MCViewPoint

Opinion from a Libertarian ViewPoint

Posts Tagged ‘trade surplus’

Patrick Buchanan: Tariffs — The Taxes That Made America Great

Posted by M. C. on May 15, 2019

Free trade. Free is good, right?

Buchanan seems to advocate permanent tariffs. The Donald appears to view tariffs as a non-permanent corrective measure, I think.

Tariffs encourage high domestic producer prices and lessen efficiency incentives.

A few win and we pay the price. Literally.

Is what was true 100 years ago true today? I am afraid we will find out the hard way. Time will tell.

https://www.cnsnews.com/commentary/patrick-j-buchanan/tariffs-taxes-made-america-great

By Patrick J. Buchanan

As his limo carried him to work at the White House Monday, Larry Kudlow could not have been pleased with the headline in The Washington Post: “Kudlow Contradicts Trump on Tariffs.”

The story began: “National Economic Council Director Lawrence Kudlow acknowledged Sunday that American consumers end up paying for the administration’s tariffs on Chinese imports, contradicting President Trump’s repeated inaccurate claim that the Chinese foot the bill.”

A free trade evangelical, Kudlow had conceded on Fox News that consumers pay the tariffs on products made abroad that they purchase here in the U.S. Yet that is by no means the whole story.

A tariff may be described as a sales or consumption tax the consumer pays, but tariffs are also a discretionary and an optional tax.

If you choose not to purchase Chinese goods and instead buy comparable goods made in other nations or the USA, then you do not pay the tariff.

China loses the sale. This is why Beijing, which runs $350 billion to $400 billion in annual trade surpluses at our expense is howling loudest. Should Donald Trump impose that 25% tariff on all $500 billion in Chinese exports to the USA, it would cripple China’s economy. Factories seeking assured access to the U.S. market would flee in panic from the Middle Kingdom.

Tariffs were the taxes that made America great…

What great nation did free traders ever build?

Free trade is the policy of fading and failing powers, past their prime. In the half-century following passage of the Corn Laws, the British showed the folly of free trade.

They began the second half of the 19th century with an economy twice that of the USA and ended it with an economy half of ours, and equaled by a Germany, which had, under Bismarck, adopted what was known as the American System.

Of the nations that have risen to economic preeminence in recent centuries — the British before 1850, the United States between 1789 and 1914, post-war Japan, China in recent decades — how many did so through free trade? None. All practiced economic nationalism…

Be seeing you

capitaism

 

 

 

 

 

 

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Trump’s Trade War is Already Over — Strategic Culture

Posted by M. C. on May 14, 2019

After that the real energy war starts as Russia completes Power of Siberia and begins pumping natural gas to China. And China directs its state oil companies to buy more oil from Iran while lowering its purchases from Saudi Arabia unless the Saudis accept Yuan for it.

That’s where the real leverage in this whole fiasco lies.

https://www.strategic-culture.org/news/2019/05/12/trumps-trade-war-is-already-over/

Tom Luongo

May 12, 2019

I hate to break the news to China bashers, but the trade war with the US is over. I’ve maintained for months that Trump has no leverage in trade talks with China. If he did China would have done a deal by now.

They haven’t and they likely won’t unless you are talking some form of deal which allows Trump to save face here. But to be honest I’m beginning to doubt whether anyone in the White House cares. This is about the Great Powers Game and the simpleton idea that for one country to win in trade another has to lose.

This is, of course, nonsense.

Trade is not a zero-sum game. Ideally, all voluntary trade is a win-win scenario for both the buyer and the seller. If it wasn’t the trade would not be made. Lost in the numbers is the comparative perceived value of the exchange.

China is still running a massive trade surplus and that is true. But from the perspective of US trade, that is as much a function of Trump’s own profligate spending habits as any structural inequalities.

Trump is running a $1 trillion budget deficit. This is money that is conjured up out of thin air by the miracle of selling bonds. $1 trillion in bonds. Where do you think those $1 trillion in government expenditures goes to?

The moon? Laos?

No. It goes to China. It also finds its way into the US equity market Trump is so in love with and other places that produce goods that we Americans buy with that money. If Trump wants to win the trade war with China he should consider spending a little less money allow consumer prices here in the States to fall and let his tax cuts continue to attract capital for the right reasons – the value the American work force is capable of generating…

 

Over at my blog recently I noted:

China’s not going to implode over these tariffs. It will give Xi and his central bank the opportunity to devalue the yuan in response to the slower flow of dollars. It has to protect the lion’s share of its trade with Southeast Asia and Europe whose currencies are already in trouble.

And it will bail out the most strategically-sensitive banks and businesses over-exposed to them. It’s what they did last year in response to the 10% tariff and it is what will happen this time.

Lastly, however, is the part no one actually wants to discuss which is that China has to protect its trade with Southeast Asia and Europe. The Yuan didn’t devalue in a vacuum. The euro is down 13% from its high as are currencies like the Indonesian Rupiah, the Malaysian Ringgit and Thai Baht.

What Trump and his team are arguing for in trade negotiation is no different than what they’ve offered Iran and Lebanon, surrender your sovereignty or face punishment.

So, China reciprocates and cuts off US soybeans and other food exports. Now, a year later, Midwest banks are facing surging bankruptcies from farmers hit with the double whammy of no exports to China (who now buys them from Brazil) and massive flooding from an abnormally vicious winter and spring.

They have Trump to thank for this. He didn’t help them by not thinking through how we could be hurt by China’s reaction to his belligerence…

Let’s shift gears now and talk about what’s really going on.

Trump’s team would be fine with a trade deficit if China was still recycling that trade surplus into US Treasury bonds. They aren’t. The Chinese have held their stock of US debt between $1.1 and $1.25 trillion for two years now.

They are sending a lot of those dollars back out into the world to fund their massive Belt and Road Initiative (BRI). They are also using them to power swap arrangements with countries feeling the bite of Trump’s sanctions. Countries like Turkey, Pakistan and Iran, for examples.

To the paranoid schizophrenics who run his White House can only see China rising as a threat not a complement to the US.

Again, these are people with a zero-sum view on trade.

They, like Trump, only see things in terms of power. And if China is running a surplus they are gaining it and we are losing it.

The push to sanction the world and stop the unapproved use of the dollar is beginning to have catastrophic effects on the world economy. People like John Bolton and Secretary of State Mike Pompeo don’t care about those things. In fact, the more our ‘enemies,’ as they see them, suffer, the better it is for us. Such is their reductionist view of the world.

In no way do I believe China is somehow blameless or anything. They have taken egregious advantage of the US’s terrible policies for decades. But they are also shifting away from their mercantilist policies as Xi shifts the economy away from exports and towards a domestic consumption model…

After that the real energy war starts as Russia completes Power of Siberia and begins pumping natural gas to China. And China directs its state oil companies to buy more oil from Iran while lowering its purchases from Saudi Arabia unless the Saudis accept Yuan for it.

That’s where the real leverage in this whole fiasco lies…

 

 

 

 

 

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