It seems that they completely omitted analyzing the impact of the retaliatory tariff's; which is odd - as that can often be a major reason not to impose a tariff in the first place.
Under normal circumstances retaliatory tariffs may be important, but I think because of the relatively asymmetric nature of US-China trade (the US's massive trade deficit to China), I'm definitely more interested in how the tariffs are affecting the Chinese manufacturers and American consumers. But yes a more complete analysis should look at both sides.
I’ve often wondered why given our position vis a vis China, economically, previous presidents have been reluctant and unwilling to take these steps. Before Obama and Busch, it was Reagan and Busch senior who were reluctant to tske steps against Japan. We had the upper hand and also had logic and trade law on our side, but other than token measures were weak in this regard. Were they just too deferential to short term concerns and or offshoring interests?
Reagan and Bush believed in free trade - maybe not completely, but it was something like believed would turn out better for the long run. Note that nobody worries about Japan taking our jobs anymore.
Since we don't have parallel universes to play with we can never experiment to see which approach is better.
By all means fair trade. But what Japan was doing wasn’t fair trade. We’d open markets but they’d put up all kinds of reasons and non tariff barriers to exporters, up to ridiculous extremes such as saying Rossignol (French) was unfit for Japanse snow. I mean even if this outrageous claim were true, let the buyers decide. Sure, Japan now is not overly unfair, but in the mean time over 20 years US workers had unfsir competition. Same was happening with China, but now someone is finally willing to call things out snd say “enough”.
This can mean two things: either the Chinese are cutting prices to cope with tariffs (a benefit to the US), or Americans are displacing expensive Chinese goods for cheaper Chinese goods -- which means the demand elasticity is high and most of the burden goes to the Chinese producer, as explained by the diagrams in your study.
This is what the Maersk CEO said recently. Everyone is importing more now in case prices and tariffs rise. He also mentioned that US exports to China has slowed presumably because the Chinese government force the hand of Chinese companies more easily.
Politics and public opinion are major aspects in these disputes.
If a country slaps tariffs on your products it is very difficult not to retaliate. That's true in general and that's especially true in China regarding any foreign action that may be painted as unfair (For historical reasons this is always a big deal).
The article seems to assume that only seeing a 5% price increase on items tarrifed at 25% must mean the foreign manufacturer taking a 20% hit. However, if domestic producers become profitable at the 5% higher level then we could just buy all our goods domestically and the foreign producer can stop manufacturing. In that scenario they aren't 'paying' anything except the lost profits on goods they no longer make. If their profit margin is under 20% then they aren't paying "the other 20%". Nobody is. Consumers are just paying 5% more for goods produced domestically. If we impose a tarrif of one thousand percent and prices go up 10%, nobody is paying for the other 990%.
> In that scenario they aren't 'paying' anything except the lost profits on goods they no longer make.
But they are paying a high price by losing market share. Profits are one thing, but revenues are a whole other. Revenues support jobs, higher revenues typically offer all sorts of "economy of scale" benefits, etc. If Chinese manufacturers lose access to their American consumers, they have a high price to pay
I always thought that for a country with the World’s reserve currency, the USA ought to maximize its trade deficit instead of worrying about reducing it. It gets scarce, useful stuff (iPhones, raw materials, food) in exchange for green bits of paper that the USA can print an unlimited supply of. The green bits of paper are usually invested back into the USA creating jobs and other economic opportunities (no point in hoarding it if it gets inflated).
> The green bits of paper are usually invested back into the USA creating jobs and other economic opportunities (no point in hoarding it if it gets inflated).
The "green bits" are pumped into real estate across the US (not to mention Canada, the UK, and Auckland), inflating housing prices and making it harder for housing consumers to acquire property (kudos Vancouver for your foreign buyer tax!). Jobs are not created with these investment dollars.
While increased demand for real estate had definitely played a substantial role, housing costs could be flat or even decrease if we simply increased supply dramatically. There are a limited number of people but there is a cubic amount of space if we build up. If we had policies that encouraged always building then housing prices would collapse and we wouldn't have an affordable housing problem at all, even with foreign investors buying speculative property.
> housing costs could be flat or even decrease if we simply increased supply dramatically
I have a feeling places like SF and NY have already tried this. Considering most of these foreign investors are most interested in these two cities over lets say Nebraska, it's hard to see how NY just needs to "build more supply" is a solution.
