Giant shipload of soybeans drifts off China, victim of trade war with US
theguardian.com
theguardian.com
http://www.globaltimes.cn/content/1114855.shtml
(It is already Saturday in China.)
But, given the parties involved, I would not put it past them.
so if someone makes 25 Talos Power9 computers and the market would support 25 of them, but there is a tarriff that discourages one from being sold, then you have 1 machine sitting there, essentially on a proverbial virtual boat. Maybe its not burning fuel, but its taking up space somewhere, costing rent and overhead. Not much but a little. Now multiply that tiny amount times a billion other products ...
just a thought experiment...
Profit margins are set by competition. The customer might pay $5 except that your competitors are charging $1 so you can't even charge $1.10 or the customer buys from a competitor. If everybody's costs increase by 25% then everybody can increase their prices by 25%, because you can't profit at $1 anymore but neither can your competitors. Unless your competitors aren't subject to the tariff, which is kind of the point.
Meanwhile the revenue the tariff generates offsets some tax that now doesn't need to be collected somewhere else and would have caused a similar inefficiency or cost increase in some other place.
Tariffs suck because taxes suck and tariffs are taxes. But for a given amount of revenue generated, it's better to tax somebody else's economy than yours.
Different forms of taxation can have different economic consequences.
it's better to tax somebody else's economy than yours
Thinking of tariffs as "taxing somebody else's economy" betrays a misunderstanding of the concept of incidence (as in https://en.wikipedia.org/wiki/Tax_incidence), since you're raising prices for your own imports.
Yes, of course. Car tax has different economic consequences than [real] property tax. But a tariff on cars looks a lot more like a tax on cars than it does a tariff on real property.
Actually "tariff on real property" (meaning [high] property tax owed only by foreign nationals and corporations with foreign ownership) might be one of the best possible methods of generating government revenue.
> Thinking of tariffs as "taxing somebody else's economy" betrays a misunderstanding of the concept of incidence (as in https://en.wikipedia.org/wiki/Tax_incidence), since you're raising prices for your own imports.
It's not misunderstanding it, it's understanding it perfectly well. It's not that exactly 0% of the burden falls on the domestic economy, it's that it disproportionately falls outside of it.
When you have a tariff, there are two ways for a foreign supplier to lose.
The first is that there is a competitive domestic market for the same product. In that case the price won't change much if at all (minimal impact on consumers), the production will just shift to domestic suppliers who hire domestic workers. Then the tariff doesn't generate much if any direct government revenue, but it shifts a bunch of domestic citizens from collecting unemployment to earning taxable income, which is great in a different way.
The second is any case where the producer has to eat a tax in general, e.g. because there are substitute goods preventing the producer from raising prices, so they can't pass the burden on to the customer.
The domestic market only pays if domestic producers can't make [more of] that product and consumers are still willing to pay the higher price for it. But even then, it's not worse than generating government revenue from a purely domestic tax, it's just not any better in that unusual case.
And in practice it will typically be some combination -- domestic producers will appear charging slightly higher prices (but more than making up for it by creating domestic jobs), and then the foreign producers have to compete with them (and other substitutes) so they have to eat most of the tariff but not all of it. So the burden falls disproportionately on someone else's economy, as opposed to domestic taxes that fall primarily on your economy.
No, profit margins are the end result of all factors that go into a products manufacture and transportation until it reaches the next drop-off in the value chain or the end user.
They can even be negative. Competition aka the race to the bottom is what puts an upper bound on profit margins (absent price fixing and cartels). Without competition that upper bound disappears and then you can charge whatever the consumers are willing to pay.
Is your point that they aren't set by competition in uncompetitive markets? Because in that case the margins would typically be more than 25% to begin with and taxing monopolies and price-fixing cartels is something most people can get behind.
What you could be alluding to is that imposing tariffs could reduce competition from foreign suppliers, allowing domestic suppliers to sustain higher margins if there isn't sufficient domestic competition to keep them down. But high margins should attract new domestic competitors absent some high barrier to entry, higher margins for domestic companies is not hard to classify as "benefit" rather than "disaster" anyway, and the maximum increase is still capped at the amount of the tariff or people would go back to the foreign supplier(s).
