Steve Forbes, Arthur Laffer, Fred Smith, and Stephen Moore on the Committee to Unleash Prosperity ask Trump to seize the high ground and give U.S. firms an advantage.
Please consider the WSJ Op-Ed Mr. President, It’s Time for Zero Tariffs.
> Congratulations on the new U.S., Mexico, Canada Trade Deal. By keeping trade barriers as low as possible across North America, this USMCA will benefit businesses, workers and consumers in all three countries.
> We are writing to recommend that as you continue to negotiate new trade deals with our other allies, you pursue the endgame goal of zero tariffs. You have said on several occasions that your objective is not protectionism but to create “a level playing field” on trade. You have even suggested to our allies on several occasions that both sides “drop all Tariffs, Barriers and Subsidies!”
> We hope that you will continue to push this solution with Britain, the European Union, South Korea, Japan, and other allies. The “zero for zero” offer should include three components: zero tariffs, zero subsidies and zero nontariff barriers. The last has been a big problem for American companies in penetrating many foreign markets.
> This will help American businesses expand markets overseas and create more jobs and wealth both abroad and here at home. Zero for zero on tariffs will give American companies an advantage because, as your own Council of Economic Advisers reports, the average American tariff is 3.5%, while the average EU rate is 5%. China’s is nearly 10% and the world average is around 10%. On a level playing field, American companies and their talented and productive workers can compete with anyone, and U.S. exporters—from farmers to manufacturers to tech firms—will benefit enormously if trade barriers are abolished.
> Strategically, offering the carrot of zero tariffs will allow America to seize the moral high ground in the trade debate. It will also put the U.S. in a stronger position as you negotiate with China to end some of Beijing’s most abusive trade policies.
I endorse that letter 100% while adding. the US should do this regardless of whether any other nation follows. Business and jobs will flock to the first nation that does so.
Addendum
Disappointing comments from readers who believe in tariff parity.
Increasing tariffs because another nation does is pure silliness. It is tantamount to saying if another country does something stupid, we need to be stupid as well.
Tariffs are a tax on consumers and importers of usable goods such as steel. If China is subsidizing steel it is to the benefit of US manufacturers who use steel as well as consumers who pay lower prices for goods.
It is absolutely correct to reduce tariffs, regardless of what other nations do, on that basis alone.
Production and jobs will flow to the US if we eliminate tariffs. Consumers gain from lower prices, and even our exporters who use intermediate goods (again steel is a prime example), benefit.
Mike “Mish” Shedlock
Pursue Free Trade and be eaten alive like the USA and the second Reich did to the British Empire.
Trade policy has massive long-term ramifications on the strength of a nation’s economy. Often people fail to note the difference between free and fair trade. In many ways, the global economy has become an ill-regulated business model tilted to favor big business and giant conglomerates. We should not lose sight of the fact that while free trade is important, fair trade is far more so and should be the main issue.
Nationalistic exploitation of trade agreements has occurred throughout history and it is naive to think such schemes will suddenly end. Developing a long-term sustainable economic system that is balanced would also contribute to global cohesion and the world economy. The article below delves into how the promise of widespread prosperity from trade has fallen short with benefits flowing to a limited few.
I would like to see ConGress working on a one page trade law: “Effective in 60 days, all laws affecting trade in any way are hereby repealed.” The back would have a watermark: “This Page Intentionally Left Blank.”
But that couldn’t work alone. Along with that sort of open borders for trade, people would want to cross too. So to make sure the immigrants want Freedom – not Free Stuff – every aspect of the welfare state – anybody receiving big.gang.guv money – would have to end. All of it.
But since fiat / fractional reserve bankstering prevents saving, that would have to end too. What an extraordinarily complex puzzle. 🙂
Those (now) immigrants would want to / have to work, and small biz is the real engine of jobs, so we would have to repeal all tax laws, because by their nature they favor big.gang.biz and Fascism. Bezos can’t have His Billions with armies of minimum wage slaves without favorable tax laws and the welfare state making it possible.
The Collective Farms created by the Bankster class of the 1930’s will end suddenly with the advent of a petrol or credit crisis anyway, so all laws favoring them would have to be repealed. Small farmers will either take them over in abandonment, or like the foreclosing Banksters of the 30’s, for pennies on the dollar.
Denninger has the “heath crisis” covered, the other leg of the BigMAC (the Big Medical Agribiz Complex), so tell ConGress “Just do it!”
Gee, if we repeal the entire United States Code, this begins to look like 1785, when the people had ZERO connection with a tiny trade association between states – funded by tariffs(!) – called the United States.
NOT having a wall is an existential threat to USA and Americans and without a wall illegal immigrants and drugs flow to USA.
ACA removal is issue which only excites small numbers of Republican activists.
Trump already removed the forced mandate so nobody is anymore forced to buy Obamacare coverage.
Trump has now even started saying that pre-existing conditions coverage will be protected.
The problem with ACA aka Obamacare is that it tried to fix an insurance problem of getting everyone insurance when the problems in insurance are just the symptom and the actual problem is cost of healthcare which is high because lack of competition.
If the cost of healthcare dropped then most people could pay cash for healthcare not needing insurance and if they wanted insurance it would be much cheaper.
