Trump Threatens China with More Tariffs

May 7, 2019

https://www.fidelity.com/news/article/top-news/201905060845RTRSNEWSCOMBINED_KCN1SC0MF-OUSBS_1

As reported in the above-linked article, Trump has suddenly taken a more harsh tone with China, apparently frustrated with the slow progress in the trade talks with China.

It’s difficult to know what’s really going on here.  Last December, at a G20 meeting in Argentina, Trump announced that he was holding off on ratcheting up tariffs on Chinese imports which had been set to go into effect on January 1st until at least March 1st, pending the outcome of a new round of trade negotiations with China.  March 1st came and went as the trade talks dragged on endlessly, as they always do, which is precisely what communist dictator Xi wanted in the first place when he worked his charm on Trump at the G20 meeting.  He couldn’t care less about an agreement – something they’d never abide by.  All he wanted was more American inaction.

It seemed to be working.  But something has happened.  Reportedly, China back-tracked on some things they had agreed to earlier in the negotiations, perhaps calculating that it would result in more time wasted renegotiating what had already been negotiated.  Again, that’s all China wants – more wasted time and more American inaction.  One can only hope that, this time, they’ve miscalculated.

“What is of vital importance is that we still hope the United States can work hard with China to meet each other half way, and strive to reach a mutually beneficial, win-win agreement on the basis of mutual respect,” Geng said.

OK, Geng, let’s meet each other half way.  We’ll buy from you as much as you buy from us.  Nothing more.  Nothing less.  A balance of trade.  That’s all the U.S. is asking for.  That’s fair.  That’s real “trade” versus the mercantile relationship that you’ve enjoyed at Americans’ expense.

That’s not really what you want though, is it?  You want the U.S. to agree to a few token concessions in exchange for maintaining the host-parasite relationship that you currently enjoy, sucking the life out of the American economy while fattening your own.

We can only hope that Trump stands tall this time and puts the new tariffs in place, ratcheting up the existing tariffs and slapping 25% tariffs on the remainder of Chinese imports.  What’s at stake here is more than low prices for American consumers.  We can work through the short-term pain of that.  It’s not an exaggeration to say that America’s very existence – and perhaps even the future of mankind – is at stake.  It’s become clear that China is using its trade-fueled wealth to build itself into the world’s preeminent power – not just economically but also militarily – bent on world domination.  What’s at stake is mankind’s future as a free people vs. living under the thumb of a totalitarian communist regime.

All of the dire warnings about a U.S. – China trade war doing irreparable damage to the global economy is a bunch of baloney.  China is actually a drag on the global economy, sapping the life out of the manufacturing sector of economies around the world to sustain a labor force bloated by gross overpopulation and to stave off the civil unrest and potential collapse of its communist regime that would likely result without it.

End the negotiations.  A balance of trade with a badly overpopulated nation like China is something that can’t be achieved through negotiations because it would never agree to give up the huge trade surplus it needs for its very existence.  On the other hand, a huge trade deficit is something the U.S. can no longer endure if it wants to assure its own continued existence.  Maintaining tariffs sufficient to assure a balance of trade is absoutely crucial.

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A Trump Report Card

April 23, 2019

It’s been a while since I’ve posted anything, and thought it’d be a good time to give President Trump a sort of mid-term report card, albeit a little late.  I’ll grade him in two subjects only – immigration and trade policy – since these two areas address the economic effects of population growth, both actual growth the effect of growth imported through trade with overpopulated nations, the focus of this blog.  Beyond these, little else matters.  What about environmental policy?  Without a focus on stabilizing our population (and virtually all of America’s population growth is driven by immigration), all other environmental policies are doomed to failure.  What about foreign policy?  It’s impossible to project strength in the world if you’re weak on trade.

