A Trade War? Let’s Get It On!

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!

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6 Responses to A Trade War? Let’s Get It On!

  1. Clyde Bollinger says:

    Why is it so difficult for the so-called economists to “get it”?

  2. peddiebill says:

    I am writing as a New Zealander and somewhat puzzled one at that. Please help me understand. I really do get that the US is the most powerful country in the world but I rather thought that in the recent past this power has been used to stabilize other nations. If a poorer country with many problems of its own is trying to lift itself by free trade deals, even if the US is at a disadvantage in the trade deals, they gain by generating a more friendly world.

    Certainly the US has the power to stop the current and much needed profound improvement in the Chinese economy – but don’t forget the Chinese have been buying up the US debt and could collapse the US economy by refusing to buy US bonds – and could even destroy the Mid West economy by buying soy beans etc from places like Brazil. Why set out to produce that outcome?

    A few years ago New Zealand had the US as a major trading partner and as a consequence was prepared to support the US eg joining them in sending NZ troops to US wars in Asia, setting up treaties with the US etc. The Trump led US appears to want to go back to its isolationist and selfish system that took it into a depression at the very end of the 1920s. It is China that offers New Zealand its best partnerships at present and China who is investing in the Pacific. As a consequence we are now looking to China to buy our goods and in return we benefit by buying their goods. ( a fivefold increase in trade with China in the last few years) The US are now reluctant to help us eg want to stop us buying cheaper medicines than the ones they sell so it is hard to see why they expect us to increase our support .

    • Pete Murphy says:

      Good questions, peddiebill. Let me begin by observing that New Zealand has been a great trade partner for the U.S. – a country with whom we actually enjoy a surplus in trade in manufactured products. Unlike China, New Zealand isn’t overpopulated and doesn’t have a bloated labor force dependent on manufacturing for export. New Zealand should be very wary of attempting to trade freely with China. You too will soon lose your manufacturing base to China. It’s probably already happening.

      The problem is the inverse relationship between population density and per capita consumption and its role in driving up unemployment and poverty, and in driving global trade imbalances. For the United States, just as it is for New Zealand and other countries with moderate population densities, free trade and globalism is essentially a poverty-sharing program, driving down incomes in the U.S. in order to prop up unsustainable populations in nations like China, Japan, Germany, Korea, India, Bangladesh, etc. The list could go on and on. I encourage you to read more about this inverse relationship on this site or by reading my book, Five Short Blasts.

      Red China’s threats to halt the purchase of U.S. debt or to dump the bonds they have is a hollow threat. Since the U.S. is ultimately the only place where U.S. dollars are legal tender, all U.S. dollars accumulated through trade must eventually be used to purchase something from the U.S. Since Red China buys very little from the U.S. in terms of products, they are left with only one choice – U.S. bonds. Stopping the purchase of U.S. bonds would quickly result in an end to Americans’ purchase of Chinese products.

      Also, it’s the trade deficit that is the root cause of deficit spending in the U.S. Dollars that leave the U.S. economy through a trade deficit must somehow be funneled back into the economy in order to avoid a rapid downward spiral in the economy. Those dollars are put back into the economy primarily by taxing Americans at a lower rate, replacing the money that they spent on imports and sustaining an illusion of prosperity as the U.S. goes more deeply into debt.

      Your point about the U.S. trade deficit essentially purchasing a more peaceful world is a valid one. This is actually what led to the signing of the Global Agreement on Tariffs and Trade in 1947 – the hope that propping up the economies of Germany and Japan (primarily) through favorable trade arrangements would deter them from further aggression. It has paid dividends in terms of a more peaceful world. But the American people are absolutely fed up with what it’s done to our economy. We’re tired of paying the price for everyone else’s overpopulation. It’s time for these countries to face up to their own problems. It’s time for them to develop economies that are based on domestic consumption instead of being totally dependent on export to the U.S. for their livelihoods.

  3. peddiebill says:

    Thank you for a courteous and reasoned reply (which I have to say is not always the case when I question other Trump supporters!!)
    However I still have some other issues.

    Thank you for your kind comments about New Zealand. Unfortunately although I agree with your trade figures, President Trump has already said that New Zealand, like the other TPP lot, are ripping the US off!

    Now to the detail of your comments. I would have thought that it is virtually impossible to put a lid on knowledge which is increasingly international shared knowledge and that as a consequence that the main advantage to the US in setting up off-shore manufacturing is to take advantage of the reduced labour costs in places like Asia. Return this manufacturing if you must but the products will cost more for the US consumers.

