Red China Runnin’ Scared

April 18, 2018

https://www.reuters.com/article/us-usa-trade-china-eu-exclusive/exclusive-china-seeks-trade-firewall-with-u-s-allies-in-rush-of-ambassador-meetings-sources-idUSKBN1HO1Y0

It all began with Trump’s tariffs on steel and aluminum.  Red China responded with tariffs on about $3 billion of American exports.  Trump upped the ante with a proposal for tariffs on $50 billion in Chinese imports.  Red China responded in kind, including tariffs on American soybeans, and they promptly began buying their soybeans from Brazil.  No dummies, the Brazilians.  They raised their prices.  And the EU, now unable to buy from Brazil, placed big orders for American soybeans.  No skin off the noses of American soybean farmers.

Trump then responded with a proposal for tariffs on another $100 billion of imports from Red China, whose tit-for-tat strategy was now exhausted since they import so little from the U.S.  Instead, they threatened severe retaliation in some form that remains unspecified.  But their rhetoric was threatening.  Not Islamist “rivers of blood running through your cities” threatening, but scary enough to those who don’t really understand international trade.

Now it’s looking a whole lot like a bluff.  As reported in the above-linked article, the Chinese are now running scared, trying to drum up support for “free trade” (their version of it) with the EU (European Union).

Some of the western diplomats involved in the meetings with Fu Ziying, who is also a vice-commerce minister, have viewed the approaches as a sign of how anxious Beijing is getting about the expanding conflict with Washington, the sources said.

The rush of meetings last Thursday and Friday with ambassadors from France, Germany, the United Kingdom, Spain, Italy, and the European Union, may be a signal that China is trying to build a firewall against Trump’s aggressive trade measures, the severity of which some foreign diplomats said Beijing had miscalculated.

“China is showing confidence, but internally they appear quite concerned. They have apparently underestimated Trump’s resolve on trade,” the diplomat said, adding that Beijing is nervous about China’s major trading partners siding with Washington.

It’s not likely they’re getting much sympathy from the EU.  In 2016, the EU had a $175 billion trade deficit with Red China.  If anything, the EU is probably realizing that America’s new get tough policy has Red China running scared and, just maybe, they ought to try a little of that tariff medicine themselves.

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Red China Fires Back, but Now Low on Ammo

April 4, 2018

https://www.reuters.com/article/us-usa-trade-china/china-retaliates-slaps-duties-on-u-s-soybeans-planes-markets-skid-idUSKCN1HB0G6

As reported in the above-linked article, Red China has now matched Trump dollar-for-dollar with tariffs on American exports in the escalating “trade war.”  But now it finds itself critically low on “ammo.”  If Trump responds with tariffs on another $50 billion of Chinese imports, Red China will be able to match those tariffs again.  But then they’re done.  Trump could continue to slap tariffs on $50 billion of Chinese imports eight more times and Red China would be unable to respond because there would be no more American exports to attack.  That’s how bad the trade imbalance is and why Red China has such a losing hand.

In spite of Wall Street getting its panties in a wad over this situation, there’s really nothing to fear.  So Chinese goods become more expensive.  So what?  Americans then have a choice.  Spend more money to get them or use their money for something else.  For example, suppose Apple iPhone X’s go up in price from $1,000 to $1,250.  Maybe it’ll be just the catalyst Americans have needed to ponder whether all the money they spend on these gadgets is money well-spent.  Given the high cost of the phones and the contracts for data plans, and given that social media has now been exposed as a scheme for mining away your privacy, maybe the money would be better spent on other things, like homes and cars, for example.  The point is that less money spent on Chinese imports is money now available for spending on other things.  The impact on the U.S. economy will be a positive one – not a negative.

What Trump needs to do is take this trade war to the next level.  He needs to apply tariffs across the board to every Chinese import.  Beyond that, he needs to take on our other big trade deficits with the likes of the European Union, Japan, Mexico and a few others.  Any country that has a sustained trade surplus with the U.S. needs to be in his cross-hairs but, at the same time, he needs to lower barriers for our good trade partners like Canada, Australia, most all of South America, and others.  This isn’t a war against trade.  It’s a war for balanced trade – a war from which we should never have withdrawn.


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.


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.