Time has come to terminate “Phase 1” China trade deal and move forward with tariffs

November 14, 2020

At the time that he signed the “Phase 1” deal with China in January, I said that Trump was making a huge mistake.

Let’s back up to Trump’s inauguration three years earlier. Trump was elected to “Make America Great Again” and a huge part of that program was to bring down America’s trade deficit and bring our manufacturing jobs back home again. In his auguration speech, Trump noted the abandoned, decaying factories scattered like tombstones across the American landscape and said “it all stops right here and right now!”

To that end, Trump got off to a slow start. Proud of his deal-making ability that he demonstrated in the business world, he took the same approach toward trade. He spent two years negotiating a replacement for the North American Free Trade Agreement. The USMCA (United States, Mexico, Canada Agreement) that has replaced it only went into effect this past July. Though analysts predict it will be a net win for the United States, boosting manufacturing, the trade deficit with Mexico has tripled in the meantime and we’ve yet to see any change in business dealings with that country.

At the same time, China launched a charm offensive with Trump and it worked. Trump fell for their promises to boost imports from the U.S. When he realized he’d been snookered, Trump finally did what he should have done in the first place, slapping tariffs on some Chinese goods. He later boosted those tariffs to 25% and levied them against half of all Chinese products. Then, to get China to make a trade agreement with the U.S., the “Phase 1” deal, he threatened to levy the same tariffs against the remainder of all Chinese products.

Predictably, China agreed to make significant progress toward buying more American goods and, to his credit (and unlike deals made by previous administrations), he included specific goals and deadlines. However, just as predictably, China has made no effort whatsoever to comply. They’d already gotten what they wanted. No more tariffs, and they counted on Trump being no different than any president who preceded him – there’d be no follow-through or enforcement. So far, they were right.

Making America Great Again came to a screeching halt – at least the trade reform portion of it which, of course, is the biggest and most important part. It was a huge mistake. I warned at the time that Trump was risking vital support by stalling his agenda.

Trade results for the month of September were released by the Commerce Department on November 4th. Nine months into the year, China has come up way short once again. Here’s the data: https://petemurphy.files.wordpress.com/2020/11/phase-1-china-trade-deal-2020-ytd.pdf. China’s purchase of manufactured goods is up slightly, but still less than the 2017 baseline and 30% short of the goal for 2020. Their purchases of energy products are 65% short of the goal. Their purchases of agricultural products is 52% below the goal, and their purchase of total goods is 38% short of the 2020 goal.

The deal’s goals were divided into four categories of goods. Nine months have passed. That’s 36 opportunities that China has had to demonstrate a good faith effort to meet the goals. Their score? Nine months into the deal, they are 0 for 36. They are only 8 for 36 in terms of meeting the 2017 baseline. No coach of any team would keep his/her job with that kind of record. It’s time to fire this deal.

Trusting China to meet their commitments was a big mistake that stalled Trump’s trade agenda and likely cost him the badly needed votes in the election. However, it’s not too late. Trump could put the trade agenda back on track toward making America great once again by declaring China’s performance a failure, terminating the deal and imposing the tariffs that should have gone into effect a year ago. Leave the deal in place and Biden will pretend that it doesn’t even exist. Terminate the deal and Biden will face a dilemma: cave in to China and drop the tariffs and prove to all American workers that he cares nothing about their plight, or leave the tariffs in place, scoring a big win for Trump’s legacy.

This is a last chance for Trump to demonstrate his determination to “Make America Great Again.”


Reflections on Trump’s Presidency and the Election – Part 2

November 11, 2020

I closed my last post with the question: was this a rigged – legally rigged – election? Let’s begin with a look back at how the election unfolded.

Throughout the campaign, from the moment Biden won the nomination, polls consistently showed that Biden was ahead by a 10-12 point margin. That’s a big margin – discouraging for Trump supporters and stirring enthusiasm among encouraged Biden supporters. New polling data that continued to show Biden leading by that large margin was often the daily lead story across the whole spectrum of media. Did the media knowingly publish false polling data? Were the polling organizations providing the media with falsified data? It smacks of voter suppression.