So, with that said, let’s begin with the good news:

Immigration Policy:  A+

Trump has done a fantastic job on both illegal and legal immigration, each of which had been contributing a million people per year to America’s population growth.  Thanks both to Trump’s zero tolerance policy for illegal immigration and dramatic cuts in legal immigration, the Census Bureau reduced its estimate of the U.S. population by 1.3 million people at the end of 2018.  He spent a lot of political capital in his efforts to get funding for a border wall and, when Congress wouldn’t agree, had the guts to declare a national emergency to obtain the funds.  “What emergency?” the media cried at first, but not for long, when their own reporters in the field began reporting on the humanitarian crisis at the border that resulted from the adminstration’s efforts to enforce the law instead of turning a blind eye to illegal immigration as previous administrations have done.  Now there’s virtually no complaints about Trump’s enforcement efforts or his emergency declaration.  His policies are likely responsible for the fact that increases at the low end of the wage scale are outpacing higher income increases.  Recently, during a trip to the southern border, Trump declared that “Our nation is full.”  Truer words were never spoken.  Ultimately, this is the biggest reason that immigration needs to be reduced.  Trump has done an absolutely fantastic job of reining in out-of-control immigration.

That’s the good news.  Now for the not-so-good:

Trade Policy:  D

Such a low grade may seem surprising and harsh, especially in light of the tariffs on metals and his seemingly tough position with China, including a 25% tariff on some items and a 10% tariff on half of all Chinese imports.  However, it’s those very actions that elevate his score to a “D” from an “F”, the score I’d give to every previous president going as far back as Franklin Roosevelt.  They’ve been a nice start, but fall far short of what we were led to expect from him in the way of trade policy.  Like all previous presidents of the modern era, Trump has been sucked into endless trade negotiations, a ploy that nations with large trade surpluses have used successfully for decades to forestall meaningful action by the U.S. – namely, tariffs.  We were promised that the North American Free Trade Agreement (NAFTA) would be torn up or promptly replaced.  Trump’s administration did negotiate a new agreement, but one that reportedly does little to shrink the enormous deficit with Mexico and it may never even be enacted, if Congress has its way.

Action on China is stalled.  Tariffs on auto and parts imports now appear to be idle threats.  Beyond China, there’s been no action on reducing the trade imbalance with other nations like Germany, Japan, South Korea, Taiwan, Vietnam and a host of others.  The trade deficit in manufactured goods has continued to explode to new record levels under Trump.  Employment in manufacturing has stalled once again.  Trump sees trade as a venue for demonstrating his deal-making prowess, and he sees tariffs as leverage to use in trade negotiations.  He doesn’t understand that favorable “deals” with overpopulated nations are impossible and a waste of time, and that tariffs are the only way to restore a balance of trade with those nations.  Regarding the ongoing trade negotiations with China, he recently declared that the U.S. will win, whether a deal is reached or not.  He’s wrong.  The Chinese have already won by sucking him into time-wasting talks that, at best, will yield a deal that the Chinese will use to continue to grow their trade surplus with the U.S.  He had them on the ropes with the tariffs and then caved in, letting them off the hook.

In summary, Trump’s trade policy is stalled and our trade deficit is getting worse, not better.  This has been a major disappointment.  He’s wasted valuable time.  As I’ve said many times, a tariff program will produce some pain in the short term as prices rise and companies are slow to build manufacturing capacity in the U.S., but will ultimately yield incredible economic growth once that capacity is in place.  Had Trump been more aggressive with tariffs, the short term pain would have given way to some major economic gains by the time of the 2020 election.  Now, that’s probably not possible and, instead, his economic program is at risk of stumbling into the election.

He’s done a terrific job on immigration but all may be lost if he doesn’t get his trade policy off dead-center.


More Evidence that Tariffs are Working

March 8, 2019

https://www.reuters.com/article/us-trade-emerson/as-trade-wars-rage-emerson-plots-new-u-s-expansion-idUSKCN1QP0IQ

Here’s more evidence that the tariffs on Chinese imports are working.  As reported in the above-linked article, Emerson Electric now plans to move manufacturing back to the U.S.  It’s a complete reversal from their strategy of only ten years ago.

In 2009, the chief executive of Emerson Electric Co. bluntly told investors at a Chicago conference what many of his counterparts at other manufacturing firms would only say privately.  “I’m not going to hire anybody in the United States. I’m moving,” David Farr said as he blasted U.S. taxes and regulations and called it an easy decision to expand in India and China.

