Hacker News Reader

Comment by Leary | Hacker News Reader

The most recent tweets by Trump regarding this:

"The reason for the China pullback & attempted renegotiation of the Trade Deal is the sincere HOPE that they will be able to “negotiate” with Joe Biden or one of the very weak Democrats, and thereby continue to ripoff the United States (($500 Billion a year)) for years to come... Guess what, that’s not going to happen! China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers...great for U.S., not good for China!"

View on HN

The import tariffs are paid by the people inside the importing nation.

A US import tax on Chinese goods is a tax on American consumers and manufacturers.

The way to tax China itself would be an export tax on money bound to China, including the transfers of immobile or intangible assets to Chinese nationals or corporations via domestic exchanges or brokerages--and including the cash value of transferred intellectual property.

Imports are paid for by exports. If you're worried about a trade imbalance, you could always say that the other nation can keep sending more goods if they want, but we'll only pay for them with trade goods and services, not with cash, or ownership of land and capital.

Another way to wipe out a history of past trade imbalances would be to announce the retirement of the domestic currency, citing counterfeiting or hacking, hyperinflation, or whatever else that may sound plausible.

You then allow only your own nationals to exchange old money for new money. In order to avoid losing all of the value of their old money, foreign holders would have to buy something from a domestic person, who could then exchange the currency.

A smart exchanger would then either keep the new cash, or buy back their sold things at a lower price. In effect, it ends up being a one-time tax on domestic currency being held abroad. Any country that had been building up a reserve of your currency via trade deficits either has to settle up immediately by importing a giant bolus of your trade goods, or it gets screwed.

That sounds like a great way to lose reserve currency status immediately.

If your currency is a reserve currency, this measure is unnecessary--you can just print more of it.

That has the unfortunate disadvantage of devaluing the currency your own citizens hold.

Only the rich ones. The citizens who have their debts devalued, and whose assets are mostly in residential real estate, would see it as a fortunate advantage.

What's the benefit of having reserve currency status?

US States have right and left been legalizing precious metals for currency this last year, perhaps in preparation for a return to the gold standard and dumping federal reserve notes after an audit of the federal reserve...

> What's the benefit of having reserve currency status?

You get to print absurd amounts of money without significant inflation because every other nation in the world hoards your currency because it’s the de facto standard for trade. US dollar stability owes a lot to the fact that everyone else holds a ton of dollars.

> US States have right and left been legalizing precious metals for currency this last year...

It’s never been illegal to trade precious metals for goods or services. Precious metals may not be legal tender but no one has been prevented from using them as currency.

To the extent that some states may make gold or silver coins legal tender, it’s just pandering to conspiracy theories and paranoia. In the event that the dollar collapses, having gold as an alternative legal tender does nothing. Anyone saying otherwise is either lying or ignorant.

If someone owes you $1300 dollars, having gold as an alternative legal tender doesn’t help you if the dollar collapses. The person owing you is absolutely not going to go find a Troy ounce of gold coins to pay you. They’re going to happily pay you the $1300 they owe you in devalued US dollars. And you’ll accept, because that’s what legal tender means.

Taxes on transactions, such as tariffs, are almost never paid only by one side. The side with less flexibility is going to pay most of it, adjusting prices as needed to make this so.

China has less flexibility. Idled factories are a huge problem, and there is no other buyer as large as the US. It is relatively easier for the US to buy elsewhere, both abroad and domestic.

About 83% of the tariff burden is getting paid by China. (analysis by European financial firm)

Even the part we do pay isn't all bad. It reduces the need for other taxes. It supports American workers, reducing income inequality.

Seriously, 83%? That's insane!

Seems things are going far better in this little trade war than I was expecting. If the 17% paid by US consumers displaces other taxes, that's a huge net gain.

> The import tariffs are paid by the people inside the importing nation.

While that's technically true, the tariffs have the effect of increasing the price of goods, so the exporter may need to lower their price and drop their profit margin to remain competitive.

> The way to tax China itself would be an export tax on money bound to China, including the transfers of immobile or intangible assets to Chinese nationals or corporations via domestic exchanges or brokerages--and including the cash value of transferred intellectual property.

