Token Bump in Exports to China in May Falls Far Short of “Phase 1 Trade Deal” Goals

July 4, 2020

Trade data released by the Commerce Department on Thursday for the month of May reveals that China bumped up its imports from the U.S. slightly, but still fell far short of the goals of the “Phase 1 Trade Deal” signed with the U.S. in January.  Here’s the data (source:  USA Trade Online):  Phase 1 China Trade Deal 2020 YTD.

This deal sets goals for Chinese imports of American goods for four different categories of products:  manufactured products, energy products, agriculture products, and total products, using 2017 Chinese imports of these products as the baseline for increases.  Through May, we’re now five months into this deal.  That’s 20 opportunities to meet the monthly goal for each category of product.  So far, China has not met one single goal.  In fact, in May, for the first time, China exceeded the 2017 baseline for one category of product.  They imported $1.249 billion in energy products vs. the 2017 baseline of $0.758 billion, but still fell short of the goal for May of $1.943 billion.

Year-to-date, China is behind its commitments by the following amounts:

  • manufactured products – 25.7% below goal
  • energy products – 69.6% below goal
  • agriculture products – 60.6% below goal
  • total goods – 35.9% below goal

This is pathetic.  At this point, one can only conclude that, rather than trying to live up to the deal and boost its purchases of American goods, China is actually making a concerted effort to reduce its purchases.

In October of 2018, the monthly trade deficit with China hit a record of $43 billion.  In May of this year, that deficit was down to $27 billion.  But the “Phase 1 Trade Deal” gets no credit for that decrease.  In December of 2019 – the last month before the deal was signed, the deficit with China was $24.8 billion.  All of the drop in the trade deficit with China is thanks to the 25% tariffs that are in effect for half of all Chinese imports.  The “Phase 1 Trade Deal” has had absolutely no impact on further reducing that deficit.

A huge part of the “Make America Great Again” promise was to reduce the trade deficit and bring manufacturing jobs back home.  There has been virtually no progress.  In May, the deficit in manufactured goods fell just $1 billion shy of the record deficit of $75.8 billion set in December, 2018.  Trump has squandered his term with making fruitless deals.  The deficit with Mexico is worse than ever, hitting a record in March.  The progress made in reducing the deficit with China (through the implementation of tariffs) was offset by increases in other countries, most notably Vietnam and Mexico, and that progress ground to a halt with the signing of the “Phase 1 Trade Deal.”  There’s been absolutely zero progress in reducing the deficit with the EU.  To date, there hasn’t even been an attempt.

Trump needs to kill the “Phase 1” deal now and extend the tariffs across the board to all Chinese products to demonstrate that he’s still committed to the “MAGA” promise if he’s to have any hope of being re-elected.  Far too much time has been wasted, but it’s not too late.


China Fails to Meet “Phase 1 Trade Deal” Goals Again in April

June 5, 2020

As I predicted at the outset, the “Phase 1” trade deal with China, formalized by President Trump and Chinese dictator Xi in early January, is proving to be a total waste of time in the push toward achieving a balance of trade with China.  Once again in April, as it has done every month so far, China has not only failed to live up to its promises to increase imports of American goods, it hasn’t even met the baseline of matching its 2017 imports of U.S. goods.  Here’s the table I created to track their progress, updated through April (the most recent data available):  Phase 1 China Trade Deal 2020 YTD.  Their imports were up very slightly in April, but are still well short of even the 2017 baseline.

What are working well are the tariffs on Chinese imports which Trump was smart enough to leave in place until China demonstrated its sincerity in abiding by the “Phase 1” trade deal.  Imports from China remain approximately 40% below their 2018 level.  Through the first third of 2020, the trade deficit with China is on track to fall to its lowest level in ten years.  Had Trump not implemented the “Phase 1” deal and instead had enacted across-the-board tariffs on all Chinese imports, as he was on the verge of doing before signing the deal, we may very well have been on track to wipe out the deficit with China altogether.

