Posts Tagged ‘Trade War’

The fall and fall of U.S. tariff barriers

March 1, 2019

Click to enlarge. Hat to Barry Ritholtz

The United States, like almost all industrial countries, built up its infant industries behind protective tariff walls that shielded them from more efficient, because longer-established, competitors.

This historical graph shows what has happened since then.  Tariffs against foreign imports are down to a tiny fraction of what they were in the 1930s or 1940s.

President Trump deserves credit for forcing trade policy onto the national agenda.  Unlike his predecessors, he does not argue that more and more globalization is the answer  He is right that it is time for a change.

But trade wars aren’t an answer either

Rather the U.S. should do what successful exporting nations do, which is to build up their industries through a carefully targeted industrial policy.

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Trade war tactics and strategy

March 5, 2018

Reuters reported that the European Union is considering applying 25 percent tariffs on American motorcycles, bourbon and blue jeans, if President Trump imposes new tariffs on steel and aluminum imports.

Motorcycles, bourbon and blue jeans?  Kevin Drum of Mother Jones explained the significance.

Hmmm.  Harley-Davidsons are made in—what?  Wisconsin, right?  In Menomonee Falls, actually, about 50 miles from Janesville, where Paul Ryan lives.  The Jim Beam bourbon distillery is in Clermont, Kentucky, about 20 miles from Mitch McConnell’s house in Louisville.  Levi’s is headquartered in San Francisco, about two miles from Nancy Pelosi’s house.

I think that’s a pretty funny example of trade war tactics.

Trump: detente with Russia, conflict with China?

December 15, 2016

One good thing which I hoped to see in a Trump administration was a détente with Russia.

Hillary Clinton as Secretary of State and in her campaign record seemed hell-bent on a military confrontation with Russia, the one country with enough nuclear weapons to destroy the United States, over issues that matter very little to the American people.

chinatrump1461102238372-cachedIt looks like this hope will be fulfilled.  Unfortunately Trump seems hell-bent on a military confrontation with China, and also with Iran.   This, too, could turn out badly for the United States and everybody else, although for different reasons.

President Trump isn’t even in office yet, and his lifetime success strategy is based on being unpredictable, so I don’t claim to be able to foresee what he will do.

But based on his appointments and his rhetoric, it appears as if he intends to intensify the “pivot to Asia” begun under the Obama administration.

The anti-Russia policy was based on economic sanctions, covert war and a military buildup to force Russia into a destructive arms race.    It appears as though an anti-China policy will be the same.

The problem with this, from the U.S. standpoint, is that China is a stronger economic power than the United States.  By some measures, it has a larger gross domestic product.  It has a stronger manufacturing economy.   The United States has a trade deficit with China.   The U.S. government probably could finance its budget deficit without selling some of its Treasury bonds to China, but it would be more difficult.

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The US is already in a trade war with China

June 9, 2016

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President Obama has a habit of undercutting Republicans by stealing their issues.  He is doing that to Donald Trump on trade.

Trump has threatened a trade war with China, but the Obama administration has already launched a trade war.

Trump proposes to hit China with protective tariffs of up to 45 percent on goods shipped to the United States.   But the Obama administration has authorized U.S. Steel Corp. to ask the International Trade Commission for permission for total ban on Chinese steel exports to the United States.

U.S. Steel executives ask for the ban in retaliation for theft of their trade and manufacturing secrets by Chinese hackers.

Earlier this year the Obama administration has imposed a tariff of 522 percent on cold-rolled flat steel from China and 72 percent of this type of steel from Japan.  Cold-rolled flat steel is used in auto manufacturing, shipping containers and construction.

The justification for the tariff is that Chinese companies are dumping steel on the world market below their cost of production.  They produced more steel than they can profitably sell, and so are trying to cut their losses by selling their product for whatever they can get.

Based on a quick reading of on-line news articles, I think there is a basis for the charges against the Chinese.  European countries also charge China with dumping.

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