That's an interesting idea, but doesn't the US Constitution ban export taxes?

https://fas.org/sgp/crs/misc/R42780.pdf

It bans taxes on "articles exported". Banknotes, shares of stocks, bonds, title to real property--these are arguably not "articles".

You couldn't tax a crate of polypropylene combs going from Chicago to Shenzhen. You might be able to tax the sale of 100 shares of stock in Acme Unbreakable Combs, Inc. to Chan Jingwei of Shenzhen on the Nasdaq exchange. Maybe tax the transfer of technical plans and patent rights for a comb-making machine from AUC Inc. to Acme Shenzhen Manufacturing, a Chinese corporation. And you might be able to tax the sale of a Seattle 4000-sqft 5-bedroom house to Mr. Chan.

In all those cases, you're not moving goods, you're moving ownership.

Is there any caselaw that takes that view?

Someone would have to enact a law establishing an export tax first. As far as I am aware, you can't challenge a law as unconstitutional until it has been passed and signed.

> US import tax on Chinese goods is a tax on American consumers and manufacturers.

And a regressive tax at that, as it will affect poor people more compared to the better off.

A 25% tariff results in low-singe digits % price increase at in the store. The tariffs are on cost of goods, but cost of goods is usually a fairly small fraction of retail price.

Even a 5% increase in the monthly costs of a lower-income family is 5% too much in this era of stagnating real wages. And

Most families don't spend all that much money on stuff manufactured in China. Family budgets are largely comprised of rent/mortgage, food, and transportation. Then you have clothing and household goods, some of which is manufactured in China. So we're looking at a 5% increase in a small fraction of a family's monthly budget. As a point of comparison, families regularly weather much larger fluctuations in their monthly budget due to changes in the price of gasoline.

There are very real problems with how China treats foreign companies (intellectual theft, requirements to partner with Chinese companies and many more). I'm happy they get addressed. However, Trump completely misrepresents the problem and the impact of tariffs. The negotiations clearly are tackling the right issues, yet here he is talking about trade deficits as some kind of theft and tariffs as a straight up win like some moron who doesn't get econ 101. He is doing his (for once) good effort such a disservice. Is he trying to divide the country by even representing his good work in a way that will only appeal to his hardcore supporters or does he truly not get it? Is there a more charitable explanation?

Edit: I also have very sour memories of Obama complaining about the trade deficit with Germany. In that case none of the real issues like we have doing business with China existed. In essence Obama was complaining about German companies being too successful and Germans saving too much money. Maybe I'm particular sensitive to trade deficit rhetoric because of that. If the passing field is level, then maybe the deficit is the fault of the country that has the deficit. In this case the playing field is very skewed and that's the problem.

He doesn’t get it. It’s obvious at this point that he’s just not very intelligent and makes it worse by putting in zero effort to understand.

Does his understanding matter? If Mnuchin and Lighthizer are hitting all the right notes in the negotiation, does it matter if Trump understands any of it? Let him bluster and take credit for Mnuchin and Lighthizer's good work.

The problem is that his communication is what's most visible and it's misrepresenting his administration's good work. It would be good for the country to at least be unified on some issues. Yet this gets presented in a way where we again can't even agree on the problem.

His style of talking is to use simple terms even to the extent of sounding stupid to let the messages go across clearly. Trade deficits being neutral or slight bad is a niche view by a some economists. Most people view trade deficits as bad, rightly or wrongly. The word deficit, loss, and inbalance all have bad connotation. And the loss is huge, adding to a dramatic effect. He's trying to justify his action to his voters. Why won't he use trade deficit reduction as a goal?

Also balanced trade would be better than trade deficit, so it's a worth goal to achieve.

If the market was fair, then it's the US's fault to not make more attractive products and buy tons of stuff from China. It wouldn't be China's fault that they are successful and we are not. It would be like Obama bitching about Germany that I mentioned above. But that's not what's going on here. China is playing unfairly.

The market in regarding to China is not fair, so all is moot. Germany isn't play so fair as well [1].

[1] https://www.export.gov/article?id=Germany-Trade-Barriers

If the trade with China is discriminatory, he should call that out and not whine about a trade deficit, which can have many reasons (like US products might be bad or US consumers consume too much)

The link you provide only mentions high testing standards and even specifically calls out that they don't get applied in a discriminatory way. Can you elaborate more?

Reply on news.ycombinator.com