A decade later, Farr has made a stunning reversal: Emerson now plans to build at least three new U.S. plants and is already expanding existing domestic operations. Farr saw a new era of U.S. protectionism coming before Trump’s election – and started planning accordingly, he said in an interview with Reuters at the company’s sprawling headquarters near St. Louis, Missouri.

“For the first time now, I’m looking for best-cost U.S. locations” to build factories, he said.

Trump’s election, Farr said, accelerated a political shift against free trade policy that is now transforming many U.S. firms’ domestic investment strategy. Protectionist policies — especially toward China — are now a rare point on which many Democrats and Trump agree, relegating formerly bold Republican free traders to the sidelines.

The article goes on to provide some details of Emerson’s plans, particularly to spend $425 million on capital projects in the U.S., including $250 million for new manufacturing facilities.

And it’s not just Emerson:

Farr’s new take on U.S. investment reflects a broader questioning of overseas expansions, especially in China, for both political and operational reasons. A survey of top managers at 500 U.S. companies conducted in December by investment bank UBS AG found that 31 percent have moved or are moving production facilities to avoid tariffs. Fifty-eight percent said they expect tariffs to “have a positive impact on domestic investment.”

It’s not just the tariffs.  Farr seems to be disillusioned with manufacturing in China.

Forces beyond politics are pushing manufacturers like Emerson to reconsider investments in China, including rising labor and logistics costs there …

… Emerson’s renewed commitment to U.S. manufacturing is also part of a larger move by global manufacturers to produce more goods in the regions where they are consumed to save on transportation costs.

I believe there are other factors at work here too.  The domestic Chinese economy is flattening out at a far lower level than CEOs expected.  They dreamt of a nation of more than a billion people becoming western-style consumers in the mold of Americans, making China a market four times the size of America.  It hasn’t happened because gross overpopulation in China strangles their per capita consumption.  They built a lot of capacity in China to serve a market that never materialized – capacity that was then dependent on exports to make it profitable.  Along with higher wages and high shipping costs, Trump’s tariffs have eroded their profits even further.  Supplying the American market from China no longer makes sense.

This story, and the one I posted about yesterday – about BMW putting on hold its plans to export EV’s from China – are just tiny examples of the effect that tariffs have in driving manufacturing back to the U.S.  Just imagine the potential as this begins to snowball.  Imagine how many factories would have to be built and how many people would have to be hired to staff them to make all of the products you see on the shelves at the box stores today that are all sourced from China.  There would be an economic explosion in this country the likes of which haven’t been seen since the end of World War II.

The tide is turning against the failed concepts of free trade and globalization.  It’s crumbling right before our eyes.  The very fact that Reuters, a pro free trade and pro globalization publication until now, saw fit to even publish this information is evidence in itself of changing sentiment.

And kudos to Reuters for pointing out that Republicans were even more guilty than Democrats for pushing the free trade globalization agenda to the detriment of the American people, and that Trump has led the charge against it.  Nice to see that some on both sides of the aisle are getting on the bandwagon.

 


California Admits Failure in its Carbon Reduction Efforts

February 5, 2019

https://www.reuters.com/article/us-usa-climatechange-california-insight/a-climate-problem-even-california-cant-fix-tailpipe-pollution-idUSKCN1PQ4MJ

Once in a while I divert my focus from the economic impact of population growth to highlight other impacts, like environmental.  This is one of those times, as the report in the above-linked article is so significant that I can’t let it pass without comment.  The state of California is admitting that its decades-long drive to reduce auto exhaust emissions is a complete failure.

For three decades, California has led the fight to control tailpipe pollution, with countless policies promoting cleaner gasoline, carpooling, public transportation and its signature strategy – the electric vehicle.  Californians now buy more than half of all EVs sold in the United States, and the state’s auto-pollution policies have provided a model being adopted around the world.

Indeed, California’s focus on reducing carbon emissions has been a model for the rest of the world.  In fact, such carbon reduction is the model upon which the Paris Climate Accord, whose stated goal is to reduce greenhouse gas emissions to a level at which sustainable development can continue, is based.  The result?

Tailpipe pollution here is going up, not down, despite billions of dollars spent by one of the most environmentally progressive governments on earth.