No, I did not say that.
I said that competition is in some cases a factor but definitely not the major ingredient. Profit margins are not an input into some calculation, they are the result of a calculation.
Sure, competition isn't the only factor in margins. But it is a major determinant of how much of the total surplus goes to the consumer rather than the producer.
And the point was that if you raise costs for all competitors, it isn't necessarily fatal to the market that the amount is larger than their original margins, as long as it isn't larger than the total producer+consumer surplus. Because when everyone's costs increase by the same amount, the producers may be able to pass some of the cost on to the consumers.
decades -> centuries
https://en.wikipedia.org/wiki/David_Ricardo#Comparative_adva...
Like all things, there are trade offs.
Edit: saving ~3t/hr of oil per ship
I suppose that could be caused by an anchor and drifting but it seems more likely to me (as an uninformed idiot, though I've been in anchored boats before and don't remember them moving in circles because of it) that it is under power (albeit not very much).
Eddies are a thing.
I see it like big rig trucks who don't want to stop at stop signs since the need a lot of energy and rowing through gears to get back up to speed.
Just my wild Saturday morning pre-coffee theory.
Some ships have a direct drive. So the moment the engines start, the prop shaft is turning. These ships will control thrust via Controlled Pitch Propellers. Basically the pitch of the propeller blades are controlled hydraulically and the steeper the pitch, the more the blades cut through the water and the more thrust generated. CPP systems allow ships to use shaft generators for electrical power at sea. The engine's revs are constant (to keep the electrical frequency the same) and power is changed via setting the propellers pitch.
Some ships have drive trains which let you clutch engines in and out, but you wouldn't run them for long periods of time de-clutched.
The engines do not like being run at an idle load for long periods of time (whether direct drive or clutched), you get loads of crud building up as they don't properly warm up. Also you are burning fuel and increasing their hours (planned maintenance is usually based around running hours). So you wouldn't generally drift and idle. You would shut the engines down and keep them on immediate notice.
A lot of modern ships are diesel electric. So the props are driven by large electric motors. So in this case, you can stop and start propulsion instantly (as long as you have enough generators running and connected to the switchboard)
The proper term in windmills and airplanes is 'feathered', I don't know what to call that state in a boat.
For safety purposes 'coarse' is not always the best position because if the wind is heavy enough it will have a lot of torque to work with, 'flat' is much easier to hold down with a brake.
You can keep a ships main engines at various notice levels. For example:
Immediate Notice - Engines should be ready to start immediately from the bridge when required.
5 Minutes Notice - Usually
- Indicator cocks are open. - Fuel pumps are on. - Lube oil pumps are on.
Starting sequence : - Turn the engines on compressed air - Close indicator cocks - Engines ready to start
30 Minutes Notice - Usually - Indicator cocks are open - Fuel pumps are off - Lube oil pumps are off
Start sequence: - Start Lube oil pumps - Turn engines on turning gear for 10 minutes - Turn engines on compressed air - Turn fuels pumps on - Close indicator cocks - Engine ready to go
2 Hours:
You can do minor maintenance on the engines. For example, swapping out injectors. Engines are warm. Starting sequence is similar to the 30 minute starting sequence.
24 Hours:
Some larger maintenance can be done. Like changing a cylinder head.
48 Hours:
Engines can be completely cool. Jacket water drained. Usually for major maintenance. Like changing a cylinder liner.
These timings can vary between ships/companies. But generally they operate with similar ideas.
Source: I was a marine engineering officer working at sea for 5 years.
I saw an old documentary following a big cargo ship who was anchored with others waiting to get in to the suez.
Another ship broke free of its anchor and was having trouble starting their engines and were drifting toward the ship in the documentary.
The captain was doing the math on how quickly they could start their engines to try to get out of the way and it would have to be an emergency start that they thought might result in damage.... particularly upsetting as this was their first voyage on a new ship, new engines... they didn't want to start them.
