting their wages. That is what happened. Of course this means that consumers have to pay more for made in USA products. So you have a transfer of wealth from consumers to the workers.
The cost of living goes up for everyone so the workers get no real benefit from any boost to their money wages. costs also goes up for businesses that rely on imported components and/or other tariff-taxed imports. These days that means a lot of them.

If their wages rise more than inflation, it will be ok. I too expected inflation to pick up with the tariffs. But it did not happen.

‘Experts’ wrong again: Trump tariffs have not penalized American consumers
The latest set of statistics from the Bureau of Economic Analysis (BEA) shows all of the professional pundit claims of higher prices on imported goods due to Trump tariffs are simply disconnected from reality. In actuality the year-over-year prices of import products are actually dropping:
Trump seems to have the magic touch.
Economic theory is great in the abstract, using unassailable logic and fundamental principles grounded in reality. But human beings and their collectivities are complex, and often intervene in the economic sphere for reasons unrelated to the logic of economics.
The standard economic theory is this:

1)Trading partners will retaliate with tariffs of their own and put your workers out of work.
2)Tariffs will boost import prices, stoking inflation.

None of the above happened.
Perhaps because the benefit to local business is exceeding the cost of the tariffs?

IOW, the Chinese were ripping us off, more than those who were in the know wanted to let on?

User avatar
Doc
Posts: 3050
Joined: Thu Dec 15, 2016 7:09 pm
Location: Cradle To Grave

Re: Trade War

Post by Doc » Sun Jun 16, 2019 5:13 pm

https://theconservativetreehouse.com/20 ... ore-165103
President Trump Outwits Chairman Xi Jinping Ahead of G20 Summit…
Posted on June 15, 2019 by sundance

President Trump has taken the leverage of economics to levels of geopolitical strategy never seen before. Nowhere is the genius strategy more clear than in the way Trump has positioned the trade reset and confrontation with China.

In hindsight every move since early 2017 including: (1) the warm welcome of Chairman Xi Jinping to Trump’s Mar-a-Lago estate; (2) the vociferous praise poured upon Xi; (3) the November 2017 tour of Asia; (4) the direct engagement with North Korean Chairman Kim Jong Un; the strategic relationship with Japanese Prime Minister Shinzo Abe; and a host of smaller nuanced moves have been quietly building toward a conclusion.

The upcoming G-20 summit is the last chance for Trump and Xi to reconcile considerable differences and President Trump has the strongest strategic position any Chinese official has ever faced.

After Beijing walked away from previous agreements between USTR Robert Lighthizer and Vice-Premier Liu He, Trump initiated a series of punishing economic consequences that had to have been well planned in advance.

The economy in China is reeling from the pressure applied; and stunningly it has only been a month since the consequence phase began.

In addition to tariff increases, the U.S. blacklisted Huawei Technologies Co., threatened other major Chinese tech companies and essentially cut-off China from the international supply chain it needs to sustain itself. Beijing responded by drawing up a list of “unreliable entities” and making threats against any enterprise that would walk away from business engagement with China. The totalitarian response has worsened the situation, and more companies have announced their intent to decouple from Beijing.

An important aspect, missed by most observers, is the ideology and outlook within any Chinese engagement. Quite simply, if it does not benefit China it is not done. Therefore any negotiation with China is challenging because Beijing will cede no ground they view as already won.

China does not believe in ‘concession from current position‘ within any terms. Ultimately this is the reason why the negotiated agreement by Lighthizer and Vice-Premier He was dismissed by Beijing and talks collapsed. China will not cede an already attained position.

China never negotiates terms where they give ground. Almost all negotiation with China has historically surrounded time. To appease the West the longer-thinking approach of China has been to negotiate winning more slowly, but they will never retreat on previously won gains.

