The simplistic solution to our trade deficits and outsourcing of American jobs to Asia is to slap 30% tariffs on imported goods. That is how Trump says he’ll bring back the jobs and make America great again. It seems China only accounts for half our annual trade deficit. A few other countries make up the difference. Trump would have to start a trade war with just about every major country in the world to bring back those jobs. We import $2.2 trillion of goods and export $1.5 trillion of goods. When Trump slaps that 30% tariff on those imports, what do you think the rest of the world will do regarding our $1.5 trillion of exports? One guess.
How will households who haven’t seen an increase in their real household income since the 1980s handle a 30% increase in the cost of virtually everything they buy? Do you think any domestic jobs might be lost due to the 30% tariff? Do you think inflation might go up a little? What about interest rates to offset the rising inflation? I wonder what that would do to interest on the $20 trillion national debt.
Simplistic campaign slogans sound good in theory. The reality might be a little more complex, with a few unintended consequences.
The United States has ran an annual trade deficit for 40 years in a row now.
Last year was no exception, and in 2015 the U.S. had over $1.5 trillion in exports while importing $2.2 trillion of goods. The resulting trade deficit was -$735 billion.
Today’s map from HowMuch.net, a cost information site, helps put this most recent information into perspective. Keep in mind that a trade deficit also means an outflow of domestic currency to foreign markets, as the U.S. is spending more money abroad than it is bringing in.
Here’s where that currency went:
(largest negative trade balances)
- China: -$365.7 billion
- Germany: -$74.2 billion
- Japan: -$68.6 billion
- Mexico: -$58.4 billion
- Ireland: -$30.4 billion
China alone represents about 50% of the total trade deficit. In comparison, Europe only adds up to 23% of the overall negative balance.
The United States also has smaller, positive trade balances with some nations.
Here they are:
- Hong Kong: $30.5 billion
- Netherlands: $24.0 billion
- Belgium: $14.6 billion
- Australia: $14.2 billion
- Singapore: $10.4 billion
Even if the U.S. multiplied its largest positive trade balance (Hong Kong) by a factor of 12x, it would only just then be enough to even out the deficit with China.
Hong Kong is not longer a country but a part of China, its surplus not really a surplus as such.
Germany sort of surprises me as a deficit, I didn’t realize we had that much of a trade imbalance with them, wonder what accounts for it? Vehicles?
If the tariffs are accompanies by an end to the anti-business atmosphere promulgated by the government, I don’t see why local innovation won’t quickly move in to attempt to pick up the slack. When entrepreneurs aren’t fearful of, say, IRS or EPA raids, 5 years of permit hell to start a business, TARP bailouts, and frivolous DOJ minoritiy lawsuits, they will produce again. It’s likely a Trump administration will do this, just by appointing sane bureaucrats to head the various alphabet agencies.
You advocate to keep drinking rather than to sober up and face a hangover. Hang onto our measly 1.5 trillion in exports so that it can slowly be whittled away to even less over the coming decades as the rest of the world consolidates its economic domination over the U.S. Well perhaps business will have to suffer, while this country decides to start protecting its own interests again, instead of being the bleeding heart to the world. We will be better in the long run. Anyway, we can still maintain our exports by exporting millions of illegals, who only send the bulk of their money home anyway.
I don’t advocate anything. I am simply pointing out inconvenient facts. There will be plenty of pain to achieve the gain.
China and U.S. – both apply tariffs on each others exports, but China has a big advantage on the number and amount of tariffs.
I agree with tumbleweed.
Admin, you must not have gotten the memo. It’s like this – trump is such a skilled negotiator, and ‘knows all the good words’ that the will negotiate the law of unintended consequences out of existence.
Jim, it’s a great subject that needs to be openly debated. Kudos for putting it up. Tumbleweed is right on the money, in a vacuum, tariffs would be a disaster. But there are many more pieces to the puzzle. I’m pretty sure trump understands this, judging by his tax plan. It could turn out good a different way, also. Maybe Asia would choose to abandon the slavery model and pay wages. That would be good for everybody. I’m on the road today, I love this subject, but won’t be able to add much for now.
starfcker
I haven’t seen Trump’s detailed comprehensive plan. Can you send me a copy?
Thus the era of Pax Americana slowly fades. We are entering a period in which we are no richer than the rest of the world — we have exported our wealth and prosperity in exchange for goods and services. On top of that, we have served as the world’s policeman in an effort to keep commerce flowing.
As Murrow put it, “Good night and good luck!”
If it sounds too good to be true…
Politicians will always make statements that sound good as soundbites and thus get people to vote for them. Think of the clueless morons who believed, “if you like your health plan, you can keep your health plan.”
Same thing, different day. The reality of implementation is always a bitch.
Here you go, jim.
That’s your brilliant fool proof plan. Can you send me a link to where I can read up on Trump’s trade and tax plan to make America great again? I’m really interested in the details. Businessmen always have detailed financial analysis before undertaking any large project. Right?
Damn ,those are some pretty Asians gals in those ads. What’s the trade deficit on pussy ?Maybe I could order one or two. Probably be better off just buying a blow up doll.
bb
You made me laugh. Click the damn ads and make me some money.
Can a country have a trade deficit forever without repercussions?
