Easy and good trade war must be working out -- Good job, guys!


#1

March 2018 Trump said:

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win

May 2019 Trump said:

Talks with China continue in a very congenial manner - there is absolutely no need to rush - as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S…

Remind us again, Mr. President, who is sending those payments to the U.S. Treasury? And we still can’t balance a budget? And how easy are they to win? When do we “win”? How much longer must we pay higher taxes to our bloated government?


#2

The day to day markets are driven more by psychology than facts. The Democrats, free-trader globalists and MSM provide plenty of scare tactics. The markets today dropped many, many times the highest possible impact of the last increases. Xi will force many of his impacted industries to lower prices.

It’ aint over 'till the fat lady sings.


#3

How long do you think “easy” takes?


#4

It would take a hell of a lot less time if the President wasn’t opposed by virtually the entire Washington establishment and MSM. Xi, RocketMan, Putin, Maduro and the Ayatollas are all trying micro-aggressions to probe the Presidents resolve in the face of his domestic political smear jobs.


#5

Fair enough.

It’s called “history”. We know where this goes, because we’ve been here before.

You can’t fight what supply & demand does. They are immutable forces. It’s equally an immutable fact that politics has toxic effects upon economic matters.

Pretending history doesn’t apply to you, is the prerogative of people who like to imagine they or the time they’re living in is “special”. Reality always begs to differ.


#6

I could have mentioned it yesterday but today the Dow recovered most of it’s Monday losses when people realized the ridiculous overreaction.

PS Some of the high speed program trading on Wall Street actually reads current news sources (without human intervention) including all the hair-on-fire reaction to China’s “big” response.


#7

History, yeah. Our revolution many have had as one of its causes our exploitation as a cog in the wheel of the British Mercantile system but we wasted no time in implementing a tariff system of our own in 1789.

To an extent this is true. For centuries smuggling did not involve illicit goods like drugs, it was trading with illicit nations. Free traders might forget that there was never a system of global free trade until the post WWII era, courtesy of the United States Navy. We were “paid” for this, in a way, by using it to consolidate large parts of the world into opposing the Soviets. The Cold War ended 30 years ago and we continued providing the service for free. Freedom of the seas does factor into our national security but the economic benefits of the current free trade world order are clearly elsewhere, China isn’t the only beneficiary. As a percent of GDP we are the least dependent nation in the world on trade (except for Yemen, Sudan and a few other tiny nations). Trump will eventually kick over the apple cart if China and Europe don’t shape up. Trump hasn’t destroyed the NATO military alliance, they have done it for themselves. You can’t have a military alliance without a military. How many armored divisions can Germany or, indeed, all of Europe put in the field? The real NATO today is the United States, Poland and Romania.

Sorry to digress from OT, bad habit picked up from some participants here.


#8

The IMPORTERS of Chinese goods pay the tariffs…not necessarily the eventual CONSUMERS who have the ability to find other substitutes for those goods.


#9

It is easy, keep your foot on China’s neck until they stop ignoring their own commitments and gaming the Markets; they need us far more than we need them and this “war” (a joke of a term for this) is hurting and exposing China while our economy is humming right along with full employment and solid consistent growth.

Trump is right and he understands economics unlike like his critics, nobody thought China would give up their advantage without squawking but nobody who watches what Trump is doing (as opposed to the rhetoric designed to calm or frighten the economically illiterate) knows how this ends.

China will not only capitulate, if they keep their neck stiff for too long it might just be the end of the communist system in China to boot.

Trump is once again alone in the fight, and once again he will win anyway; with any luck the GOP will collapse right along with the communists in China :slight_smile:


#10

And if the Apple products consumers experience a temporary shortage of products while Apple moves … our Republic will survive.


#11

When tariffs were ~5%, compared to the ~20% we’re leveraging now?

Equally, the clock has since run forward, and we understand better what this does now. It de-industrializes.

Over half of South America would be as rich as S. Korea if it did anything else. Instead, they’re caught in a cycle of impoverishment.

Peter Zeihan, I’m aware.

But using Steel production as an excuse is faulty reasoning when the U.S. military itself is saying there’s no threat.

When people do that, they’re either misunderstanding the situation or they’re hiding ulterior motives.

The bit Zeihan doesn’t mention is that the trade is disproportionately for things that are harder for us to produce ourselves. Our only recourse after walling off China is to trade with someone else. Or suffer production bottlenecks.

If China can attract partners through Belt & Road, they can replace us, just like we try to replace them.
Turns out even G7 countries are desperate for that kind of money. And New Zealand. And Japan.


#12

Like destroying British steel in the 19th century and becoming the largest producer in the world.

For example?

Where this is true, why not trade with a country that does not threaten you?

OMG, a temporary shortage of appliances, tennis shoes and electronic toys while re-locations take place. How will we survive?

Last I heard New Zealand is doing just fine. Large influx of smart Chinese money driving up real estate prices. Japan is going balls to the wall building a military because?

Yes Slim, we do live in separate realities.

Or Constitution establish the largest free trade zone in the world presently consisting of 50 sovereign states who have agreed than any enlargement of this zone is to be done by our representative government. Free Trade is not an unalienable or constitutional or natural right. You think otherwise.

Tariffs are a way to level the playing field with countries employing unfair practices. You think otherwise.

SOME industries may require protective tariffs to preserve national security. You think otherwise.

I believe in intellectual property rights. You do not. But I am digressing from the OT here.

'night all.


#13

Amen. And doesn’t egage in human rights abuses.


#14

You might wanna tell the Chinese that…? They’ve played politics with their trade practices for decades while we’ve taken it in the shorts. They poison the well, and you tell, us “drink up”. Then you’re surprised that the poison induces a negative reaction!