Denninger has written a good list how to fix healthcare problems:
That was written by an affluent libertarian. It’s ridiculously over simplified. How about something a lot easier. Single payer universal healthcare. Let us use the oft cited horrible Canadian system as an example. They have much better healthcare outcomes that is well documented. Half per capita costs and overall a higher satisfaction rate than the USA. That alone would make the US more competitive. It would cut costs by about 8-9% of gdp. You can incentiveize fat Americans to live a healthier lifestyle by giving tax rebates to those that do or make those that don’t pay higher co-pays.
I just had a tariff related idea:
Tariff rebates:
In cases where for example there are tariffs on some materials that are not manufactured in USA there should be tariff rebates for the products USA companies manufacture from tariffed materials in USA but then export abroad.
So if a company uses tariffed materials to build products and exports 30% of their production outside of USA they should get a 30% rebate from the amount of tariffs that they paid for the tariffed materials.
This way US companies exports will stay competitive even with the materials they use in manufacturing being tariffed.
I am surprised how few people understand Trump is a complete fool on Trade. The EU even offered to remove all tariffs. Supposedly Trump’s goal. Trump refused. He is a liar and a fool on trade. Moreover, as I have explained, if China wants to subsidize the US, it is to OUR advantage. Trump’s legitimate gripe is on IP theft. Tariffs are not the solution.
There is no need for Ad Hominem attacks on the President. What is needed is deeper understanding.
Short term, getting subsidized products from China benefits some Americans — those who did not get their income from making the products which Chinese imports replace. Longer term, getting subsidized products from China harms most Americans, through the loss of jobs, the loss of government tax revenue, the loss of industrial capacity, and ultimately loss of independence. Surely no-one believes that the Chinese are subsidizing the US out of the goodness of their hearts?
100% agree.
Consumption based economy where the consumption is kept up with ever increasing debt at all levels in federal government, states, cities, companies and consumers is NOT a functioning long term solution.
Without Fed pushing money into economy and keeping rates artificially low, without bank regulators looking the other way and letting banks again multiply the money at debt-frenzy levels, without 2009 suspension of FASB accounting rules allowing for the hiding of bad debts in balance sheets and letting banks earn their way out and without ever increasing debt levels everywhere the consumption capitalism model would have crashed in 2009.
However the debt bubble was blown even bigger and the debt bubble became truly global with China and EU and almost every country increasing debt levels at huge speed.
This can NOT continue so the only options for USA are to bring manufacturing back to USA so there is something backing the dollar or keep going until USA is Venezuela with NO production other than currency.
The problem with Trump is that he is right on trade and tariffs and protecting US jobs and US workers that are the assets of any country but Trump has also blown deficits to double the Obama levels.
This is not sustainable long term so the production, jobs, wages and economic activity has to be brought back to USA rapidly and the immigration (both illegal and legal) of low wage workers that pay no taxes or pay less taxes than they consume services and benefits has to be stopped quickly or the deficits become unmanageable.
USA is paying 700+ billion dollars a year in interest on federal debt.
The wall would cost 25 billion ONCE.
All democrats and many establishment Republicans claim that the “huge” cost of the wall is reason not to build the wall.
Both Senate and House are filled with politicians that are 99% totally economically incompetent…
Mish is right that having zero-on-zero tariffs with countries with comparable wages, comparable work regulations, comparable environmental rules and that do not practice mercantilism through currency manipulation would be the most logical and efficient solution so in future USA could have zero tariffs with EU both ways, at least in theory.
However China is a completely different thing.
There should be no zero tariffs towards China and instead Chinese environmental, wage, workplace and currency manipulation abuses should be stopped through additional tariffs.
Also I find it hard to believe EU was willing to remove tariffs on agricultural products and no one person in EU has a right or ability to offer zero tariffs since 27 countries have to agree and have things ratified by their parliaments and I am 100% sure France would stop any deal that would put agricultural products at zero tariffs because Macron would not like to drive around when angry French farmers block roads and burn manure to protest him if he would do such a thing as approve zero tariffs on agricultural products.
Also Germany has many non-tariff ways to protect their industry through regulations and Germany (with France) is the one who mostly decides EU-rules so EU would also have non-tariff ways to protect German industry and French agriculture in zero-tariff situation.
I have never heard that the EU made that offer
I doubt the EU offered to remove all tariffs. Politico reported the European Trade Commissioner stated agriculture would not be included in the offer. Also, there are ways to restrict trade other than tariffs.
As I see it, the problem is really one of mismatched regulations. If the US believes its regulatory environment is fair and just for all, then it is counterproductive for it to provide a way to cheat those regulation via free trade. Either restrict trade with countries that do not abide by those same regulations, or remove those regulations in the US so local businesses are not burdened with an unreasonable handicap.
The economic combination of unilateral free trade and uncompetitive local regulations stalls out when few produce anything locally and consumers have maxed out their credit cards.
I could almost see the strings and visualize the puppeteers behind The Shrub and the Telepromper In Chief. Not so easy with Trump because of his erratic message.
However, he is a spokesmodel, but we may not want to ask “for whom.” No human has the capacity to think all these issues through like committees of dozens would. And the administration is still riddled with Globullist Traitors serving a different master, un-fired holdovers from the Collectivist Regimes of the last 30 years. No surprise about the mixed message.