Trade deals don’t work.  Tariffs do.  We have no control over exports because we have no control over what other countries are willing to buy from us.  But tariffs give us total control over imports – what we buy from them.  Trade policy should be the simplest policy that any president deals with, yet every one of them makes it as complicated as possible.  We make the same mistakes over and over and American workers pay the price.  It makes me sick.


Emerging Lessons from The Covid-19 Pandemic

March 31, 2020

As the Covid-19 pandemic has played out, lessons have begun to emerge about our society which, in blissful ignorance over the past seven decades, we have evolved in the interests of growth and efficiency in ways that are now proving to be dangerous – dangerous to our health, our economy and even civilization as we know it.

Globalism and Global Supply Chains:

Nothing became more readily apparent as the virus took hold than our inability to produce even the most basic medical supplies – masks, face shields, gowns, medicines and ventilators.  Why couldn’t we just crank up the capacity at our factories?  Because we don’t have any.  Like everything else, we’ve made ourselves totally dependent on foreign sources for these items.  Why couldn’t those foreign sources crank up their factories and just send us what we needed?  Because they were in the same boat and needed them themselves.  The whole world quickly found itself in the same boat.  “Globalism” has provided the perfect mechanism for spreading local outbreaks across the world almost overnight and has rendered us nearly incapable of fighting them.

At the beginning of the outbreak in the U.S., we were critically short of N95 masks, a shortage that, while being addressed, threatens to persist.  So just make more, right?  Some companies are tooling up to do just that.  But that’s the problem.  It takes time to “tool up.”  We haven’t been making any such masks in the U.S., so there’s no factory where we can just add more shifts or crank up the output.  The manufacturing has to be tooled up from scratch.

How hard can it be to make simple masks?  Start with the fabric.  No fabric of any kind is made in the U.S. any more.  It has to be engineered to screen out a minimum particle size.  Now it has to be thermoformed into the shape of a mask.  That takes special molding tooling.  To make that tooling requires sophisticated machining equipment.  We have that equipment, but almost all of it is foreign-sourced.  So what happens when that equipment breaks down?  Multiply that level of complexity a thousand-fold in order to produce ventilators which also aren’t made in this country (at least they weren’t until Ford, GE and GM began building factories recently to do it).

The same goes for test kits and pharmaceuticals, all of which until now have been foreign-sourced.

President Trump recently vented his frustration with this situation in one of his daily White House briefings.  He vowed that while we can engage in trade with everyone, we can never again let ourselves be dependent on anyone.  Others have made the same observation.  Complex global supply chains that depend on pulling together materials from all over the world in order to keep society functioning is a recipe for a disaster.

It’s interesting how quickly those who, in the past have mocked others as “protectionists” and “isolationists,” have resorted to exactly those measures to stem the spread of this pandemic.  Now, isolating ourselves is our only hope for saving hundreds of thousands of people and, while doing so, we’re put at risk by the globalism that they championed.

No Spare Capacity:

Global competition has fueled a relentless drive for efficiency, just-in-time delivery supply chains and cutting costs to the bone.  That means squeezing every ounce from every capacity available, whether it’s labor capacity, factory capacity, and even the capacity of our health care system.  Everything has been functioning with virtually no capacity to spare.  Even in the best of times, the intensive care units and emergency rooms at our hospitals function at near-capacity.  Most of you have visited hospitals before all this started.  How many empty beds did you see as you walked down the halls?  How many times did you pass a patient on a gurney in the hallway?

How many times have you gone to a store – any kind of store – and found that you were fortunate enough to get one of the few remaining items you’re looking for that are left on the shelf?  Maybe there are none, and you’re told that more are arriving tomorrow.  It’s because inventory management systems have cut to the bone the amount of inventory in the warehouse.  We’ve even learned that the stockpiles of critical items maintained by FEMA and the CDC, while sufficient for smaller local or regional disasters, are woefully short of what would be needed for any kind of major disaster.  (And isn’t it interesting how our definition of “major disaster” has just changed?)