I received my ballot sometime in September, if I recall correctly. I noticed that, for every race – from president to dog-catcher – the Democratic party candidate was listed first, followed by the Republican candidate, followed by the lesser party candidates – Green Party, Libertarian Party, etc. Why, I wondered? I found that curious. The parties weren’t in alphabetical order, since the Republican candidate would appear much further down, nor were they in alphabetical order by the candidates’ names. (Again, Trump would have been at the bottom of the ballot.) That had to be some kind of advantage – being listed first on the ballot – however small. There are those people who will simply check the first name they see.

I filled out the ballot and signed it. It occurred to me that my signature was no proof whatsoever that it was I who had filled out the ballot. I could have signed a blank ballot and sold it for a hundred bucks. If I was incapacitated in some way, my caregiver could have filled it out and instructed me to sign it.

I put the ballot in the official drop box at the township office weeks ahead of the election to be sure it arrived on time, and not wanting to get the ballot back two weeks after the election marked “insufficient postage.”

Election night finally arrived. As polling closed in the Eastern time zone, early results showed Biden winning by a wide margin. However, we were cautioned that these early results were skewed by mail-in ballots, which were the first to be counted, and mail-in ballots are heavily Democratic. Huh?

Sure enough, as in-person ballots were counted, Trump pulled into the lead, by substantial margins in some cases. I stayed up until midnight and finally went to bed happy, knowing that the “Make America Great” program was on track for another four years.

The next morning, I awoke to a new reality. Trump’s leads were nearly evaporated. The media commentators and analysts explained that the mail-in ballots were the last to be counted, and that mail-in ballots were heavily Democratic. Now I was totally confused. Last night they said they were the first ones counted!

As more ballots trickled in, Trump’s leads in Wisconsin and Michigan were flipped. Five states remained – Pennsylvania, North Carolina, Georgia, Nevada and Arizona. (Well, six, when you include Alaska.) In each case, 10-15% of the ballots remained uncounted. A day passed with virtually no update to the tallies. Another day passed. Nothing still. Something was beginning to smell fishy.

After a couple of days of this, we learned the truth about the delay. Ballots weren’t being counted, because there were no remaining ballots. The delay was simply a waiting game for more “expected” ballots to arrive. Then, more truth: in Georgia, there was a “ballot-curing” process underway, where activists were going door-to-door giving voters a chance to fix problems on ballots that had been rejected. (One can’t help being suspicious that they were also rounding up new ballots. It’d be easy to do. “Oh, Mrs. Jones, we also noticed that your husband didn’t return his ballot. Would you like to fill this one out now?”) We were assured it was all perfectly normal and legal, but it didn’t pass the smell test. It sure seemed for all the world that, once the vote tally was in after the polls closed and it was known how many more votes were needed to flip the results, Democratic party activists were given an opportunity to go out and round up the votes they needed. Maybe that’s not what happened, but it sure as hell smelled rotten.

And it was all legal. Some states did it right. Signatures on mail-in ballots had to be notarized to prove who filled them out. Ballots had to be received by the close of the polls to be counted. Florida is an example.

Other states, however, in their zeal to provide voters a safe option for voting during the Covid crisis, liberalized mail-in balloting with little or no regard for the integrity of the results. Your ballot might not arrive in time if mailed? No problem, we’ll give it 3 days, or a week, or 10 days to arrive after polls close. Don’t know how much postage to put on it? No problem. Don’t put any on it. It’ll get delivered anyway. That means it won’t have a postmark? No problem. We don’t care.

Like in Pennsylvania. No postmark was necessary. They could magically arrive up to ten days late and, unless it could be proven that they were submitted fraudulently after the polls had closed on election day, they were considered legal ballots.

Then we learned that, following a judge’s order for the post office to search for missing ballots, the post office simply rounded up 300,000 ballots and turned them in without scanning them, leaving them with no postmark to prove when they had been mailed.

As I write this, three states – Arizona, Georgia and North Carolina – are still rounding up ballots.

And can someone help me understand the rationale that says mail-in balloting is favored by a wide margin by Democrats over Republicans? That defies logic. There are no political factors involved. People would choose to use mail-in ballots for various reasons:

1. The voter may be out-of-town on polling day.

2. The voter may want to vote absentee just for the sake of convenience.

3. The voter may be a shut-in.

4. The voter may have wanted to avoid exposure to Covid.

None of these factors would cause more voters to favor one candidate over the other. The fact that the results from mail-in ballots differed from the results of in-person voting by a significant margin is clear evidence of some kind of malfeasance.

