He's "Ready to Go"

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anonymous_coward
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He's "Ready to Go"

https://www.zerohedge.com/news/2018-07-20/im-ready-go-500bn-futures-tumb...

All chinese imports. Nice.

Please tell me, is Fox news reporting any of this? I haven't seen anybody post about this except for me.

Tom C
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Oddly enough, we once managed

Oddly enough, we once managed to live without any Chinese imported cr@p.

mainemom
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I'm old enough to remember

I'm old enough to remember the Democrats and the press constantly hammering the Reagan administration over the "trade deficit." In the 80s, it was Japan and Germany, not China, who were singled out for blame.
No doubt Trump's views were shaped by those times!

For me, as an econ geek who's watched as Americans have wrung their hands over "trade deficits" for 30+ years, I'm pleased to see so many from all sides unite in agreement that trade deficits don't matter so much, and that tariffs are bad. How refreshing!

In an effort to persuade Republicans to part ways with Trump on trade, supposed free traders, some new to the cause, are using words from one of Reagan's speeches as if he were arguing against Trump's policies:

"Yet today protectionism is being used by some American politicians as a cheap form of nationalism, a fig leaf for those unwilling to maintain America’s military strength and who lack the resolve to stand up to real enemies — countries that would use violence against us or our allies. Our peaceful trading partners are not our enemies; they are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends — weakening our economy, our national security, and the entire free world — all while cynically waving the American flag. The expansion of the international economy is not a foreign invasion; it is an American triumph, one we worked hard to achieve, and something central to our vision of a peaceful and prosperous world of freedom."

Boom! Right?

What they don't tell you is that the main protectionists at the time were leading Democrats like former KKK organizer Robert Byrd, and that in the same speech, Reagan said this:

"Above all else, free trade is, by definition, fair trade. When domestic markets are closed to the exports of others, it is no longer free trade. When governments subsidize their manufacturers and farmers so that they can dump goods in other markets, it is no longer free trade. When governments permit counterfeiting or copying of American products, it is stealing our future, and it is no longer free trade. When governments assist their exporters in ways that violate international laws, then the playing field is no longer level, and there is no longer free trade. When governments subsidize industries for commercial advantage and underwrite costs, placing an unfair burden on competitors, that is not free trade."

Sounds familiar.

All of which prompts the question: can there truly be mutually beneficial, one-sided free trade, and is it sustainable?

Economike
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OK, I'll bite. A challenge

OK, I'll bite. A challenge to the imagination.

Can there be any such creature as a one-sided trade?

Toolsmith
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One side is following free

One side is following free trade rules, the other side is cheating. That seems clear enough. It's only sustainable if the non-cheating side is producing enough extra value to cover the trade deficit.

Mike G
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https://www.paulcraigroberts

https://www.paulcraigroberts.org/2018/07/23/more-lies-from-the-corrupt-e...

For two decades the offshoring of American jobs to Asia and Mexico has destroyed the careers and incomes of tens of millions of US citizens, the pension tax base for state and local governments, the federal tax base for Social Security and Medicare, and the opportunity society that once characterized the United States of America.

The rise in corporate profits that resulted from substituting foreign labor for American labor rewarded corporate executives and boards, hedge funds, large shareholders, and Wall Street with profits at the expense of the American population and the US economy.

Ugenetoo
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MkeG puts his finger on the

MkeG puts his finger on the problem.
The deep state coastal elites have been making beaucoodles of money by of offshoring our American jobs.
They are not happy with DJT.

Economike
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It's Groundhog Day here at

It's Groundhog Day here at AMG!

In order to understand "free trade" one must first understand what "trade" is. It's evident that Donald Trump isn't the only one challenged by this concept.

For example - "One side is following free trade rules, the other side is cheating. That seems clear enough. It's only sustainable if the non-cheating side is producing enough extra value to cover the trade deficit."

Trade is a voluntary exchange of goods and services. This is as true of trade between Iowans and Ohioans as it is of Americans and Chinese. No one would claim that Iowa somehow "cheats" with its trade policy, but lots of people are willing to believe that somehow the Chinese "cheat" Americans who voluntarily purchase Chinese goods. By the way, does anyone besides mainemom remember when Japan was the foreign trade cheater?