If that means things like iPhone manufacturing needs to be moved to the US, causing the price to double, then it's on Apple & Co to build more automated processes and/or raise prices. If car and firearms companies can do it, why not everyone else?
It's not an argument against tariffs in general, but about these specific ones. There has been no actual tariff put on completed iPhones yet, right? Meanwhile the costs of someone developing a new phone here have gone up, and there is even more pressure to scale up and away from domestic runs.
Perhaps it does make sense looking at the larger numbers, if there still is in fact sizable (non-military) semiconductor production to prop up. My instinct just says otherwise!
(tangential: I think free trade could have worked out much better with sane monetary policy. As it is now, every time the stuff at Targ-mart gets cheaper, the price of housing is forced to go up!)
- it pisses off trade partners who may not act as rationally as you expect
- it might not be possible to manufacture an iPhone without cheap labour
Both of these will disrupt trade significantly, meaning productivity drops and the global economy suffers, reducing economies of scale and creating a negative feedback cycle that continues.
Also manufacturing jobs are crap, regressing your economy towards that will lower the standard of living for your citizens in general. The reason cars are manufactured in the US is to reduce shipping costs and give a great marketing line. Firearms it’s to reduce dependencies on other nations for weapons.
That's far too broad of a statement. You're thinking of $1/hour 2003 Chinese labor style manufacturing, or making cheap toasters for $12 / hour.
The developed world doesn't do much of that manufacturing any longer, they all shifted to high value manufacturing. Even South Korea - a more recent member of the developed club - makes its phones in Vietnam, not domestically.
The manufacturing jobs in eg Germany and the US pay moderately well in fact. The US BLS indicates total compensation for manufacturing employees averages over $39 / hour ($25.x salary, $13.x benefits).
There are a vast array of manufacturing engineering jobs that pay far better than that.
Manufacturing jobs are progressive, not regressive. They absorb large amounts of lower skill, lower education labor. They're a requirement for countries with any meaningful population base. Without those jobs, lower skilled labor tiers end up working $10-$15 / hour service jobs (in the US), typically with few benefits. Further, they often teach a trade, valuable skills, in the process. And last but not least, it's almost always critical to make things, which you can trade with the rest of the world. A high income economy can't survive on domestic barista service jobs (ie low value consumption jobs).
It forces trade partners to lower their own protections, resulting in freer trade than before. People respond to incentives.
>it might not be possible to manufacture an iPhone without cheap labour
Automation.
> Also manufacturing jobs are crap.
Manufacturing provided decent jobs for many American men feeding their families. Next you'll tell me that trucking is terrible and we should get rid of that too. Schumpterism is probably a necessary trait for ambitious people, but don't be cavalier about jobs that provide respectable livelihoods to normal people.
> There is a consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade, deregulation, and the reduction of trade barriers has a positive effect on economic growth. In fact protectionism has been implicated by some scholars as the cause of some economic crises, in particular the Great Depression.
I dont know if such consensus is really justified (since these economists could be politically/ideologically biased).
However, the wikipedia article did not mention the other side of the coin - namely, what protectionism does, and if it has any benefits (and drawbacks).
Protectionism exists in the financial sectors (in which a majority of wealth is being created in the USA). I suspect that those that argue for free trade only argues for free trade for things they benefit from (but protectionism for things that might hurt themselves - even if free trade overall helps others).
Do you have evidence for this, or are you just saying it because you don't like the conclusion?
No, there wasn't. At most, there was concensus that certain policies he proposed would have adverse impact, but not all of those policies were implemented, and policies rarely have their full impact within a 1-2 year period.
> and that it can't grow at anything over 3%,
No, there wasn't.
> and that "those jobs are not coming back"
To the extent that there has ever even a widespread belief among economists, much less a consensus on that, it was (and is) on the long-term trend in certain sectors, not about the absence of positive short-term fluctuations.