That’s all great for minimizing costs, but now we can see just how risky that can be.  People are paying for that kind of efficiency with their lives.  There is a role for government to play in assuring that a certain minimum amount of spare capacity exists throughout our supply chains – supply chains that are not dependent on other nations – that can be readily tapped in the event of national disasters like pandemics, wars, etc.

The Risks of Dense Populations:

Consider where this virus originated and where it’s hit the hardest.  It originated in a country with one fifth of the world’s population, a country so densely populated that it’s people, at least in some quarters, rely on live animal markets as a source of food.  China is four times as densely populated as the U.S.  Pause and think about that.  Imagine if the U.S. had four times as many people.  Imagine New York city with four times as many people.  Or Chicago.  Or any other city you can think of.  Imagine our rural areas with four times as many people.  They’d no longer be so rural.

Where has the virus hit hardest?  Italy is almost twice as densely populated as China.  So too is Germany and the U.K.  Most of Europe is as densely populated as China.  Major cities in the U.S. and around the world are hundreds of times more densely populated.

Even in the best of times, living in a densely populated area is a little risky.  With a sky-high cost of living (especially housing), and with many (perhaps most?) people living paycheck-to-paycheck, you’re at constant risk of finding yourself homeless.  The supply of basic necessities relies on complicated supply chains that are vulnerable to disruptions.  In the worst of times – and what we’re enduring right now, while bad, is probably not even close to being “worst” – living in such densely populated conditions is downright dangerous.  Diseases can spread like wildfire.  Natural disasters or wars could cut off supply lines.

What’s the solution?  Live in a less densely-populated society.  How is that possible?  Modern civilization requires both urban and rural areas.  Cities are needed to pull together labor forces to manufacture goods and provide certain services, while rural areas are needed for farming, forestry, recreation, etc.

The way to achieve this is with fewer, smaller cities and more rural, wide-open space.  Consider countries like Canada and Australia – each with the same size as the U.S. but with one tenth or less population density.  Though each is dealing with coronavirus outbreaks, they’re no where near the scale of what the U.S. is facing.  Why?  Because they were already more isolated to start with.

On the other hand, think about India – a place so densely populated that it’s almost impossible for them to practice any kind of social distancing.  Will they pay the price, or will the fact that India is a hot climate where the coronavirus, like the flu, can’t survive to any great extent spare them?  No one knows.  Only time will tell.

Then there’s cruise ships.  Before any of this happened, we were already hearing constant stories of norovirus outbreaks that sickened passengers, cut cruises short and necessitated thorough cleaning of the ships.  Now we’ve seen that, given a deadlier virus, those ships are death traps.  And each is just a small-scale example of what can happen in a densely-packed society.

Secure Borders:

Together with the advocates of free trade and globalism, the open border advocates have also gone silent.  Our failure to quickly shut down international travel exacerbated the spread of the virus in the U.S.  How much worse could it have been had we not been able to shut down the borders at all?  How much worse could it have gotten had we not already taken steps to secure our southern border?  Now we can see the value in maintaining secure borders, and the need to further tighten down on illegal immigration.

Beyond these, there are many, many other lessons to be learned about preparedness for major disasters.  One lesson that will only become clear as our economy begins to recover is that we’re going to pay for decades for the folly of allowing our economy to be siphoned away to drive growth in the rest of the world.  Our dependence on deficit spending to offset the drain of the trade deficit had already become dangerous as our national debt swelled to an unsustainable level.  We were already bailing as fast as we could to keep our leaky boat afloat.  Now, the $2 trillion stimulus package, together with the $4 trillion in additional debt that the Federal Reserve is issuing, will blow the transom off the boat.  It will prove impossible to keep the economy afloat while maintaining a trade deficit.  It’s critical that we get serious about restoring a balance of trade, both to reinvigorate our manufacturing base and to stop the hemorrhaging of our national debt.