It doesn’t really matter whether something is silly or not, human nature is unstable, as pendulums swing back and forth, changing people’s attitudes as cycles progress.
Glass-Steagall was created to prevent what is happening now from ever happening again. Then it was dismantled so that what is happening now could happen again.
Nothing stays the same.
The economics of the world’s countries is not one size fits all. There are numerous currencies of different values. There are different standards of living and standards are rising or falling depending on which country one resides.
If everyone went to ZERO tariffs tomorrow, it would only be a matter of time before some countries would be rebelling against it. Same for a gold standard. It works until it gets in the way, just as Glass-Steagall did.
What surprises me most about Laffer is he has a theory that too low or too high a tax rate generates lower tax revenues than expected; and yet he supports a 0% tariff. A self contradicting “expert” can’t be taken seriously.
That makes no sense? A tariff is not the same as income tax.
Tariffs are bad. Income taxes are even worse.
I am trying to decide if it is funny or sad that so few people understand what Trump is doing. He is using ultimate negotiation to get what he really wants which is to get free trade. He is fighting fire with fire. I am really impressed with him. Very few people understand negotiation, even though he HAS SAID no trade tariffs or barriers are his ultimate goal. Imagine using tariffs and trade barriers to get free trade! I am loving it.
That’s okay, I’m trying to decide whether it’s funny or sad people are still using the 9D chess argument with Trump.
He’s going to lock her up, build the wall, end the wars, and MAGA any day now. You just wait!
Trumps biggest failure has been that there is no wall yet despite the 25 billion funding needed ONCE to build the wall being just 0.5% of yearly US federal budget.
There are loads of totally incompetent politicians among both democrats and establishment republicans that cite the cost of the wall as reason not to build it at all.
This despite US paying over 700 billion in just interest on the federal debt yearly and the 25 billion cost of the wall being nothing in the big picture.
Many politicians are totally incompetent economically.
I disagree with Mish on some issues but this is one we agree on. Drop the tariffs to zero. The problem is Congress will never let that happen. To many promises to constituents and pork. Trump will never go for it either.
Very few people understand communism, even though the Dear Leaders HAVE SAID that what’s best for The People is their goal…..
It’s just, in the meantime, they have to fight fire with fire and send The People to gulags, to break those capitalists…
there are many people who believe this:
I’m from the government and I’m here to help.”
in this case it is :
My government is going to protect my job from cheating chinese or any other cheating people
My government will make “even playing field”, “playing on a level playing field”….
a ha ha ha ,and a ho ho ho
Except that the letter’s facts are cherry-picked bullshit. Average tariff means nothing, it’s the weighted mean tariff that counts, which is around 1.6% for the US (25% on light trucks and vans) and the EU. The US also heavily subsidizes agriculture, to say nothing of the massive subsidies routed via military spending.
If you want to have an even playing field, you have to start by being honest, not some propaganda. The idea that Americans would do just fine on an even palying field is self-congratulatory malarkey. America has huge rackets in medical care, education, and pharma which is effectively a huge tax that makes American labor uncompetitive. Start by destroying all the monopoly rackets, and make sure you include the banks.
The idea that the US is being taken advantage of by the ROW is self-serving and dangerous BS — countries acting from some sense of fake victimhood and grievance are countries that start wars.
You are right that USA has many things that drop the competitiveness and among them is the healthcare racket where hospitals run local monopolies and buy up local doctors offices and refuse to give a price list and charge different people different prices based on their insurance and have crazy high charges that would never happen in a competitive marketplace and government bureaucrats keep this going by limiting for example medical imaging startup starting next to a hospital offering medical imaging for 100 bucks while the hospital charges 800 bucks.
Also government is responsible for the fact that insurance companies do NOTHING to contain costs since government has limited the amount of profit an insurance company can get so the only way to get more profit for the insurance company is for costs to rise in healthcare so the cost of insurance rises so the insurance company gets more profit.
Also the drug industry is insane with pharmacies being contractually forbidden from telling customers that they could buy some medicine for 8 dollars cash while their co-pay from insurance is 30 dollars.
Also drug companies sell drugs much cheaper in Europe and elsewhere in the world than they do in USA so Americans pay for all drug development.
Also illegal immigrants use massive amounts of healthcare through ER’s and all this cost has to be paid by other users of the hospital in question since illegals can get it for free.
All of the above can be fixed.
In education the law making student loans non-dischargeable in bankruptcy and all the excessive loans students are given has raised the cost of studying crazily high.
Make student loans unsecured and dischargeable in a bankruptcy and remove federal guarantees and cost of education will drop 80% with less debt dollars chasing that education
At it’s most fundamental, the greater the share of wealth that is being doled out as compensation/appreciation for simply idly sitting there “owning” stuff; whether that be owning a house, or owning a license to practice medicine, or owing the monopoly right to produce a drug; the less a share is left to serve as compensation for the productive work which creates the wealth in the first place.
You can’t have it both ways. The money paid for a house, is either going to a guy just sitting there with a government granted right to the land, OR it is going to the guys doing the work to improve the land by way of constructing something on it. NOT BOTH at the same time.
Financialization following Nixons retard moment, has dramatically shifted the balance. Away from productive workers. To idle, connected “owners.”