“The strategies that we’ve used up until now just haven’t been effective,” Mary Nichols, the head of the California Air Resources Board, told Reuters.

How is this possible – that such measures are having no effect?  The answer is quite simple, and it’s a point I’ve tried to drive home repeatedly.  The planet doesn’t give a damn how much you reduce your carbon emissions.  All it cares about is the total amount of greenhouse gases in the atmosphere.  Population growth is negating any gains in per capita carbon emissions.  What difference does it make if everyone reduces their personal emissions by 50%, let’s say, if the population doubles?  Not one damn bit.

That failure has less to do with energy or environmental policies and more with decades-old urban planning decisions that made California – and especially Los Angeles – a haven for sprawling development of single-family homes and long commutes, according to state officials.

Note the word “development.”  It’s the same word you find in the stated mission of the Paris Climate Accord – sustainable “development.”  It’s a code word for population growth.  “Sprawling development” doesn’t happen without it.  “Sustainable development” doesn’t happen without it.  In fact, “sustainable development” has been the biggest cause of climate change and those who continue to promote it are scamming you into supporting their real agenda – profit growth for global corporations.

The fact is that there is no solution to climate change or any of the other myriad negative consequences of population growth that doesn’t BEGIN with a focus on stablizing the human population.  That’s not to say that we shoudn’t also focus on minimizing our emissions of all kinds – not just greenhouse gases but gaseous, liquid and solid emissions of all kinds.  Nor is “sustainable development” a solution to poverty.  It’s actually making it worse, with over-crowding driving down per capita consumption and, with it, employment.

Of course, there’s no overt mention of “population growth” in this article – just “sprawling development.”  So don’t be surprised if the scam continues, but with a new, additional focus on trying to drive people together into tiny apartments in high-rise housing.  Yeah, that’ll work.  That’s a future we can all really look forward to.

 

 


MAGA: Is Trump Becoming a Liability?

January 28, 2019

In the wake of the government shutdown fiasco, you have to begin to wonder whether Trump is becoming a liability to the “Make America Great Again” movement.

It isn’t so much the fact that he reopened the government.  It’s the way he did it.  He caved in.  He totally capitulated to Democrats’ insistence on maintaining an open border, getting absolutely nothing in return.  What should he have done?  First of all, he should have followed through with his threat of declaring a national emergency.  Secondly, he should have withdrawn America from NAFTA and immediately put in place tariffs on all manufactured goods from Mexico, effectively making Mexico pay for the wall like he promised.   Finally, he should have immediately begun deporting the “deferred action” illegal aliens that he offered to protect.

The “deal” to reopen the government for three weeks, supposedly for the purpose of giving Trump and congress time to negotiate a deal on border security, is a farce.  Trump has given up all leverage that he had on the border wall issue and Democrats have made it crystal clear that they’ll never support a dime for securing the border in the only way that it can be secured – by building a barrier.  Either there’ll be an impasse again, or Trump will cave in a 2nd time and try to sell something less than a barrier – maybe more funding for border patrol agents and technology – as a win.

The problem goes far beyond the border wall issue to the half-hearted, inconsistent implementation of virtually every element of his “Make America Great Again” (or “MAGA”) program, a program consisting of three key elements:  a re-balancing of trade to bring manufacturing jobs back to the U.S.; putting an end to rampant, out-of-control immigration – both legal and illegal; and putting an end to the rest of the world behaving like a spoiled, entitled teenager treating the U.S. like a doting parent, providing everything it asks for and getting nothing but scorn in return.

We were promised a wall to virtually put an end to illegal immigration across our southern border, to be paid for by Mexico.  We were promised a prompt withdrawal from NAFTA, and tariffs on products from Mexico, which would have made fulfilling the border wall promise a snap.  We were promised tariffs on Chinese imports and on auto imports.