Economists have long boasted that “mankind is clever enough to overcome all obstacles to further growth.”  At the same time, survivalists have built bomb shelters, amassed stockpiles of food, ammunition, batteries and other gear, and have practiced survival skills.  Suddenly, the latter group looks a little less wacky and the economists seem a bit humbled.  Mankind is not clever enough to overcome all obstacles to growth because, in a finite world, it’s impossible for so many reasons that they can’t even be listed.  Try as we might to keep growing the population, nature will find a way to restore balance in ways that we can’t even imagine, and likely with consequences too horrible to contemplate.

We’d better learn these lessons, because next time it could be much worse.  Though this virus is very contagious and much deadlier than the flu, it’s not as deadly as it could be.  In 1918, the Spanish flu killed approximately 50 million people at a time when the world’s population was just 3 billion.  In 2003, the SARS virus killed 10% of the people it infected.  Luckily, SARS was only contagious when it when symptoms became obvious, making it easy to identify and isolate those infected, which limited the number of cases to just over 8,000 world wide.  Then there’s ebola, a virus that kills half of everyone it infects.  Imagine if a virus emerged that was that lethal and was just as contagious as the novel coronavirus.  It could wipe out three billion people or more and threaten the very survival of mankind.  It might be a hundred years from now.  It might be tomorrow.  But fail to learn these lessons from this virus, and that’s what’s going to happen.

 

 

 


“Phase 1” China trade deal off to a really bad start

March 7, 2020

You’d think that if China liked the “Phase 1” trade deal that it signed with the Trump administration in early January, and the hope for tariff relief that it offered in the future, that China would have gone out of its way to demonstrate a good faith effort in its first month.  It did just the opposite.  To say that it didn’t meet its quotas for imports from the U.S. would be an understatement.  I suspected that China never had any intention of complying with this agreement.  They already got what they wanted – a reprieve from any further tariffs and a return to the status quo trade relationship with the U.S. – one in which it protects its massive trade surplus.  So I promised to track China’s progress in complying (or not) with the agreement.  The trade data for the month of January was released yesterday by the Commerce Department.  So here we go.

First of all, a little background is in order.  What did China agree to in this “Phase 1” deal?  They agreed to meet four major milestones in terms of importing U.S. goods and services in the years 2020 and 2021, with the objective of reducing China’s trade surplus with the U.S.  The goals use 2017 as a baseline.  Here are they are:  Phase 1 China Trade Deal Goals.

These goals weren’t broken down into monthly goals, but it was made clear to the Chinese that the U.S. would be tracking progress toward meeting these goals and would quickly call out China if they fail to demonstrate progress.  It would be reasonable to expect that China would gradually ramp up its imports of U.S. products such that by the end of 2020 they would have met the goals for the year as a whole.  Therefore, I’ve broken down the annual goals into monthly goals that ramp up in a linear fashion to meet the annual goals.  For example, in order the meet the goal for their purchases of U.S. manufactured goods – $121.1 billion for 2020, starting from a baseline of $88.2 billion in 2017, which is $7.35 billion per month – China needed to import $7.772 billion in January, $8.194 billion in February, $8.616 billion in March, and so on, in order to reach $121.1 billion by the end of the year.

The results are in for January.  China failed to meet the goal for each category of products, and not by a little.  Here’s the results (in billions of dollars):

Category                     January Goal            January Actual

Manf’d Goods                 $7.772                          $5.597

Energy Products              $0.995                           $0.276

Agriculture Products       $2.16                             $0.944

Total Goods                     $10.921                         $7.215

Monthly data for services exports to China isn’t available.

In each case, China’s imports of American products not only didn’t meet the goals, but declined from the 2017 baseline levels.  One month’s worth of data isn’t enough to pass judgment yet on whether or not China is failing to live up to the “Phase 1” deal, since monthly figures vary up and down.  Like I said at the beginning, however, you’d think that China would want to get off on the right foot.  If I were Trump, I’d review the data through March (which isn’t released until May) and then warn China if their imports are lagging.  Three months later, I’d scrap the “Phase 1” deal and reinstate all tariffs that had been planned prior to its signing.  Hopefully, at that point, Trump will have learned a lesson about making any further trade deals with China.  There is simply no way that China will voluntarily reduce its trade surplus with the U.S.  Tariffs are the only way to make that happen.