You forgot the legal racket. The legal system poses a major drag on the economy. We have the most lawyers per capita in the world and the Chinese have the most engineers per capita. That is not good and needs to change.
I don’t agree with trump on much, but he’s doing a great job with China. Don’t see where China’s growth comes from long-term if they can’t continue to pilfer intellectual property from the west.
The Fallacy of Intellectual Property
Very good reads indeed – more people need to be exposed to this. Funny enough, Kinsella started out as a patent lawyer if memory serves.
when have the letter writers ever been correct about anything?
“The solution is create tariff parity immediately so raise American tariffs to a minimum of 10% for China and minimum of 5% for EU.”
Very Wrong as is the claim “there is no logic in the unilateral zero proposal.”
Not just wrong bordering on idiotic as I have explained many times. Tariffs are a tax on consumers as well as industries that use those imports. The tax on steel is beyond idiotic.
Tariffs are NOT a tax on consumers, tariffs are a tax on companies offshoring production and tariffs are a tax on foreign producers of products and tariffs are a tax on companies operating as sellers of mainly foreign made products.
Since every company prices their products for the maximum amount that they can get while still maximizing their sales to get the maximum overall profit companies like Apple will just have to make do with 40% profit level in a situation where there would be 20% tariffs compared to the current about 60% profit level.
Companies like Walmart and Amazon which sell mainly Chinese made products will also have to make do with smaller profit level.
The losers will be owners of Apple, Amazon and Walmart stock since less profit margin will lead to lower stock prices.
The losers will be executives at Apple, Amazon and Walmart since they will have smaller compensation when there are lower profit margins.
In an ideal world and with similar countries zero-on-zero tariffs on everything would be clearly be the most efficient and economically beneficial system so USA and EU could have zero tariffs between them.
However communist China with Central planning and no political rights, no legal rights and no worker rights and slave like wages and bad conditions at work and excessive hours of work and using environmental destruction as competitive advantage is a situation where giving them zero tariffs would be a huge mistake.
China should have NEVER been allowed to WTO and George W. Bush made a huge mistake in letting them enter WTO.
Even more laughable is the fact that USA has had less tariffs on Chinese products than China has for USA made products and also China has huge non-tariff barriers.
Bush and Obama were both only sucking up to big multinational corporations and as such Obama was a total fraud to the people who voted for him.
Only people benefiting from the current trade setup are owners of companies and executives of companies which benefit from lower cost of production while still keeping sales and profits up through the continually increasing debt bubble in USA and Europe at all levels.
Consuming yourself to prosperity through creation of currency without actual value created by the economy backing that consumption and currency did not work in other economic models and it will not work in the current debt-consumption-capitalism either.
Venezuela has lots of money but no products to buy.
Weimar had lots of money but no products to buy.
Soviet Union had lots of money but no products to buy.
USA will either end up with lots of money and no products to buy (since the dollar will become worthless like money in Venezuela, Weimar and Soviet Union if the only product in USA will be debt and dollars) OR there will be a massive deflationary crash wiping away all debts but crashing consumption, tax revenue, jobs, property values and wages since people will not be able to buy anything since they will have nothing but debt but can not get any more debt.
Spending money one can not repay is an act of fraud but still USA is spending money it can not repay since the productive capacity of the economy including workers are continually destroyed through offshoring of production and importation of tens of millions of illegal immigrants and millions of legal low wage immigrants.
The economic model needs to change from current debt-consumption-capitalism back to production-capitalism like it was until the 1970’s and Trump flawed as he may be in many ways either gets this or just feels it.
He has had the same ideas regarding trade since the 1980’s and in the 1980’s their wisdom was not apparent because world was still in a haze of debt but now the world is in a smog of debt and it is clear the current model is NOT sustainable.
Fed, deficit spending, wage arbitrage, environmental arbitrage, fractional reserve lending, excess debt at all levels, too low interest rates decided by incompetents like Bernanke, Greenspan and Yellen, debt consumption economy, seeing high real estate prices as wealth despite them stopping family formation and dropping the number of kids families have etc. has brought us to this point and things need to be fixed before capitalism breaks down and crazy leftist lunatics like democratic-socialists get into power and destroy things completely.
“Tariffs are NOT a tax on consumers, tariffs are a tax on companies offshoring production and tariffs are a tax on foreign producers of products and tariffs are a tax on companies operating as sellers of mainly foreign made products.”
Have you ever, in your life, as much as seen a supply or demand curve drawn out? Ever bothered investigating where they came from, why they tend to be drawn as diagonal slopes etc.; and why they, rather than bombastic statements (or “look ma what happened once in 1954 on a graph..), are used in economic reasoning?
Do you honestly believe Greenland putting a tariff on tropical fruit, doesn’t cost Greenlanders who need them to get necessary vitamins, anything? Or even, that tariffs on oil doesn’t cost American drivers anything?
Greenland putting tariffs on tropical fruit would be beyond stupid since they can not grow tropical fruit.
Since USA produces oil tariffs on oil would lead to USA producing and exploring more oil and leave less demand for oil from Saudi Arabia so less money for Saudis to keep killing babies and civilians in Yemen through war crimes and starvation tactics and also less money for Saudis to fund export of Wahhabism and Salafism around Europe to try to brainwash muslims in Europe into Saudi extremism.
