Directly contradicting Trump, White House economic adviser Larry Kudlow Admits US Will Pay for China Tariffs.
- White House economic adviser Larry Kudlow on Sunday acknowledged that the Chinese do not directly pay tariffs on goods coming into the U.S., contradicting President Donald Trump’s claims that China will pay for tariffs imposed by the U.S.
- Kudlow said that “both sides will suffer on this,” but argued that China will suffer significant GDP losses as export markets are hit. The blow to U.S. GDP, on the other hand, won’t be substantial since the economy is “in terrific shape,” he said.
Kudlow is right about point one, wrong on point two.
The US economy is not in great shape unless you consider economic bubbles as a great shape.
Goldman Sachs Same Story
Goldman Sachs says the same thing: The cost of Trump’s tariffs has fallen ‘entirely’ on US businesses and households.
- Goldman Sachs said the cost of tariffs imposed by President Donald Trump last year against Chinese goods has fallen “entirely” on American businesses and households, with a greater impact on consumer prices than previously expected.
- The bank said in a note that the trade war’s impact on U.S. consumer prices is now higher than previously expected, partly because Chinese exporters have not lowered their prices to better compete in the US market
- “One might have expected that Chinese exporters of tariff-affected goods would have to lower their prices somewhat to compete in the US market, sharing in the cost of the tariffs,” Goldman said.
Right Where We Want To Be
That set of Tweets is from Sunday. It’s a repeat of economic idiocy from Friday and Saturday.
Not Economic News
Trump is either a blatant liar or an economic nitwit.
His Tweets prove it.
This is not economic news. It’s political news repeated over and over so many times it’s embarrassing.
Kudlow contradicted his boss. That’s the real story.
Chris talks to @larry_kudlow about who actually pays the tariffs with China if they were to be imposed #FNS pic.twitter.com/cwl89OyLDK
— Fox News Sunday (@FoxNewsSunday) May 12, 2019
Play the video in the Tweet.
Kudlow tried to duck pointed questions but got trapped. He simply could not stomach telling blatant lies unlike Treasury Secretary Steven Mnuchin.
For further discussion, please see
Mike “Mish” Shedlock
The average US consumer will not notice the effects of tariffs until inflation starts to bite. IF the cost to consumers is small, then it won’t matter. Consider that the FED is all worried about falling prices. This tariff fiasco might just be a blessing for the ‘2% target’ crowd. (Whom I disagree with.)
Sellers of US goods overseas will be hurt, no doubt, but that is not the majority of voters.
Of course the media will publish stories of farms going broke due to low prices. I noted that recently a story whined about farmers taking yet another hit to grain prices. They stated that farm prices had declined for 6 years in a row. Funny, no one seemed to mention that in main stream media until now. Wonder why??
I am as confused as Denninger. According to the Fake News, when China imposes tariffs on American products it hurts farmers and other US producers, but when we place tariffs on Chinese products it doesn’t hurt their producers. Can’t have it both ways.
Tariffs are paid ALWAYS by the end buyer – American Consumer! Trump is displaying his stupid ignorance re economy/Tariff!
If it’s the chinese who are paying for the tariffs (as Trumptard claims), why he limits the tariffs to 25% only, why to increase the tariffs to 100% or higher so that the U.S. government makes more money from the tariffs?
“The US economy is not in great shape unless you consider economic bubbles as a great shape.”
“Great shape” is a relative term, as far as capital is concerned, and relatively speaking we are in MUCH better shape RIGHT NOW than the rest of the world, including China. China is an export economy that’s trying to transition to domestic, which will take another decade and lots of pain. Exports to China are a minuscule part of our GDP. So, you tell me who will suffer the most, which tells you who has the leverage.
You can continue preaching what should be, but the invisible hand has the final say so in the direction of markets, which will have blue chip stocks twice as high, along with the dollar, over the next couple of years.
“Kudlow contradicted his boss. That’s the real story.”
The real story is that 60,000 American factories have closed. Nothing happens in a vacuum.
DC needs the cash,red ink is piling up at a blistering pace ,easily adding 2 trillion dollars of new dept this year,and close to 3 trillion next year so they need every penny ,this economy is driven solely on massive gov’t (borrowing)spending!
It is beginning to look like a wings-stay-on or wings-fall-off moment in the stock market. If anyone is bluffing we should find out soon.
“Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries…”
Huh? So is the President admitting that the purpose of the tariffs here is to hurt China, not to bring manufacturing jobs back to the USA? Because he is obviously signalling that companies can just move to other countries besides China.