No More Trade Deals, No More WTO

February 29, 2020

https://www.reuters.com/article/us-usa-trade/ustr-vows-to-push-for-trade-deals-with-britain-eu-seeks-reforms-at-wto-idUSKCN20M3BN

As reported in the above-linked article, the Trump administration continues to pursue more trade deals, with Britain, the European Union and now Kenya.  With his background in wheeling and dealing on real estate, Trump sees deal-making as the way to dig the U.S. out of the deep trade deficit pit it has fallen into.  Yes, I know, “digging” isn’t the way to escape from a hole.  It only makes the hole deeper.  That’s kind of the point I’m trying to make.  Trade deals are what got us into our trade mess in the first place, including the worst deal of all – the deal with the rest of the world to set up the World Trade Organization to oversee the whole process.

The whole point of a trade deal is to coerce another country into concessions (things they don’t like), using concessions of our own (things we don’t like) as the motivation.  Then what happens?  Being the global “nice guys,” we live up to our promises – the concessions we made – while the other side doesn’t.  We cajole them about their failures to live up to their side of the bargain.  They promise to re-double their efforts.  Months go by.  Still nothing happens.  Months turn into years.  The trade deal that was initially hailed as a “big win for American workers” instead yields a massive, persistent trade deficit and the dismantling of the manufacturing sector of our economy.

Why do we need trade deals?  Just tell us what you have for sale.  We’ll then decide if we want to buy it and how much we’ll buy.  We’ll reciprocate.  Here’s what we have for sale and here’s the price.  Buy it if you want.  But if you don’t buy from us as much as we buy from you, we’ll use tariffs to assure that a balance is maintained.

You want to sell us avocados?  Or coffee?  Fine.  We won’t put any tariff on them because we’re not able to grow them ourselves.  But you want to sell us a car?  We already have companies making and selling cars – more than we know what to do with.  So we’ll put a high tariff on your cars, unless you’re able to buy just as many from us.  That kind of seems pointless though, doesn’t it?

And we certainly don’t need a “World Trade Organization” setting rules to advance their own agenda.  The Trump administration is pushing the WTO to reform and end its practice of protecting developing countries like China at the expense of the U.S., and stubbornly insisting on “free” trade with other developed countries like those of the EU – countries whose gross overpopulation assures a trade deficit for the U.S. – even after decades of proof that a massive, destabilizing trade imbalance is inevitable.  Why bother?  We don’t need the WTO.  What can they do if they don’t like our tariffs?  They can authorize other countries to raise tariffs of their own, which is what they may or may not do anyway, regardless of whether or not the WTO even exists.  So the WTO really serves no purpose whatsoever, other than to suck funding from the American economy to support its endless meetings – meetings whose only purpose is to invent new ways to divide up the American market for the benefit of other countries.

Case in point:  Trump was having great success in cutting our trade deficit with China through the use of tariffs until he signed the “Phase 1” trade deal with them last month – a deal that had essentially been in place for months already, just awaiting the formality of the signing.  As a result, all of the momentum toward restoring a balance of trade with China has been lost.  The trade deficit status quo with China has been restored, albeit at a slightly lower level, and for what?  Chinese promises  – the same promises they’ve reneged on for years.  We’ve once again ceded control of the trade situation to China.

Another example:  the “USMCA” agreement with Mexico and Canada – supposedly an improvement over the NAFTA deal that devastated American manufacturing almost as badly as our trade situation with China.  What’s been the result?  Since Trump was elected, our trade deficit with Mexico continues to spiral out of control, and it’ll be years before anyone can say definitively that the USMCA agreement didn’t work.  (Anything less than a balance of trade with Mexico is a failure.)  The USMCA agreement eliminated the threat of tariffs on Mexico and put Mexico back in the driver’s seat of the trade relationship.

