Trump Wins Major Concessions from South Korea in Deal Revamp

March 27, 2018

https://www.bloomberg.com/news/articles/2018-03-25/south-korea-says-agreement-made-with-u-s-on-trade-deal-tariffs

As reported in the above-linked article, the Trump administration has won major concessions from South Korea in exchange for exempting them from the steel tariffs.  South Korea agreed to:

  1. A quota on their steel exports to the U.S. that cuts those exports by 30%.
  2. Double the quota for American car imports from the current maximum of 50,000 cars to 100,000 cars.  (Although it’s not likely that they’ll actually import that many.)
  3. Allow the U.S. to extend its tariffs on trucks by 20 years until the year 2041.  (The U.S. has always maintained a 25% tariffs on truck imports.)

That last item is a big concession by the Koreans, since Hyundai and Kia were geared up to introduce pickups into the U.S. in 2021.  This effectively kills those plans.

The U.S. – Korea trade deal, known as “Kotus,” was negotiated by the Obama administration and signed in 2012.  That year, our trade deficit with S. Korea was $16.6 billion.  In 2017, the deficit was $22.9 billion.  Obama had hailed the deal as a “big win for American workers,” but it proved to be exactly the opposite.

These concessions by Korea demonstrate just how deeply tariffs are feared, and how much power the U.S. can wield in trade negotiations with the threat of using them.  I hope that Trump is emboldened by this success and applies the same (or more) pressure on others, especially Red China.  I hope that this is only the beginning of restoring a balance of trade for the U.S.

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A Trade War? Let’s Get It On!

March 25, 2018

I’ve been waiting a long time for this – my whole life, really – and now it seems to be happening.  Trump seems to be finding his footing in making good on his promise to end the “free trade” rape of America’s economy and workers.  In the wake of imposing tariffs on steel and aluminum, this week he also edged closer to slapping tariffs on $60 billion worth of Chinese imports.  And the whole community of globalist trade parasites that has fed on the American economy for decades is freaking out.

It’s been amusing to watch the reaction and threats of retaliation.  First, the EU (European Union) threatened to slap tariffs on American exports of bourbon, Levi’s blue jeans and Harley Davidson motorcycles.  Trump responded, “go ahead, and we’ll put a 25% tariff on imports of European cars.”

Let’s stop right there and take a look at this situation.  In 2017, the EU imported $839 million worth of bourbon whiskey.  Sounds like a lot of booze, right?  And while I can’t separate Harley Davidson motorcycles from other brands and bicycles, I can tell you that the EU imported $802 million worth of motorcycles and bicycles in general from the U.S.  And how many pairs of jeans did they import?  None.  Zilch.  Why?  Because virtually none are made in the U.S.  It’s kind of pathetic, actually, that EU officials can’t even name three American imports without getting one of them wrong.  I’m sure that the folks at Levi’s had  puzzled looks on their faces and, at the same time, officials in Bangladesh or wherever Levi’s are made these days cringed.  By contrast, the U.S. imported $43 billion worth of cars from Europe – half coming from Germany alone.  Upon hearing Trump’s threat to slap tariffs on their car imports, the EU backed off fast from further retaliation threats.

You might ask, couldn’t the EU then respond with tariffs on imports of American cars?  Yeah, but they only imported $8 billion worth of cars in 2017.  The whole idea of “retaliation” is to strike back in a way that hurts at least as much as what’s been done to you.  Therein lies the problem for anyone with a huge trade surplus with the U.S.  It’s impossible to “retaliate” in any meaningful way.  In the above scenario, where the U.S. puts $1.6 billion worth of bourbon and motorcycle exports at risk, the EU stands to lose twenty-five times that much in auto exports.  The U.S. could actually just hand Jim Beam and Harley Davidson $1.6 billion to make up their loss, and still be way, way ahead.

Then there’s China or, as I’ll refer to them from now on, “Red China.”  That’s how they used to be known under Chairman Mao Tse Tung, until the U.S. began making overtures to them in the hope of turning them into a more free and open society.  But, in my opinion, with Xi Jingping’s power grab, making himself China’s communist dictator for life – just like Chairman Mao – China no longer deserves that respect.  From now on, they’re once again “Red China” and “Chairman Xi.”