There should be tariffs on foreign oil if one thinks it like that.
However since oil is essential in everything it would be better to have no tariffs on oil.
The sooner Saudis pump their oil fields completely empty the sooner the export of radical islam by Saudis will stop.
The war in Yemen should be stopped and MBS should be designated persona non grata all over the world for what happened in Saudi consulate in Turkey and MBS should be told to stay in Saudi Arabia.
If Jared Kushner keeps being a “buddy” of MBS he is an incompetent fool and the news that Kushner was having private Whatsapp messaging with MBS shows that Kushner has no political eye at all and Trump is stupid if he listens to any more “advice” from his “advisor” Jared Kushner.
However tariffs on produced things and agricultural things are a different thing from tariffs on oil or tropical fruits which can not be grown locally.
The purpose of tariffs is to protect local industry and local workers and local jobs and since the workers and jobs and industry are the backbone of each country the offshoring of production and making workers redundant and unemployed was massive waste for USA.
Only ones benefiting from the debt-consumption-offshoring-capitalism were large companies and banks and owners of large companies and banks.
Anyone can grow anything, if they just throw enough money at it. The population of Greenland sitting on ergometers producing power to run a grow lamp in a grow house, can easily keep a tropical fruit tree alive until it’s ready to harvest. If efficiency and cost doesn’t matter at all, you can grow pot on the moon. And build Iphones in California.
And, similarly, any country can produce oil. There is oil everywhere. Even on the moon, as you can make it synthetically. Some places are just better suited to produce it more efficiently, with less effort and hence cheaper. So it makes sense that those places do it.
Tariff on steel is idiotic since it was not hiked in a similar way for products made from steel and this mistake by Trump led to US producers using steel losing US markets to imported products made from steel.
However the fix for this is NOT to remove the tariff on steel but increase tariffs on products made from steel with similar amounts.
The tariff on steel is sound if done properly since China was dumping steel made by government controlled companies meaning it was likely made at a loss and this loss just being hidden in the darkness that is Chinese banking system and government owned and government controlled companies.
China also makes steel in a very polluting way because China uses environmental destruction as a competitive advantage (and in a communist controlled economy there is no cost to pollute) so each steel ton that China produces less steel is a huge environmental win for the world.
China also has slave like wages for workers at it’s steel mills and no worker protection and huge hours of work so avoiding Chinese steel through tariffs is all the way the moral choice.
Some people have asserted that one of the factors which destroyed the English Empire (on which at one time the Sun Never Set, since it spanned the globe) was the unilateral adoption of zero or low tariffs. Some day, I would like to find the time to do some research and see if the assertion is true.
People have been trading for millenia. If unilateral zero tariffs are truly an engine for economic growth, there should be some historical examples which demonstrate that. There are lots of historical examples which show that governments running deficits are not sustainable. It seems likely that running trade deficits will also be unsustainable.
As to the tariffs on steel being counter-productive, I have to agree. But what choice does a President have when he has to act alone to try to bring trading partners to the negotiating table? All a President can do is use existing Executive authorities because he is facing a Congress composed of people who are economically illiterate, or bought by the Chinese, or both.
One obscure example of zero tariffs being an engine of economic growth springs to mind: The United States.
One might also consider tariffs between cities and counties. Go ahead. Crank up those tariffs and bask in the wonder of how rich you’ll be. Gosh, you can keep all those “good manufacturing jobs” instead of sending them elsewhere while magically renaming them to “sweatshop labor”.
The Federal government supported itself almost exclusively on tariffs during the 19th century. When was this zero tariff utopia you reference in the US? Since the first substantive law signed by George Washington was the Tariff Act of 1789 signed on July 4, 1789 no less, it seems Tariffs haven’t hindered the growth and development of the US.
The zero tariff utopia has been between the States.
The US is an obscure example of a single nation. Therefore, the zero tariff area is reciprocal within the nation. That is very different from unilateral zero tariffs by one nation.
Good point.
I prefer another argument for why the US States’ non-tariffs are not a good example of a reason to believe low tariffs are the way to go. That argument does not acknowledge or require that reciprocal low tariffs are the best way to go, even if non-reciprocal low tariffs only may be.
Anyway, as to your point, it rings a bell. This is a fun article:
The article’s story (points for the Don LaFontaine reference) was probably taught in Wharton when Trump was there. Certainly, so far as criticism, Trump runs a tit-for-tat type strategy. Drives his critics crazy.
I’m generally a proponent of free trade, but the malevolent intentions of trading partners can’t be ignored. They may be willing to tolerate temporary loses to gain long term control. It may be like the industrial Trusts that developed in the US in the late 19th century. Once all competition is undercut, regardless of temporary losses to the Trust, monopoly power yields immense profits. Likewise, once domestic production is non-existent the exporter gains monopoly control unless other sources of supply can be accessed. How is this outcome addressed by unilaterally opening the flood gates with no tariffs? If the losses to the exporter are temporary, it may make sense to temporarily flood a market with below cost goods to wipe out competition. In which case, it seems both workers and consumers will ultimately lose.