Throughout all of this deal-making for the past three years, the trade deficit declined slightly in 2019, and that decline was thanks to tariffs and not any deals.  The trade deficit remains enormous, leaving the manufacturing sector on life support and leaving us more vulnerable to recession and supply disruptions, something that’s becoming painfully obvious as the coronavirus problem worsens and we discover that we’re dependent on China for our supply of protective clothing and for pharmaceuticals to combat it.

President Trump, please, no more trade deals.  Kiss the WTO goodbye and put the U.S. Trade Representative’s office to work setting an managing tariffs.

 


Led by China, Trade Deficit Falls in 2019

February 10, 2020

Click to access trad1219.pdf

As reported by the Commerce Department on Thursday, America’s trade deficit in goods and services fell in 2019 for the first time in six years.  Trade in goods fell for the first time since 2016.  The decline was due entirely to the reduction of imports from China as a result of the tariffs put in place by the Trump administration.

The trade deficit in goods in 2019 fell to $853 billion from $875 billion in 2018. The decrease was led by a huge decrease in the deficit with China, which fell to $345.6 billion from $419.5 billion in 2018.  The trade deficit with China was the lowest since 2015.  Even more encouraging, the trade deficit in goods with China fell for the 5th consecutive month in December to $24.8 billion.  Imports from China fell by $87 billion in 2019.

Last month, the Trump administration signed the “Phase 1” trade deal with China, which rolled back some tariffs on Chinese imports in exchange for Chinese promises to boost imports of American goods.  The deal had been in the works for months.  If the Chinese wanted to demonstrate enthusiasm for this deal, they certainly didn’t show it in December.  The Chinese promised to increase their purchases of American goods in four different categories, using their 2017 imports as a baseline.  In 2020 they are to increase their purchase of American manufactured goods from $88.2 billion in 2017 to $121.1 billion this year.  They ended 2019 with purchases of $88.4 billion.

They promised to increase their purchases of American energy exports to $27.6 billion this year from $9.1 billion in 2017.  They ended 2019 with purchases of only $3.6 billion.

They promised to increase their purchases of American agricultural products to $36.5 billion this year from $24.0 billion in 2017.  They ended 2019 with purchases of only $10.2 billion.

And they promised to increase their purchases of American services.  That data hasn’t been released yet.

China needs to ramp up its purchases of American goods dramatically, beginning with the month just ended.  Did they?  We won’t know until next month when the January trade data is released.  Personally, I doubt that we’ll see much increase from China, if any.  They’ve already signaled that they think the coronavirus outbreak should give them a pass.  Trump will be a fool if he lets China get away with reneging on this deal.

Next month I’ll begin reporting on China’s monthly progress in meeting the terms of this deal.  I’ll also be keeping a close eye on the balance of trade with Mexico, now that the USMCA agreement has been signed into law.  I’m extremely skeptical of both of these agreements.  The only way to achieve a balance of trade with such densely populated nations is through the use of tariffs.  Such nations would never willingly agree to any deal that endangers their surplus of trade with the U.S.  But they’ll agree to any deal that forestalls the implementation of tariffs because it simply buys them more time for business as usual.

Time will tell, beginning next month.

 


China Already Weaseling Out of Trade Commitments

February 5, 2020

https://www.reuters.com/article/us-china-health-usa-supply/white-house-adviser-says-china-virus-to-delay-u-s-export-surge-from-trade-deal-idUSKBN1ZY1SD

As reported in the above-linked article, China has already begun to weasel out of the commitments it made in the “Phase 1” trade deal, signed only two weeks ago.  They’re blaming the coronavirus outbreak and citing a clause in the deal that provides for relief in the event of a “natural disaster or other unforeseeable event.”  And it seems that the Trump administration is buying it.

Give me a break.  At the time of this writing, approximately 500 people in China have died as a result of this new virus.  Compare that to the approximately 50,000 people who have died this season from the flu in China.  Ten million people die every year in China from one cause or another.  Remember that this is a country of 1.4 billion people, and we’re to believe that 500 deaths have rendered them unable to meet their trade commitments?  Do people in China eat less or otherwise consume less because of this outbreak?

