China Slaps Tariffs on U.S. Products
nytimes.com
nytimes.com
As a Latin American I laughed hard at this. For the last 60 years many 3rd world countries have been vassal states of the US and European Union, supplicating them to stop farming protectionism that keeps our economies so restricted. You know, "imperialism" is a word with deep meaning and a long history in 3rd world countries.
Probably I will regret later what I say now, but until then: welcome China, thanks for giving the "gringos" a taste of their own medicine.
Imagine the US being nuked as "a taste of their own medicine" for previously being the only country to use nukes... how would that work out for developing countries? I would guess not well. Not well at all. Just like a nuclear war impacts more than just the countries fighting, a trade war between two superpowers is going to hurt the developing world far more than it will hurt the US or China.
1.China build roads, buildings not only for living but also whole industrial parks that create jobs in Africa which local population can also benefit later on while the US seldom do the same thing at least with compatible scale. I'm not saying China is unselfishly helping Africans but it's more kind of long term selfish behavior that cultivate local stability and prosperity.
2.China don't set up values promotion preconditions for financial aids to Africa countries while US/Western countries often have a "universal values" promotion agenda combined with financial aids, maybe with good intention.
Western MSM almost always omit these 2 differences when making comparisons trying to sell their own belief that the relations are similar.
Untrue. China has been making massive investments there to secure natural resources in the past few years.
It does nothing but mirror the radical mindset you choose to focus on within America. One might suggest if you were serious about positive change, or even just having a discussion in this thread, you would provide some insight and knowledge toward solutions.
As a Latin American, it's disheartening to read.
As a Latin American you surely noticed how large the China tentacles are. Latin America is full of ongoing Chinese projects where a little local complain trigger a call from the Chinese president.
In Latin America a lot of problems can be explained by internal forces (e.g. corruption). As the Martin Fierro[1] says "Los hermanos sean unidos porque ésa es la ley primera. Tengan unión verdadera en cualquier tiempo que sea, porque si entre ellos se pelean, los devoran los de afuera" [2]
[1] https://en.m.wikipedia.org/wiki/Mart%C3%ADn_Fierro
[2] "Let brothers be united, because that’s the first law. Have a true union in any time that goes, because if they fight each other, they get devoured from outside."
Really you have to hand it to China. They figured out how to play the game to win. And now it's their western counterparties that are suffering economic and political chaos.
Twenty years ago, as a young student, I took a class in China on doing business there. On the plane over, I got talking to an American who had been doing business there for a good 10+ years. His advice was as true today as it was then: we are allowed to do business there so long as it benefits the Chinese, especially in terms of the transfer of intellectual property and industrial knowledge. A few years after that meeting, my father-in-law’s company went into a co-venture, and like hundreds ( or more ?) of other American firms, eventually saw their venture taken over by the Chinese partner. How many US firms, from bicycles to electronics, have seen perfect clones of their products flood the market as their products were produced by day, and by night, the same assembly line produced knock-offs under a Chinese brand?
But it doesn’t matter. So long as there are a billion potential consumers, American companies will be consumed with their greed, and believe that they can succeed. As The Economist recently wrote, we have completely misunderstood and underestimated China. They have no interest in US companies being successful there.
Tariffs are not the answer; they make us look like a fading empire stuck in the past. Learning to compete and not just rest on our laurels of being the victors of World War Two is the only way for the US to move forward in the world.
"Hasn't responded"? It was America's idea in the first place!
It started 24 years ago with the Clinton administration granting China "most favored nation" status.[0] A controversial move at the time, and one that broke a one of Clinton's campaign promises.
Lest anyone think I'm being partisan about this, it's worth noting that the previous administration (George H.W. Bush) had also been supportive of the idea of opening up trade with China, so it was not limited to any one political party. The idea of opening trade with China had been brewing for a long time, and accelerated once the end of the Cold War occurred. 1994 was when it finally came to pass, thus setting up the events we've seen play out between China and the US for the next two and a half decades. Who knows where it will go from here?
It's particularly sad to go back and read statements from past US presidents expressing optimism that there would be "long-term sustainable progress on human rights" in China as a result of expanding trade, especially given what's happening today with China's "social credit" system.[1]
[0] http://tech.mit.edu/V114/N27/china.27w.html
[1] https://www.reuters.com/article/us-china-credit/china-to-bar...