The idea that a "trade deficit" involves some sort of problem of sustainabliity is economic nonsense, a confusion of monetary effects with the underlying trade itself. To reapeat, trade is an exchange goods and services. The currency used to facilitate the exchange does not affect the underlying value of the exchange.

I won't belabor this. Here's a thread from the archves that remains vital:

http://www.asmainegoes.com/content/china-tire-tariffs?page=1#comment-460...

Toolsmith
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We don't "trade goods". We

We don't "trade goods". We buy goods, and sell goods. It's not guaranteed to be one-for-one. They are not directly linked, as in a swap. If the values differ, then something is moving... value, represented by money. If enough new value is being created to match the outflow of value, then an outflow of value won't cause problems. This is why a "trade deficit" can exist for extended periods of time without causing collapse.

Economike
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We don't "trade goods". We

We don't "trade goods". We buy goods, and sell goods. It's not guaranteed to be one-for-one. They are not directly linked, as in a swap..

This is true, of course. Money, as a temporary store of value, is the grease that facilitates complicated market transactions that go far beyond a barter system.

If enough new value is being created to match the outflow of value, then an outflow of value won't cause problems. This is why a "trade deficit" can exist for extended periods of time without causing collapse.

Yes, again, very agreeably expressed. In trade, everyone seeks to gain something of greater value in exchange for something of lesser value, even when the "something" is temporarily represented by currency. In international trade, value of inflow and outflow is adjusted through changes in currency prices. For example, when Norwegians aren't producing enough export goods to pay for the goods they wish to import, the value of the krone will fall and imports in Norway become more expensive.

None of this sheds any light on the notion that nations are able successfully to "cheat" on trade..

Melvin Udall
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I'm out of my element here,

I'm out of my element here, but when I hear "cheating" I think more along the lines where cost and price of any good or service have no direct relationship. Sort of like advertising with "loss leaders" to achieve a different purpose.

Isn't this the essence of dumping?

Toolsmith
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No one would claim that Iowa

No one would claim that Iowa somehow "cheats" with its trade policy, but lots of people are willing to believe that somehow the Chinese "cheat" Americans who voluntarily purchase Chinese goods. By the way, does anyone besides mainemom remember when Japan was the foreign trade cheater?

Yes, I remember Japan being the huge beneficiary of a trade. Japan grew quite rich during that time. Once more goods starting coming from Taiwan, Korea, and more recently China... that wealth building slowed.

Under our constitution (Interstate Commerce clause), Iowa is not *allowed* to directly impose a trade policy regarding trade with other states. It cannot impose tariffs on interstate goods. It can tax sales in its own jurisdiction, but not elsewhere. At least that's how it's been... with internet sales, that may change now that SCOTUS is involved in that issue. Anyway, whatever states do, it affects all of that states' commerce not just some going to specific places. How can this be a valid comparison with foreign countries which clearly *can* have trade policy?

One of the clever tricks Japan used is still in use today: dumping. Artificially lower the price of a product until competition is driven out of business - thereafter, pricing can be whatever is desired. This is one of those "cheating" methods that doesn't exist. Companies with deep pockets do this directly; governments do it with subsidies.

I keep seeing the term "voluntary" in the posts on this. What's up with that? Has a trade deficit ever been produced by "involuntary" purchases? Does "voluntary" purchasing automatically validate all other aspects of a trade relationship?

Toolsmith
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An odd statement in this link

An odd statement in this link:

http://www.asmainegoes.com/comment/460540#comment-460540

When a foreigner receives dollars in exchange for selling something, the foreigner must either exchange his dollars for his local currency or he must purchase an American product with dollars. In either case, eventually those dollars must be used to purchase something from an American. I suppose that pmconusa would say that, at that point, the foreigner is sending a portion of his wealth back across the border. That supposed loss of American wealth turns out to be equal to an American gain: a wash transaction.