Only two weeks into the trade deal, and China is already proving that it never had any intention of complying.  Rather, it was just a ploy to buy some time and tariff relief, in just exactly the same way that every other trade commitment it has ever made was merely a ploy to make the U.S. shut up and go away.  It seems to be working again.


Is the “Phase 1” trade deal with China a bad deal?

January 20, 2020

https://www.reuters.com/article/us-usa-trade-china-details-factbox/whats-in-the-u-s-china-phase-1-trade-deal-idUSKBN1ZE2IF

The above-linked Reuters article provides a breakdown in basic terms of what’s included in the “Phase 1” trade deal with China.  To make it easier to understand – and in preparation for tracking progress – I’ve created this spreadsheet, which shows what China has agreed to in terms of boosting its imports from the U.S.  Phase 1 China Trade Deal.

In addition, China agreed to:

… stronger Chinese legal protections for patents, trademarks, copyrights, including improved criminal and civil procedures to combat online infringement, pirated and counterfeit goods.

…  follow through on previous pledges to eliminate any pressure for foreign companies to transfer technology to Chinese firms

… refrain from directly supporting outbound investment aimed at acquiring foreign technology

… refrain from competitive currency devaluations

China’s retaliatory Dec. 15 tariffs, including a 25% tariff on U.S.-made autos, have been suspended.

So what did the U.S. give up in return?

… will cut by half the tariff rate it imposed on Sept 1. on a $120 billion list of Chinese goods, to 7.5%.

Tariffs that were scheduled to go into effect on Dec. 15 on nearly $160 billion worth of Chinese goods, including cellphones, laptop computers, toys and clothing, are suspended indefinitely.

That’s the deal in a nutshell.  On the surface, it sounds like a good deal, boosting exports by $200 billion per year.  But don’t be fooled.  This deal rolls back some existing tariffs and suspends new tariffs – tariffs that were making rapid progress toward restoring a balance of trade with China – in exchange for nothing more than promises, and China has a long history of breaking its trade promises.  China got exactly what it wanted – time – more time to continue business as usual.

With this deal, the U.S. is once again trying to export its way out of its massive trade deficit.  It’s similar to the vow that Obama made in January of 2010 to double export within five years.  It didn’t happen.  Not even close.  It’s impossible to export your way out of a trade deficit with nations whose gross over-crowding makes them utterly dependent on manufacturing for export to sustain their bloated labor forces.  And that’s China, among others.

Aside from their promise to boost imports, that promise about protecting intellectual property has been made many times before.  It’s untrackable and meaningless.  And currency manipulation?  The data proves that trade deficits have nothing to do with currency valuation.

The only hope is that the Trump administration will be more diligent than previous administrations in holding China’s feet to the fire, returning to the use of tariffs when China fails to meet its commitments.  China’s betting they won’t, and that future administrations will roll over like previous administrations.

I’ll begin tracking China’s progress on meeting its import commitments (or lack thereof) beginning with the January trade data, which isn’t released until March.


November Trade Report Best in Two Years

January 11, 2020

Click to access trad1119.pdf

… or three years, depending on how you look at it.  In terms of the overall trade deficit, it was the lowest since October of 2016.  More importantly, the deficit in manufactured goods, at $63.2 billion, was the lowest since September of 2017 – good news, but that’s still a horrible deficit.  (A link to November’s report is attached above.)  Check out this chart of the balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.

The drop in the deficit is due entirely to a decline in imports.  (Exports remain flat.)  Most notably, the deficit with China shrank to $26.4 billion, the lowest reading since March, and down from $37.9 billion during the same month in 2018 – a 30% drop.  This is solid evidence that the tariffs on China are having the desired effect.