Why should I be interested in hurting China and the Chinese people? Why should I care if something is made in China instead of Morocco? In fact, I’d much rather have the Chinese government deeply considering its trade relations with the US when they are considering aggressive moves internationally. Not so much with Morocco.
I have been somewhat supportive of the President’s thoughts on international trade, immigration, and war. Tariffs on China only isn’t going to bring jobs back to the States, aggression towards Iran isn’t going to help the Middle East, and screaming about building a wall is only driving greater immigration as people try to get in before the wall goes up.
Good ideas followed by poor implementations is failure.
United States economy is almost at full employment. Businesses have been struggling to find people to work for a while now and wages are starting to rise because of labour shortage.
If you bring these jobs back to US, who is there to employ and do this work? There’s no one!
US consumes more than it’s capable of producing by itself, some jobs have to go to other countries.
You’ll need millions of people to produce goods worth $500Billion to bring back all jobs from China, people that are just not there.
There’s also another change that is likely to bring back jobs. US has been subsidizing shipping costs for China by up to $300Million through USPS. Last year, Trump administration decided to pull US out of Universal Postal Union and they demanded that the postal rates have to be fair and no more subsidizing postal rates for developing countries.
It’s currently cheaper to ship a package from Beijing to New York than it is to ship a package from New York to LA. That’s why there are so many Chinese goods on Amazon and Ebay and thousands of independent e-commerce store. If you add 25% tariff then increase in cost of shipping; blocking goods coming from all developing countries, that will surely bring back jobs to US and support US manufacturers and small businesses. There are no people to work, so I can’t predict how this will go.
The reason Trump wants to hurt China is because they hurt our economy as detailed in this investigation report.
Remove this — [DOT] – – in the link below
https://ustr [DOT] gov/sites/default/files/Section%20301%20FINAL.PDF
Kudos (no, not Kudlow)! Mr. Jon. One guy in this whole thread really understands what Trump is up to! Make no error here, Trump is the smartest guy in the room, and guess what (?) he just happens to be right.
(Bloomberg) — “I’m lost and perplexed,” said Chinese furniture maker Ben Yang as he reeled Friday from news that U.S. tariffs on his products were hiked to 25% from 10%. “We probably have to switch to making something else or shut down altogether.”
Furniture makers like Yang’s Sunrise Furniture Co., based in the industrial heartland of Dongguan in southern China, already had wafer-thin profit margins after years battling rising labor and other costs. A Bloomberg Economics analysis of almost 1,000 companies in major export sectors found “not many” can survive tariffs of 25%.
That raises the specter of substantial disruption to China’s dominant role in the global supply chain with painful adjustments rippling across the world after President Donald Trump escalated the trade war last week. China’s best hope is that it can soften the blow by selling more to the rest of the world and in its rapidly expanding home market.
“The U.S. tariff hike threatens to dislodge China from the global supply chain,” said Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte. in Singapore. “The current China-centered supply chain will likely break up and shift towards Southeast Asia and disperse more widely across the globe.”
For cable maker Jiangyin Haocheng Electrical Appliance Wire and Cable Co. based in the east coast province of Jiangsu, Trump’s tariffs “have thrown everything into uncertainty” said marketing manager Ellen Lee.
Thin Margins
“We only have a profit margin of 10% — it’s so thin that we can’t reduce prices any more,” she said in a telephone interview. Her only comfort was that most of her competitors are also based in China and so everyone will be hit.
Taizhou Jinba Health Technology Co. in Zhejiang province on the east coast sells half of its brightly-colored hair dryers and curling irons to the U.S. The 25% tariff hike will slash that share to about 30%, according to sales representative Ryan Tao. With a profit margin of 20% to 30%, the company will reduce prices by 5% to 10% to keep customers, he said.
That puts them at the top of the companies Bloomberg Economics examined. Fewer than 60 companies out of 1,000 listed exporters in the study had profit margins higher than 25%. Three hundred had profit margins of more than 10%, and the rest were below that.
Increasing tariffs to 25% on about $200 billion of goods will reduce China’s exports by 2.7%, drag on growth by 50 basis points over the next two to three years, and cause 2.1 million jobs to be lost, said Liu Ligang, chief China economist at Citigroup Inc. in Hong Kong in a May 10 note.
U.S. Exposure
Still, exports to the U.S account for around a fifth of China’s total and Deutsche Bank AG estimates that China’s industrial output overall has only a five percent exposure to the U.S. market.
Chinese production serving the rest of the world is five times more important than the supply chain serving the U.S., Deutsche Bank China economist Zhang Zhiwei in Hong Kong said last year. The key issue is whether U.S. tariffs drive out supply chains from China that serve other countries and history suggests they will not, he said.