I think there is more information than in the article on most favoured nation status that might give useful context. The article discusses a relatively narrow set of tariffs on certain items produced in China, largely tied to human rights violations in China; MFN predates this by quite some time.
Most favoured nation (MFN) and its counterpart national treatment (NT) are cornerstones of the General Agreement on Tariffs and Trade (GATT)[0], which was a product of the World War 2 era treaties designed in large part to prevent the sort of interstate acrimony that could lead to World War 3.
The GATT mandates that signatories — including the USA — adhere to MFN and NT, which respectively oblige states to not apply tariffs to one country and not another, and to not favour domestic industry over foreign by way of subsidy or tariff or other market-distorting unfairness by the state. When a state violates MFN or NT, any harmed state has standing to apply a sort of reciprocal treatment, namely they have the colour of right to apply market distorting tariffs and subsidies of their own.
A recent example is the USA application of a tariff on imported steel from Europe, which entitles the European Union to apply a reciprocal tariffs on imports from the USA, such as bourbon.
The GATT evolved into the World Trade Organization (WTO), which routinely determines the merits and quantum of damages associated with often complex accusations of violations of MFN and NT.
The origin China-USA MFN and NT goes back in principle at least to the GATT, which in turn is based on the failures of the inter-war period that lead to WW2.
Which is all to say, it's not accurate to state that the Clinton administration granted MFN status to China (broadly speaking, anyway), and I'm not certain that in the broader context of the complex history of trade relations that any start of the trade disputes we see today can be so precisely pinpointed.
[0] https://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_a...
This is wholly inaccurate. China has had MFN status continuously since 1980.[0] Clinton renewed China's MFN waiver in 1994, as did every president each year until trade relations were permanently normalized under Bush in 2002 after China acceded to the WTO.[1]
"Most favored nation" itself is a bit of a misnomer — now known as "(permanent) normal trade relations," it's a status granted to every trading partner. Only two countries (Cuba & North Korea) are denied NTR, with an additional six (Belarus, Turkmenistan, Azerbaijan, Kazakhstan, Tajikistan, Uzbekistan) granted temporary NTR under periodically renewed waivers.[2] Those denials and waivers are based on the Jackson–Vanik amendment to the Trade Act of 1974, punishing countries for violating human rights under communism, not as a trade negotiation tactic.[3]
MFN/PNTR is a core tenet of the world trade agreements (and liberal international order generally) that the United States has been pushing for decades. The very first article of the 1947 General Agreement on Tariffs and Trade (GATT) established unconditional MFN treatment among members.[4] It remains the guiding principle of the modern WTO.
The denial of MFN/PNTR status to China was an anomaly, not the norm — a bet that allowing China into the global community would accomplish more for human rights and well-being than isolating China and preventing the economic rise that's propelled half a billion people out of extreme poverty in three decades.
[0] http://www.cnn.com/ALLPOLITICS/1998/06/03/china.trade/
[1] https://georgewbush-whitehouse.archives.gov/news/releases/20...
[2] http://www.au.af.mil/au/awc/awcgate/crs/96-463.pdf (n.b. Slightly outdated - Vietnam and Ukraine got PNTR in 2006 along with Russia and Moldova in 2012 in the sanctions law known as the Magnitsky Act.)
[3] https://en.wikipedia.org/wiki/Jackson–Vanik_amendment
[4] https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm#a...
Consider the last Pearl Harbor (2001) at the time it was the sixth-best debut of all time in Japan. That was very much intentional and had a big impact on the film.
At least in RoboCop 3, the antagonists was Japanese.
Its all a dirty game.
it's also not trade.
> it's also not trade.
That's not true in the slightest [0]. Trade can be imagined as transactions on a two sided ledger. Investment can be seen as a trade of capital for a claim on future returns from the investment.
[0] https://www.mercatus.org/publications/american-balance-of-tr...
So, you can use it as a personal definition, but it's not the current definition used in economics.
Did you read the source provided? It addresses that very issue.
> So, you can use it as a personal definition, but it's not the current definition used in economics.
Can you substantiate that with some evidence, please?
"The United States runs a deficit in trade and a surplus in investment and lending, meaning that foreign investors step in to make up for the shortfall in domestic savings."
Trade clearly excludes investment and lending in that sentience.
PS: It's meaningful to talk about the exchange of goods as independent from investment and that's what trade is referring to. Otherwise everything is going to zero out which is a less useful definition.