Btw notice how the economists admit USa has NOT been playing on a level playing field:
” the average American tariff is 3.5%, while the average EU rate is 5%. China’s is nearly 10% and the world average is around 10%. On a level playing field, American companies and their talented and productive workers can compete with anyone,”
The solution to that is create tariff parity immediately so raise American tariffs to a minimum of 10% for China and minimum of 5% for EU.
Then consider environmental, wage parity and worker rights tariffs on top of that.
Zero tariffs would lead to all production moving to China making Americans even more poorer and even more dependent on Fed continually creating money out of thin air and even more of the US economy only keeping going because of ever increasing debts at every level from federal government to consumers.
Countries which only produce currency have always in history had that currency crash totally when their economies have crashed totally because nothing of value being produced in them.
Instead of zero tariffs Trump should have put more tariffs so in addition to steel and aluminum tariffs there should have been tariffs on everything made from steel and aluminum.
On top of that there should be environmental tariffs to make it cost China something to continually use destruction of environment by destroying air, water and land as competitive advantage in a communist controlled economy.
On top of that there should be wage-parity tariffs so if producing a widget takes 1 hour and Chinese worker gets paid 1 dollar an hour and producing the same kind of widget in USA takes one hour and costs 15 dollars and hour then the Chinese widget has a tariff of 14 dollars.
Also there should be worker-rights tariffs so when Chinese factory makes their workers live in the factory area and makes them work 6-7 days a week in 12 hour days and has suicide netting around the buildings where the workers live to stop suicides there should be an economic cost through tariffs for also that.
With this latest inanity from economists I am starting to think they got their degrees from cereal boxes.
No tariffs only works when there is not rampant debasement of currency and ever growing mountains of debt and Fed goosing the economy through their loose monetary policy since without these offshoring of production would have crashed consumer demand and led to huge drop in tax revenues leading to huge cuts in government so companies offshoring production would have seen demand for their products crash making said offshoring of production impossible.
No tariffs only works when the countries having no tariffs betwen them have similar environmental, legal, worker etc. protections and wage levels are similar.
Letting China into WTO was a massive mistake only benefiting the 1% and Bush should be forever reminded of his mistake.
The current offshoring of production and still keeping consumers consuming model is only possible because of Fed, ever growing mountains of debt and deficit spending since it keeps the profits of companies up so they get the sales and the lower cost of production so they get to eat their cake and still keep their cake.
The current importing tens of millions of illegal immigrants and millions of legal low wage immigrants and still keeping consumers consuming model is only possible because of Fed, ever growing mountains of debt and deficit spending since it keeps the profits of companies up so they get the sales and the lower cost of wages so they get to eat their cake and still keep their cake.
The current version of capitalism namely debt based consumption while destroying ability to repay the debts does not work and needs to be fixed before USA and Europe end up with no production and only mountains of debt and broken chinese made widgets.
“The current version of capitalism”
gold standard was once providing level playing field where no one can cheat and lie for long time. Well western leaders and its people did not like it.
american tariff is a tax on american people, not on chinese people.
you are saying to get rich we need to tax ourselves.
if all jobs go to china and we do not have job how are we going to trade?
The tariffs are a tax on Chinese companies and American companies that have offshored production to China.
I want to STOP the flow of jobs to China so USA has jobs and USA has production with which to trade with the production keeping the value of dollar based on something.
Without production and with zero tariffs on everything and with consumption being based on debt and with jobs being moved to China US would be in road similar to Venezuela.
Venezuela killed production because the Venezuelan dictator kept confiscating the production so producers stopped producing because it would be confiscated anyway and with workers losing their jobs so only production Venezuela had left was production of currency with not even toilet paper being available to purchase with that currency.
USA has been killing production through offshoring while keeping consumption and company profits going through ever increasing debt levels.
Having zero tariffs unilaterally would lead to even more production leaving USA leading to even more people losing jobs leading to a Venezuela like path.
Destroying producers and jobs through Venezuela style confiscation is stupid.
Destroying producers and jobs through zero tariffs and importing everything while consuming based on debt is stupid.
Producers and workers are the lifeblood and backbone of every economy.
All choices that destroy or demotivate these cogs of economy should be avoided.
As far as I’m aware, US manufacturing output is at a record high.
Zero tariffs between US states, obviously resulted in all production moving to the poorest one. And the EUs reduction in internal tariffs resulted in all production moving away from high cost Germany, to low cost Greece…..
Actually Euro led to Greek industry and Italian industry becoming uncompetitive with German industry for mechanical products and industrial products so Germany got more markets because Greece and Italy were not as efficient as Germany when in same currency despite wages in Italy and Greece being lower.
Euro also led to Greek industry and Italian industry becoming uncompetitive with Chinese imports in many products so China got more markets.
Greece and Italy lost productive jobs in many industries because of Euro but the ever growing debt bubble enabled by Euro allowed this job destruction and competitiveness destruction to be hidden under jobs created by debt based consumption and more government jobs paid with government debt.
The consumption in Greece and Italy were kept up by ever increasing levels of debt since debt was easy to get since Euro brought lower rates since there was NO currency risk and ECB told banks to keep Greek and Italian government debt as 100% guaranteed assets on the books.
In US many more jobs would have moved from high cost states to low cost states in Republican controlled middle of USA but this movement of jobs was lessened by importing 22 million illegal immigrants to USA who mostly stayed in California and other Democratic controlled states and worked low wage jobs.