However, in advance of the G20 Summit in Japan President Trump has positioned Chairman Xi in a lose/lose dynamic. This forces the outlook of Beijing into a state of internal anxiety. Only President Donald Trump could have achieved this position, is really is remarkable and is noted within this Bloomberg article:

(Bloomberg) By now, Xi Jinping is used to Donald Trump’s tariff threats. But the U.S. president’s latest ultimatum is personal, and the Chinese leader’s response could have far-reaching consequences for his political future.

Trump on Monday said he could impose tariffs “much higher than 25%” on $300 billion in Chinese goods if Xi doesn’t meet him at the upcoming Group of 20 summit in Japan. China’s foreign ministry — which usually refuses to provide details of meetings until the very last minute — declined Tuesday to say whether the meeting would take place.

The brinkmanship puts Xi — China’s strongest leader in decades — in perhaps the toughest spot of his six-year presidency. If Xi caves to Trump’s threats, he risks looking weak at home. If he declines the meeting, he must accept the economic costs that come with Trump possibly extending the trade conflict through the 2020 presidential elections.

“Whether they meet or not, none of the possible scenarios are good for President Xi or the economy in the long run,” said Zhang Jian, an associate professor at Peking University. “You don’t have a good choice which can meet the needs of the Chinese economy or Mr. Xi’s political calculations.” (read more)

Read that again carefully….

“If Xi caves to Trump’s threats, he risks looking weak at home. If he declines the meeting, he must accept the economic costs that come with Trump possibly extending the trade conflict through the 2020 presidential elections.”

That is what you call a Lose/Lose scenario.

China NEVER faces lose/lose situations. The Chinese culture doesn’t even have a frame of reference for a position that includes ‘less losing’ amid better options.

For President Trump to have navigated Chairman Xi into such a position is the pinnacle of strategic success. In the long history of western engagement with Beijing it has never happened, ever.

President Trump is now playing with Chairman Xi like a mouse in a maze.

Trump wants to go to the full confrontation position. Donald J Trump has been talking about this for thirty years. Additionally, for the past two years he has strategically laid the groundwork and aligned the allies needed for this final confrontation. President Trump is looking for an excuse to apply the scale of tariffs on China that will crush their U.S. export business – and – force them into massive state subsidies to retain their manufacturing model. This approach creates pressure to retract from preexisting global financial obligations.

President Trump has threatened more tariffs and more consequential action as it relates to non-tariff barriers, IP protection, forced technology transfers etc. as a result of China reneging on their prior agreement. In essence, President Trump has put Chairman Xi under threat. Beijing’s traditional and cultural position would be no-meeting and no negotiation while under threats.

However, as a baseline disposition President Trump doesn’t want Xi Jinping to meet with him. The appearance of a ‘slight’ is the opening Trump can exploit to apply the 25% tariffs to the remaining $350 billion of imported Chinese goods. This will crush his adversary.

So what does President Trump do… while the tariff threat and trade punishment looms (and he keeps reminding everyone of it), he levels massive amounts of praise upon Chairman Xi making the pressure almost unbearable.

Laughably, U.S. President Trump is wearing the panda mask, and simultaneously applying the dragon approach. Yes, Trump is using China’s own duplicitous strategy against them.

Chairman Xi cannot meet with President Trump or his appearance implies a willingness to negotiate terms; and that reverses the dismissive position previously outlined by Beijing when they rebuked the earlier agreement. A meeting now would appear as weak.

However, if Xi refuses the G20 meeting he will be walking into a trap and allowing President Trump to take all adversarial action that could indeed collapse Xi’s economy.

Worse still, Beijing cannot fall-back-on their historic approach and begin shooting missiles from their proxy province of North Korea to attain leverage and negotiating position… because President Trump has already blunted that ability by meeting with Chairman Kim Jong Un.

Oh, the G20 is going to be epic.

…and LOL, the G20 is on Trump’s home ASEAN turf, Japan, with Trump’s good friend and golf partner Prime Minister Abe.
“"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros

Post Reply