"""Foreigners who sell America goods will either spend the dollars they earn on US exports or assets or exchange the dollars with someone else who wants to buy US exports or assets. Thus, America’s international accounts are always balanced.
* The United States runs a deficit in trade and a surplus in investment and lending, meaning that foreign investors step in to make up for the shortfall in domestic savings. As long as domestic savings lag behind investment, foreign investors will make up the difference.
* Deficits with a single country are meaningless. Just as individuals have “trade deficits” with their grocery store, so do nations run deficits and surpluses unevenly with one another, and it is impossible to eliminate these deficits without addressing the gap between domestic savings and investment.
CONCLUSION
America’s commercial trade with the rest of the world is a part of a complex, interrelated system. If the US government intervenes by turning the spigot to change the flow of dollars through one set of pipes, it will of necessity change the flow through other pipes. It is a contradiction to decry the outflow of dollars to buy imports while at the same time seeking to increase sales of US exports or investment in the US economy."""
You are ignoring the or, if it said 'on US exports such as assets' then you would be correct in your interpretation.
Exports are a subcategory of total trade, which again is a useful distinction otherwise they would say trade not Exports. This was intended to confuse without being wrong, but exports and trade are meaningfully different and used in context correctly, but you are interpreting them as the same thing when they are not.
PS: Another way of stating this is trade must be balanced. I exchange one apple for one orange then by the existence of the trade the implication is the orange and the apple have equivalent value with each side valuing the others item more than their own. That's still true if you replace apple with Yen or whatnot which is again why trade deficits are only meaningful when you only look at goods.
Let me give an example: If Tesla builds a factory in Shanghai, even if it does not import these cars back into the US, it can substitute the current export of US-made cars into Asia and thereby reduce US exports and increase US trade deficits.
Sure, it does: net inbound capital flow is necessarily equivalent to trade deficit, so increasing net investment from US to China necessarily reduces the US-China trade deficit (or, increases the China-US one if you do enough of it.)
This is also why trade policy may not be the most effective mechanism to addressing as trade deficit (if you even need to address it, which is a different debate.) Instead, just address the pattern of domestic investment: the more domestic investment opportunity is taken by domestic investors, the lower the capital inflow and the lower the trade deficit.
And there is no guarantee with free capital flow you will get net inflow into China. If anything there was an even larger outflow before China tightened up the control. And even if you managed a net inflow into China, there is no guarantee it will reduce the bilateral trade imbalance with US per se, so long as the demand for US assets is not reduced.
Of course if you meant that US could impose capital control to make trade deficit go away, I would agree.
The US is often the provoker of things due to a mix of over confidence and desire for the status quo. Given population differences this has historically only been due to technological and capital knowledge.
Connective technology both spread information/education and also lowers capital requirements meaning the US no longer has an advantage. In face it has many disadvantages culturally including a large sect of tradition it's and people who think trying hard is good enough.
The fallback argument is always around human rights or some other moral grandstanding but the history of the US proves otherwise. No country has perfectly clean hands but it feels like the US doesn't acknowledge this.
China protecting their country from free roaming of foreign capital can't be considered act of trade war. That's the only way to get ahead of current leaders in any market. If you don't do that, the current leaders will just come and buy whatever you built that's better than what they have and you are left with just coin and nothing on them.
It has been a one-sided conflict because the risk of provoking the other is too great. It's like MAD but in the economic realm instead of the military. China has a gotten slight advantage on us by playing chicken and we're afraid that by responding we may escalate too far.
"I think that our trade deals have been negotiated for a
very, very long time now to benefit large, multinational
corporations, not to benefit the American worker," Warren
added. In an interview on CNN's "State of the Union" she
continued, "What I'd like to see us do is rethink all of
our trade policy. And, I have to say, when President Trump
says he's putting tariffs on the table, I think tariffs are
one part of reworking our trade policy overall."
Tariffs on X generally help domestic X producers and hurt domestic X consumers. For most values of X, production is done by companies which are mostly owned by a small number of people, whereas consumption is done by a much broader group. So one would generally expect tariffs to help businesses at the expense of workers. And aren't tariffs usually advertised as helping American businesses? To say now that it hurts them seems like a weird change of tack.
I think the thinking is that Tariffs will be one way to keep China from abusing that. In any case I think the assumption you're making is that it hurts consumers because it destroys consumption of cheap foreign goods. But I think what you're missing is that it increases consumption of domestic goods made by domestic workers. Obviously analogies are bad for discussing the actual nuance of matters.. but think Walmart in a small town that funnels profits out of the local economy versus small town businesses generating and circulating wealth locally.
