Guest Post by Caroline Baum
Every time I hear President Donald Trump articulate — maybe “ramble on about” would be a more apt description — his theory of trade, I want to scream.
Why? Because it makes absolutely no sense. He insists that China pays the tariffs on its exports to the U.S. when it’s U.S. businesses and consumers (mostly) who bear the cost.
For some reason, reporters refuse to follow up on Trump’s outlandish assertions in interviews or at impromptu press gaggles. So I have taken it upon myself to play that role and ask Trump the tough questions about trade, the one subject on which he has been curiously consistent for over 30 years.
CB: Mr. President, you said in a tweet on Sunday that “For 10 months, China has been paying Tariffs to the USA;” that “we have billions of dollars coming into our Treasury — billions — from China” as a result of the tariffs on Chinese imports. Can you explain how that works exactly?
DJT: “The U.S. has been losing $800 billion — not million, billion — a year on trade. We’ve been paying China $500 billion a year for many, many years. It’s a disgrace. Previous administrations let China rip us off. That stopped with Donald Trump.”
CB: Why is buying something you want from someone else at a mutually agreed-upon price “losing?” No one is challenging the notion that China engages in unfair trade practices, but neither is anyone putting a gun to our heads and forcing us to buy stuff from China.
DJT: “We’re charging China tariffs. We’ve never taken in 10 cents from China. Not 10 cents. And now we’re taking in billions and billions of dollars.”
CB: Not exactly. Your tariffs, which as of Friday amount to 25% on $250 billion of Chinese goods and a proposed 25% levy on an additional $300 billion, did increase customs duties flowing into the Treasury. But the U.S. was collecting custom duties on Chinese and other imports before you came along: about $12.3 billion a year, on average, from 2007 to 2016.
In the first six months of fiscal 2019 — from October 2018 through March 2019 — customs duties totaled $34.7 billion compared with $18.4 billion in the year-earlier period. The Treasury expects to receive $69.5 billion in customs duties for the full fiscal year 2019. So yes, customs duties have increased. But you still haven’t explained how China is paying the tariffs.
DJT: “NO COLLUSION! NO OBSTRUCTION!”
CB: Can we please stick to trade? Even your top economic adviser, Larry Kudlow, conceded on Fox News Sunday that China doesn’t pay the tariffs. Is Larry going to be targeted for export?
DJT: “The tariff payments go directly to the U.S. Treasury.”
CB: But they don’t come from China! That’s the point.
Let’s try this again. China receives money — dollars — for the goods it sells to the U.S. It isn’t paying anybody anything.
When goods enter the U.S. from China, the importer — usually a middleman — has to fork over the tariffs, or customs duties, to the Treasury within a matter of days. From there, the importer has some options. He can pass along the full amount of the tariff to his customers. He can eat some of the increased cost, lowering his profit margin. He can try to negotiate a better price with the exporter. Or he can find alternate sources — i.e. other countries — for the goods. In the last two instances, China may suffer, as Kudlow suggested. Only in the third one does China bear the cost of the tariff.
DJT: “Tariffs can be completely avoided if you buy from a non-Tariffed country, or you buy the product inside the USA (best idea). Americans can produce incredible goods for American consumers and the rest of the world. U.S. consumers don’t pay more if we don’t buy from China.”
CB: But we do buy from China! There is a demand for Chinese goods at the prices they charge. I guess you could always slap 100% tariffs on China’s imports and make the bilateral trade deficit disappear. But China isn’t sitting still. China announced Monday that it plans to raise tariffs on $60 billion of American imports starting June 1.
DJT: “Look at all the manufacturing jobs that have been pouring back into this country since I became president! There is absolutely no rush to make a trade deal with China. We’ll see what happens. President Xi Jinping and I have a special relationship. He wrote me a very beautiful letter, which I’m framing and mounting in the Oval Office next to the very beautiful letter I received from North Korean President Kim Jong Un.”
CB: And what about “my farmers,” as you affectionately refer to them? China has already retaliated by placing tariffs on almost all U.S. agricultural and food imports from the U.S. China went from the No. 1 export market for U.S. agricultural products in fiscal 2017 to third in fiscal 2018 to an expected fifth in fiscal 2019. Have you talked with soybean farmers recently? Soybean prices just hit a 10-year low.
DJT: “My farmers love me. I’m taking care of my Great Patriot Farmers with $12 billion in direct aid. And we’re going to use all of the revenue pouring into the Treasury to buy more of their crops than China ever did.”
CB: I presume you’ve heard of “mercantilism,” the idea that nations can export their way to prosperity? It has never made any sense to me. Why use a nation’s scarce resources to produce goods for other countries? It sure doesn’t sound like “America First.”
DJT: “The GDP rose 3.2% in the first quarter. The unemployment rate is at a 50-year low. We have the best economy in history. Tariffs are a great way to make countries stop taking advantage of us. China will be hurt very badly if it doesn’t make a deal because companies will be forced to leave China for other countries.”
