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

March 16, 2018


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!


Tariff Hysteria

March 3, 2018


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.

Trade Deficit in Manufactured Goods At Record High

December 7, 2017

The trade deficit in manufactured products* rose to a record high of $64.6 billion in October, surpassing the previous record of $63.3 billion set in March of 2015.  Take a look at this chart of our monthly deficit in manufactured goods:  Manf’d Goods Balance of Trade. Exports of manufactured goods haven’t risen since September of 2011 (in spite of Obama’s laughable proclamation in 2010 that we would double exports in five years).  In the meantime, imports have soared by almost $30 billion.  It’s a dubious distinction for President Trump who, during his inaugural address in January, spoke of “…rusted-out factories scattered like tombstones across the landscape of our nation…” and proclaimed that “This American carnage stops right here and right now.”

To be fair, Trump didn’t mean that it would happen on the spot.  His administration has been taking steps to address our trade problem, trying to renegotiate NAFTA (the North American Free Trade Agreement with Mexico and Canada), imposing tariffs on some products and, most recently, blocking China from rising to “market economy” status with the World Trade Organization.  Aside from the work on NAFTA, which may conclude soon with the U.S. walking away from that ill-conceived agreement, the rest amounts to little more than the token steps taken by previous administrations.  The net result is that the plight of the manufacturing sector of our economy grows steadily worse.

Enough is enough.  It’s time to walk away from both NAFTA and the World Trade Organization and begin implementing tariffs.  Any tariffs would be better than our current trade policy, but smart tariffs that address the real cause of our trade deficit – attempting to trade freely with badly overpopulated nations characterized by bloated labor forces and anemic markets – would be much more effective.  As an example, it was reported yesterday that Canada, angered by their treatment in the NAFTA negotiations, has canceled an order for Boeing-made fighter planes.  Why are we treating Canada this way?  Sure, we have a trade deficit with Canada, but it’s due entirely to oil.  In 2016, our biggest trade surplus in manufactured goods, by far, was with Canada – $44 billion, more than double any other country.  Canada is our best trading partner.  Why anger them?  Why not tell Canada that our beef is with Mexico, with whom we had a trade deficit in manufactured goods of almost $68 billion in 2016 – our third worst behind China and Japan – and that they’ll get just as good a deal from the U.S. without NAFTA?  Slap the tariffs on Mexico, not Canada.

We could completely wipe out our trade deficit in manufactured goods by applying tariffs to only ten countries – China, Japan, Mexico, Germany, Ireland, Vietnam, South Korea, Italy, India and Malaysia.  These ten countries, all more densely populated than the U.S. (all but Ireland are many times more densely populated), account for all of our trade deficit in manufactured goods.  While we have defiicts with others, they are much smaller and are offset by surpluses with the rest of the world.  The point is, we don’t have to anger the entire world with tariffs – just ten out of the more than 220 countries in the world.  So let’s be smart about how we do it, but the time has come, Mr. President.  Stop delaying the inevitable.  Do what you know needs to be done.

* The trade deficit in manufactured products is calculated by subtracting services, trade in petroleum products, and trade in foods, feeds and beverages from total trade, as reported by the Bureau of Economic Analysis in its monthly reporting of international trade.


Trump on Trade with China: Media Misses the Point

November 10, 2017


As was widely reported yesterday morning, Trump emerged from two hours of a meeting with Chinese premier Xi Jinping and had this to say:

I don’t blame China. “After all, who can blame a country for being able to take advantage of another country for benefit of their citizens? I give China great credit.”
The above-linked article goes on:
Instead of pointing the finger at Beijing for exacerbating trade disputes, Trump blamed past US administrations “for allowing this trade deficit to take place and to grow.”  It was a notable shift in tone from a President who was elected to office partly for his tough talk on holding other countries accountable for practices that disadvantage US workers.
Trump went on:
We want a vibrant trade relationship with China.  We also want a fair and reciprocal one. Today, I discussed with President Xi the chronic imbalance in our relationship as it pertains to trade and the concrete steps it will take to solve the problem of massive trade distortion.
A “notable shift in tone?”  Maybe a shift in tone, but the media is completely missing the not-so-subtle and huge shift in U.S. trade policy that this represents.  Previous presidents have chided China for unfair trade practices like currency manipulation, theft of intellectual property, subsidizing their exports, and manufacturing in sweat shops that also pollute with reckless abandon.  They used to put all of the onus on China for helping to correct our enormous trade imbalance.  The Chinese must have been rolling in the aisles with laughter when our trade negotiators left.
Not this time.  What Trump is saying is that the time has come for the U.S. to take the matter of restoring a balance of trade with China into our own hands.  Trump has been itching to begin levying tariffs on imports from countries that have large trade surpluses with the U.S. and, though he made no mention of tariffs in this speech, his vow to take matters into our own hands should send chills down the spine of Xi.  Restoring balance with China by slowing their exports with the use of tariffs would practically collapse the Chinese economy.
But so far it’s just talk.  What is Trump waiting for?  It seems clear that he’s biding his time with China in the hope that their help with reining in “Little Rocket Man” in North Korea will lead to his demise.  Probably a smart move but, if it doesn’t work by the time North Korea has the ability to put a nuke on an ICBM, the U.S. will have to act and the Chinese will lose whatever leverage holding the North Korean attack dog at bay has afforded them.
In the meantime, our trade deficit in manufactured goods grows worse.  Here’s the latest chart, gleaned from the trade data for September that was released on last Friday:  Manf’d Goods Balance of Trade.  Nothing has changed since Trump took office, and nothing will until he stops dithering with pointless negotiations and begins applying tariffs to these countries with bloated labor forces and emaciated markets.  My sense is that that time is growing nearer, but time will tell.