1.) http://www.businessinsider.com/r-senator-warren-in-beijing-s...
1. When a protectionist market is created, global companies generally tend to avoid competing in them. What this means is that the local companies producing the protected goods are generally one-market only. They're only interested in the protected market and know they're shielded from foreign competition... less competition == less incentive to make world class products. And new firms will not generally target the captive market created by regulation unless they know the regulations will stay that way for many decades to come.
2. If you can create regulations to keep foreign competitors out, you can also use regulations to keep domestic competitors out. This is a favorite strategy used by bigger corporations in countries with lax implementation of laws, but strict laws on paper. Just threaten smaller firms that they will be sued and take them over.
As an example making a PCB with a nominal impedance spec. A domestic company will take that to mean you want full testing and careful analysis. A foreign company will quickly rough out a stack up and send you the boards.
Because my impedance spec was nominal and not critical the foreign company is the correct approach.
Assembling iPhones in the US would mean more crappy domestic jobs paying near minimum wage. It would also make iPhones more expensive, not just for US consumers, but worldwide. So fewer iPhones are sold. Meaning fewer high paying design and engineering jobs at Apple, at app developers, etc. And more of those jobs in South Korea, at Samsung.
Free trade is a wonderful thing that makes everyone better off in the long run. A lawyer who fires his secretary to do his own typing because he can type faster than her is a fool.
If one of the participants has an absolutely massive population, a unified mono-culture known for being incredibly hard workers, doesn't lack any particular disadvantages, and is run my (what seems to be) and incredibly smart communist dictatorship, how do you guarantee that in one thread of possible outcomes that this dictatorship isn't able and willing to spread its wings to largely bring the entire planet under it's dictatorship. I'd hope you don't deny that the US as de facto world leader exercises a little global influence, if all the pieces fall into place and China with it's massive advantages over the US, how do you guarantee this outcome will not (and can not) come to pass?
A typical response to this question is that a free democracy always beats a dictatorship (this belief is so pervasive and unbending in the West, it's almost like a religion), but this is in no way whatsoever(!!!!!!!!!) guaranteed to always be true, in fact even with our incredibly small historic sample sizes, things were looking pretty iffy with Germany back in WW2, and they are tiny compared to China.
And I suppose I should make it explicit: no, I am not guaranteeing this outcome, I am warning of it as a possibility - but those who say it can not and will not happen are making a guarantee.
It's GDP is about half the US. And their "communist" system is being run entirely off the back of a mostly free market economy. Free markets always beat communism and socialism.
And if you believe that none of this matters, that China is a real threat, the last thing you want is to impose tariffs on them that hurt us more than they hurt China.
You may find this article interesting:
https://reason.com/archives/2017/10/26/the-fragile-generatio...
Note that Apple is not required to create robots to build in the US. It is an option they have, but there are other options as well. I would expect Apple to be smart enough to consider all options. The obvious alternatives to consider are move the factory to some other country; or have consumers vote against the tariff by showing how much cheaper the iPhone is elsewhere; there are probably more options I haven't thought of.
Why do people trust a lawyer's opinions when they so clearly don't understand the underlying principles?
Please get a book on tariffs and their history and read it. Please. Literally any of them.
But that obviously wouldn’t meld with your free trade boner very easily
This is laughably false. The postwar US hegemonic sphere is built on trade liberalization. Please read up on GATT, the WTO, OECD, and the 1934 Reciprocal Trade Agreements Act.
Prewar, the 1930 Smoot-Hawley Tariff Act[4] is widely viewed as one of the worst economic decisions ever made, badly exacerbating the Great Depression by collapsing global trade. The US has been the world's main driver of trade liberalization since that protectionist mistake was reversed in 1934, for the entire duration of its superpower status.
[0] https://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_a...
[1] https://en.wikipedia.org/wiki/World_Trade_Organization
[2] https://en.wikipedia.org/wiki/OECD
Protectionism was very effective in developing economies. Once your economy dominates and functions mainly by extracting value from submissive developing nations (who are not allowed to enact the same proteionist rules that allowed the US to become so powerful) free trade becomes beneficial to you (but not the other party)
The effects of the Smoot-Hawley Act as well as a hundred years of economic consensus are quite clear on this: protectionism is bad.
>Protectionism was very effective in developing economies.