#15

And they’re suffering for it. They’re not “winning”.

People who say they are, haven’t actually looked at China itself. They’re not paying attention to why they’re so desperate to give loans to countries who are likely to fail to pay them back.

They’re not seeing the capital flight.

They’re not seeing what overproduction has done to them.

Pretending that they’re “winning”, is like liberals celebrating the Chinese Maglev line, and citing it as a model. It’s superficial. Underneath, there’s nothing but debts and corroding infrastructure.


#16

Nope, this was the effect of the McKinley Policy:

“_This tariff increased consumer costs on everyday goods. For example, tariffs on men’s and women’s clothing jumped by 50%, plates and cutlery faced a 75% tariff, and food faced tariffs of up to 100%.2 Trade was also diverted away from the United States; for instance, Canadian agricultural exports to the U.S. decreased by half, but quadrupled to England.3 From 1890 to 1894, when the increased tariff was in full effect, per capita GDP decreased by more than 2%, while unemployment tripled._4”

Our greatest growth at the time were in industries that weren’t traded. Commodities and services.
Manufacturing lagged behind (I wonder why?).

We overtook England in steel, because our labor was cheaper.

Aerospace or computer assemblies made with raw materials we don’t have natural sources for.

Companies that vertically integrate that production under one roof have an advantage. India has that right now with nuclear production.

Equally, a country that prized blue-collar skills/ devoted more to translational research, and thus, offers a broader supply of firms who can do sub-contracting for you. In short, production scale.

We traded with the Soviet Union, and it worked to undermine them. It does the same to China.

Lose Competitiveness:

Because integrated supply chains. What we produce uses parts from other places. Trying to find closer or domestic analogues results in our prices going up, and competition undercutting us.

And us losing jobs.

And us chasing our own allies into China’s hands, who will use them as an alternative:

Well it seems you didn’t hear:


#17

We live in the same reality; where certain people don’t know how to do cost-benefit analysis.

Just like those who backed high speed rail in California.

You offer speculation and rhetoric, not evidence. The U.S. military has itself stated our steel manufacturing is not endangered, yet still you persist with the myth.

Having suspicions doesn’t excuse you from having to acknowledge that you made an error.


#18

It isn’t whether or not the Chinese are ‘winning’ relative to us, it’s whether we are losing relative to what we once were. Chinese consumers are becoming prosperous on their trade with America, and their government keeps American products (such as still exist) unaffordable with high tariffs or outright bans.

“Tariffs bad”, you say? Offset them with more domestic tax cuts and regulation slashing. Dynamite a few bureaucracies into oblivion to pay for it. Screw the chi-coms, they’re doing their best to screw us.
And WE. DO. NOT. NEED. THEM.


#19

Then I repeat:

Lose Competitiveness.

We don’t build our products in a vacuum. We don’t trade in a vacuum.

With tariffs we isolate ourselves, while pushing our allies further into China’s orbit. Which is their entire goal. To integrate the world into their sphere and away from us. To break the Geopolitical container they’re stuck in.

Yet China’s actions unravel themselves; we’ve seen this with Malaysia. We’ve seen this with the stockpile of steel they don’t know how to get rid of. We’ve seen this with the ghost cities they price too high for their own people to afford.

The CCP is playing for time before their economy implodes from their own mismanagement, and they’re embroiled in domestic problems that may just drag them out of power. Any actions we take that pushes other countries into Belt and Road delays that process, and may even give them the ammunition to overcome it.


#20

Let’s just consider the US’ largest export to China… Soybeans.

Now, let’s look at where China get’s it’s total supply of Soybeans:

Now let’s say that US beans become 25% more expensive because China places a retaliatory tariff upon them.

Prices will increase and this will create opportunities for other suppliers to take advantage of higher prices and potentially increase output. Perhaps output pre-tariff is capped due to costs to expand, but now, South American suppliers will be able to increase prices between 1-24% and still sell for less than US suppliers while incurring no additional costs. Competition between non-US suppliers will prevent gouging, but demand from non-us suppliers will increase, so prices will increase and so will profits.

My question is this…

What prevent’s non-US suppliers from increasing output long term and permanently cutting into US supply? That is, right now, South America supplies 56 million tons of Soybeans to China, what happens if traffits shift that to 60 million or more? And thanks to higher profits, marginal costs in South America decline making Soy cheaper in South America long term such that when the tariffs are removed Chinese companies continue to purchase Soy from South American suppliers reducing US output?

Now I don’t pretend to have all of the facts here, but I don’t think situations like this are unreasonable.

One other point. Ret seems to think that China needs the US more than that US needs China.

Trade between China and the US is a trade for something other than just goods and services. China has over 1 billion working aged people they want to keep employed and they lack the domestic demand to make that happen. The US on the other hand wants low prices that its domestic market can’t supply (either in cost or volume).

So low prices for us and relatively speaking, lower unemployment for them.

So the next question in my mind is who has greater leverage?

The US? Maybe if China was it’s only target, but the US has imposed tariffs on Canada and the EU, which only drive Canada the EU and China closer together.

I think Xi will wait out Trump because Xi, being a lifetime ruler, has more long term control than Trump, especially given that an election is right around the corner. When US consumers see laptops, TV’s, Cellphones and a host of other produces increase in price over the next year (assuming this goes the distance) US consumers will revolt and Trump, as Teflon coated as he has been, will get burned.

Bookmark this and we’ll discuss it 6 months to a year from now…

Of course, there is more than economics going on here. There are geo-political implications I admit that I am unaware of…So if this works out in Trumps favor, I’ll say it now, it won’t be because of how he’s perceived the economics of it…

Thoughts?