So, anyway, back to Red China.  Trump is threatening to slap tariffs on $60 billion worth of their exports, and it would probably escalate from there.  Already, Red China has threatened to retaliate with tariffs on soybeans, and then with tariffs on an additional 127 American products.  And the Chicken Littles of globalism are freaking out with dire warnings of the consequences of a trade war.

So, just like we did with the EU above, let’s take a detailed look at this situation.  In 2017, Red China imported $12.4 billion worth of soybeans from the U.S.  The other 127 products total up to $3 billion for a grand total of $15.4 billion worth of retaliation to America’s tariffs on $60 billion worth of Chinese exports.  So, once again we see that Red China is incapable of mounting any kind of real retaliation at all.  With over $500 billion in exports to the U.S., while only importing $130 billion, there’s simply no way for Red China to retaliate in any meaningful way.  If all trade with Red China were halted completely, the U.S. wins by $370 billion.  Hell, we could just hand soybean farmers $12.4 billion and still be ahead by $357.6 billion!

Oh, by the way, the threat of tariffs on American soybeans would hurt the Chinese more than Americans.  Does Chairman Xi think that his people will simply eat less?  Of course not.  He’ll have to get his soybeans somewhere else, like Brazil, and now those countries who imported soybeans from Brazil will turn to the U.S., probably bidding up the cost of soybeans.  No skin off of our noses, Chairman Xi.

Not so fast, the free trade advocates and globalists warn, American consumers will be hurt by higher prices in a trade war.  Oh, really?  Not if you factor quality into the equation and the fact that cheap junk from Red China has to be constantly replaced.  Last year, I replaced the faucet in our bathroom, which had been there for thirty years.  We wanted to replace it with the exact same model, since it’s used in other bathrooms in the house and still goes well with the other decor.  Already  it’s falling apart.  The handles keep coming loose because the threads were cut too sloppy (as is often the case with Chinese products) and the hot water handle squeaks like a rusty gate.  So the cheap Chinese version barely lasts a year while the old, American-made version held up for thirty.

This week, while doing a wood-working project, my lightly-used, Chinese router quit.  I wanted to replace it with a good, American-made router but I found out, sadly, that none are made in the U.S.  Not only that, no power tools of any kind are made in the U.S. anymore.

So, no sooner did I buy a cheap Chinese router, than my printer quit on me, just past its warranty.  New printers have become an almost annual purchase for me.  To summarize, I’m really getting sick of dealing with poor quality Chinese junk, just like virtually every American is.  A boon to U.S. consumers?  Baloney!

Of course, the real reason that the claim of lower costs for American consumers is a lie is because cost is relative to income, and our huge trade deficit and corresponding job losses with Red China have held down and even cut American incomes more than it has reduced costs.

Trump has used “national security” as his rationale for levying tariffs on steel and aluminum.  Why stop there?  Look at clothing.  Virtually none is made in the U.S.  Isn’t it a matter of national security that we might all be running around naked during a war?  Well, we could make our clothes, right?  Nope.  No fabric is made in the U.S. either.

Or how about the example of power tools I talked about above?  It takes tools to make things.  We don’t even have the tools it takes to make tools!  Where would we get them during a war?  Let’s face it.  If a war broke out right now, we’d soon find ourselves fighting it naked with nothing more than clubs.  Maintaining a healthy manufacturing sector – one capable of manufacturing everything that we need – is a matter of national security.

A trade war?  It’s impossible for the U.S. to do anything but win, and win big.  Come on, President Trump, let’s get it started!


“U.S.” Chamber of Commerce Sides with China

March 16, 2018

https://www.reuters.com/article/us-usa-trade/chamber-of-commerce-warns-trump-against-china-tariffs-idUSKCN1GR29G

There are few groups I despise as much as the “U.S.” Chamber of Commerce.  First of all, let’s be clear about who they are.  It’s not an American organization that promotes American interests.  Rather, the “U.S.” Chamber of Commerce is the U.S. branch of a global trade organization that was founded in France in 1599.  Its mission is the promotion of trade and they consider all trade, regardless of winners and losers, to be good.  If trade benefits China to the detriment of the U.S., then that’s fine with them and they want more of it.  They couldn’t care less that it results in an enormous, unsustainable trade deficit that drives unemployment and poverty in the U.S.