CB: So if I understand you correctly, your theory of trade goes something like this: Trade wars are good — and easy to win — because they hurt U.S. farmers (lost exports), U.S. businesses (higher prices for imports of raw and intermediate materials), U.S. consumers (higher finished goods prices), and the U.S. government (support payments for farmers).
No wonder the stock market is giving the latest escalation in the trade war the thumbs down. Good luck at the G-20 summit next month, Mr. President. It’s been a pleasure chatting with you.
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Yep, the textbook free market argument which unfortunately bears little or no relationship to reality. In reality, the USA “powers that be” encouraged manufacturers to move to China….they figured it was a win-win…China would make cheap crap for our consumers and in turn be tied to the “west” or at least be less likely to attack us since we are the cash cow allowing them to build ghost cities, and for the Commies to stay in power…..all it cost us was our manufacturing base, our middle class a $500B annual trade deficit, B’s more in social services (for the unemployed) and the societal costs of having hollowed out our economy by becoming focused on “services” where apparently nobody can make a decent wage flipping burgers or making beds at hotels.
The Chicoms, in turn, were not only happy to take our money, our factories, our jobs and steal our technology but in a classic payback for the British Opium Wars are destroying our society by pumping Fentanyl into the country at an industrial scale zombiefying many citizens. Lastly, the grand bargain as also failed as the appeasement of China for 40 years as only emboldened them to think that they can depose America as the world’ hegemon……Way to go policy wonks in DC….massive and epic failure.
DJT is using tariffs as a tool…and not an end goal to suggest otherwise is just incorrect. Better to have those tarriffs and start to undo the damage done by the bad policy of appeasing China than allowing the continued destruction of the USA. Its not free trade when US companies have to give up their intellectual property and 50% of the business to operate in China. Its not free trade when every product sold by China seems to have illegal intellectual property stolen from US or European companies. Suck it up Buttercup……reality can be hard but its the only way to get to a better place.
Yep, if it was going to be easy it would have been done long ago. It just may turn out to be painful for all and we have people rolling over already. This is the hail Mary that some have waited for because the next administration will go back to biz as usual. Think pay for play like creepy Joe and son.
Martel-Fuckin aye
Caroline Baum. Nuff said.
Been laughing at her for years.
America’s manufacturer’s were driven from America by 40+ years of legislation and regulation that increased their costs and priced their products out of the market. In other words, they were TAXED out. Forced to decide between perpetually declining revenue unto bankruptcy, or moving operations to someplace where they weren’t taxed. When the ever-declining cost of distribution and shipment (to their U.S. customer base) dropped below the costs of environmental regulation, workplace regulation, and — inclusive of all — LITIGATION; they moved.
Tariffs could be a necessary part of bringing manufacturing back to the U.S.; but only if the TAX here is lowered at the same time. Otherwise, the effect is simply to increase prices without impacting where items are manufactured. They won’t return until it costs less overall to produce here, than it does to produce in China, et al., and ship here.
We’ve only ourselves to blame. Nobody worried about competition in international trade until AFTER we had, for decades, fucked ourselves in competitiveness.
Trump’s tariffs could, theoretically, be a great start; …. but, in the end, they won’t be.
The only real question is whether Trump knows this or not. Is this just more distraction? A meaningless theatrical flourish by a circus ringmaster? Or is there real intent behind it?
And, is the intent a trade war for trade war’s sake because the globalists feel that China has gotten too big for its britches? Just askin’.
Good comment, Msz, but I will amend one thing – for the most part, manufacturing has not left the US. As a percent of GDP, manufacturing is largely unchanged over the decades. What has happened is that it has become heavily automated. And the equivalent of around 65 million manufacturing jobs have been lost to automation since the 1950s.
Even if manufacturing were to come back – it will not, owing to the cost reasons you mention, which will remain lower in Thailand, India, etc. – there would be few jobs created.
Trump crows about 400,000 additional mfg jobs being created in the last 2 years. He fails to mention that that number is only about a 3% increase in mfg jobs, at the same time GDP went up over 6%.
So, manufacturing jobs as a percentage of the workforce is not even keeping up with GDP – and mfg jobs as a percentage of the workforce continues to fall. And will continue to do so unabated.
So, the trade war will give the US all the pain, and little of the gain. It will not be pretty.
Genetics: What Happens When You Crossbreed a Cartoon Villain with a Child That Has the Attention Span of a 3 Month Old Puppy – A Pictorial Guide:
More Images:
GFY.
Please get back on your meds!!!
Did you pull your meme off of some post on Mother Jones?
An Aussie that has TDS, what are the odds….