Soon after the inauguration, Trump invited Red China’s communist dictator to dinner at Mar A Lago and was quickly seduced into holding off on tariffs on China.  Then he caved in to pressure not to withdraw from NAFTA and instead got sucked into a ridiculously drawn out negotiation of a new agreement with Mexico and Canada that may or may not be any improvement at all, and that Congress seems in no hurry to take up.  Goodbye to any chance of getting Mexico to pay for the wall.  He did implement a small ten percent tariff on half of Chinese imports after it became clear that Chairman Xi’s promises were nothing more than a ploy, but caved in on further implementation once the global corporations began their pissing and moaning.  Now we’re sucked into the same kind of trade negotiations that the rest of the world has used for decades to stall America’s efforts to stand up for itself.

Then there’s North Korea.  Give Trump credit for using the toughest sanctions ever to forced them to agree to denuclearization, but Kim’s promises have proven hollow and North Korea seems to be off the hook once again.

I don’t blame Trump alone for all of this.  Everyone around him has been against him from the start – the Democrats who despise him and would never agree to anything he wanted, the media, global corporations, global organizations, his own staff and even members of his own family (globalists like Kushner and Ivanka) who have stonewalled his programs.

All of the backlash from the MAGA initiatives was to be expected.  I predicted as much in Five Short Blasts – a period of inflation caused by significant tariff-induced price increases, but eventually followed by explosive economic growth as manufacturing in America returned.  Trump needed to go all in with his program quickly, enduring withering criticism for a couple of years or so before having the last laugh when GDP began to explode as factories were rebuilt and as the manufacturing sector of the economy exploded.  It would have taken a lot of guts to be almost universally despised in the short term in order to have history remember him as an American hero in the long term.

However, I see a real danger in what’s happening here.  Trump’s incomplete implementation of these policies will yield only the pain without achieving the benefits that would eventually come, and will be deemed complete failures.  They’ll be forever labeled as “Trumpian” policies that no one will ever dare to attempt again.  America will be forever doomed to massive trade deficits and budget deficits, and will eventually collapse under the weight of gross overpopulation and a national debt that the rest of the world can no longer sustain.

It’s not too late for Trump, but it’s getting pretty darn close.  He needs to immediately begin ignoring all of globalist noise and whining and go all in with what he knows needs to be done.  Declare an emergency.  Build the wall.  Withdraw from NAFTA and slap tariffs on Mexico, and tell congress that if they don’t like it, then they can pass the new agreement he negotiated.  Slap tariffs on all Chinese exports and raise them to 25% or higher.  Slap 25% tariffs on all auto imports.  Tell the rest of the world that we’re willing to buy from them only as much as they buy from us.  Sure, the globalist outcry will be almost unbearable, but so what?  Continue down the path you’re on and history will remember you as a complete failure.  So what is there to lose?


An Example of Why Tariffs Can’t be Piecemeal

January 17, 2019

https://www.fidelity.com/news/article/top-news/201901170104RTRSNEWSCOMBINED_KCN1PB0CB-OUSBS_1

The above-linked article is a good example of why tariffs can’t be applied piecemeal to only specific products.  A Michigan auto parts supplier is shifting the manufacturing of some components from Michigan to Israel to skirt the tariffs on steel.  Israel gets steel tariff-free and the parts they manufacture no longer count as “steel,” so they can export them to the U.S. free of tariffs.

I give Trump a lot of credit for implementing tariffs and hope he goes much further but, in order to avoid situations such as the one reported on in this article, tariffs must be targeted at nations – densely populated nations – not products, and must cover every product from such nations – not just specific products.

If Trump had applied the tariff structure I recommended in Five Short Blasts, a structure indexed to population density, the RoMan manufacturing company would never dream of outsourcing components to Israel, since all imports from Israel would be subject to a 40% tariff.  It’s worth noting here that, in 2017, our third worst trade deficit in per capita terms was with Israel, one of the most badly over-populated nations on earth – three times as densely populated as China.  In per capita terms, our trade deficit with Israel is four times worse than our deficit with China.

The Trump administration sees tariffs as a tool to force concessions from nations that continue to maintain trade barriers (like tariffs) against American products.  It believes that if it can get Europe, for example, to drop its 10% tariff on American cars, then American manufacturers will begin exporting a lot more cars to Europe.  But they won’t, at least not nearly in the quantity needed to offset the number of cars imported from Europe.  The problem isn’t the tariff, it’s the inability of Europeans to consume even their own domestic capacity because their dense population (nearly equal to China’s population density) makes car ownership impractical.

