The Wall Street Journal reports U.S. Moves Toward New Tariffs on China Despite Fresh Round of Trade Talks.
> The Trump administration is moving closer this week to levying tariffs on nearly half of Chinese imports despite broad opposition from U.S. business and the start of a fresh round of talks between the U.S. and China to settle the trade dispute.
> “Trump is a deal guy,” said one person closely following the talks. Until the Chinese make a concrete offer, the person said, Mr. Trump will continue to encourage the dueling agencies about what action to take.
> President Trump, a Republican, continues to take a skeptical, hawkish view toward Beijing, said U.S. officials. At a fundraiser on Friday in the tony Hamptons section of New York’s Long Island, he focused on China, said two participants. The message was: “They better pay attention because we’re not done with those guys yet,” said one of the participants.
> The U.S. is considering tariffs of either 10% or 25% on thousands of categories of products, including for the first time a substantial number of consumer goods, including furniture, computer parts and luggage.
> So far, the administration has levied 25% tariffs on $34 billion in Chinese goods—mainly machinery and electronic components—which was matched dollar for dollar by Beijing. On Thursday, 25% tariffs are set to go in place on another $16 billion of Chinese imports, which Beijing also promises to match.
> The American Chemistry Council, a chemical industry trade group, said that after the first hearings on the China trade dispute, the trade representative removed all but one of the targeted chemicals from tariffs. But then it added even more chemicals to the second round of tariffs due to go into effect on Thursday, and removed very few after ACC objected. That record “means they aren’t really listening to people,” said Edward Brzytwa, the ACC’s director for international trade.
> On Wednesday, Chinese negotiators are due to start talking with a U.S. team led by Treasury Undersecretary David Malpass, at the invitation of the U.S. The negotiations are aimed at finding a way for both sides to address the trade disputes, the officials said, and could lead to more rounds of talks. If all goes well, the two sides would figure out a way to end the trade dispute ahead of planned meetings between Mr. Trump and Chinese leader Xi Jinping at multilateral summits in November, said officials in both nations.
> But there are plenty of obstacles ahead, particularly if the U.S. goes ahead with its tariffs plans and China hits back, as it has threatened, with tariffs on another $60 billion of U.S. goods. That would mean $110 billion of U.S. exports to China—85% of the total—would be subject to tariffs. Such an outcome is likely to increase pressure on Mr. Trump to go ahead with even more levies.
Tired of Threats
I am tired of these threats. Just do it. Massive tariffs will either collapse trade or they won’t. And if they don’t, just keep piling on tariffs until that happens or until China and the EU agree to the alleged free trade Trump wants.
After all, the Fed will bail out any administration mistakes. Right?
For reflection on my sarcastic comments, please see Trump Complains About Fed Rate Hikes: Expected Powell to be “Cheap Money Chair”.
Mike “Mish” Shedlock
The idea that any (voluntary) deal is a good deal is … simplistic, to say the least. Good for whom? Classic example would be Exxon’s take over of Mobil — which was a great deal for the Mobil CEO who agreed to the deal, maybe not such a good deal for the shareholders, and definitely not a good deal for the employees.
When a US manufacturer wants to enter the Chinese market and is told that the price of admission is to make the product in China (and bring the technology too), the US manufacturer may be faced with choosing the least unacceptable option. If he does not agree, his competitor will. Moving manufacturing to China may not be a good decision (except for the Chinese), but it may be less bad than the alternative.
The Chinese have played the potential of their 1 Billion person market brilliantly. Now at last we have a US President who is not taken in by over-simplified economic theories and is using the reality of the huge US market to advantage. Of course, the Chinese influence-buyers are out to get him. No surprise there.
Noone ever said a voluntarily entered into deal is necessarily a good deal. It’s just the best one, out of all the ones available. Obviously so, as otherwise, a different one would have been picked. Noone agrees to a worse deal, if a better one is available.
Because of that, the way to improve matters, is to make the available domain of deals available to people to pick the best one from, larger. Meaning, reduce constraints on what deals people are allowed to make.
Conversely, you can never make things better overall, by adding more restrictions.
You can certainly make things better for some people that way. Say Pacific Heights roach-shack owners, by banning other people from building roach-free shacks next door, that people would rather spend their money on. Or the owners, and unionized labor force, of Death Valley Waterworks, by banning anyone from a place where water can be bottled cheaper from selling to their captive audience. Being able to force others to hand you a massive amount of money, for something that is essentially free, can be lucrative, after all. Duh!
And that is the problem with getting government involved in anything: Trump and crew only talks to a few people. The people they talk to are predominantly CEOs, Union leaders and other privilegeds. Trump has no time to speak with every current American, much less all future ones. So, by listening to “business”, represented by the proprietor of Death Valley Waterworks and the union boss from the plant; he may well think dehydrating the rest of the Valley to death is a great, “job creating” policy. Ditto for a similarly situated steel mill in Pennsylvania.