Also legal low wage immigrants have flooded mostly the same democratic controlled states through massive chain migration and visa lottery (with one Sudanese guy telling me he brought 4 of his sisters and brothers and their wives and husbands and many kids to USA after winning Greencard for himself through the visa lottery so one visa lottery Greencard turned to around 30 people) and massive H1B immigration and H2B immigration.
H1B immigration is pure wage arbitrage so American IT workers are fired after training their Indian H1B replacements that are paid less than American workers and the H1B’s are captive to the firm that got them the H1B so there is an almost slave like employment dynamic with H1B workers.
The malaise and hopelessness in many Republican controlled states is a political choice since many jobs would have moved there from California and other Democrat controlled states to replace those lost in stupid trade policies if there was not a pool of 22 million illegal immigrants working low wage jobs and if there was not a policy of bringing millions and millions of legal low wage immigrants to USA.
The Euro, like any fiat currency, leads to all manners or dislocations and misery. That’w what being robbed does to people. And facilitating robbery is the sole and only reason for fiat currencies in the first place. So, yes…
But that has exactly nothing to do with the EUs lowering of internal tariffs. American politicians are not, as of yet anyway, talking about cooking up a new common fiat currency shared between the US and China. Just about tariffs.
Then why did the jobs all go to Mexico and China and earlier Japan when they had the huge barriers and tariffs?
Basically due to regulatory arbitrage (no controls on pollution, govenrment subsidies, no worker safety nor judicial mechanism to address torts), jobs go where the workers are treated the worst – which might be better than starvation, but not by much. They will go where they can just dump toxic stuff or even plastic into the rivers and oceans (where is that plastic trash thing in the pacific from? China!)
I can add debt and subsidies and currency manipulation (it doesn’t work under a gold standard because the gold moves in the other direction and inflates or deflates creating an equilibrium). Meanwhile does the 20 trillion federal debt matter or not? If we had to pay for stuff with cash, it might be more expensive than putting it on the credit card.
Or put it differently – BECAUSE you can sue a manufacturer here if their product burns down your house, it will be more expensive than something cheaply made in China where you can’t sue them, that a few in any batch will catch fire. There is a problem with diet suppliments that are often contaminated or don’t contain what they say, but those are the cheaper ones. And if you are allergic (see “Poorly Made in China”).
I don’t see a problem with zero barriers across Countries with similar laws, either English Common Law or the Roman derivatives for the EU, but there is a big problem when you can basically pay less for stolen merchandise.
“…where the workers are treated the worst…” Superb description of exactly what’s happening, especially with China. Chinese workers have essentially paid for China’s trade advantage with us by having their wages docked the $3 Trillion or so China has loaned us via U.S. govt. debt purchases in order to sustain the ongoing trade imbalance. I.E., ‘We, the communist party, know what’s best for you; keep your mouth shut, your head down and making those cheap gadgets for the stupid capitalists until we own them, too.’
Hurrah for Zero, Zero, Zero!
” jobs go where the workers are treated the worst”
you are little bit confused.
capital or jobs go to the places where there is rule of law, where rules do not change over night, where you know that you going to get your money back.
capital or jobs go to the places where workers can perform job, have good work ethic.
capital or jobs go to the places where is easy to start business.
capital or jobs go to the places where is less regulation.
and question for you, how many regulation and regulatory agencies did america have in 1900?
how bad was pollution than?
We know from history that any time government action produces undesirable results, the solution is never to reduce government action, but rather more government action.
There is logic in the “zero for zero” proposal. But there is no logic in the unilateral zero proposal. If lower unilateral tariffs and non-tariff barriers (ie, what the US has done for decades) expanded the economy, the US would look very different today; and other countries would have followed suit (They have not).
Even zero for zero does NOT work with a country like China that is ruled by communists and uses environment destruction as a competitive advantage and uses abuse of workers as a competitive advantage and uses slave like wages as a competitive advantage and makes Chinese people criticizing these policies of the Chinese communist party just disappear.
The US does look very different today than it would have if it had instead implemented the high tariff “import substitution” policies it’s southern neighbors did post WW2. As much of a dump as we are, they are still even worse off.
The development that has harmed the US, specifically the us working and middle classes, has nothing, zip, zilch, zero to do with tariffs and barriers on goods trade. And everything to do with financialization, legalification and regulation.
The US, like the UK, are more burdened by deadweight in the FIRE, legal and administrative roles than virtually any other country out there. Even that communist dump China, is now a freer, less costly place to do something productive. The Party, for all it’s totalitarianism, is simply much less of a drag than the combined weight of the money printing beneficiaries in the West.
The share of American incomes deriving from producing, inventing and improving stuff have dropped dramatically since Nixon de facto put the finishing bullet in the head of his homeland.
Instead, income has been earned by “investing.” Which is no more than another word for either sitting around doing nothing, or busying oneself doing net-zero-gain makework. No wealth gets created by some dimwit wasting his life thing he is “smart” by regurgitating “diversification” and “moving averages.” None. Absolutely none at all. Yet the chimps engaged in this idiocy, has been doing quite well. Now how do you think that came about? Who do you suspect had to give up wealth, in order for those clowns to gain any?