Trump: “I want tariffs. ….bring me some tariffs.”

September 1, 2017


With trade negotiations with both China and Mexico bogged down in trivial minutae, it was beginning to appear that Trump’s campaign promise to impose tariffs on both was nothing more than a ploy to win votes.  After all, we’ve seen this movie dozens of times over the past decades:  endless talk about intellectual property rights, labor laws, unfair government subsidies.  The list goes on and on and, in the end, our trade deficit gets bigger and bigger while our manufacturing sector withers.

Then, a few days ago, the above-linked report appeared.  Perhaps Trump has just been giving the “globalists” one last shot at negotiating something meaningful so that, at least, they can’t say he didn’t try.  But it seems that he’s getting fed up with the lack of progress.

Reportedly, in the presence of the “globalists” on his economic team – U.S. Trade Representative Robert Lighthizer and Economic Council director Gary Cohn, among others (which perhaps included daughter Ivanka and her husband Jared Kushner?) – Trump told chief of staff John Kelly:

So, John, I want you to know, this is my view. I want tariffs. And I want someone to bring me some tariffs … I know there are some people in the room right now that are upset. I know there are some globalists in the room right now. And they don’t want them, John, they don’t want the tariffs. But I’m telling you, I want tariffs.

Do it, John!  Draw up a tariff plan.  Help President Trump implement it and our long, long nightmare of trade policy idiocy will finally be over!  Then, instead of debt ceiling and budget negotiations getting deadlocked over how to pay for everything, our congressmen will have a new problem – what to do with all the additional revenue.

Let’s not give up hope yet.


Seven Months Into Trump’s Administration, Has Anything Changed?

August 14, 2017

I’m back from a hiatus at my north woods retreat, and there’s a bit to catch up on.  For now, however, I’m wondering what has really changed in terms of the economy since Trump took office seven months ago.  Let me begin by sharing a recent experience.

My wife and I stopped into a small restaurant in Boulder Junction, Wisconsin for dinner one evening earlier this week.  Boulder Junction is a tiny town in Vilas County in northern Wisconsin, a popular vacation area frequented mostly by folks from Chicago and Milwaukee.  A polite Asian lady, speaking broken English, seated us and told us the waitress would take our order shortly.  Upon ordering, the waitress assured us that our order would be prepared as we had requested.  It wasn’t.  When we complained, the waitress – without even offering to make it right – apologized and explained that there was a “language barrier” in the kitchen.  A language barrier in Boulder Junction!  I couldn’t believe it.

Another old lodge that we visit for dinner is staffed with waiters and waitresses from Lithuania.  They just can’t find reliable help in the north woods of Wisconsin, they explain.  However, another restaurant just up the road seems to have no problem.

I know what’s going on here.  These little businesses don’t have the wherewithal to recruit foreign laborers.  So how do they get them?  While I can’t provide proof, I’m certain that the Chamber of Commerce is importing foreign labor and pushing them on these businesses, or making them available at rates so cheap that these businesses don’t even have to bother with trying to hire locally.  So, when it comes to Trump’s promises to stop these kinds of practices, there’s no evidence that anything has changed.