Care to cite any sources? The infant industry argument is not widely supported by economists[0] and is mostly parroted by heterodox/Marxist economists like Ha-Joon Chang.
>Once your economy dominates and functions mainly by extracting value from submissive developing nations (who are not allowed to enact the same proteionist rules that allowed the US to become so powerful) free trade becomes beneficial to you (but not the other party)
This shows a fundamental misunderstanding of the purpose and effects of international trade. Comparative advantage creates a mutual benefit for both parties to trade. The postwar liberal order has been associated with astonishing increases in standards of living across the globe.
[0] http://journals.sagepub.com/doi/abs/10.1177/0973801010005001...
Clearly this discussion is going nowhere if you believe this is a good description of Ha-Joon Chang.
Please stop and consider that trade is a very complex situation with dependencies on many things, human psychology being one incredibly important but not very obvious one.
Turning a complex system into a binary, as you are doing, is not an optimal form of analysis. It introduces significant risk, because you are constraining your ability to consider possible outcomes of various policy decisions. Furthermore, you are basing your beliefs on recorded human history, which is an incredibly small sample size, and you are only looking at the average outcome. There is a tremendous amount of uncertainty and luck in human history, but the tone of your writing is that you have an utterly perfect understanding and indisputable conclusion.
At the very least, can you consider the possibility that while free trade is undoubtedly superior on average, that there can be negative individual outcomes in smaller time or regional frames?
EDIT: Also don't forget:
a) History is written by the victor
b) A lot of the studies you may cite (or other may use against you) are written by imperfect human beings, may be not perfectly correct or comprehensive, may contain bias (may be sponsored by someone looking for a particular conclusion) if not outright lies (lies, damned lies, and statistics and all that), and are not guaranteed to play out the same under different conditions.
The above would help explain why there are differences of opinion on such matters as this, and many other things. There seems to be this incredibly pervasive sentiment on both sides (yes, even yours!) of the political divide particularly in Western cultures, that the Ultimate Truth is blatantly obvious, if only the other side wasn't too uneducated to see it. This style of thinking strikes me as very ironic.
EDIT (to Rory, as I am throttled):
> I'm happy to consider exceptions to that rule or reasons to believe it is flawed.
Based on your tone and words, you certainly don't seem to have an open mind on the matter. I don't mean that as a snipe, I mean it is a fact that unfortunately you may find offensive. Keep in mind, people aren't perfect, and you are a person.
Above you said: "The effects of the Smoot-Hawley Act as well as a hundred years of economic consensus are quite clear on this: protectionism is bad."
You didn't say protectionism can be bad, or tends to be bad, you said it is bad. This is the very point of my criticism, it is an absolutist, one-dimensional conclusion on an incredibly complex system, based on a tiny sample size. If this statement offends you, you should stop and think about that for a little while, and I mean that sincerely and as non-offensively as possible.
> However, there is substantial theoretical and empirical work to support this point. Are you proposing an alternative or just handwavingly dismissing it as "science is wrong sometimes"? Unless you'd like to point to evidence that protectionism is good or at least a theoretical framework under which it can be good, the claim is little different from "evolution is just a theory, why don't you consider alternatives?"
Based on a disciplined reading what I've written, without subconscious interpretation and extrapolation, can you try to think of how this statement might be less than perfect? I could easily point out some flaws in this statement, but that tends not to be an effective way of communicating on these topics. Are you able to see any flaws in it, at all? (And, feel more than free to point out logical errors in my thinking, I encourage it!. But in good faith, before doing that please address my reasonable points.)
I'm happy to consider exceptions to that rule or reasons to believe it is flawed. (Certainly there are game theoretical reasons to impose protection in the short term in the hopes of coercing the other party into agreeing to lower overall protection in the long term. Though all indications are that the administration gives lip service to that at best — they are fundamentally opposed to free trade.)
However, there is substantial theoretical and empirical work to support this point. Are you proposing an alternative or just handwavingly dismissing it as "science is wrong sometimes"? Unless you'd like to point to evidence that protectionism is good or at least a theoretical framework under which it can be good, the claim is little different from "evolution is just a theory, why don't you consider alternatives?"
> But that obviously wouldn’t meld with your free trade boner very easily
http://www.igmchicago.org/surveys/free-trade
You believe your feelings over the consensus by professional Economists.
As for the rest of your argument:
A) WWI/WW2 onward is related to Free Trade and the other economies being destroyed.