Then there’s the matter of the high percentage of mail-in ballots that were returned – reportedly 90% or more. Anyone who has ever done a mass mailing – no matter how important, how clearly the envelope is marked as containing important information, and how much the recipients have been advised of the importance of the mailing and to watch for its arrival – knows that you’re lucky to get a 75% response. The other 25% were never read, were tossed on a pile of mail, and buried the next day under a new pile of mail – all eventually to be thrown out. A 90% return rate is clear evidence that someone intervened to round up the missing ballots. Illegal? No, but when only certain demographics are targeted for such follow-up, it becomes an effective tool for legally “rigging” the election results, especially if it’s allowed after the close of the polls. Now that’s a plausible explanation of why mail-in ballots may have heavily favored Biden over Trump.

This is ridiculous. One can’t help being suspicious about an election process so lacking in controls but, then again, it’s all perfectly “legal” this year. It’s got to change if voters are to have any confidence in the integrity of our election process. State laws that allow such sloppy control over ballots need to be challenged all the way to the Supreme Court if necessary. The shoe may very well be on the other foot in the next election.

Here’s what needs to be done to restore the integrity of and faith in our election process:

  1. Measures must be taken to assure that the person casting the ballot by mail is, in fact, the voter to whom the ballot was sent. Requiring notarized signatures is one way to accomplish that.
  2. Mail-in ballots must be received by the close of the polls on election day. Voters had PLENTY of time to mail those ballots well ahead of the election.
  3. The counting of mail-in ballots should begin when the polls open on election day and no results should be released until after polls.
  4. Organizations that publish polling data prior to the election should be held accountable and subject to fines and investigation if the election results fall outside their published margins of error.
  5. The publishing of exit polling data prior to the close of the polls on election day should be banned.

A “stolen” election? Maybe. It was easy enough to do it “legally.”


Reflections on Trump’s Presidency and the Election

November 10, 2020

I was never a fan of Trump before the 2016 election. As the Republican candidates began their campaigns for the primaries, I gave him zero chance of winning the nomination. He was too acerbic, mean-spirited, brash and bully-like – to the point of being self-destructive – for many voters to get behind his candidacy. However, as American workers and their families continued to reel from the economic damage wrought by the “Great Recession” of 2009, his “Make American Great Again” program caught on like wildfire.

Trump came right out and laid the blame for America’s problems squarely on those factors that every American knew was to blame – the factors that no other Republicrat would even utter for fear of alienating their global corporate benefactors: trade policy that had destroyed the manufacturing sector of our economy, and out-of-control immigration that was being used to keep our labor force in a constant state of over-supply in order to suppress wages. After decades of these policies that turned America – once the world’s preeminent industrial power and the richest nation in the world – into a skid row bum, begging the rest of the world to buy up our ever-growing mountain of debt, the American people were fed up and more than willing to overlook Trump’s issues in the hope of restoring America to the greatness we remembered.

From the outset, Trump faced challenges like no other. The proponents of globalism immediately kicked into overdrive in an effort to destroy him, cooking up a phony Russian influence narrative and then, when that didn’t work, impeaching him over the Ukrainian phone call without proving any “quid pro quo.” Beyond that, it took him a couple of years to weed out of his cabinet people who were supposedly the best in their field, but who proved to be nothing more than globalists bent on sabotaging his America First agenda.

In spite of all that, he made huge strides toward actually “Making America Great Again.” He cut both legal and illegal immigration dramatically. He got Mexico and Central American countries to cooperate in stopping the immigrant caravans. He made big cuts in quotas for refugees and H1-B visas (that steal jobs from Americans) and eliminated the “diversity” category of immigration altogether.

He got rid of the North American Free Trade Agreement and replaced it with an agreement designed to shift more production from Mexico back to the U.S. He slapped 25% tariffs on half of all Chinese imports, reducing the trade deficit with that country. He raised GDP growth above 3% and sent unemployment to record low levels while wages rose at their fastest pace ever.