> Paul Krugman, the perennial darling of progressive intelligentsia
Krugman isn't a progressive or particularly a favorite of progressives. The darlings of the progressive intelligentsia don't generally have gigs in the corporate media.
Not among any economists I talk to or read. (Which is the bulk of the mainstream.) The consensus was “tax cuts are real, tariffs are bluster.” Hence the stock market rally. The moment the second part was proved untrue, the rally faltered (but has not stalled).
You can pull off protectionism to the extent: that you don't need others; or so long as it's limited given your context; or depending on your strength and or ability to command concessions (eg lopsided deals); or depending on what you're willing to give up to protect something (eg give up cheaper prices to shield farmers, or ensure strategic national production of a thing).
Ask France about its agriculture. Ask the US about its truck tariffs. Ask Germany about its car tariffs (EU facade). Ask China about, well, everything. Ask Japan about, well, lots of things. Ask Brazil about its wild economic controls. Ask Mexico about its restrictions on the energy industry. Ask Russia about, well, everything. The list just keeps going.
You can list on one hand the relevant economies with zero or near zero protectionism.
It seems highly reasonable that China would be doing better if they toned down their protectionist policies.
If that were the case, the US, China, Japan, South Korea, Britain, France, etc wouldn't be major economic powers. Every major economic power today copied the US protectionist model of the 19th century to become rich. Every single one.
The US was explicitly protectionist well into the 1900s.
https://en.wikipedia.org/wiki/Protectionism_in_the_United_St...
Since 1945, we became implicit protectionists while touting free trade.
Without protectionism, japan and south korea wouldn't have toyota, sony, samsung, etc. Without protectionism, china wouldn't have baidu, tencent, etc. Without protectionism, our industries would be owned by britain and europe and we'd only be a raw materials supplier.
"Washington and Hamilton believed that political independence was predicated upon economic independence. Increasing the domestic supply of manufactured goods, particularly war materials, was seen as an issue of national security. In his Reports, Hamilton argued that the competition from abroad and the “forces of habit” would mean that new industries that could soon become internationally competitive (“infant industries”) would not be started in the United States, unless the initial losses were guaranteed by government aid (Conkin, 1980). According to him, this aid could take the form of import duties or, in rare cases, prohibition of imports. He called for customs barriers to allow American industrial development and to help protect infant industries, including bounties (subsidies) derived in part from those tariffs. He also believed that duties on raw materials should be generally low (Dorfman & Tugwell, Early American Policy, 1960). Hamilton explained that despite an initial “increase of price” caused by regulations that control foreign competition, once a “domestic manufacture has attained to perfection… it invariably becomes cheaper”."
https://en.wikipedia.org/wiki/Tariffs_in_United_States_histo...
Washington, Hamilton and most of our founding fathers were protectionists because our industries were young and needed protection against more established industries of britain.
> There is a consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade, deregulation, and the reduction of trade barriers has a positive effect on economic growth.
When you have to lean on consensus it usually means they have no idea what they are talking about or are pushing political ideology. We have historical proof that protectionism works. It's called the US, China, Britain, Japan, South Korea, etc.
Always take evidence over consensus.
US standard of living is supported by free trade (energy, goods)
Until some tangible benefits come from this trade war, it's nothing but downside. And aside from some vague claims about "fairness", it's not even clear what those benefits are supposed to be.
Had it not been for protectionism, the UK’s textile industry would not have competed with India’s, in fact they forced their wares on India, to the detriment of their own textile industry.
Of course pretty much any country is capable of building a strong industry in some specific area, whether that's textiles, food etc.
The question is at what cost, and whether it makes sense overall. That buildup of the UK's textile industry didn't come free, it was effectively a tax on everyone in the UK who wasn't working in textiles, because they'd otherwise have been able to buy them for less, and thus have more money left over for other things, including investing in or building other industries.
Which isn't to say that there's no use for protectionism. But specific examples like this don't help. It could just as well be that the UK was going to experience an economic boom anyway, and that protectionism slowed down their long-term growth.