There's a whole world market buying and selling things with US Dollars which does not involve buying *anything* from an American. Entire countries operate on it. Companies stockpile it, for many reasons - not the least being tax avoidance.

https://www.theatlantic.com/business/archive/2014/03/the-em-trillions-em...

When the Japanese were up to this, the money came back... to buy property, not goods. Entire buildings and factories. Mines, land, mineral rights. More recently, Hillary Clinton helped Russians buy a huge part of our Uranium reserves. Not all money transfer is trade.

Green-ee
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Boy, it just seemed like

Boy, it just seemed like yesterday when liberals were bellyaching about Chinese goods flooding the Amurican marketplace. Maybe liberals like the cheap Chinese goods after all. Who can tell what liberals like these days since liberals are flipping and flopping like a fish out of water. One minute this, next minute that.
If nothing else President Trump is making the crazy even crazier.

Mike G
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Should it be said that the

Should it be said that the trade policies of the past several decades have been a benefit to American? These policies have been supported by both "parties", as if there was a difference between the two on allowing the corporations to gain profits while shipping labor costs overseas.

So as Roberts states, as jobs went overseas and costs decreases here for the consumer, who benefited, initially the US consumer, then with the loss of jobs, the FED decreased interest rates and allowed easy credit so Americans could replace their loss of wages with debt.

Has not debt increased exponentially in the US and also in the west? Has not lower interest rates forced Americans into the stock market etc to get a return? Are not these investments riskier than more sound bonds, are not the retirement funds at risk of defaulting? Are not bonds now a very risky investment?

Should we just continue the failed economic policies of the Clinton/Bush/Obama era of the past? Does 21 Trillion dollars in debt not tell you something?

Does not America's MIC policy of pivot to the east tell us something?

Don't know what Trump's policies will benefit, but status quo is a disaster, and it probably is too late.

Economike
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Anyway, whatever states do,

Anyway, whatever states do, it affects all of that states' commerce not just some going to specific places. How can this be a valid comparison with foreign countries which clearly *can* have trade policy?

Yes, states can't impose tariffs but nonetheless states typically have trade policies. Maine, for instance, reduces taxation on tree growth in order to increase its export of timber-related products. (Could a New Hampshire timber producer say that Maine is "cheating" on trade? Sure. Any trade policy is arguably "cheating" from someone's point-of-view.)

One of the clever tricks Japan used is still in use today: dumping. Artificially lower the price of a product until competition is driven out of business - thereafter, pricing can be whatever is desired.

And how's that working for Japan? Perhaps not so clever? Despite the obvious fact that "dumping" is a favorite argument among protectionists, there's little evidence that dumping actually works to capture long-term market share. In order for dumping to succeed, we'd have to observe relative inflexibilty of production possibilities. And if we're thinking about "dumping" as a nation's industrial policy, we'd need to assume that government central planning actually works to improve a nation's prosperity. If this amounts to "cheating" it strikes me as a counterintuitive proposition: a company (or nation) chooses to give away a portion of its production in hope of gaining it back with interest someday.

I keep seeing the term "voluntary" in the posts on this. What's up with that? Has a trade deficit ever been produced by "involuntary" purchases? Does "voluntary" purchasing automatically validate all other aspects of a trade relationship?

"Voluntary" is a useful reminder that trade consists of mutual value-added transactions among individuals. Beneficial trade results from freedom of choice. In distinction, for example, the Soviet Union's purchase of Cuban sugar was part of "international trade" but certainly was not voluntary from an individual viewpoint, and of doubtful gain to one or both nations.

There's a whole world market buying and selling things with US Dollars which does not involve buying *anything* from an American. Entire countries operate on it. Companies stockpile it, for many reasons - not the least being tax avoidance.

Of course, there are numerous transactions denominated in dollars. And, yes, there's an international currency market. (Here's an odd example: many car loans in Hungary are denominated in Swiss francs.) And, further, foreigners hold stable currencies, with the dollar most prominent, as secure reserves. (And the dollar's use as a reserve currency contributes to the trade deficit.) But, all considered, so what? A dollar in the Bank of China's vault is of the exact value of a dollar in a Wal*Mart cash register. That some currency doesn't circulate as fast as other currency doesn't tell us much about trade. The dollar's value depends on what it can buy.