The problem is exactly the same wrt banking bailouts. Listening to executives from Goldman Sachs, and Trump’s real estate companies; you could well be convinced widespread bankruptcies and fire sales would somehow be a bad thing. Rather than simply a way for most Americans to get a better deal on a house, or a casino.
I strongly believe that these “trade” threats have nothing to do with trade but rather are entirely about global hegemony. It’s clear that the US is committed in maintaining its global military and economic dominance. Any country that stands in its way will be crushed, either militarily (for weaker countries such as Iraq, Syria and Libya) or economically (for stronger countries such as China, Russia, Iran and Turkey, for now).
No economist, business person or farmer, believes that a trade war is a good idea, yet Trump continues to dole out sanctions and tariffs without regard to the obvious negative outcomes that major trade wars will eventually have on the US economy.
But I believe that this will be an exercise in attrition, as economic damage results in social and political upheaval in targeted countries (and hopefully not the US). This will take a while and hopefully it will not evolve from and economic war into a real war. But there is very real and significant risk here that that market continues to ignore or downplay.
China has had massive tariffs, sanctions and road blocks with its economic trade for 30 years. It has gotten them a $400/year billion trade surplus with the US and a near trillion dollar trade surplus with the rest of the world. Along with massive growth and a massive increase in their standard of living.
Not a shot fired in a “real war.”
Now when a leader of the US has had enough of bad trade deals – we get the tanks in the street and nukes flying scare mongering.
The only “bad deals” are restrictive ones. A surefire way of making anything, as in absolutely anything, aside from genuine (Biblical) crimes better, is to make them freer. Give people a broader palette of options from which to choose. That way they can optimize over a bigger domain.
Having some orange haired bonobo stick a gun in their face and confiscate 20-25% of what they just bought on their Saturday shopping trip to Walmart, doesn’t benefit anyone. Aside from the bonobo, I presume. And perhaps his closest partners in crime, who are too useless, worthless and unproductive to find a less destructive means of sustaining themselves.
The US is only harming its global hegemony. The idea that all the other nations in the world are harming the US by shipping product below cost (and getting rich by doing this) is crazy. The US currently has an exorbitant advantage that no other nation has: it can get stuff just by printing up more dollars. That is what in fact pays for the outsize military machine which keeps the rest of the world in line. The US is now working very hard to destroy this advantage. The rest of the world is keenly aware that you cannot enter into an agreement with the US (can’t be trusted) and that trusting them with the world reserve currency is a mistake. The deals that are hammering American citizens the worst are medical care, education, and military spending. In no other country do people get a worse return on the costs these “deals” impose, and Trump will be last to address them.
“The deals that are hammering American citizens the worst are medical care, education, and military spending.”
You forgot to add housing to the very front of this list. Now if you purchased your house prior to the early 2000’s, then congratulations. However, since then housing has become an intentionally hyper-inflated asset. The bubble should have burst permanently (or at least for a long time) back in 2009 had the banks failed as they should, but that didn’t happen with Obama at the helm who acted like just another white guy when it came to past presidents and the banking elite.
At least Trump is trying to help manufacturers here, unlike every other administration for the past 50 years who have thrown them to the wolves of the world-wide free market, while coddling most other industries: healthcare, insurance, higher education, banking, law – just about every occupation not concerned with producing something. Really, manufacturers/technical people of this country have been essentially dealing with internal tariffs concerning all the other non-producing sectors. So, let’s start a trade war and allow the manufacturing/technical sector the benefits of protection that the non-producing sector has enjoyed for so long!
There are several ways to negotiate. One is to roll over and play dead like obama. Kinda like the folks who pay full MSRP on a new car.
I am tired of these threats. Just do it. Massive tariffs will either collapse trade or they won’t.
You haven’t actually mentioned a single bad deal. Give us an example of a deal that an American and a Chinese party entered into which was disadvantageous to the American party but they closed the deal anyways.
Any deal executed voluntarily by corporations or individuals is a good deal by definition. Both sides enter only deal they believe are favorable to them. Along comes Trump and he tells businesses that he knows better than they do on what a good deal is. It’s idiotic, by definition.
Mish you’re missing one thing – this is not some David Ricardo world of all the world’s countries playing nice. The Chinese are not our friends and they don’t mean us well. You need to look at this with more than just a pure economics viewpoint.
You drag out Obama every time trump does something chuckleheaded. Take responsibility for what you voted for..
“Kinda like the folks who pay full MSRP on a new car.”
As in, instead of insisting on paying 20-25% more than MSRP for one…..?