> If we had policies that encouraged always building
We have those in Australia, it's called negative gearing. We also have the most expensive houses when compared to average income and our cities have taken your advice and started to build up at rapid paces. Still hasn't worked.
The Aus government is now suggesting we lower our immigration cap from 1% of total pop yearly so maybe that will help.
For various reasons there seems to be a tendency for those who invest in real estate to exercise their political power in such a way as to maximize the value of their investment. Some of those who look for a reason why affordable housing is scarce in their community may consider looking in the mirror.
Exactly. The wealthy landlords in our small rural community vetoed a Walmart, vetoed a community college and continually try to prevent new home construction.
You don't even need to build up. There's plenty of land at current densities, it's zoning and people with guns/legal authority that prevent others from building where they want to.
Or we could curtail speculative investment from a foreign nation's citizens (as other countries do, Thailand and Mexico come to mind) and not have to find ways to radically increase housing supply that we're not able to accomplish regardless. The charade that housing supply momentum can adjust faster than capital movement needs to end.
In places that can build more housing, it is done. In places it can't be done, or the local citizens don't want it done, it is not. "Build, baby, build!" is just as ridiculous as "Drill, baby, drill!" [1] We work backwards from those two fundamental truths.
It’s complicated. Sure, there is way more space than people if we want it, but a surprisingly large number want to live in the same few places. If many want to live in Manhattan, and they do, you’ve only got Manhattan to fill up and then the prices rise, which they did.
WHich is something that is completely controllable, as the Vancouver example you point to. Irrespective of whether that’s a good thing or not, the point is, the problems with real estate investments isn’t because of the trade deficit, but because the US doesn’t take any steps to prevent the money being invested in real estate.
It also makes those things more expensive, both for the property those services occupy and for the cost of paying high enough salary to attract necessary staff.
Also there are other forms of tax besides property tax, so governments don’t need expensive property to fund their services.
> I always thought that for a country with the World’s reserve currency, the USA ought to maximize its trade deficit instead of worrying about reducing it
Indeed. That was basically post-war US economic policy in a nutshell. The worrying about reducing the trade deficit is a purely political argument. Trump is simply the first person in power to actually believe the nuttery.
> Seeing how they had an $800 billion trading surplus with US, I'd expect that.
You're doubling the trade surplus. It was $375 billion for 2017. Total trade was $635 billion.
China's trade surplus with the US for 2018 is running slightly higher, it'll probably come in near $410b. Mostly due to the US consumer and economy being pretty revved up this year.
The impression that that readers of say the New York Times would be left with at this point is that Trump stupidly imposed tariffs that only hit American consumers, whereas China brilliantly targetted tariffs right at Trump's base. This appears to be the precise opposite of the truth: the tariffs on China are mostly affecting China, and whilst the overall impact of the soy tariff isn't clear it was definitely the result of it being one of the few things the US exported to China in significant amounts rather than of ingenious Chinese planning.
And of course the effect is far more dramatic over time than just the direct tariff hits.
It's pushing companies to move their supply chains out of China, as few are expecting that this is a short-term trade conflict.[1] This will go on for decades in varying forms.
The US wins in all scenarios from that effect. Some limited manufacturing comes back to the US; win. Some manufacturing moves to Mexico, whose labor costs are now often cheaper than China's; win. Some manufacturing moves to China's Asian rivals with cheaper labor costs, such as Vietnam; win. The US will push half a trillion dollars into Vietnam via a trade deficit over the next decade, that they can use to develop with. Every dollar of supply chain the US pushes out of China and into smaller neighboring rivals, is a win for the US strategically. The goal is to dilute China and redistribute trade into numerous other Asian nations that aren't a superpower threat. This isn't just a trade conflict, it's the start of a long-term political contest over whether China is going to acquire hegemony over Asia - something only China has an interest in, which leaves the US with a dozen regional allies against that outcome.
The strongest results will be the long-term supply chain shift that will gradually take place over a decade or more. The longer the US keeps up the pressure the better that outcome.
Wow, the NYT lies to paint Trump in a bad light! Whooda thunk?
I definitely didn't think imposing tariffs was a good idea, but once it was explained that a lot of other countries (including Canada) impose a lot of tariffs on us, and that this action was an attempt to level the playing field, it suddenly seemed like it wasn't such a stupid idea after all, and it may actually be working to the benefit of the U.S.
