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Trump is a Nazi, Only More Elitist
Okay, I’ll admit: The headline here is clickbait.
But here’s a data point which I think proves Donald J. Trump — if, in fact, this needs proof — is blowing steam out of his pie-hole. (I’m not trying to dive into the Trump vs. GOPe argument. I’m just trying to help Rob run a business here. I want people to read this post, think about the data point I’m writing about, and then join Ricochet.)
Chinese exports plunged 20 percent last month:
The weaker trade figures will be a fresh blow for Beijing’s economic policymakers who are trying to persuade markets around the world that the nation’s economy is sound.
The economy grew at its slowest pace in a quarter of a century last year and analysts are also worried about the weakness of the nation’s currency and capital flowing out of the country.
Among China’s key exports, labour-intensive products such as toys and shoes fell 12.4 per cent in the first two months of the year.
Exports of cars decreased 33.5 per cent, the customs administration said.
“It’s really frightening to see trade fall like this,” said Zhou Hao, an economist at Commerzbank in Singapore. “Net exports, on the surface, don’t matter much for China’s headline growth, but the real role of exports for China is far bigger if employment and the related value chain are considered.”
China just doesn’t look to me like it’s killing us:
China used to be a currency manipulator to our detriment. (Remember when Mitt Romney was banging on about that? He was probably blowing steam out of his pie-hole, too. I think it was true, but that was in about 2007. Probably wasn’t true by 2012.)
Anyway, they’re not anymore, or if they’re manipulating it, it’s to our benefit. Now they seem to be propping the yuan up, not holding it down. So if anything, Chinese exports are now artificially expensive — which is one reason their trade is plummeting.
I just don’t think they’re killing us. Look:
The trend seems pretty clear. We’re doing well from China having MFN status. How else could those charts and those trendlines be interpreted?
Anyone have a different interpretation?
Published in Economics, Foreign Policy, General
I don’t deny this. Anyone who does is blind. But I don’t believe this has happened because of the terms of our trade with China, and don’t think the solution lies in restricting that trade. Our exports to China have been rising steadily. That there’s a trade deficit doesn’t mean anything: our total export rate has gone up. Both the US and China have become wealthier from this trade.
But it hasn’t translated into good, secure jobs for a large segment of the US population. (Including me, by the way; I’m among those who live one unexpected expense away from disaster — it’s not just people in manufacturing whose jobs have been “creatively destroyed.”) That’s the problem, and unless we’re trying to solve the right problem, we run a very high risk of causing more problems not only for those affected (please don’t make me pay more for imported Chinese goods, I couldn’t afford to live like a middle-class person without them), but for people who are still doing okay, or well, for now.
But these jobs aren’t being lost so much to trade with China as they are to technology change. And I’m not sure we really know yet how to to fix this. Tariffs on imports amount to a heavy tax on all Americans. I’d be much more comfortable with the idea if the plan was viewed and described as a tax — a heavy tax — and the revenue used from this form of taxation explicitly allocated to giving one-time, no-strings-attached grants to people who want to relocate/retrain/retire; after which, the tax would be lifted. A long-term, heavy tax on imports seems like a recipe for economic disaster.
Reducing the corporate tax rate — ours is among the highest in the developed world — would be a much better, more obvious start. Capital would start returning to the US immediately.
Your argument is essentially that we should have economic sanctions on China because of their military buildup and aggression. It’s a different argument from the argument about the benefits of trade. I’m much more inclined to agree with you about this. But to suggest that we’ll benefit from it economically is disingenuous. The point of sanctions is to coerce a rival, and that decision shouldn’t be sold as one that will benefit us economically: wars are costly, and they don’t pay for themselves.
I can show you instances that the job loss was due to the Chinese subsidizing raw steel to gain manufacturing jobs from the US. US steel fabricators lost business and indeed had to sell assets at a loss , many of which moved to China, who bought them at a dime on the dollar. No new technology involved.
The US loses jobs, and one generation of welders, punch press operators and lathe operators never become skilled and the capital equipment gets liquidated. When the Chinese mess up the quality, US companies are stuck as there is no domestic capacity to make it here at the old quality levels. A handful of lone survivors are left to only do the most critical parts. I know, I have one as a client.
Most job losses are not due to magic technology changes but intentional, planned economic warfare. They destroy our assets with subsidy and then buy them cheap, they build the skills and then also the companies that supply the new Chinese firms build factories to supply their new customer, the Chinese steel fabricator.
We have mid sized companies competing with a government with a billion plus people and a specific nationalist strategy. Our folks lose a lot. Our government , staffed by free traders, believe they must be doing the right thing. Of course, none of them understand assets versus transactions.
An economy is not just transactions, but assets and skills. If you use transactions to destroy income producing assets, you win, the other guy loses.
I get so tired of explaining how business works to economists. They forget that in addition to transactions, there is a balance sheet.
Apple could not make an IPhone in the US, even if they built a plant. All the other companies that supply parts for it moved their plants to China. Apple would have to build out three supply chain layers deep to build anywhere but China.
We are in a dangerous world and we cannot put free trade flowers in their gun barrels, despite the 1960s mythology.