So it should come as no surprise that it opposes any efforts by the administration to restore a balance of trade.  After imposing tariffs on steel and aluminum, the Trump administration is now taking aim at certain imports from China that have thrived on the theft of American intellectual property.  Protecting national security from the theft of such property is a no-brainer, though past administrations haven’t had the guts to do it.  Naturally, the Chamber of Commerce doesn’t like it.  Siding with the Chinese, here’s what they have to say:

U.S. Chamber of Commerce President Thomas Donohue said in a statement on Thursday that such tariffs, associated with a probe of China’s intellectual property practices, would be “damaging taxes on American consumers.”

… Donohue said the Trump administration was right to focus on the negative economic impact of China’s industrial policies and unfair trade practices, but said tariffs were the wrong approach to dealing with these.

… “Tariffs of $30 billion a year would wipe out over a third of the savings American families received from the doubling of the standard deduction in tax reform,” Donohue said. “If the tariffs reach $60 billion, which has been rumored, the impact would be even more devastating.”

… “Tariffs could lead to a destructive trade war with serious consequences for U.S. economic growth and job creation,” hurting consumers, businesses, farmers and ranchers.

Of course, the Chinese wholeheartedly agree:

In Beijing, Chinese foreign ministry spokesman Lu Kang said Donohue’s comments were correct, adding that recently more and more American intellectuals had made their rational voices heard.

“In fact, U.S. trade with China in the past 40 years very objectively reduced American families’ per capita spending burden,” Lu told reporters. “We have said many times, there are no winners in a trade war.”

These statements are loaded with lies about trade that have been perpetrated for decades by globalists and their organizations like the World Trade Organization and the Chamber of Commerce.  Here’s the truth:

  1. Tariffs are not taxes on American consumers.  They’re taxes on the companies who export to the U.S.  They’re incentives to encourage corporations to produce domestically, driving a demand for workers.  They’re incentives to encourage consumers to buy the cheaper, domestically made alternatives.  If some consumers choose to continue buying the more expensive imports, then the revenue from the tariffs enables the federal government to keep individual tax rates low.  In the first half of America’s history, all federal revenue was generated by tariffs.
  2. Tariffs don’t cause trade wars.  All trade is a “war”  and those who run chronic trade surpluses are the winners and those with chronic trade deficits – the U.S. has the worst in the world by far – are the losers.  We’ve been in a trade war since the birth of our nation.  In 1947, with the signing of the Global Agreement on Tariffs and Trade (GATT), the U.S. gave up the fight in the hope that doing so would placate the aggressor nations who had initiated the past world wars.  It’s the global equivalent of local businesses paying “protection” money to local gangsters.  At some point – the point the U.S. has now reached – the extortion becomes too much to bear.
  3. When you have such an enormous trade deficit as the U.S. – the goods deficit now approaching a trillion dollars per year – it’s impossible to come out the loser by imposing tariffs and restoring a balance of trade.  Contrary to the claims of the globalists, costs for American consumers would actually go down when those costs are measured as a percentage of their incomes, which is the only rational way to measure it.  Who cares if prices rise when your wages rise even faster?  That’s exactly what would happen.

Don’t listen to the self-serving traitors like the U.S. Chamber of Commerce.  The tariffs that the U.S. used throughout its history to build itself into the world’s preeminent industrial powerhouse will work again just like they did in the past.  It’s time to force grossly overpopulated nations with bloated labor forces to deal with their own problems.  Americans are tired of footing the bill.  Bring on more tariffs!


No Weaknesses in February Employment Report

March 10, 2018

https://www.bls.gov/news.release/empsit.nr0.htm

Ever since the “Great Recession,” as the economy very slowly recovered, there have always been some hidden weaknesses in even the best of reports.  If the economy added a lot of jobs as measured by the establishment survey, the employment level, as measured by the household survey, didn’t measure up.  If the unemployment rate dropped, it was often because some of the labor force had mysteriously vanished.  Or the average work week declined.  Or there were downward revisions to the previous two months.