He stood up to China. He got North Korea to halt their saber-rattling. He pulled us out of the horrible agreement with Iran that virtually guaranteed them a path to a nuclear weapon. He defeated ISIS. He forced NATO countries to begin paying their fair share of their defense costs. The rest of the world began treating us with respect again instead of playing us for fools and treating us like chumps.

He quickly pulled us out of the “Paris Climate Accord.” If you don’t see that as a positive thing, then I challenge you to tell me the mission statement of the Accord. You can’t do it, can you? I doubt that one person in a thousand – maybe one in a million – could tell me what it is. Most people think its mission is to protect the environment, to stop global warming through drastic cuts to greenhouse gas emissions. You’d be very wrong and shocked to learn that its actual mission is to reinvigorate “sustainable development” – the very concept whose practice over the last four decades has led to climate change – focusing on development of third world countries using fossil fuel technology, and all paid for by the U.S.

He did a hell of a lot in spite of the push-back from Democrats and the media. So what went wrong? Sadly, Trump could never get out of his own way. As someone close to me said, “if he’d just kept his mouth shut and stayed off of Twitter, he’d have won the election easily.” Trump just couldn’t stop himself from making over-the-top attacks on anyone who disagreed with him. To vehemently disagree with opponents wasn’t enough for him. He had to destroy them. Voters elected him to put the globalist establishment in its place, but what he did to some people was beyond the pale. The best example I can think of is how he denigrated John McCain. There were many other examples.

And he was a poor communicator. He did a poor job of making Americans understand what he was accomplishing and how it’d make their lives better. Pulling out of the Paris Climate Accord is a good example. Did you ever hear it explained to you as I did above? Instead, the media dictated the message, while Trump focused on trashing his enemies.

Then there was Covid. His initial approach was right on target, but he quickly grew impatient with its effect on the economy. He could have advocated for reopening the economy while doing everything we could to do it safely. Instead, he tried to minimize and even deny the problem. His approach resonated with a lot of people, but angered many more who are terrified of this disease.

Trump will soon be gone from the White House. But there are still a hell of a lot of people who fervently believe in the movement he started to “Make America Great Again.” There are three kinds of voters in America: those who believe America never stopped being great, those who believe that it’s not as great as it once was and needs to be made great again, and those who are fine with seeing America in decline. The biggest group, by far, is that group in the middle. The first group is in denial or detached from reality. The latter group is tiny, but very real and active, and a threat.

Trump started a movement that can and should live on, and will live on with any candidate or party that takes up its banner. Trump could play a huge role in keeping it alive, but that would require fundamental changes in his approach that I doubt he’s capable of. Maybe Mike Pence? Maybe Nikki Haley who did an outstanding job as Trump’s UN ambassador. Or maybe Mike Pompeo, his Secretary of State, who took no crap from any foreign country, to put it in coarse terms. It could even be a Democrat, if one were able to see its potential to restore the party’s image as the party of the working man. Biden? No.

Covid and the daily drumbeat of negativity from the media were a lot to overcome but, in the final analysis, Trump may have been his own worst enemy in his election defeat. Though he’s making a valiant effort to continue to fight with a myriad of court challenges, he won’t prevail. Few believe there was rampant fraud. I agree with those who say that every legal vote should be counted.

But was the election rigged? An election can be rigged through entirely legal means. Consider gerrymandering, the perfectly legal (in some states, not all) of redrawing congressional district boundaries to virtually assure that, once elected, it’s virtually impossible for the incumbent to be defeated. That’s rigging an election and it’s perfectly legal. It’s not a factor in the presidential election – at least not directly – but there are other ways to legally rig that election. I can’t help but have my suspicions. But this has gone on long enough for now. More on that in my next post.


Biden would consult “allies” on trade policy

October 30, 2020

https://www.reuters.com/article/us-usa-election-biden-china-exclusive/exclusive-biden-if-elected-would-consult-allies-on-future-of-u-s-tariffs-on-china-advisers-idUSKBN27E07R

As reported in the above-linked article, Biden would consult with “allies” to use “collective leverage” to “strengthen his hand” in conducting trade policy with China. It seems that Biden has no clear ideas of his own on the matter. And Biden fails to understand that we have no allies when it comes to trade policy. The rest of the world, especially those so badly overpopulated that they’re heavily dependent on exporting to the U.S. to sustain their bloated labor forces, are allies not to the U.S. but to the concept of “free trade” which, thanks to the relationship between population density and per capita consumption, virtually guarantees that they’ll enjoy a surplus of trade with the U.S. It is they, including China, who are exercising “collective leverage” against the U.S.