And the same story goes for legal and regulatory nonsense. One group of people doing their darnedest to steal the stuff productive enterprise makes via ambulance chasing, and another working on nothing more than trying to prevent this theft and/or “insuring” against it; adds up to another exact ZERO, as far as wealth creation is concerned. It is the exact equivalent of digging ditches to then fill them in. Probably makes sense to naive Keynesians, and perhaps others with the intellect of a 2 year old, but that’s it.
The only way wealth is created, is by stuff being done more efficiently. There is no other way. You don’t create wealth by bickering over who “owns the right” to already existing stuff. Nor by mindlessly, (and 100% randomly, even in the case of Warren Buffet), buying one three letter code, selling another one, believing in Santa Claus and Waves, and all the rest of the mindless trash that has been given a lease on life by unconstrained money printing.
Neither do you create wealth by sitting on your couch in a house. Even if you do call it a “home,” and pay some other zero-wealth-creator so slather on the cheese in some for sale ad. Instead, you straight up destroy wealth, as soon as you make any effort at all, aimed at preventing, or making it more difficult for, your neighbor to create some wealth, by turning useless land into covered productive space.
That’s why and how America went from Shining City on the Hill, to a dump making Tora Bora seem positively civilized. One dumb, economically literate, non productive nor even understanding what productivity constitutes, yet oh-so self righteous, beneficiary of the undifferentiated crass theft that is all than any money printing is at a time.
The American working, middle, entrepreneurial as well as any other classes have been forced to subsidize this whole theft party. Obviously so, since those are the only guys creating any of the value the self righteous chimps have been consuming and amassing “ownership of” and “the rights” to. This is why working and middle classes have suffered. Along with productivity, competitiveness and all the rest they represent.
If they want their money back, or even just a country back, they will need first and foremost to diagnose who stole it correctly. Then take it from them. Not from imaginary hobgoblins halfway around the world, who only aids in diverting attention away from the ones doing the real stealing.
Financialization and forever increasing debt levels enabled by Fed and banks are what enabled the offshoring of productive work because the increasing debt levels kept up the consumption so companies offshoring production got to eat their cake and keep their cake when they got more profits when offshoring led to lower cost of production while increasing debt levels everywhere kept consumers consuming.
Financialization and forever increasing debt levels enabled by Fed and banks are what enabled the immigration policy of letting tens of millions of illegal immigrants come to USA and enabled the immigration policy of millions and millions of legal low wage immigrants being brought to USA because the increasing debt levels kept up the consumption so companies getting low wages from illegal immigrants and low wage legal immigrants got to eat their cake and keep their cake when they got more profits when lower wages led to lower cost of providing services and making products while increasing debt levels everywhere kept consumers consuming services and products.
This robbery of workers started in the 1970’s and increased rapidly when Reagan incompetently gave the first amnesty for millions and millions of illegals in 1986 and has continued ever since.
You are right that huge parts of US competitiveness are ROBBED by healthcare system and insurance system tied to healthcare that is inefficient and full of graft and anti-competitive practices.
You are right that huge parts of US competitiveness are ROBBED by drug companies making Americans pay more for drugs than anybody else in the world and over-medicating Americans on top of that. Also this drug over-pricing is made worse by the insurance system with pharmacies forbidden to tell when one could pay some drug cheaper with cash than through the health insurance with co-pays.
You are right that huge parts of US competitiveness are ROBBED through the complete out of control lawsuit frenzy and huge legal costs companies have.
You are right that huge parts of US competitiveness are ROBBED through the very expensive colleges and universities that in many cases do NOT even teach anything useful.
Also huge parts of US competitiveness are ROBBED through the huge HR bloat that companies are forced to have by regulation.
Also huge parts of US competitiveness are ROBBED through the over-regulation at all levels.
Even if not a single immigrant had entered the US between Nixon’s ‘tard moment and today, and not a single good had been shipped in from China nor Mexico; the money that idle geezers in Pacific Heights have “made” by sitting on their couches, would still have to be first earned, then stolen from, Americans who did productive work. The roaches and sourdough funghi living in the walls, don’t create any wealth on their own…..
Printing money, and especially distributing the fresh print by way of credit creation, increases asset prices. Hence, it hands free gains to idle “asset” owners. That’s what it does, and that’s all it does. That’s it’s purpose. It’s entire purpose.
Since putting Washington’s face on paper does not magically create new wealth, these gains have to be taken from someone. And the only someone’s to take it from, are those who are producing wealth. Meaning, those who do productive work. Meaning, American workers. The decimation of American working and middle classes is fully explained by this: They have been robbed, for the purpose of enriching idle asset owners.
Anything else that may or may not have happened since 1971; immigration, end of Cold War, political Islam, global warming, gays in the military, the Los Angeles olympics, cigars in interns, synthesizers, right to carry laws….. what have you; is entirely incidental. Lots of things have happened since 1971. Some of them may even matter to someone, for some reason.
But the reason why American workers are now poorer than they otherwise would be, is specifically because their earnings have been stolen. Duh! And handed out, largely and increasingly to others, as reward for something other than productive work. Fix that, and American workers will be doing just fine again. No matter what the gays and the Chinese and the Unabomber may be up to in their respective times and places.