Previously I wrote that it's important to understand what trade is. This requires being able to distinguish real exchange from monetary phenomena.

Toolsmith
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Dumping worked fine for Japan

Dumping worked fine for Japan. Many businesses were driven out of business. The fact that someone else... Korea... China... now does it better than Japan does not in any way change what happened at that time. It's still working, but it's now China doing the lion's share. Seen any US made solar cells recently?

If this amounts to "cheating" it strikes me as a counterintuitive proposition: a company (or nation) chooses to give away a portion of its production in hope of gaining it back with interest someday.

Just because you can't see how it could work doesn't mean they can't. And I'd argue Japan got decades of essentially monopoly sales in many categories.

Voluntary means little when there is monopoly, however that came about.

Economike
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Economics consists of what is

Economics consists of what is seen and unseen. It's easy to find evidence that "dumping" works by finding industries that appear to benefit from it. That doesn't establish that dumping is effective in contributing to a nation's overall prosperity.

Again, there's little evidence that dumping works as protectionists like to imagine.

If you think dumping works, would you be in favor of the United States government implententing such an industrial policy? Keep in mind that such a policy would require government planning and control of production, necessarily over-riding the preferences of individual producers.

Toolsmith
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Why would it require central

Why would it require central control? You think Hitachi can't make decisions like that on their own? There was never any evidence that Japan's government did that, nor was it required. All the government needed to do was create conditions which allowed it, and didn't interfere. This fantasy that central planning is how dumping is done is simply that - fantasy. Centrally planned economies are a total disaster, since bureaucrats can't know enough about situations in every company and industry to actually plan properly. You can't micro manage an entire economy, communism proved that for us. But you can tilt the table, and look away when someone takes advantage of the situation.

Evidence? How many US circuit chip makers still exist? How many steel makers? How many industries have been totally wiped off the map? How many does it take?

mainemom
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Green-ee said

Green-ee said
Boy, it just seemed like yesterday when liberals were bellyaching about Chinese goods flooding the Amurican marketplace. Maybe liberals like the cheap Chinese goods after all. Who can tell what liberals like these days since liberals are flipping and flopping like a fish out of water. One minute this, next minute that.
If nothing else President Trump is making the crazy even crazier.

And that was really my point. Who is a free-trader and who is protectionist now comes down to which tribe you're in and which tribe holds the White House.
Before the second half of the 20th century, Democrats were reliable free-trade, while Republicans tended to faver protectionism.
https://www.washingtonpost.com/archive/opinions/1985/09/29/democrat-prot...

Then came the Reagan era, when the press and Democrats were obsessed with the so-called trade deficit. Unions in particular demanded that politicians do something about it.
Fast forward to Trump, who seems to agree with the Democrats from the 80s. Now we see the press and Democrats downplaying the importance of the trade deficit and blasting Trump for his tariffs.

I say, hooray, we finally have consensus that tariffs are bad, and trade deficits don't matter.

To respond to Economike, who is of course right on the economics, I'd say yeah but... the phrase "free trade" as plain English words implies neither trading partner is enforcing barriers (or subsidies). The reality is there can be many barriers or subsidies yet the trade can still be mutually beneficial. It's "free trade" in that the exchange is voluntarily undertaken. But it's no longer "free trade" in the sense that it's barrier/subsidy-free.

In the news, our farmers are being hurt by new tariffs on agricultural exports.
I think it's ironic given that US agriculture had been helped for years by US government export subsidies/credits.

Economike
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mainemom -

mainemom -

Agreed. As has so often been remarked by many on AMG, including both of us, there is no such animal as a free market or free trade. The closest anyone can get is a trend toward the reduction of government-imposed frictions. And I agree that trade is beneficial for any nation that reduces its trade barriers regardless of the barriers that other nations maintain.

Toolsmith -

You think Hitachi can't make decisions like that on their own? There was never any evidence that Japan's government did that, nor was it required.