Changing gears, the Commerce Department released the June trade figures last week.  Here’s a chart that shows the balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.  As you can see, it continues on the same downhill trajectory that it’s been on throughout the Obama administration.  In fact, in the 2nd quarter of 2017, the deficit in manufactured goods set a new record of $185.6 billion.  In other words, contrary to Trump’s inaugural vow that:

“… rusted out factories scattered like tombstones … stops right here and stops right now!”

matters have actually gotten worse.  While the Trump administration is currently involved in renegotiating NAFTA and in negotiations with the Chinese, and the U.S. negotiators are reportedly taking a much harder line in these negotiations, I’m very pessimistic that any improvement in our balance of trade will result.  Why?  Because there’s nothing to negotiate.  The ONLY thing that will make a difference in America’s favor is tariffs, something that no nation would agree to in “negotiations.”  Anything they will agree to will be totally unenforceable and any attempts to enforce them would be met with whining and, more importantly, a cut-off in funding of candidates unless they pressure the Trump administration to back off of enforcement actions.  These same kinds of negotiations have been tried and have failed for decades.  Most recently, Obama’s deal with South Korea, which he hailed as a “big win for American workers,” has actually proven to be a disaster.

In the meantime, the “new normal” economy that emerged during the Obama administration, in the wake of the Great Recession, goes on.  GDP growth remains stuck in the 1-2% range, wages are stagnant and job growth (when viewed in the context of the “100,000 jobs is the new zero” economy) is anemic at best.  The economy is being kept afloat by deficit spending (up 10% so far this year), a once-again growth in credit and an inflated stock market.  The illusion of good times isn’t going to last.

I’m growing impatient with the Trump administration’s dithering on these issues.  Can you tell?


Low Wages Play Little Role in Trade Imbalances

July 20, 2017

In my previous two posts in which we examined the lists of America’s worst trade deficits and best trade surpluses in manufactured goods, it seemed clear that low wages were not a factor.  Many of our worst trade deficits were with wealthy nations like Germany, Ireland, Switzerland, Denmark, France, Japan and South Korea.  The list of our best trade surpluses was also dominated by wealthy nations.

Let’s take a closer look at the issue.  If we sort a list of nations by purchasing power parity, or “PPP” – a factor roughly analogous to wages, and divide them equally into five groups, ranging from the wealthiest nations to the poorest, here’s what we find:

  • Among the 33 wealthiest nations, whose PPP ranged from $129,700 (Qatar) to $34,400 (Cyprus) in 2016, the U.S. had a trade deficit in manufactured goods with 15 of them.
  • Among the next 33 nations, whose PPP ranged from $33,200 (Czech Republic) to $16,500 (Iraq), the U.S. had a trade deficit with 13 of them.
  • Among the next 33 nations, whose PPP ranged from $16,100 (Costa Rica) to $8,200 (Ukraine), the U.S. had a trade deficit with 10 of them.  China is near the top of this group.
  • Among the next-to-last poorest group, whose PPP ranged from $8,200 (Belize) to $3,100 (Lesotho), the U.S. had a trade deficit with 13 of them.
  • Among the very poorest nations, whose PPP ranged from $3,100 (Tanzania) to $400 (Somalia), the U.S. had a trade deficit with only 4 of them.

So if low wages cause trade deficits, why aren’t our trade deficits concentrated among the poorest nations instead of that group actually representing the fewest deficits by far.  And why does the richest group of nations include the most (and some of the biggest) deficits?

There’s no denying the fact that, among the poorest nations, the U.S. had a deficit in manufactured goods with 17 of them.  Included in that group are Vietnam and India.  But both rank among the top 25 nations with the fastest growing PPP (146% and 145% relative to the U.S., respectively) over the past ten years.  Since incomes are rising so fast in those countries, then if low wages are a factor in driving trade imbalances, shouldn’t our deficits with those countries be declining?  They’re not.  Quite the opposite is happening.  Our deficits with both have exploded over the past ten years, by 349% with Vietnam and 250% with India.  Our trade deficit is making them wealthier.

It’s difficult to argue that low wages play no role whatsoever.  Mexico is an obvious example of where American companies are setting up shop there, just across the border, for no other purpose than to save on labor.  Everything made there comes back into the U.S.  Virtually none of those products are sold into the Mexican market.  While many of the other manufacturing operations built in other countries like China are put there primarily in pursuit of those markets, that’s not the case with Mexico.  And mysteriously, the increased demand for labor in Mexico doesn’t seem to do much to raise wages there.  Mexico is being used as a virtual slave labor camp and, by all appearances, there must be some collusion between American companies and the Mexican government to keep it that way.

Aside from the glaring example of Mexico, low wages play no role whatsoever in creating our massive trade imbalance in manufactured goods, as proven by the fact that the vast majority of our worst trade imbalances are with wealthy nations.  Instead, trade imbalances are caused by high population densities that make our trading partners incapable of consuming products anywhere close to their productive capacity.