Trade is nothing. Assets and skills are power. Our trade ‘partners’ know that. The US used to know that. Then we got a class of elites educated beyond their experience.
I wouldn’t say that’s true at all, most economists recognize that this is enormously complex. Here’s a pretty-much state-of-the-art summary of what (pretty much) the majority of academic economists would say:
Your beef isn’t with the economists, it’s with people who simplify what the economists say into political slogans. Might be good to disaggregate some of the points made on this thread into separate components:
That is not quite what I am saying. I pointed to our “financing” of the Chinese military buildup as only one (1) of the adverse consequence of unrestricted trade with China. I consider a tariff a means to offset this effect by funding our own military capability. This posture doesn’t seem coercive, just remedial.
On the other hand, the second use of the tariff to attain economic and political goals I listed earlier as additional aims of the tariff would be coercive or punitive in nature. I like to think of the tariffs used with this intent as “tyranny taxes”. “You want access to our markets, you want to trade with us, well start protecting our intellectual property, continue to reform your political system, start respecting religious liberty, … and be prepared for us to protect our workers as we see fit.”
I may not be understanding your question. Are we in violent agreement here: the threat of losing some of their US export market, with the concomitant inability to fully employ lots of their currently employed workers would scare the Chinese leaders mightily?
I’m asking this: What is it that keeps Chinese workers pacified? Is it having a job so that they have something to do all day and a paycheck of some number of yuan at the end of the week, or is it food and other goods on the shelves to buy with their pay?
The Soviets all had jobs, and nothing on the shelves. They were not happy.
The Chinese are not necessarily our perpetual enemies. The identity of enemies changes all the time. We fought a war of survival within living memory against enemies who are now our closest friends.
What is more likely to turn these potential Chinese enemies into friends: Trade, or trade war?
You’re the one who thinks a tariff means a “trade war”, not me. And trade that pays for China’s military expansion – why doesn’t this adverse effect register with you?
having a job to pay for stuff is necessary to enjoy “prosperity” is it not? There isn’t a shortage of consumer goods in China, is there? This isn’t the old Soviet Union.
Tariffs mean retaliation. Significant tariffs (45%) mean a trade war. I don’t know when a country has imposed draconian targeted tariffs and not started a trade war.
You make it sound (as does Trump) that we send them money and they send us nothing. They have to produce the $560 billion of goods that we buy from them. That costs a lot of money to produce. So the help we are giving their military build up consists only of the profit they make on the trade. Obviously they are selling to us at low prices, right? So the profit can’t be all that much.
Are you saying that we can’t match their military build up from other sources? That if China, a much poorer country, can build a carrier group, that we can’t build 10 carrier groups to continue our dominance? That the only source, or even the main source, of Chinese military strength comes from its trade with us?
The reason that I don’t find the trade-military argument persuasive is that these are not activities that have much to do with each other, in my opinion.
We don’t see eye to eye on this subject. We are cutting our defense budget while they expand their percentage of GDP allocated to their build-up.
They use asymmetric warfare to negate our carriers (AD/A2 missiles, for example). The Communist Party has set up their economy to be export driven, so much of the monies it spends comes from the export economy – hence provides a hefty percentage of the monies for its defense buildup.
I don’t think Trump will impose tariffs anywhere near what you cite. China would lose a trade war with us, as I have indicated and seems obvious from the trade imbalance in their favor. So their retaliation would be muted or short-lived…for the reason I have laid out in previous messages
This is a choice we make, not a consequence of trade.
We can also use asymmetric warfare. I don’t see why we should not be better at it than anyone.
“What you cite” should be “what Trump promises.”
We both lose. It’s not obvious to me that they would lose more than we would lose. They would lose the export market and would have to export elsewhere, and we would lose the imports and would have to import from elsewhere, or produce ourselves at much higher prices, either way reducing our standard of living.
You are clearly wrong here. How do I know? Because Donald Trump has promised to “Strengthen the military so that it’s so big and so strong and so great that nobody’s going to mess with us.” He has also promised, more specifically, to increase the U.S. military presence in the East and South China Seas.
How does an invasion of Taiwan help China with this? Or does this only happen when China is so powerful and we are so weak (contra Trump) that China no longer has to worry about an American military response or a trade embargo response?
At present the Chinese government is about to realize the folly of its interventions into the economy. It’s currency, contra Trump, is in danger of falling, not rising. It has enormous overcapacity. It has built empty cities. There is tremendous inequality between the rich, relatively capitalist coast and the poor state-run interior. It’s not clear to me that China is the ogre that we need to worry about.
Trump dealt with historical experience regarding currency manipulation. Why do you point to the momentary blip in China’s financial affairs and say that refutes his claims? That’s just silly. If you have historical data to bring to bear, then let’s see it.
And how does your last sentence above in any way pertain to this discussion? If you are saying that China is on the verge of having some large correction that will diminish the rate that its military grows for awhile, that may be true, at least until this upset is over with. But look at the rates it’s Navy has grown in the last decade, and observe the US Navy decline at the same time, and tell me that isn’t a very worrisome trend – particularly since the US patrols all over the world, while China concentrates in its own backyard – where Taiwan lies.