Tariffs aren’t negotiating tactics.  They’re absolutely imperative to maintain a balance of trade with densely populated nations.

 


It IS a crisis. Build the wall.

January 9, 2019

For those not familiar with this blog, let me begin by stating that I’m an independent who votes issues – two issues in particular:  trade policy and immigration.  These two issues dwarf all others in importance because of the role of population growth – the United States’ own population growth and the imported effects through trade with grossly overpopulated nations – in driving up unemployment and poverty.  Obama promised to address the trade deficit and I voted for him.  He reneged on that promise and I did not vote for him the 2nd time around.  Trump promised to address both the trade deficit and immigration, so I voted for him.  Trump’s doing a good job on both fronts – at least the best he can, given the push-back by the globalists in the media, in Congress and even among his own staff.

But a good communicator he isn’t.  I thought he missed some key points in his address last night.  So I’ll try to fill in the gaps.  First of all, it’s just common sense for any nation to build a physical barrier along any border that’s under constant assault, as our southern border has been for many decades.  The cost – a few billion dollars – is minuscule – chump change compared to the annual federal budget.  The federal government is constantly looking for new ways to inject stimulus into the economy to offset the economic drain caused by the massive trade deficit.  Virtually every penny spent on building a wall would create jobs, just as it does in infrastructure projects.

Claims by the Democrats that a physical barrier isn’t an effective tool against illegal immigration are, at face value, absolutely preposterous.  If a physical barrier isn’t effective, then why do so many senators and congressmen live in gated communities, as Trump pointed out?  Why do prisons have walls?  Why are airports fenced?  For heaven’s sake, even landfills have fences around them!

In the lead-in stories on the major networks that covered Trump’s address, they reported on the decline in border apprehensions.  From the year 2000 to 2018, border apprehensions have declined from 1.6 million per year to 400,000 last year.  Is that proof that a crisis doesn’t exist?  No.  What happened after those 1.6 million apprehensions in 2000?  Virtually all of those illegal immigrants, once processed, were released into the general population.  They, and the problems they brought with them, were here to stay.  Now, however, Trump has taken a zero tolerance approach to the problem, trying to detain all until either their requests for asylum can be validated or they can be deported.  The detention facilities are bursting at the seams.  Children are separated from their families.  A couple have died from the flu.  (No mention of the hundreds of American kids who die from the flu every year.)

There’s the crisis.  Even at the reduced levels of apprehension, the sheer numbers dwarf our ability to deal with them quickly and humanely.  Just because a crisis has been ignored for decades doesn’t make it any less a crisis.  Just because what needed to be done decades ago was never done doesn’t mean we shouldn’t do it now.  The very definition of insanity is doing the same thing over and over and expecting different results.  Expecting the illegal immigration problem to just magically go away without putting up a barrier is insane.

The onslaught of migrants fleeing wars in the Middle East and famine and poverty in northern Africa for Europe has been universally described as a humanitarian crisis.  Since the beginning of that crisis a few years ago, Europe has taken in about 800,000 migrants and is struggling mightily to cope with the results.  The United States, with approximately the same population and geographical area as Europe, has been invaded by an even greater number of illegal immigrants yearly, year in and year out, decade after decade.  And yet, Democrats (along with plenty of Republicans) deny that a crisis exists.  Given their “druthers,” many Democrats would prefer to ignore the problem altogether and leave the border wide open.  Hillary Clinton is a self-proclaimed open border advocate.

Enough is enough.  If Democrats can’t stomach the thought of admitting that Trump is right on this issue and pony up the chump change needed to build the wall and re-open the government, then Trump should proceed without them.  If the Democrats didn’t want Trump to declare a crisis, then they shouldn’t have described the conditions at the detention facilities as a crisis.  Declare an emergency and immediately start building the wall.  Of course there’ll be a legal challenge.  So what?  The wall can be finished by the time that winds its way through the courts.

If that fails, here’s an idea:  put a road on top of the wall and bury the funding in a transportation bill!