B) Pre-1900s Protectionism was largely due to continuous trade wars with other powers that is universally agreed to have been detrimental for all involved.
Literally everything you are saying is not fact-based.
Tariffs make more expensive to invest abroad than locally and investment is the crucial part of growing an economy.
As consumers, the people of an importing country could win in the short term.
If you think that the economy is global and that it doesn't matter where the productive capacity is, then tariffs are a bad thing. Otherwise, if you are worried about unemployment and that your country could become only a "services" country, maybe tariffs make sense.
[1] https://fred.stlouisfed.org/series/UNRATE [2] https://fred.stlouisfed.org/series/OUTMS [3] http://www.igmchicago.org/surveys/steel-and-aluminum-tariffs
Meanwhile the wealth gap is at historic highs. Increasing demand when supply is already low should bring up wages.
>It's also notable that tariffs are one of the few policies that economists are almost in universal agreement about [3].
Tariffs will not generally improve the welfare of Americans, removing the tariffs after our global competitors have ceased their own unfair trade practices, improved worker conditions, stop polluting so much, etc. may improve the welfare of everyone.
Tariffs are an extremely inefficient form of redistribution. If you want to fix the wealth gap, just make the pie as large as possible and redistribute directly.
> Tariffs will not generally improve the welfare of Americans, removing the tariffs after our global competitors have ceased their own unfair trade practices, improved worker conditions, stop polluting so much, etc. may improve the welfare of everyone.
I'm not sure what to make of this. It sounds like the plan is to make ourselves worse off in the hope that it also damages China? Most of the difference in labor practices comes from the fact that the US is much richer than China. It's unlikely that we can convince China to stop being poor by taxing ourselves.
It's hard to make the pie as large as possible when your second largest trade partner isn't playing fair.
>I'm not sure what to make of this. It sounds like the plan is to make ourselves worse off in the hope that it also damages China? Most of the difference in labor practices comes from the fact that the US is much richer than China. It's unlikely that we can convince China to stop being poor by taxing ourselves.
China has weird rules that restrict foreign companies from doing business there, which is a defacto tariff on all US corporations who want to sell to China. There's a lot of other industry-specific ways in which China is not playing fair. Of course American corporations want to manufacture in China to avoid paying for an American standard of living. And I get that poor countries are going to have lower wages. But these people are working in factories where suicide nets are necessary. We can pressure them to do better. Then of course there's environmental concerns which we're increasingly aware are an international problem, not an localized one.
We can't enact law in China, but we can pressure them to make changes which are more fair to American competitors and healthier for the entire planet.
Does anyone know of a good nuanced article or discussion on tariffs? The standard argument that I've seen is to invoke comparative advantage and call it a day. I've never really bought into that argument, so I'd love to see a less theoretical review of the effects that tariffs can have.
I strongly believe, and constantly test this theory as I am reading the news and forum discussions, that if there is an aspect of gender, sexuality, race, culture, and probably a few others involved in a given scenario, there are very strong subconscious mental processes that interfere with the thought processes of otherwise very logical and perfectly well-intentioned people.
What about working conditions in some of these countries the U.S. trades with? Is it all cool so long as we benefit from cheap labor?
Furthermore, there's an imbalance between capital and labor in terms of arbitrage opportunities. Capital can easily take advantage of labor arbitrage but labor is not mobile and thus, cannot take advantage of cost of living arbitrage.
I get the sense that most folks that support minimum wage increases don't really think much about the labor conditions of those making most of the stuff they consume.
If all we do is rebalance $100 billion in trade away from China and back to US production (out of the ~$300 billion deficit), that is money going into the US economy and not to enrich a foreign economy. If it net costs the US economy 15% more to do X domestically, we keep the rest of that value gain that comes home instead of sending the majority of it over to China.
The majority of consumers in the US have jobs. Those consumers all benefit from a tighter labor market and increased wage competition. And consumers are connected in numerous ways, both distant and local. That job producing domestic steel instead of buying it from Russia, may employ a wife or a husband in a family of consumers, bolstering wages within a household.
They also hurt businesses that consume X. Steel tariffs hurt automakers, for example, who now must pay more for the metal and deal with supply chain issues.
Many US automakers have factories in Mexico as well as in the US, and some models for the US market are built in those Mexican factories.
Question: will steel tariffs in the US encourage these automakers to shift more production to Mexico?
[0] https://en.m.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_...