Maybe you can go ask Chinese officials about this – because they are anything but shy about declaring their intention of “unifying” Taiwan with the mainland even though they would pay a pretty price to do so. All bluster do you think?
I can’t pretend to know what China is planning or really wants. It could be bluster. Totalitarian states often engage in bluster about foreign interventions to divert attention from domestic woes. This was a central issue of the 1960 campaign. I was present during the campaign when John F. Kennedy came to my town and discussed the islands of Quemoy and Matsu.
My stance is that they are less likely to engage in such destructive behavior if the cost to them is higher, including the loss of their most important trade partner, as well as the significant possibility of military defeat. Hence, the need for us to keep a powerful navy. I assert simply that we are either able to do so or not, regardless of trade.
Well, you find the money to do so, given the trends in the chart below, and you will be my hero.
I’m not going to be your hero, but neither is a candidate who promises to reduce entitlement spending only by reducing fraud, waste, and abuse.
Oh, you are right there, Trump clearly dodged the issue. But politicians during the election cycle who actually come forward with a plan to fix the SS and Medicare problems we are soon to face – entailing much pain and sacrifice for the electorate – essentially commit ritual hari-kari. Witness Chris Christie. Have any other Rep candidates provided plans to deal with this pressing problem you can point me to?
There’s also a reliable rule of thumb that cites 19% of GDP as the max any government will collect in revenues. As demand (government spending) climbs above that, various leaks are sprung and made worse. You can set a tax rate anywhere you like, but 19% is as much as you will collect.
Therefore, anything above 19% *will* be deficit financed either once or many times over.
The question is whether China can find other trade partners or current partners with needs that will be freed to meet with a trade war against the USA. The USA currently composes 16.9 percent of Chinese exports. I have a feeling that China can do that.
I am not underestimating China. They have made steps towards improving their military but they are currently still far weaker than we are. We have the capacity to deploy military assets anywhere and can, they cannot.
We have superior equipment and more experienced soldiers and officers than the Chinese as our soldiers have actually seen combat and dealt with the logistical issues of war while the Chinese have not.
China is not our equal. Do they perhaps desire such? Maybe, but we need more time to tell.
The military is not the issue, the welfare state is. The military has an explicit purpose, the welfare state does not and several of those programs have no taxes associated with them or deficits with their taxes.
Sorry, but you don’t know what you are talking about (see next)
China could take Taiwan…most military analysts think the proposition is ~50/50. So everything else you said about comparative strength is utterly meaningless. Who cares if we could drop into Afghanistan right now and smash the Taliban and China couldn’t?
Yes, everyone knows entitlements is the problem. EVERYONE ON THE ENTIRE PLANET. And everyone knows that the American public would rather cut our defense than cut entitlements. that is the point of my comment. And, if you look at the chart I supplied, you will see that it already factors in a reduction in defense – everyone is already planning on defense being cut… this is all elementary stuff here.
Your conjecture that China could find other trade partners to replace the US is highly dubious. China trades with everyone on the planet now – they much prefer the US market for many reasons, all of which would be vacated if they tried to sell their wares to other countries at cut-rate prices, the only way they could even have a prayer of clearing out their inventory – which they couldn’t.
Who is saying China would try to preempt the trade war? China wouldn’t need to, they would simply do this after the tariffs were put in place and trust me, the world’s population is increasing and the demand is not decreasing. China can find other buyers.
On the issue of the military and their possible invasion of China. Do you think we would do nothing as China tried to invade Taiwan. Do you really think the Chinese would be prepared for a war with us?
Your entire argument is that China can invade one island nation, we can invade countless nations at once. What do you think is gonna happen when the Chinese try to hold Taiwan? At least half our fleet carrier groups will drop the flying $%!t out of them along with at least one or two US armies (our armed forces have technically never been beaten in conventional war). The Chinese will then have to contend with us and our Asian allies along with the other numerous Asian nations that are ticked off as hell at China’s current aggressive behavior.
I would hope China’s leaders are smarter than that. They are not exactly beloved for their work. Most other Asian ethnic nations do not like them at all. A war or act of aggression to the level of taking Taiwan would end badly for China; they know that.
I think that probably is overstated. China has spent a lot of money building empty cities, from scratch. Why do they do this? I think because they can’t get enough buyers for their exports at prices they find acceptable. Nor can they risk the social unrest of high unemployment. So they build “infrastructure” just to employ excess labor. This is the surest sign to me that they have maxed out their exports to the world.
As far as the consequences to China invading Taiwan being quite severe, most assuredly, I agree. But they would love to have suzerainty over the island and might chance the repercussions. If we can keep our military strong enough, the chances diminish. Our lax trade policies managed to aggravate the correlation of forces, to the point where the temptation for the Chinese is growing and growing. We need to take remedial action to forestall any adventurism by China. For too long now, as Trump says, the free traders have elbowed aside the “smart traders”.
I’m a fan, Claire, but you couldn’t have picked a worse headline in terms of alienating some of Ricochet’s membership. Please dial back such inflammatory headlines.