But not this time.  The economy added 313,000 jobs – much more than expected.  And the growth in employment blew past that figure, rising by 785,000.  The only reason that the official unemployment rate didn’t drop is because the labor force grew by 806,000 – in a month when the total population grew by only 160,000.  So where did all of these workers come from if the economy was at “full employment” as so many “economists” would have you believe?  They came from the labor force backlog that was created by the “mysteriously vanishing labor force” trick employed by the Obama administration.  As a result, the labor force participation rate rose by 0.3%.

And there was more good news.  Manufacturing employment rose by 31,000 and is now up by 125,000 in just the last four months.  The average work week increased by 0.1 hours and wages rose by 0.1% – a modest increase, but one that keeps wage growth year-to-year at 2.6%, which is greater than inflation.  And the numbers of jobs added were revised upward for both December and January, adding another 54,000 jobs.

I’ll admit that the growth in manufacturing employment puzzles me.  Exports haven’t grown at all, while imports have been soaring.  That leaves domestic consumption as the only possible explanation, but GDP (gross domestic product) grew at only a 2.5% rate in the fourth quarter.  Perhaps growth is accelerating in the 1st quarter?  Perhaps manufacturers are beginning to sense that, while the tariffs we’ve seen so far under Trump have been modest, Trump means business with his “America First” approach and they are changing their strategy away from off-shoring and back toward more domestic production.  If that’s what’s happening, and if Trump continues to levy more tariffs to help domestic manufacturers, then the job gains we saw in February may be only a small taste of what’s to come.


Trade Deficit Soars in January

March 8, 2018

https://www.bea.gov/newsreleases/international/trade/2018/pdf/trad0118.pdf

The above-linked report, released by the Bureau of Economic Analysis (BEA) this morning, reports that the trade deficit soared in January to $56.6 billion, the worst reading since October 2008.  Here’s a chart of the data, dating back to January of 2010 when President Obama boasted that the U.S. would double its exports within five years:  Balance of Trade.

Exports of manufactured goods fell in January and remain at the same level as March of 2012.  During that time, imports of manufactured goods have risen by $36 billion.  The goods deficit rose to $76.4 billion in January, an annual rate of $917 billion.  The deficit in manufactured goods alone was $68.3 billion, and is rapidly getting worse.  Check this chart:  Manf’d Goods Balance of Trade.  Since Trump took office, the trade deficit has jumped by 16%.

The trade deficit is killing economic growth.  It cut 4th quarter GDP (gross domestic product) growth by 31%.  Without the effects of trade, 4th quarter GDP would have come in at 3.63% instead of the actual figure of 2.5%.  GDP hasn’t grown by 3% since 2005.

This isn’t what Trump promised us.  While tariffs on steel and aluminum would be a good start, what’s needed badly are tariffs that cover the entire spectrum of manufactured products until a balance of trade is restored.  Perhaps with the departure of globalist Gary Cohn from Trump’s economic team, some real progress on trade may finally be possible.


Tariff Hysteria

March 3, 2018

https://www.reuters.com/article/us-usa-trade/trade-wars-are-good-trump-says-defying-global-concern-over-tariffs-idUSKCN1GE1PM

Unless you’ve been living under a rock somewhere, you already know about the tariffs on steel and aluminum imports that Trump announced on Wednesday.  The reaction has bordered on mass hysteria, especially among “economists.”  I put that word in quotation marks because those who present themselves as experts in the field, but either lack the curiosity required to examine the effects of population growth, the biggest factor driving the global economy today or purposely avoid it because the findings would destroy their credibility, aren’t worthy of being dignified with the label.  One such “economist,” representing a “think tank” whose purpose it is to advance the cause of globalization (that is, the fleecing of Americans to prop up the economies of grossly overpopulated nations), described Trump’s tariff plan as a “return to 18th century trade policy.”  Apparently he doesn’t understand that the use of tariffs dominated U.S. trade policy through the first half of the 20th century, transforming the U.S. into the world’s preeminent industrial power and the world’s only “super-power.”

The reaction on Wall Street was swift, with market indexes falling several percent.  But not the stocks of U.S. steel producers.  Those actually rose several percent.  So what does that tell you?  Unlike “economists,” investors are people who put their money where their mouth is.  Investors fear what this move could mean for inflation and the broader economy, but they know very well it’ll be a big boost to steel and aluminum producers.  If tariffs are good for that industry, doesn’t it stand to reason that they’d be good for others if applied to those products as well?  How about autos?  Electronics?  Appliances?  The fact is that every U.S. producer of every category of product where the U.S. has a trade deficit would benefit from tariffs.