Classic example: America can produce 5 cars a year and 6 apples. Japan can produce 3 cars a year and 2 apples. If America devotes its energy to making all the apples and Japan does the same for making all the cars, Japan could make 10 cars a year and America could make 9 apples - so thus, there will now be 10 cars available versus 8 and 9 apples a year versus 8. So there is more product available for everyone, true, that is an undisputed fact. But several questions remain unanswered:
What are the effects to the American people if making cars provided a lot of well-paying jobs to its working class which cannot be replaced? The answer is that many people are out of work; and they cannot go make apples because agriculture is heavily automated. They cannot all go to college because they don't have the money and student loans are very expensive.
What happens if America spends more money on importing cars from Japan than it makes from selling apples? Is there not a net drain on American wealth?
So I think classic theory about these things overlooks many important topics. It reduces a nation's health to the amount of goods that are producible between its economy and its trade partners; if more goods are produced overall then everything is better. But it does not take into account the effects of job losses or trade deficits.
Edit: Might I also add that the American economy was heavily protected by tariffs throughout almost its entire development? Tariffs were significantly higher from the 1800s to the 1900s; it is only in recent decades that they have been consistently lower. Andrew Carnegie's Carnegie Steel for example experienced tremendous benefit from high tariffs on steel; the impact of his fortune can still be seen today in almost all American libraries. While the relevance of this anecdote can be disputed, it serves a valuable purpose if it gets us to question our trade dogmas.
I agree China cheats, and we need to do something, else they will cheat more. Economic models suggest that lopsided trade is still overall good for the "loser" side, but that's in aggregate: specific sectors can still end up with a nasty hit, like the rust-belt did.
> "I think that our trade deals have been negotiated for a very, very long time now to benefit large, multinational corporations, not to benefit the American worker," Warren added. In an interview on CNN's "State of the Union" she continued, "What I'd like to see us do is rethink all of our trade policy. And, I have to say, when President Trump says he's putting tariffs on the table, I think tariffs are one part of reworking our trade policy overall."
But the issue is what is the U.S., via President Trump, actually doing, not what is one Senator talking about. My impression is that Trump is pushing tariffs in order to increase nationalism through conflict, i.e., to maximize divides at national borders. It's the same reason he's creating problems for immigrants, including legal ones. (I know HN doesn't like politics, but sometimes politics is factually part of the issue; if HN didn't like IP, we couldn't just omit it from a discussion of routing without being dishonest about what was going on.)
Warren's comment isn't evidence that it's necessary, or evidence of anything but her opinion. Is there any evidence, such as a broadly accepted economic analysis, that it's 'necessary'? That there is a problem? What problem? How are tariffs the best way to solve the problem?
That’s not my impression. I perceive the tariffs as a response to the yawning trade deficit between China and the U.S., as well as China’s state-sponsored IP theft from U.s. companies, currency manipulation, technology transfer requirements for foreign companies, Party cell embedding requirements [0], and various other protectionist policies.
As for evidence of necessity: the U.S.-China trade gap is hundreds of billions of dollars, on top of all that other stuff.
[0] https://www.washingtonpost.com/world/asia_pacific/command-an...
But why does a trade deficit between two specific economies (even the largest ones) mean anything in and of itself? And how would punitive tariffs, which are sure to be responded to in kind, help citizens of the US? If we have a trade deficit with a country, meaning we take in more of their goods than they take in of ours, how is this a good idea?
I find it helpful in our current political climate to start by asking, "What if this isn't a completely new paradigm 4D game of political chess but rather idiots doing dumb things?" Given we have seen this particular game played hundreds of times in the past by similarly economically-illiterate ideologues, assuming a different result this time because It's the Future seems hopelessly naive.
what particularly are you referencing here? The U.S. can impose tariffs because no one is capable of a state funded coupe against us due to our military strength. If you are referencing the 'failed' protectionism in Latin America in the 70s, it never really had time to run its course before clandestine intervention.
1.) https://www.usatoday.com/story/money/economy/2018/03/14/euro...
2.) http://money.cnn.com/2018/03/22/news/economy/steel-aluminum-...
“Only reasonable that EU seems to be omitted from
tariffs based on national security grounds given that
EU and US are close allies,” Danish Prime Minister Lars
Loekke Rasmussen wrote on Twitter. “Rather than
threatening to raise tariffs against one another EU and
US should work together to solve the real problem of
overcapacity.” [1]
1.) https://www.usatoday.com/story/money/economy/2018/03/14/euro...
