Guest Post by Paul Craig Roberts
The first thing to understand is that it is not a trade deal. It is Trump backing off his tariffs when he discovered that the tarrifs fall on US goods and American consumers, not on China. Trump is covering his retraction by calling it a trade deal. China’s part of the deal is to agree to purchase the US goods that it already intended to purchase.
The purpose of tariffs is to protect domestic producers from foreign competition by raising the price of imported goods. What Trump, his administration, and the financial press did not understand is that at least half of the US trade deficit with China is the offshored goods produced in China by such corporations as Apple, Nike, and Levi. The offshored production of US global corporations counts as imports when they are brought into the US to be sold to Americans. Thus, the cost of the tariffs were falling on US corporations and US consumers.
Tariffs are not an effective way to bring offshored US manufacturing home. If Trump or any US government wants to bring US manufacturing back to the US from its offshored locations, the way to achieve this result is to change the way the US taxes corporations. The rule would be: If a US corporation produces in the US with US labor for US markets, the firm’s profits are taxed at a low rate. If the corporation produces products for the US market abroad with foreign labor, the tax rate will be high enough to more than wipe out the labor cost savings.
As I have emphasized for years, the offshoring of US manufacturing has inflicted massive external costs on the United States. Middle class jobs have been lost, careers ended, living standards of former US manufacturing workers and families have dropped. The tax base of cities and states has shrunk, causing cutbacks in public services and undermining municipal and state pension funds. You can add to this list. These costs are the true cost of the increased profits from the lower foreign labor and compliance costs. A relatively few executives and shareholders benefitted at the expense of a vast number of Americans.
This is the problem that needs to be addressed and corrected.
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Maybe you should run for POTUS…. or, just stfu and let Trump do his thing.
MAGA
Explain me these downvotes? There’s no difference between a Trump tariff and the super awesome mystery tax proposed by the OP. Is there that much vitriol ’round here for His Excellency?
“If a US corporation produces in the US with US labor for US markets, the firm’s profits are taxed at a low rate. If the corporation produces products for the US market abroad with foreign labor, the tax rate will be high enough to more than wipe out the labor cost savings.”
Ding Ding Ding …we have a winner.
And more proof the criminal Federal government does not work for US.
The result would be a protected US industry. That means high cost, low quality, reduced ability to compete world-wide.
Instead, just eliminate corporate tax and red-tape, and allow business the chance – not the guarantee – to compete successfully.
I read over the trade deal, and here’s my take. China agreed to buy an extra $200B of goods and commodities for the next 1.5-2 years (most of which can easily be stockpiled.) There’s no commitment on their part after that, at least that I could see. What does the US get? Our banks and bond rating agencies get access to the Chinese market, which on an ongoing basis could be worth $trillions. So the real long term winner in this trade deal is the banking cartel, not Joe Sixpack.
Aw fuck. I thought it was a trade deal.
Yeah, that’s the problem. Nothing to do with billions of the world’s reserve currency being printed daily out of thin air that we can trade for real goods. China is getting what is essentially counterfeit money and we’re the ones getting screwed?
“The rule would be: If a US corporation produces in the US with US labor for US markets, the firm’s profits are taxed at a low rate. If the corporation produces products for the US market abroad with foreign labor, the tax rate will be high enough to more than wipe out the labor cost savings.”
Ya mean a disincentive tax like a fucking tariff? Brilliant. And to stop American corporations from transferring ye alternate disincentive tax onto consumers, we’ll need price controls. This post has no credibility with me.
As I recall the offshoring really got rolling after NAFTA went into effect, and Clinton didn’t have to sign it, but that’s history. What I’m most thankful for is Trump getting us out of the TPP. I think that move had impact allowing Brexit as well. Time we took care of our own and make the bastards who’ve been screwing us for decades pay up!
It’s worrisome that the Democrats and many establishment Republicans passed the USMCA together; what poison pill is in it?
Trump has been the only one who has stood up to China and the raw deal the American people got from NAFTA and other trade agreements. I support the tariffs 100%. We should realize that the American corporations and Government conspired with these trade agreements to screw the American workers and Citizens.
China is not our friend, and we will one day most likely end up in a war. Thanks to the traitors in the corporate and government circles, it will probably be a war we will lose….