Virtually every media outlet since Trump “tweeted” about the tariffs soon after announcing them has quoted him as saying “… trade wars are good and easy to win …” in an effort to make him sound like a buffoon.  At least the above-linked Reuters article does provide the full quote further down in the article:

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump said on Twitter on Friday.

Put in the context of our massive trade deficit which, in terms of manufactured goods, isn’t just billions but is now approaching a trillion dollars a year, he is exactly right – a trade war would be a good thing and not only would it be “easy to win,” it’d be impossible to do anything but win and win big.  “Economists” and other countries don’t want you to know that.  They want to scare you with warnings of retailiation by other countries:

Europe has drawn up a list of U.S. products on which to apply tariffs if Trump follows through on his plan.

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” European Commission President Jean-Claude Juncker told German television.

Wow, that shows you how far down the list of products they had to go to find some that they actually import from the U.S.  And “blue jeans?”  Seriously?  Don’t they know that even Levis aren’t made in the U.S. any more?  Regardless, do you really want to go there, Europe?  Go ahead.  Slap tariffs on Harleys and bourbon.  We’ll retaliate with tariffs on cars.  See how you like that!  How long would Mercedes, BMW, Volkswagen, Porsche and all the others survive without access to the U.S. market?

Another popular warning among the globalist fear mongers is that higher prices will be passed along to U.S. consumers.  The cost of every product that uses steel and aluminum will soar.  That’s utter nonsense.  When foreign steel producers have to raise their prices by 25% to cover the tariffs, will their customers continue buying their steel or will they simply turn to American suppliers that weren’t that much more expensive in the first place?  That’s the whole purpose of a tariff – not to collect revenue and make American consumers pay more, but to force the buyers of those products to switch to American suppliers.

There is a legitimate fear among manufacturers that forcing them to pay more for steel and aluminum, even if it’s only slighly more when they switch to American suppliers, will make them less competitive with foreign imports.  Here’s one example quoted in the article:

But home appliance maker Electrolux (ELUXb.ST) said it was delaying a $250 million expansion of its plant in Tennessee as it was worried U.S. steel prices would rise and make manufacturing there less competitive.

OK, Electrolux, would you change your mind if Trump also levied a tariff on imported appliances?  Not only would you go forward with your planned expansion, you’d probably rush to develop plans for more and bigger expansions.  My point is that these tariffs on steel and aluminum are a good start, but to have a real impact on the economy, they need to be levied on virtually every imported product so that, in every case, American consumers will choose the less expensive U.S.-made products.  Will that stoke inflation?  Sure, but not as fast as the demand for labor would send wages up.

Other fear mongers have raised the spectre of another scary scenario, where heavy buyers of U.S. debt, like China, would retaliate by dumping their bond holdings, driving up interest rates and inflation along with it.  Could they do that?  Sure, if they wanted to shoot themselves in the foot.  They’d be driving down the value of their biggest investments.  And let’s not forget that, as the U.S. trade deficit shrinks in response to the tariffs, the U.S. will be issuing less debt.  So the U.S. will be pulling bond issues off the table as fast as China and others try to sell theirs.  The end result is a wash and their “retaliation” will end up only hurting themselves.

The tariffs on steel and aluminum, on top of a few other small, targeted tariffs (like the recent tariffs on washers) are good, small steps.  But they’re nothing compared to what really needs to be done – the application of tariffs across the entire spectrum of manufactured goods.  To do that, the U.S. needs to withdraw from the World Trade Organization.  Or perhaps it doesn’t matter.  The only power the WTO has is to authorize other nations to retaliate – nothing more than they would do anyway, even if the WTO never existed.

A trade war?  We’ve been in a trade war ever since our country was founded.  The problem is that, with the signing of the Global Agreement on Tariffs and Trade in 1947 – the forerunner of the World Trade Organization – the U.S. gave up the fight.  The U.S. laid down and let others begin feeding on it like a swarm of parasites.  It’s high time we put up a fight again.