MAGA
I just love these Johnny-come-latelys WHO DID NOT UTTER ONE PEEP OF PROTEST DURING W’s and BO’s presidency while China stole our technology, enacted tariffs, decimated the blue collar middle class, destroyed whole industry’s and took our manufacturing jobs!!!!!! Now that President Trump is trying to do something to correct these years of abuse allowed by Liberal Democrats and Establishment Republicans, we have these LOSERS coming out of the woodwork who didn’t give a hoot about what China was doing to us all these years!!! Caroline, you and your buddy Tom are truly disgusting and hypocrites of the highest order. Go mutilate yourselves!!!!!!
Mustang – so, you think China stole the blue collar jobs? You really need to get a clue. Automation killed those jobs – 65 million of them. Americans began to consume more – lots and lots more. China happily supplied all that consumer shit. Americans began to think that they were eternally blessed, and acted with zero concern for the future.
Sure, China does not play fair. But their part in destroying the blue collar jobs was minuscule in relation to what automation did. High paying blue collar jobs putting nuts on bolts disappeared, as high pay for such menial tasks was never going to be a long-term phenomenon.
China did and do indeed steal, cheat, etc. But Americans were happily spending themselves into oblivion using credit, letting their education system decay, letting their infrastructure decay, giving money to the parasites, letting their family structures decay, letting Mexicans flood in by the tens of millions, letting violent black culture thrive, letting the govt accumulate unpayable debt, letting union drone govt workers collect unfundable pensions, etc.
Those things had zero to do with China. That shit is on the American people. China had almost zero to do with decimating blue collar jobs. The blue collar jobs were never a long term option, and the blue collar folks made the noose for their own necks by not using that once in a lifetime opportunity to set themselves and their children up for the future.
Stupid is as stupid does. And the American people squandered their golden opportunity and borrowed against the golden eggs, then ate the damn golden goose, and will bear the burden of those mistakes for generations to come.
Good lord, LLPOH. Gut shot.
Wip aka DB – I get sick and tired of folks that want to place the blame everywhere but where it actually belongs. No one did this to the US – they did it all to themselves.
The US had the world by the nuts. It was largely unscathed after WW2. Its manufacturing system was roaring, it had resources, it had the best form if govt EVER created. And now it is fucked.
It ruined its education system, it ruined its culture, it destroyed its family system, it let crony politicians remain in office, it generated debt so large the mind cannot even conceive of the total, it let illegal immigrants stream in, it involved itself in untold foreign wars at the cost of untold American lives and perhaps millions of others, it rebuilt its enemies only to see them become its enormous economic competitors, it created a welfare state and removed personal responsibility from its citizens, it generated massive amounts of personal debt and debt driven consumption, and it put the banksters in charge of the fucking money supply.
And these fucking morons say shit like “the Chinese decimated the blue collar middle class”. Are you fucking kidding me? This was the Chinese’ fault? Seriously, these people are too stupid to pour piss out of a boot.
The fucking Chinese saw an opportunity, and they took it. They saw the US was acting like a pack of drunken imbeciles, and took the opportunity that was presented to them on a silverbfucking platter.
Fucking imbeciles have no clue. Tariffs will fix manufacturing! Fuck no they will not. That ship has sailed. The US had the chance to catch another ship, but instead kept waiting on someone to raise the fucking rotting hulk that is manufacturing, and that hulk will never float again.
Fucking dipshits – it is the fault of the Chinese! For fuck sake, they never forced anyone to but any damn thing. I have posted time and again links to where Americans can buy any damn thing they want American made, but they will not do it. Stupid is as stupid does. Dumb fucks buy that Check nese shit and then blame the Chinese.
You cannot underestimate the stupidity of the Average Joe. No matter how stupid you think they are, they are way stupider than that.
Well, at least it presents enormous opportunity for me and mine., and those like me and mine, many who inhabit TBP. The lazy, uneducated, blinkered dumbfucks at least serve the purpose of being sheep to the carnivores of the world. Wolves gotta eat too.m
I usually do not support what Lloph has to say as some of it is pure hogwash. However, he is 100 percent spot on regarding automation. I live in Memphis, Tennessee and went to the Burger King to get a Chicken Sandwich. There on the counter were two self order kiosk. You know why they are there? Fast food chains can’t can’t increase the cost of their goods to offer higher wages for counter help. This move to fifteen dollar an hour fast food wages will cause millions of kids and seniors to become unemployable. They will be replaced by automation. I recently read about McDonald’s opening a store in Phoenix, Arizona that only has two employees. The store is supposedly totally automated. The two employees are there to receive supplies and maintain the equipment. Even Walmart has now decided to eliminate greeters at the door. They will be replacing them with an automaton that says welcome to Walmart when you enter the store.
Lloph’s advice to learn a trade that can’t be automated is very sound. You should be encouraging any children that you can reach to do so.
Someone should post Brandon Smith’s most recent masterpiece as its own thread..
He explains the trade war within the faux populist pied piper, centrally planned, supranationally-powered BIS central bank currency race to the bottom
http://www.alt-market.com/articles/3761-america-will-lose-the-trade-war-because-that-is-what-globalists-want-to-happen
The previous article by Brett Arends makes this author sound like an idiot.