A more balanced world would be a better place. As it stands, I am of the impression that the weakness of the US regarding trade is the only factor that can balance the power ratios in the world.
It is extremely unfair to pick on the one matter were you are "losing" and pretend that it is morally imperative to fix it, without taking into account the whole picture.
How do you figure?
Under the “US empire” the world has had more progress and less conflict than ever before.
Edit: heck, ask that to the Americans. Inequality in your homeland is rampant. What you call American Empire is known also by Globalization, and it seems that is not very popular in the US right now.
Anyway, that decission is not for the US to make, and I reckon the whole world would prefer a more balanced situation.
I’m asking what makes you think a more balanced world would have been better?
> Inequality in your homeland is rampant. What you call American Empire is known also by Globalization, and it seems that is not very popular in the US right now.
Yes. We believe the “American Empire” has been far too altruistic towards other nations and ignored its own people....
I don’t think that really helps your argument.
We believe that:
1) The US has been extremely egoistical, by more than making up for the losses it has endured on trade by manipulating the global economy through the use of its monopoly on the dollar. Also by plundering resources all around the world (see Irak war for example).
2) That the economic problems of the US are of its own making, by buying into the fantasy of the American dream and letting its politicians funnel all richess to the 1 percenters, while promising that the money will trickle down.
If you believe that France, or Germany, or any other members of the EU wouldn't have done the same had their currency become the global default by dint of being the largest economy on the world, you're kidding yourself.
1) In this context why does it matter what you believe?
America doesn’t need your permission to fight for fairer trade deals.
2) I don’t think you understand Americans or our problems.
A 10% increase in tax revenues by focusing on the uber-wealthy will not fix our structural problems.
We know you do not need permission, and even when you pretend to get it (Irak war), you do it by blatantly lying.
You will not sell to the world that your fight is fair though.
> A 10% increase in tax revenues by focusing on the uber-wealthy will not fix our structural problems.
Your structural problems are not our problem - that is, as long as you are being confrontational. The world can be convinced to be more sensitive to the US's issues if the US shows sensitivity for the world's issues.
You want a fairer trade? Great! Let's do that. Let's eliminate at the same time the dollar as a huge distorting factor.
I think you misunderstand the power imbalance.
The world needs to convince the US that it is fighting unfairly.
We spent over a trillion dollars on the Iraq war. We could handle a 1-2 trillion dollar trade war - who else can reliably say the same?
The same imbalance that strengthens your hand on trade (the huge trade deficit that the US has), is a big weakness regarding the dollar: the fact that the world has accumulated and keeps accumulating dollars could prove a big problem for the US once we decide your policies must be retaliated with actual measures.
For example, it does not make any sense for the EU to be unable to abide by a perfectly working international commitment (the agreement with Iran about non-proliferation, which has been positively audited internationally), just because we are unable to manage the flow of capitals when the US decides to block them. It would be in the interest of the EU to actively fight the prominence of the dollar.
Maybe if Trump starts talking about across the board 50% tariffs it might make sense.
I think the EU has far bigger structural problems to worry about.
You really think that the US has been too altruistic? From my perspective in the South Pacific ocean, that's a very odd statement.
Unless you're referring to the $50 billion of foreign aid per annum, but then that money is less than a tenth of what the US spends on the military - if you wanted to shift spending internally. I don't think the foreign aid is curtailing internal domestic spending, I think it's political ideologies. You guys could have vastly more accessible and available healthcare and social welfare if you so chose, but for political and ideological reasons, you choose not to. It does baffle me.
I certainly agree with you that the US century has been good for many people across the world, and vastly preferable to the alternatives, but I see very little altruism in America's activies and very much realpolitik.
However, it does help when the world's leading power with the most firepower also happens to be a nation where the individual is considered valuable, and freedom and democracy considered core traits, even if your own internal execution is somewhat lacking.
What I am saying is: "we could do much better, but the current course of action is bringing us to a much worse situation"
I wouldn’t call it realpolitik.
I think a lot of the decisions are based around a mix of altruism and ideology. It’s hard to seperate the two.