I'd say that the Japanese economy has operated as a quasi-cartel (e.g. arcane system of trade barriers), but let's assume that each Japanese company that has practiced dumping has done so independently. If so, what's stopping US corporations from doing the same and cleaning everyone's clock? If dumping is successful, why can't everyone succeed at it? What am I missing here?

Most people, not necessarily you, who advocate protective tariffs claim that China has engaged in dumping as a national policy. Do you disagree that China has implemented a national trade policy of subsidized exports?

Toolsmith
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A company like GM can't do

A company like GM can't do what Mitsubishi could do... control labor costs. GM has UNIONS to deal with, and that fixes costs much higher. Add the cost of government regulation and the financial returns to stockholders demanded by the financial system here (which does NOT take the long view). Deep pockets are required - a company must be able to build up a large reserve and the willingness to use that reserve with a long view of the future.

Japanese companies were noted for taking the long view, focusing on growth and long-term market share; American ones have usually had a very short view fixated on stock valuation and other financial measures. An American company COULD do it... but they would have to fight their shareholders every step of the way, with financial analysts screaming at them the whole time.

Economike
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OK. Controlling labor costs,

OK. Controlling labor costs, avoiding excessive regulation, taking the long view.

That's not cheating, right?

Toolsmith
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No, but selling your product

No, but selling your product overseas for less than it cost to produce in order to force a competitor out of business and create a monopoly is cheating. Especially when the prices pop up to over costs right after you succeed.

Mark T. Cenci
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I read today that tarriffs

I read today that tarriffs are being are being eased on EU imports in response to increased purchase of USA crops and energy products. With Trump lauding movements toward free trade. Is Trump a true protectionist?

Toolsmith
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Of course not. He's just

Of course not. He's just using protectionism as a negotiating point.

Previous administrations have given away the farm/store/vault. In order to get a good deal now, the starting point has to be changed so that a compromise will be an improvement. Posturing with a tariff policy does just that. I won't be surprised if we don't end up with *any* tariffs...

Mike G
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https://www.lewrockwell.com

https://www.lewrockwell.com/2018/07/thomas-dilorenzo/fake-populism/

President Trump’s tariffs have already instigated retaliation by other countries that have placed higher tariffs on American goods. If this doesn’t stop soon, Al Gore may have to send President Trump another framed photo of Congressmen Smoot and Hawley, authors of the notorious Smoot-Hawley tariff of 1929, as he did when he debated Ross Perot. The Smoot-Hawley tariff spawned an international trade war that reduced the volume of world trade by two-thirds in the subsequent three years.

curious and curiouser

mainemom
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I get what Trump's view is re

I get what Trump's view is re free vs. "fair" trade.
Certain US exporters have less opportunity to compete when their goods face tariffs.
In the US market our producers lose market share when competing imports are subsidized by a foreign government.
So, even if in the aggregate US producers and consumers are better off with imperfect trade deals, some specific US producers are worse off. Where said producers were the backbone of a local economy, then "bad trade deals" might make their entire region worse off.
Trump's grasp of this is one of the reasons he won in the rust belt.

The goal of course is not to prolong tariffs and subsidies, but to remove them everywhere.

Toolsmith
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The goal of course is not to

The goal of course is not to prolong tariffs and subsidies, but to remove them everywhere.

Which can't happen as long as you want to be loved, and thus are willing to be the only country playing the game that way. Previous administrations did not understand that in a negotiation giving in before it starts is not how to get a good deal. They still don't understand.

Economike
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Agreed. It's easy to

Agreed, mainemom. It's easy to underestimate Trump's grasp of policy by listening to him instead of watching him.

In its effect on international trade, his tax reform was a tour de force, increasing the competetiveness of American corporations in foreign markets.

It's hard to tell if Trump has a rigorous grasp of economics, or whether he's deliberately misleading his base with his goofball ideas about trade, but that's hardly relevant if his actions succeed.

Mike G
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How can you expect free trade

How can you expect free trade when so many economies are centrally controlled, do you think the oligarchs/corporations/central banks in the West, the Chinese commies will/are practicing fair or free trade?

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