But companies will still have to adapt.
“Global supply chains will be reshaped, with the likely relocation of clusters and producers to avoid tariffs,” said Zhuang Bo, chief China economist in Beijing at research firm TS Lombard. “Trade frictions would deter business investment in China or incentivize companies to reallocate capacity to other regional economies or back to the U.S.”
Long-term Threat
The long-term threat for China is how its role as the core of the world’s supply chain holds up. Tariffs of 25% are set to give that probably its biggest ever test, with the Trump administration today poised to announce details of its plans to impose more tariffs on the remaining $300 billion in trade. Beijing hasn’t yet announced any details of its own plan to retaliate.
Some Chinese firms will dodge Trump’s latest blow as they have already shifted production overseas. Wenzhou Changjiang Automobile Electronic System Co. in Zhejiang province will not be hurt because it set up a factory in Brazil years ago and its China production serves only the domestic market, says sales manager Vincent Ren.
“Our China factory is running day and night to catch up with the local orders,” said Ren, whose company makes car electronics. “We are increasingly focusing on the domestic market.
And the free trade plan to stop the Chinese from stealing our intellectual property and ripping us off is????
It seems to me that the free trade advocates have had about 25 years to pursue “fair trade” and respect for intellectual property via the no tariffs policy and it has not worked.
Seems to me that tariffs are a stick that will cause minor damage to US and major damage to China. Maybe that will work.
Look for more “assembled in Vietnam” products to hit store shelves in the coming months.
Another angle… Tariffs are indirect sales tax so the Republican donor class are okay with it. It is part of the trend of shifting taxes away from the top 1% to the bottom 90% since US businesses will also pass the cost to consumers. The trend started when they raised social security taxes to offset the reduction of corporate taxes under the disguise of creating a social security trust fund.
The demand side of the economy is getting squeezed and they wonder why growth is slow and populist are gaining traction.
The Chinese major trading tool isn’t tariffing our goods. Instead they devalue their currency vs USD. If they do this even more to counter our tariffs, it will just strengthen USD and make us even less competitive on trade.
To fight China, instead of applying tariffs, we should be dumping USD in Forex.
Not that I’m in favor of any of these actions.
What do you think happened to the USD overnight and the Chinese Yuan….one is up the other way down, guess which is which!
I am not a fan of Trump because of his dishonesty and immorality. That being said, the issue of the tariffs is interesting to me. Tarrifs, historically, would have been a democratic position. Of course, the idea being that if we make those imported goods more expensive, then companies here can afford to manufacture them and compete. But, now, Trump has done it, republicans support him, and democrats are against them.
I’m no fan of Kudlow either, putting him just slightly above Steven Moore in my list of partisan economic hacks. But, what he actually said in that interview is that, yes, he admitted that the tariffs are paid by American Consumers, and, that we have taken in alot of money by doing so (A tax hike on American citizens and businesses), but, that, over time, the outcome stated above (manufacturing here) would come to pass.
I don’t actually think that will happen, as, at the end of the day, the salary of a Chinese factory worker is much less than an American factory worker. But, I enjoy watching these so called Republicans defending an issue that used to be an issue of the left. HaHa
There are many examples of people acting “out of character” in American politics and it highlights how intellectually bankrupt we have become.
The right now support tariffs, but they also went along with the neocon ride for decades, meaning many wars, massive deficits, and big government in the name of security. Nothing traditionally conservative about any of that. Many vociferously support Trump even though 2019 Trump bears little resemblance to the 2016 Trump that captured their hearts.
The left have also become warmongers, supporting the “world’s policeman” role. They support huge corporate conglomerates that are more than happy to virtue signal to gain this support. They even support regimes and cultures that repress the rights of women, minorities, gays, and others as long as they too can claim to be oppressed while doing so. The only thought process behind this is some sort of bizarre hierarchy of victimhood that is constantly updated and consulted.
As others have stated, libtards hate Russia and Trumptards hate China. Personally I think this is intentional, that party elites have purposely made their positions ridiculous to demoralize people and ensure that nobody operates out of principle. Trump illustrates this phenomenon as well as anyone. After all, if one can support President Trump as much as Candidate Trump, what does that person stand for besides a personal devotion to Trump? The QAnon “4D chess” explanation looks more ridiculous every day.
Both the democratic party and republican party are now the republican party of old. Trump is not a republican. That’s why both parties hate him.
The last 2 Dem administrations actively pursued open trade policies with NAFTA and TPP while the current administration killed both.
Dem candidates are pushing for more regulation on tech giants and the break-up of conglomerates like Facebook.