For example I would say Europeans and Americans have some fairly similar ideals overall. However, if something is bad for Europeans in the short term then they tend to avoid it.
I’d say the only exception is on European integration where they are driven by ideology.
> You guys could have vastly more accessible and available healthcare and social welfare if you so chose, but for political and ideological reasons, you choose not to.
Could we though? And with what trade-offs?
States have a lot of power in the US - so for example a state like California could implement its own single payer system and show the rest of the country how it is done.
Yep, you already pay the most for healthcare in the world, yet people are routinely bankrupted by medical issues.
> And with what trade-offs?
Health insurer and pharmaceutical company shareholders might get a lower dividend.
In NZ, we have (near) free healthcare available for all, but private health insurance and private hospitals still exist as an alternative for those who want them. We have far fewer economies of scale - our entire population is only slightly larger than the population of LA in a country larger than the UK - yet our healthcare costs impact our economy significantly less than they do yours.
I know that some of the world's best medical treatment can be sourced in the US - if you can afford it, or your insurance cover it. But I also know that we spend less on healthcare and live longer, and no-one ever goes bankrupt because of medical bills.
But I also know that a former President of the USA once recorded an LP (admittedly before he was President, 10 years after he co-starred in a film with a chimpanzee) explaining that socialised medicine was pretty much Communism and/or the devil, so yeah, I find your country a very strange beast.
Our government already spends as much on healthcare as many governments with socialized medicine.
If it was simple then we would already have it.
> We have far fewer economies of scale - our entire population is only slightly larger than the population of LA in a country larger than the UK
And that’s exactly why the push for socialized healthcare scares so many Americans.
Countries like NZ clearly demonstrate it can be done at the state level.
So left leaning states can implement it and over the course of 10-15 years they can prove to the other states it is a better system.
Instead they want to push it at the federal level exposing the entire country to the risk.
> Health insurer and pharmaceutical company shareholders might get a lower dividend.
I think it might result in a lot less R&D, less capable doctors, etc.
I don't understand that - why does it scare Americans that we do it cheaper despite having a more dispersed population?
Because if you can do it with a country of a few million then there is no reason for us to handle it at the federal level.
Doing it at the federal level is then a political attack on people that want a different system and have different beliefs.
To paraphrase Churchill - the American century is the worst form of global hegemony, except for all the others.
Personally, I would much rather have lived my life under the purview of the USA than the Soviet Union or China, simply because, despite its excesses and hamfisted anticommunist coups, it is a country with values that consider the individual to be of value as a matter of course.
But we are living in a different era: an era of enligntment, democracy and globalization, where multilateralism had a good chance to succeed.
The crime of the US is not that it has been worse than the past empires: it is that is has killed, for good and for a long time to come, one of the rare chances that we had of creating a world community with strong international institutions, government by the strength of the law and not the law of the strong.
For that reason you will not find much sympathy around the world.
I'm not sure how you'd envisage such a multilateral world developing naturally from the imperialist days of the Great Game.
That is the kind of US that we admire. But that US does sadly not exist anymore, and the world is awaking to that fact.
I just worry about what comes next - in my corner of the world, China is actively seeking influence, perhaps even dominance, and frankly, the values of China are so antithetical to the values of my country that the idea of a protectionist inward facing US scares me - because the EU certainly isn't about to project power and influence into an ocean that doesn't lap their shores. The EU, while I admire it, is very much all about Europe, and bugger the rest of the world. Or so it seems to this one very subjective Kiwi.
So yes, there are more steel and aluminum jobs. But in hand there are also less jobs in farming, building construction, ship building, nail manufacture, and plane manufacturing. So the question becomes what do you value more, people working a smelter or people building airplanes, etc. Well, most people who study this have found that the effect of protectionism is fewer jobs overall and higher prices.
You can choose to disbelieve this and irrationally point to 19th century economies as a counter example while refusing to acknowledge that many factors are always in play and trade is one of them, but this is the argument being made.
And CHINDIA can get US dollars by exporting their Services/Products to America;