Bloomberg reports China Trade Outlook Darkens as Trump Threatens Total Tariffs.
>Trade data for August released Saturday echoed both the cause and effect of the standoff with the U.S. — the surplus with the U.S. rose to a record, while overall export growth slowed. A lone bright spot may be faster-than-expected import growth, signaling that domestic demand in the world’s second-largest economy is holding up for now.
>“With further large-scale U.S. tariff measures imminent, Chinese exporters will be hit hard and China’s GDP growth rate in 2019 is likely to be dented,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. “If the U.S. keeps ramping up its tariff measures against China, the export sector will face a long, hard road ahead despite government measures to mitigate the impact.”
>Hours before Trump’s Friday threats, China announced measures to support some of the exporters targeted by the barrage of higher duties. The Ministry of Finance said it will raise export rebate rates for 397 goods, ranging from lubricants to children’s books, meaning that firms shipping such products abroad will pay less value-added tax. The new rates will be effective from Sept. 15, the ministry said in a statement on its website.
Misleading Chart
I added the arrows to the Bloomberg Chart.
The chart is misleading because it compares on one scale absolute increases, but year-over-year percentages increases on another.
At first glance it appears as if China exports are declining. Rather, only the growth in exports is declining. That said, the US is bearing much of the brunt of it.
Trump Eyes Another $267 Billion In Tariffs
On Friday, I commented Trump Eyes Another $267 Billion in Tariffs (And He’s Foolish Enough to Do It).
That $267 billion is in addition $200 billion in tariffs not yet scheduled.
Will It Work?
The short answer is no even though China does not import $467 in goods from the US. But it can penalize some products heavily.
It can also reduce export VATs as noted above.
Finally, tariffs are not on a tax on US consumers, they also serve to strengthen the US dollar hurting the very exporters Trump seeks to help.
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Interesting: “The [Chinese] Ministry of Finance said it will raise export rebate rates … meaning that firms shipping such products abroad will pay less value-added tax.”
Seems like the US tariffs will in effect be paid by the Chinese government — and not by the US consumer. If US Congress-scum can be prevented from screwing things up, this would mean less US government borrowing. Sounds like a big win for the US population!
Of course, the Chinese government is going to have to paper over its lost tax revenue somehow — not so good for the Chinese population.
Transferring money from the Chinese government to the US one, benefits Chinese people. Not Americans. It’s not as if either population suffers from a government too small and underfunded.
Buying a Chinese product is a second choice for me because of quality and environmental concerns. When I choose Chinese therefore it is because other products are not available at a price I can pay. Adding tariffs means I will just buy less. It is doubtful I will decide to buy more overpriced US product as a result. Probably just as well for me to make do with less but somebody somewhere will have less work as a result.
How much of this was Chinese rushing products into America to beat tariffs?
This whole focus on “trade deficits” sure seems like counting angels on pinheads. At best.
“Trade deficits” seem to be some kind of measure based on geographic territory – countries, usually. Why?
There are whole industries for which the concept of a territorial “trade deficit” has no meaning. Electronics, cars, and telecommunications come to mind. Do you know of others? Each identifiable product in these industries is conceived, created, and built all over the world. And no one, not you, not me, not the globally distributed people who put together final parts lists, knows where the parts, themselves, come from. And companies that put these products together have huge incentives to report what they want to report so far as dollars-per-territory. As do the taxing entities of these territories.
So what is a “trade deficit”? And, how is it even possible that the entertaining statistics we see reflect a reality?
Calculating domestic content for products is yet another regulation crippling US industry. In some cubicle somewhere someone is looking up and tabulating where each washer and screw used in your new car came from. A nice new job for the cubicle dweller but your new car quality is unchanged with a higher labor cost.
This is the kind of “jobs” the US has been creating singce Nixon went full retard. FIRE, legal and regulatory. Not one of which is creating much, if anything at all, of value. Many/most of which are flat out destroying it.
You know things are pretty dire when the once-upon-a-time Land of the Free is being outcompeted in productive efficiency by a bunch of saps stuck under what is literally communist rule. But as long as the ever dwindling supply of productive people in the US are being shaken down for more by the FIRE, legal and government sectors than productive Chinese are by their commies; even communism cease to seem all that bad by comparison.
Trump’s tariffs cause the USD to strengthen making US exports less competitive and US imports less expensive. The result: a trade deficit that explodes every time Trump opens his big ignorant mouth. He is completely clueless.
Despite the tariffs the trade deficit grows. Looks like it is time for an all out ban of Chinese products.