    Secondly the Chinese proposed list of counter sanctions will make the industries identified less competitive eg US aircraft manufacturing is already up against Airbus.

    The US mid Western farmers have already asked Trump to reconsider because the Chinese want to seek alternative markets for trade purchases like Soy.

    The current relatively free trade is making goods landed in the US affordable – but more importantly it reduces the cost to consumers. Increase these costs by encouraging counter tariffs and bringing manufacturing back home and the US debt will rise and with it inflation which in turn hurts investors – and more importantly hurts the poorer classes in the US. By a feat of magic the President has already signed off a budget that will deliver fewer services via taxes.

    I know that President Trump has convinced his supporters that he is improving the US economy and improving employment but since last years figures of a 2.3% increase in productivity is no more than the average increase for each of the years since the Depression and the employment figures look to me as if they are massaged to avoid real unemployment totals I don’t think we should rush to agree with the President. Unfortunately despite what Fox says, the truth is not always in him!

    For example he now admits he made up the Canadian trade figures and either accidently or purposely left off the Services part of the Goods and services part of the trade figures. I am also puzzled why he keeps going on about the Chinese steel imports when steel imports from China shows China at number eleven for steel on the import list.

    Finally something which is way off topic but happens to be a major reason why I am currently disenchanted with the way the US is going: If you are a Trump supporter then I guess you are comfortable with his morals. If so please explain how vast increases in military investment to make it easier to smash cities in the war regions equates with keeping out the civilian refugees fleeing the destruction courtesy of the military might supplied by what President Trump calls the greatest nation in the world.

    • Pete Murphy says:

      Peddiebill, first of all, I’d just like to point out that I’m not a particular fan of Trump. Do a search on this blog and you’ll find that I’ve referred to him as a buffoon in the past. Don’t be offended by him claiming that New Zealand is ripping is off. He claimed the same thing about Canada, the country with whom the U.S. enjoys the largest trade surplus in manufactured goods.

      Again, I encourage you to research more on this blog or to perhaps read my book. You’ll find that the approach I’ve proposed for restoring a balance of trade for the U.S. involves the use of a tariff structure that is indexed to a nation’s population density, but held in abeyance for those countries who maintain a balance of trade with the U.S. Such a tariff structure would end up being applied to only about two dozen countries. Others, like New Zealand, Canada, Australia, virtually all of South America, and many others would enjoy totally free trade with the U.S.

      You commented that “I would have thought that it’s virtually impossible to put a lid on knowledge …” You would think so, wouldn’t you? However, that is exactly what the field of economics has done when it comes to the subject of population. In the wake of the black eye that the field was given when Malthus’ theory seemed to be refuted and was mocked by the other sciences, the field of economics vowed to never again even consider the subject. To this day, they now maintain that man is clever enough to overcome all obstacles to never-ending population growth. You probably don’t believe me, but it’s true. Research it. Better yet, ask an economist about population growth and see if you aren’t immediately dismissed out-of-hand as a “Malthusian.”

      Because of economists’ blind eye toward the subject of population, they’ve never discovered the inverse relationship between population density and per capita consumption. They don’t understand that there’s such a thing as economic overpopulation vs. the resource scarcity that Malthus proposed. They don’t understand that free trade with an economically-overpopulated nation sets up a host-parasite relationship that is almost guaranteed to produce a huge trade deficit for the less densely populated nation. The only remedy is either tariffs or quotas designed to restore a balance of trade.

      That’s why I’m pleased that Trump is venturing into the use of tariffs, because he’s exposing the lies that have been perpetrated by economists. I can’t expect that he will see the economic relationship I’ve written about, and use tariffs narrowly targeted at economic overpopulation. But at least he’s challenging economists’ conventional “wisdom” and clearing the path for his successors to go further.

  4. peddiebill says:

    The catch with Malthus is that his predictions didn’t take into account changes in how the world works. This presumably is why we are not meters deep in horse shit despite the worrying increase in horses in the 19th century. On second thoughts, perhaps what is now coming out of the White House……er!
    For me the Trump version of the tariff idea when linked to the new US tax scheme is a perfect example of the misuse of the Pareto Principle. What is good for the rich and powerful can be very bad for the poor when resources are redistributed and the law of unintended consequences must always apply.
    However you are making some good points and I will follow through on at least some of the ideas. In one sense the wisdom of the tariff
    imposition will provide its own evidence and you may well be proved right in the long run. In the meantime I am glad I don’t have my meagre resources tied up in the US share-market.

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