What does Biden expect that these “allies” will tell him? Does he think that they’ll support the U.S. in its use of tariffs to restore a balance of trade with China? Of course not. They don’t want the U.S. to realize that tariffs are an effective tool for correcting lopsided trade imbalances because they know that they’ll be next. Our “allies” will quickly lecture Biden about the evils of “protectionism” and the benefits of “free trade.” They care nothing about the damage done to the American economy because it works to their benefit.

It would be like a mangy, flea-bitten dog asking for the fleas’ help in dealing with one particularly nasty flea that’s been biting the hell out of him. The fleas will first look at each other in disbelief and then, with a wink, advise the dog that they actually do him a service, protecting him from some other imaginary malady. The big flea high-fives the other laughing fleas. The dog eventually succumbs and dies.

Perhaps he’s not interested in trade at all. Maybe he just likes the optics of appearing to be a “statesman.”

America needs a leader with a clear-eyed vision of how to restore a balance of trade and stop America’s economy from hemorrhaging a trillion dollars a year. Judging by this report, it doesn’t appear that Biden is that guy.


A Perfect Example of Why Token Tariffs Aren’t Enough

October 11, 2020

https://www.fidelity.com/news/article/top-news/202010090706RTRSNEWSCOMBINED_KBN26U161-OUSBS_1

Never mind the fact that Reuters, a champion of globalism, is eager to post negative stories about the use of tariffs by the U.S., especially when they relate to a battleground state like Michigan, and ignoring the distortion of the statistics due to the pandemic, the above-linked article makes a valid point.

The effects of Trump’s tariffs on steel offers a perfect example of why token tariffs, applied to one industry, can have the opposite effect of what was intended. Here’s the situation in a nutshell. The tariffs helped the steel industry at first. Steelmakers were able to thrive while getting higher prices for their steel. Before long, however, the increased costs for steel customers – most notably the auto industry – hurt their competitiveness with foreign auto makers. Sales slumped, reducing demand for domestic steel, which ultimately led to steel mill closures.

This is why you can’t take a piecemeal approach to trade policy. If tariffs are necessary to restore a balance of trade – which they obviously are for the U.S. – then they have to be applied across-the-board to every single manufactured product from every country that’s over-populated to the point where they are dependent on exports. Anything less is guaranteed to produce a trade deficit and a loss of manufacturing jobs.

Although I used a whole book, Five Short Blasts, to explain the concept, it’s fairly simple, really. People living in crowded conditions have low per capita consumption of products. After all, there’s not enough space to use and store them. They don’t use much, so there’s not much for people to do. Unemployment is high.

People living in less crowded conditions, on the other hand, enjoy high per capita consumption, requiring “all hands on deck” to produce what’s needed. People in that society enjoy full employment.

If these two societies try to trade freely with each other, a host-parasite relationship is established. The high population density / high unemployment state begins to feed on the market of the other, sapping it of its manufacturing jobs. It’s inescapable. The only thing the latter society can do is to halt the free-trade relationship.

As the Reuters article points out, the tariffs on steel helped the steel industry. Then why in the world wouldn’t you apply tariffs to all other industries?


August Trade Results: Another Record Trade Deficit, Another Month of China Thumbing Its Nose at “Phase 1” Trade Deal

October 7, 2020

The trade results for August are in and they couldn’t be any worse, though given the current trajectory, they may very well be worse in September.

The overall deficit soared to $67.1 billion, beating the record set only one month earlier by $3.7 billion. More importantly, the deficit in manufactured products continues to explode, jumping $2.9 billion from the previous month’s record to $83.2 billion – an annualized rate of almost exactly one trillion dollars. Here’s a chart of the deficit in manufactured goods: Monthly trade deficit in manufactured goods.

China didn’t help a bit. If they lived up to the agreement they made in the “Phase 1” trade deal, the deficit in manufactured goods would have been lower by $4.5 billion. They didn’t. Not even close. Not only did they not meet the goal in any category of goods, they even fell behind the 2017 baseline by a half billion dollars. In two of the four categories – energy and agriculture – they did import more than the 2017 baseline, but barely. They’ve made no progress at all toward meeting the goals set for 2020 in the deal. Here’s the chart: Monthly “Phase 1” trade deal results.