BB likes Asian girls. Interesting. Can’t say I blame you. They are sweet. Unfortunately, I’ve developed an aversion to them thru the years because they always want to touch my red hair and it makes my wife feel jealous and insecure. Oh well. Rock on BB. I prefer blondes, anyway. These are the links I click on here on TBP. I tell myself I’m helping out Admin in keeping TBP viable. Some things are just too important. This works for me. 🙂
“bb — You made me laugh.” ——- Administrator
CONGRATS to you, bb!!! You are now officially a beloved poster on TBP! Make Admin laugh just one more time and you will get a free Lifetime Membership. At this rate, in 100 years you just might attain Big Dog status.
Also, from looking at the map, it is very clear that all we need to do is sell more shit to Belgium. I’m sure Donald will work out a YUGE DEAL with that country.
Imposing a tariff on imported goods leads to a host of unanticipated problems.
These problems lead to the bane of American tax policies since the founding of the country: the crisis of 1832 when South Carolina threatened to secede from the union; high tariffs were also the driving force that sparked the so-called Civil War.
Here is the crux of the problem. Suppose a 40% tariff is imposed on all imports of steel. On the day such tariffs take effect, domestic steel producers hike their prices 40%, which is all profit. Consumers of steel products are shafted, whether they buy foreign or domestic steel.
What’s the solution? If there are to be tariffs, they should be accompanied by excise taxes on domestic producers that compete with tariffed imported goods. This removes the windfall to domestic producers while it doesn’t do much for domestic consumers.
Now, we have to go one step further: we have to realize that ANY TAX (from income to property) that is not also imposed on foreign producers or property (regardless of location) represents a subsidy of such foreigners. (http://redressone.wordpress.com/turncoat/)
The solution? Make all income and property in this country tax exempt. This is, in fact, how tax laws are written – but not enforced – in this country (http://redressone.wordpress.com/plantation-america/).
Don’t hesitate to have these findings validated by your lawyer.
@Admin: You KNOW the answer to the details of Trump’s trade plan….there isn’t one. He also doesn’t have a great plan to replace Oblundercare, other than something about “erasing the lines around the states”. We’ll have some truly fucked-up maps thereafter.
“We import $2.2 trillion of goods and export $1.5 trillion of goods. When Trump slaps that 30% tariff on those imports, what do you think the rest of the world will do regarding our $1.5 trillion of exports? One guess.”
No surprise there, so the obvious question is why can’t Trump, a very successful self made billionaire, see it too?
If he can, that’s probably even worse…
Armstrong seems to get it right no matter what.
The West IS going to crash and burn and the East rise to dominance, nothing can stop it.
Jim, that’s a fair question. Remember this, trump currently has no power. Providing a detailed blueprint of who and what his targets might be, many who might at this moment hold significant power, would be political suicide. When I have some time tonight, let me see what I can dig up. Fucker talks a lot, so there is more out there in bits and pieces than you might be aware of. His policy positions on his website are mostly marching orders with specific goals in mind. Here’s where we want to go, and here’s the northstar of what we intend to accomplish. The tax plan is fairly specific. I believe he has far more specific ideas of how to get things done, but we won’t see them until rollout.
We went through this tariff crap with Smoot/Hawley, back in the 1930s. It not only clobbered our economy, it dragged down the whole damned world.
‘Those who won’t learn from history…”
The saddest sayings of which I know: “It can’t happen here,” and, “It’s different this time.” Bullski-shitski.
Jim, his position papers probably are the best place to start. The china one and the tax one are the ones relevant to this discussion. The china one has some detail about how some of his proposals interlock. https://www.donaldjtrump.com/positions
An American company producing for the American market abroad pays the tariff. If the company moves back the tariff is Zero.
Foreign companies may also move capital to the U.S. . Build here and your tariff is Zero. Perhaps a negative tax to incentivize is initially required. Produce here and get a refund.
Greetings,
Math isn’t hard.
1. We want 2.2 trillion worth of stuff. This is what we have demonstrated that we want.
2. If we imposed a 30% tarriff on stuff then other people wont buy our 1.5 trillion of corn or whatever.
3. If tarriffs are high enough, no one will sell us anything and we’d have to produce the 2.2 trillion worth of stuff ourselves. After all, we’ve demonstrated that we really really really want stuff.
Making the stuff ourselves means that we keep 700 billion dollars a year right here at home. We could probably have full employment and the necessity of having to work within the confines of such tarriffs would promote creativity and productivity – exactly what we need.
Of course, none of this will matter a bit if robots take all the jobs – never mind.
NicklethroweR
The masses wanted the stuff because it was super cheap. They needed it to be super cheap because their real wages haven’t gone up in 30 years. The tariff may do what you say over time – maybe 5 to 10 years. It will also result in a dramatic decrease in consumption because the masses can’t afford 30% higher prices. The country is currently configured to generate 70% of its GDP from consumption. We may get to your desired end result, but we’d need to get through a deep depression first. No gain without pain. Will Trump explain the pain?
GREAT succinct post, nickle
bb , your tastes run parallel with those of other great Pro-Amnesty Republicans.And FWIW Asian do love them some cat.Keep an eye on little bb if you go the slant eye route.
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Diverse Brookings mouthpieces all agree. Free trade works for corporate globalism. Its not the fault of the Corporatocracy if there are no jobs outside the system of government graft.Why should consumers worry about jobs when the price of goods are so cheap? Be happy with what you’ve got..eh.
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But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.
Marx & Engels, On Free Trade (1848)
I’d like to know more about tariff rates that US producers face exporting into other countries. I couldn’t find anything with a quick search.
I remember a speaker at an agriculture meeting, about fifteen years ago, stating that US ag exports faced an average global tariff rate of something like 30 to 40 percent, while ag products coming into the US were taxed a tariff rate on average of about 3 percent.