The tariffs do actually come directly out of the importers pocket (i.e. local manufacturers). Since the general public doesn't know what tariffs are, it's right to tell it that way.
BUT there is a whole other dynamic attached to tariffs. I.e. the foreign producer lowering it's prices to not lose important clients.
I wonder how much it matters who is paying more? A more important factor might be who can last longer. A president with a fickle base used to the many comforts of a highly developed country? Who will vote again in two short years? Or the Chinese people already used to the government deciding what's best for them?
Whoever simply makes more money from the goods they export. In this case, China has more to lose.
You forget that in China, you have a dictator who uses violence and fear to keep people in check. They are stuck with his foreign policy abilities, which many analysts will conclude, Xi fucking sucks, including those around him who aren't happy about him being a dictator and praising Mao (has anything ever good come out of ppl who idolize Mao?)
The US is on it's way to prosecuting a Russian KGB asset who has been compromised and being blackmailed to willfully corrupt in order to launder the billions that Putin and his buddies stole from his own fucking country. Thankfully, the US president doesn't have absolute power, cannot stay in power indefinitely, is not immune from the institutions that the American forefathers have created to keep the President in check, a continuity in all the core national security organs such as the CIA and NSA which prevents somebody like Xi from ever pulling the same shit, and cannot just roll over people with tanks and then make a stupid song about how much people love the Tianmen square.
In China, the trade war is having a far more profound impact on society and economy but you will never hear this and neither will the vast majority of citizens in China because information cannot flow freely and it's censored.
If China seems invulnerable and powerful, it's only because they specifically crafted their image in that manner. The fact is China is dysfunctional by and large and anyone who had exposure to their political system knows it can't continue no matter how many active measures they take.
You seem to agree with me that a dictatorship can last longer in a trade war? Your gripe seems to be with what a horrible place China is. That might be true. Having lived there and done business there I think it's more nuanced than you're making it out to be. But let's say it really is that bad. Does that win a trade war before the next US elections in 2 years when US consumers might already be frustrated with higher prices?
Dictatorships are not very efficient economically, it seems.
China has become an industrial powerhouse when some modicum of economic liberty was admitted by Deng Xiaoping. Dictatorship stifles internal economic competition, and makes the economy less and less efficient.
If Mao times look too drastic a comparison, you can compare to the USSR, which was also, well, nuanced, and had leaders stat stayed at power for decades. How well did it fare against the US?
China isn't the USSR. China is increasingly capitalist, has had years of excellent economic growth, and has a quickly growing middle class. So my question remains: who gets unelected first when the middle class suffers? I don't think it's the dictator.
With more heavy-handed government involvement, I'd suppose that China is decreasingly liberal-capitalist and increasingly state/crony-capitalist. Government-controlled huge semi-monopolies are known for comparatively lower efficiency.
Then what's confusing is why China's economy grew at something like 10% for many years. When was the last time the US saw that kind of growth? Why aren't corporations democracies? I'm not convinced you have a strong persuasive case, but data is always welcome.
Taxes and unemployment have gone down, and wages are starting to go up. I wonder if anyone would get angry enough over trade war costs at the end of the day.
They are mad, but Trump has successfully spun to them the idea that they are an unfortunate victim of the situation and things will be better for everyone in the long run if we take care of this.
Well successful to the republicans and most of the independents. This is politics: it should be assumed that Democrat will oppose anything Trump does no matter how good it is - just like republicans opposed everything Obama did.
> You seem to agree with me that a dictatorship can last longer in a trade war?
No. You are connecting two separate ideas to say that I agree with you. I did not agree. I don't know who will last longer in the trade war. I do know that throughout history, the US has witnessed dictators come and go for the most part.
> Your gripe seems to be with what a horrible place China is.
No. Again, you are trying to twist my words into a "China sucks". Nowhere did I make such claim, I simply highlighted structural problems within China that suggests fragility of the Party vs the anti-fragile nature of US democracy. I used Trump as a good example of how the system is able to flush the turd, not the turd flushing the system. Please don't try to suggest that I'm comparing China to a toilet, I think it's citizens realize the full depth of the country they live in but out of fear cannot speak out in a manner that contradicts the governments view.