The deficit with China did drop slightly, falling to $29.8 billion from $31.6 billion in July. But it was of no benefit to America. The big winners from the success that Trump has had in reducing the deficit with China – thanks to the tariffs enacted before the “Phase 1” deal – have been Mexico and Vietnam. The monthly trade deficit with Mexico has quadrupled since Trump took office, soaring to a new record of $12.8 billion in August (beating the previous month’s record by a whopping $2.1 billion), compared to $3.8 billion when Trump took office in January of 2017. The deficit with Vietnam also blew past the previous month’s record, rising $0.8 billion to $7.6 billion, more than double when Trump took office.

To be fair, the trade deficit in manufactured goods was dropping nicely until the pandemic hit. It had fallen to $59.9 billion in February, but has risen dramatically since. Blame the pandemic. All of the money that Americans used to spend on dining out, travel, gym memberships and entertainment is now being spent on goods. Much of the stimulus money meant to help Americans is now in the hands of foreign manufacturers.

Though Trump has done far more than any president in decades to address the trade deficit and to bring manufacturing jobs back to America, he still needs to be much more aggressive with imposing tariffs on a wide range of countries who feed off of the American market to sustain their bloated labor forces. If he had, he’d be a shoo-in to win the election instead of finding himself the underdog. America will never be “great again” until store shelves are stocked with products “Made in the USA.”


Time to Leave the World Trade Organization

September 16, 2020

https://www.reuters.com/article/us-usa-trade-china-wto/wto-finds-washington-broke-trade-rules-by-putting-tariffs-on-china-ruling-angers-u-s-idUSKBN2662FG

As reported in the above-linked article, the World Trade Organization has announced its finding that the U.S. broke its rules when it imposed tariffs on Chinese imports two years ago.

The timing of this announcement is curious.  Of course the U.S. broke the rules.  Everyone knew it at the time.  Trump didn’t care.  It was the only way to make any progress on halting the explosion in the trade deficit with China.  So why wait until now?  Is it because Trump faces re-election in less than two months, running against a candidate who played a big role in the advancement of the globalism that the WTO enforces?

The WTO is the enforcer of the ill-conceived trade scheme hatched in the wake of World War II to bring the world together by employing the unproven concept of “free” trade.  Decades later, the results are in and “free” trade is now a proven failure.  Instead of lifting all economies of the world and bringing the world together through an inter-dependency, the WTO has destabilized the world by establishing a host-parasite relationship between reasonably-populated nations, like the U.S., and the others – like China, so badly overpopulated that they are totally dependent on manufacturing for export and feeding off of America’s market.  The WTO is directly responsible for building up a totalitarian communist regime bent on dominating the rest of the world.

It’s time to put an end to this.  Trump can do it by simply withdrawing from the WTO, a move that would quickly lead to its collapse.  Let’s return to truly free trade, where every nation is free to set its own rules in its own best self-interest.


Trump’s Efforts on Trade a Spectacular Failure

September 9, 2020

I can’t tell you how disheartening it was to sift through the latest trade data, for the month of July, released by the Commerce Department late last week.  There’s just no getting around the fact that the administration’s efforts to cut the trade deficit and bring manufacturing back to the U.S. have failed.  “Failure” would be the word to describe results that haven’t shown any improvement.  But America’s trade picture has deteriorated so badly that the scope of the failure can only be described as “spectacular.”