It is 100% unnecessary. The lack of political will to maintain a safety net and retrain people is the problem. Tariffs are just going to make that worse when it starts bleeding the economy.
http://thehill.com/regulation/international/376467-eu-weighs...
> The products listed by Juncker appeared to target industries based in the home states of congressional leaders. Harley-Davidson is based in Wisconsin, the home state of Speaker Paul Ryan (R); Levi Strauss & Co. is headquartered in House Minority Leader Nancy Pelosi's (D) hometown of San Francisco; and bourbon is made in Kentucky, the home state of Senate Majority Leader Mitch McConnell (R).
Funny enough, re China targeting US agriculture: the US has nearly the lowest agriculture tariffs. Only Australia is lower that I'm aware of among large economies. What's the legitimate grievance that China could possibly have about US agriculture? They obviously have none, it's all political retaliation.
So US tariffs are justified, but retaliation is political? Is that what you're saying?
EDIT:
> What's the legitimate grievance that China could possibly have about US agriculture? They obviously have none, it's all political retaliation.
Here's a mental model for this. You hit them first, they hit you, now you're complaining that they hit you. "It's political!". The rest of the world is watching and thinking "well, you started it".
[0] http://money.cnn.com/2018/04/02/news/economy/china-us-tariff...
Reminds me of the more strategical thinking of possible EU sanctions targeting products that are important for certain high profile republicans and their states.
The US is targeting tariffs to correct perceived trade wrongs, where foreign nations have barriers that the US does not have. Or in the case of some foreign steel, it's often dumped globally, backed with State subsidies to facilitate that.
Take Russian steel as one example. It's extremely difficult to do business in Russia and to sell major industrial products like steel into Russia. Why should the US buy any steel from Russia, when the US is highly capable of producing that steel domestically instead? It makes no sense to tolerate Russia's hyper nationalist protectionism in major industry and continue buying steel from them. Reciprocating their market behavior back toward them means that Russia never gets to sell steel into the US again.
Russia buys very little from the US, representing 0.03% of the US economy. The US imports from Russia, including a lot of steel, are equal to 1.5% of the Russian economy. It's obvious which party has a lot to lose there, there's a 50 fold gap in importance to the economy.
The EU and China by contrast to the US tariffs, started out targeting the US on political grounds. That tells you everything you need to know. It's because the US has extremely low tariffs overall, and particularly extraordinarily low tariffs on agriculture. These other trade parties have very few angles of attack that aren't political in nature because the US has such a generally open economy.
Try acting a little less biased NYT, China has had tariffs on US goods for years. They're not the ones retaliating.
Personally, I'm quite frustrated by Trump's fixation with the trade deficit. I wish he'd focus more on the issues with IP being stolen, bought, or semi-forced technology transfer. There are other advanced countries in the same boat as us and he has the chance to be a leader and form a coalition of ripped off economies. Instead, he focuses on the trade deficit and scares allies, existing and potential, with threats of tariffs instead of forming a united front against China's lack of respect for IP.
Oh, like some sort of partnership comprised of other Pacific based countries to create some sort of trade agreement that would make the coalition members have a stronger voice when negotiating trade agreements with China? We may even call it a Trans-Pacific Partnership[0].
Ideally, everyone looks at their own tariffs and decides these aren't worth it, because, like you said, they hurt consumers. This means everyone lowers tariffs and life continues better than it was before.
Really off topic, sorry, but if you enlarge the picture of the three pigs being led to slaughter by the guy holding the electric shock prod, look at their eyes. Pigs are very intelligent animals, and probably understand to some degree what is happening. Although I am not a vegetarian, I think it is shameful to eat ‘torture meat’ like pork, poultry, and veal. Who wants to eat animals that are effectively tortured every day of their lives.
I became vegetarian after there was a big news cycle about the dog eating festival in China – then I saw pictures and saw that most of those dogs appeared to be treated much better than the animals that are part of the industrialized meat process.
Torture is something, but ultimately we kill them, ending their life so we can eat them. Humans will come up with all kinds of justifications for every part of this process, it's almost not worth arguing, it's like religion in many ways – you're raised eating meat, and it's hard to be rational thinking about why that might be bad, for the creatures being eaten, for the environment, etc...
I had the misfortune to once actually see a pig processing plant, and that is one of those horrible images you can never get out of your mind.