In related news, this Reuters article reports that tariffs – primarily the tariffs on China – have cost U.S. companies $46 billion.  That’s actually good news.  It means that they’re “eating” the cost of the tariffs and not passing it on to consumers.  It also means that U.S. companies are evaluating what to do about it.  Should they keep their manufacturing in China in the hopes of waiting out the “trade war” for the tariffs to come down?  Or do they begin implementing plans to shift manufacturing to other locations?  If they choose the latter, do they move operations to some other country and risk facing tariffs there too?  Or do they bite the bullet and move operations back to the U.S.?  If the U.S. is serious about cutting its trade deficit, it has to remain committed to tariffs and implementing them on a much broader scale.  If they do, moving manufacturing back to the U.S.  is the only logical choice for U.S. companies.  Adapt or just keep “eating” those billions of dollars.


Another Phony Story about “Trade War” Woes for Farmers

January 8, 2020

https://www.reuters.com/article/us-usa-trade-china-agriculture-insight/u-s-farmers-see-another-bleak-year-despite-phase-1-trade-deal-idUSKBN1Z20CK

This above-linked article about suffering on American farms caused by Trump’s “trade war” with China was posted on Reuters last week.  I’ve been sitting on it, waiting for the latest trade data (which was posted yesterday by the Commerce Department) to refute the claims in the article.  This seems to have become a favorite tactic of the globalist media – trying to get Americans – especially farmers, a key component of Trump’s base of support – up in arms over the tariffs he imposed on China.  The article leads you to believe that American farmers had a horrible year, thanks to China retaliating against the tariffs by stopping their purchases of American agriculture products – most notably soy beans.  Here’s some samplings from the article:

… U.S. farmers are stuck with fields full of weather-damaged corn – a crop they planted after the U.S.-China trade war killed their soybean market.

As the U.S. farm economy reels from the worst harvest in decades after nearly two years of the trade war, U.S. grain growers are struggling to decide what crops might keep them in business.

China has … deepened ties with rival exporters such as Brazil and Argentina. Brazilian soy cultivation is expanding after record exports to China in the past year and China is investing in South American ports.

The article makes no mention of the fact that European nations have now turned toward the U.S. for their supplies, having been displaced from the South American market.

Many U.S. farmers have tried shifting crops to dodge the economic fallout from losing such a crucial export market. They planted 76.5 million acres of soybeans in 2019, 14.3% fewer than the previous year, according to the latest U.S. Department of Agriculture data. U.S. plantings of sorghum – used in livestock feed and the fiery Chinese liquor baijiu – dipped about 7.5% in 2019, to 5.3 million acres. Plantings of cotton have dropped, too, as China pulled back on purchases.

Come on, Reuters, isn’t the real reason that fewer acres were planted this year the fact that vast swathes of farmland were still under water in the early summer as a result of spring flooding?  I guess they want you to forget that factor.

“The agricultural system is completely broken” because of the trade war, severe weather and mounting farm debt, Hora (an Iowa farmer) said. “We have to farm smarter.”

The fact is that, in terms of exports, American farmers actually had a pretty good year.  According to the trade report released yesterday (see page 20), exports of “food, feeds and beverages” were actually up slightly year-to-date through November, rising to $123.998 billion in 2019 from $123.247 billion in 2018.  Soybean exports are up dramatically to $21.687 billion from $17.583 billion in 2018.  Other categories are up or down sightly with the exception of corn, which is down by $4.638 billion compared to last year.  (The Reuters article did note that severe weather had damaged a lot of the corn crop.)

Don’t get me wrong.  It’s a struggle to survive for farmers, even in the best of times, especially for small family farms that are being driven out of business primarily by big corporate farms.  But in spite of poor weather conditions, American farmers have actually had a pretty good year in terms of exports.  Yes, exports to China are down, but those have been offset by exports to other countries that had been sourcing from South America.  The people of the world still need to eat, and so do livestock, regardless of what’s happening with trade policy.

Pay no attention to these fake stories about the “trade war” hurting farmers.  The globalists are desperate to put a bad spin on tariff policy, especially as their other dire warnings about economic doom have been proven false.  The November trade report has even more good news about the impact of the tariffs.  I’ll post about that next.