In his inauguration address, Trump observed:

…  rusted-out factories scattered like tombstones across the landscape of our nation …

Earlier in the address, regarding situations like that noted above, he proclaimed:

… That all changes – starting right here, and right now …

The July trade data comes 3-1/2 years into his administration – plenty of time to implement changes and to see the effects.  It’s hard to find any silver lining.  Consider:

  1. The trade deficit in manufactured goods in July soared to $80.4 billion, a new record that completely blows away the record set under the Obama administration ($63.3 billion in March, 2015).  Check out this chart:  Manf’d Goods Balance of Trade.
  2. During the 2016 campaign, Trump vowed to quickly tear up the NAFTA deal and replace it with a much better deal.  Most of his term has been wasted negotiating the new “USMCA” trade deal that replaces it.  It finally went into effect on July 1st of this year, but the terms have been known for a long time, so you’d expect that manufacturers would have been busy implementing plans to get in compliance.  The results?  In July, the trade deficit with Mexico soared to $10. 6 billion.  When Trump took office in January, 2017 it was $3.8 billion.  Since then it has nearly tripled.
  3. When Trump took office, the deficit with China was $31.4 billion.  In July of this year it was $31.6 billion.  After Trump took office, the deficit with China continued to grow until, finally fed up with China’s promises to buy more American products, Trump imposed 25% tariffs on half of all Chinese products.  Almost immediately, the deficit with China began to shrink dramatically.  However, all momentum was lost with the signing of the “Phase 1” deal with China, when the U.S. agreed to halt plans to impose tariffs on the remainder of China’s products in exchange for Chinese promises to dramatically increase their purchases of American goods.  The results were predictable; China reneged on the deal.  They haven’t even measured up to the 2017 baseline that was used as a starting point.  Here’s the data, updated through July:  Phase 1 China Trade Deal 2020 YTD.  What has Trump done in response?  Nothing.  He continues to insist it’s a good deal, in much the same way that Obama stuck by his trade deal with South Korea while our deficit with them exploded.
  4. What progress was made in at least stagnating the deficit with China didn’t translate into any benefit to American workers.  Instead, it contributed to the tripling of the debt with Mexico and also ballooned the debt with Vietnam.  When Trump took office, the trade deficit with Vietnam, an economic back-water, was $3.3 billion per month.  In July of this year it was more than doubled to $6.8 billion per month.  Why?  Because no tariffs were applied to anyone other than China.  The tariffs motivated manufacturers to begin moving out of China, but there was no disincentive to simply move to secondary suppliers in Mexico, Vietnam and other places.

Some might say that such conclusions are unfair in the midst of the pandemic.  Not so.  The effect of the pandemic has been to cut economic activity to a depression-like level, and the effect of an economic slow-down has always been to shrink the trade deficit, not grow it.  That makes the enormous deficit in manufactured goods in July even more troubling.

Speaking of the pandemic, at least people are beginning to realize that being dependent on foreign suppliers for critical goods like ventilators and face masks is a threat to national security.  It’d be nice if that realization extended to other products that would just as easily be cut off during war time.  Better yet, wouldn’t it be nice if people realized that an economy that needs to stand on agriculture, construction, manufacturing and services is hollowed out and unstable if one of those legs is gone?

I don’t doubt Trump’s desire to truly “make America great again” by bringing back our manufacturing sector.  But he sees himself as a “deal-maker” and believes he can deal his way out of the trade deficit.  That’s where the problem lies.  For America, at least, there’s no such thing as a good trade deal.  I defy anyone to identify a single trade deal that has ever left America with anything but a growing trade deficit.

And forget about “free trade.”  That centuries-old concept is about as relevant to today’s trade environment as theories about a flat earth and how the sun rotates around it.  Today, trade is war – a war for increasingly scarce jobs in an ever more over-populated world.  Unlike America, the rest of the world understand this.  They know that what they really need is access to America’s market so that they can keep their bloated populations employed manufacturing goods for export.  Americans don’t have a clue.  They think it’s about lower price and more choice.

Had Trump simply applied tariffs everywhere where America was suffering a big trade deficit in manufactured goods, manufacturers would have come running back like refugees fleeing a war.  Instead of improving incrementally, our economy would have exploded.  Manufacturers would have eagerly snapped up any workers who lost their jobs to closures of restaurants, bars, gyms, movie theaters, etc. during the pandemic.  Trump’s re-election would be a foregone conclusion.  Instead, he’s going to be lucky to win.  Forget about the pandemic.  It’s his failure to make progress on truly making America great again that has left him vulnerable.

Don’t interpret this post as an endorsement of Biden.  It’s reported in the news today that Trump has criticized Biden as a “globalist.”  He’s not wrong.  But it’s not just Biden.  Until Trump came along, every politician, Democrat and Republican alike, were and still are globalists.  I’d vote for Biden in a heartbeat if he vowed to use tariffs to restore a balance of trade, but he won’t.  Though the results under Trump have been disappointing, things could and would be much worse under virtually anyone else, at least until more American politicians are willing to engage in the trade war that they don’t even acknowledge today.

 

 

 

 


U.S. Fails to Enforce “Phase 1” China Trade Deal

August 27, 2020

https://www.fidelity.com/news/article/top-news/202008242045RTRSNEWSCOMBINED_KBN25L023-OUSBS_1

As reported in the above-linked article, with six months of results from the “Phase 1” trade deal with China now in, the U.S. has “rolled over” for China yet again, ignoring the Chinese snub of the deal.  The picture that accompanies the article, showing the flag of Red China flying above that of the U.S., is appropriate.  Red China dominates the U.S. in trade because it dominates the U.S. in terms of its willingness to stand up for itself.

In spite of the fact that China has not made one inch of progress toward meeting the goals of the deal – in fact, it’s not even measuring up to the 2017 baseline for purchasing American goods – the U.S. Trade Representative’s office had this to say following a phone discussion with Chinese trade leaders:

“Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement,”

Red China has won again.  It’s tactic of making trade deals and then completely ignoring them, knowing that the U.S. never follows through on anything, has worked again, just as it has for decades.  The Chinese are once again rolling in the aisles with laughter.

Is Trump on board with this?  Is this a move calculated to avoid roiling the markets just ahead of the election?  Is he saving a tough response, like imposing the new tariffs that this deal delayed, until just ahead of the election, calculating that it will win him votes before anyone even takes notice of a market decline?

I don’t know, but I do know that the lack of progress in cutting the trade deficit and bringing back American manufacturing jobs is a major reason behind the decline in enthusiasm for his re-election.  Revitalizing the manufacturing sector of the economy is the key ingredient needed to “Make America Great Again” and it’s difficult to see any progress at all on that front.


Verdict is in: “Phase 1” Trade Deal with China is a total failure.

August 6, 2020

Trade data for the month of June was released by the Department of Commerce yesterday, so we now have a full six months of results of the “Phase 1” trade deal with China.  As I predicted when the deal was signed in January, the deal is a total failure.

You may have heard stories in the news, as I did, about how the Chinese were beginning to make progress on catching up to the goals established by this deal.  I had my doubts, so I was anxious to see the real data.  Here it is, year-to-date through June:  Phase 1 China Trade Deal 2020 YTD.

The deal established goals for the Chinese import of American goods in four categories, using 2017 trade results as a baseline:  manufactured goods, energy goods (like oil, gas, coal, etc.), agriculture goods, and total goods.  The goal was for them to increase their imports substantially in 2020, and then even more in 2021.  In the spreadsheet, I broke down those goals into monthly goals, ramping them up at a rate that would meet those goals by the end of the year.

Through May, the results were abysmal.  They failed to meet the goal in any category of product.  In fact, only their import of energy products even exceeded the 2017 baseline.  You’d think that if China were anxious to meet the goals in order to avoid further threatened tariffs, they’d at least make some good faith effort that they could point to as progress.  So what happened in June?  Their imports actually declined in every category.  They didn’t even meet the 2017 baseline in a single category.

A good faith effort to show progress?  The June results are exactly the opposite.  They are a slap in the face.  The Chinese are taunting the Trump administration – betting that they’ll be too distracted with other events to take action.

It’s time to put an end to this stupid trade deal and follow through with the threatened 25% across-the-board tariffs on all Chinese exports to the U.S.  Trump was elected, in large part, to make real progress in cutting America’s trade deficit and bringing manufacturing back to the U.S.  Aside from tariffs on half of Chinese exports and a new trade deal to replace NAFTA, little has been accomplished.  All momentum on the trade front was killed when Trump signed the “Phase 1” deal with China.  Three-and-a-half years have been frittered away.  His supporters are getting disillusioned by the lack of progress.  If Trump loses the election, it will be due in large part to his failure to fix our trade mess.

There’s no more time to waste.  It’s time to declare this deal a failure and impose the tariffs that were put on hold.  In addition, it’s time for Trump to get serious with other Asian nations and the European Union as well.  Slap all of them with tariffs and start making real progress in bringing our manufacturing jobs back.