> That might be true. Having lived there and done business there I think it's more nuanced than you're making it out to be.
again this isn't the case of "china sucks" and im not saying you can't have a good time or meet good people in China which you've certainly claimed in your anecdote. It certainly is a surprise to me as I live in a highly concentrated neighborhood of Mainland Chinese folks and I have never ever heard them talk positively as a good place to do business.
> But let's say it really is that bad. Does that win a trade war before the next US elections in 2 years when US consumers might already be frustrated with higher prices?
Again, you are trying to join separate ideas that "China could be bad", "trade war", "consumer price index in 2 years" supports your main argument which is "China cannot suck because it will win the trade war".
Not sure what your issue here is. My guess is as good as yours about the future. I just tried my best to present my opinion, which cannot be taken as the truth and neither can yours. Nothing is solved. Just two HN'ers slugging it out.
the conspiracy goes back to the 1980s, with corroborated witnesses from both American and Russian elements.
The watergate journalist wrote a book on him. The guy who prosecuted watergate is looking at finances, money laundering specifically.
I'm not saying this is a 100% thing but it's a more of a case of 99.99999% that current president has been laundering money for the Russian mob since Taj Mahal days. We also see a curious case of a man who was so broke no bank in the world would give him relief....except Russian banks....controlled by the Russian _____ .
I will leave that as a blank for you to complete as an easy exercise.
That was obviously tongue in cheek. But if you still don't think there is a very clear and almost assuredly illegal connection between Trump and Russia I struggle to believe you're exposing yourself to a variety of media sources or following the Mueller investigation at all. The mere fact he refused to enact bilateral sanctions was enough cause for serious concern.
During a trip to China, I got to talk to a citizen via a translator, and eventually the subject went to politics. They asked me how I felt about Trump, and I gave my answer, and was about to ask how they felt about Xi before I caught myself.
We couldn't talk about Xi the way we could talk about Trump because there isn't a way to honestly discuss it without allowing for criticism, or the idea that there's more than the image cultivated by the state. I didn't want to risk anyone's safety if the wrong person heard the wrong thing.
It's jarring to have this happen in real life and realize you suddenly can't have a fulfilling conversation with the other person. The chilling effect is real, and real enough that I'm not sure if I should be posting this, vague as it is.
Hmmm...when I recently went to China, I talked to a bunch of people about Xi and heard good and bad things. We had very engrossing conversations.
Of course, I can speak Mandarin so perhaps that’s why they felt comfortable talking to me.
I’m also of Mexican descent, so that might be another factor.
The irony is that I feel more comfortable using a throwaway alt on HN for this comment because I’m afraid of trolls stalking me on my real account for saying nice things about my experiences in China.
It is impossible to explain that feeling to those who had never been through it. Once they plant the seed of fear in your mind, it is very hard to get rid of it.
We don't know what will happen in 2 years. I expect a close election, and the trade war will not have anything to do with the result - though voters against may use the trade war as an excuse.
The trade war will probably have a big impact on the election. Two years from now will be two further into the trade war, and by then I expect China to capitulate. When that happens, the stock market will head for orbit.
Proven right on what account? The article only says China affected negatively more than the US is affected negatively. Both still are still being hurt, and nobody is 'winning' anything. The article only compares consumer prices increases, and fails to mention whole sectors needing government handouts (soybean farmers) or business moving out.
The confident assertion of Trump critics everywhere was that US consumers would end up paying for his tariffs and that the whole thing was just a horribly regressive tax on Americans.
If you feel like you aren’t paying more for something when you pay 5$ more just because I pay 20$ more, then have some magic beans to sell you.
China is “paying for the war” or “losing” in the sense that more of their soldiers are dying (more increase in cost), but at the end of the day no one is better of in the middle of a war than in peace and soldiers are dying on both sides. Also, at the end of it they may end up winning the war even if they do have larger losses along the way.
You are mixing the analogies here, thus the confusion.
Unlike in war, the tariff 'war' casualties is either money being transferred between countries in different direction than per the usual, or more money paid as import/export duties to the governments.
No money is magically destroyed; instead it changes hands - between the private sector and the government. Now the supposed "dying soldiers" is just more money to fund infrastructure, or invest in company's growth.
That aside, I believe the most important outcome will be diversification of supply providers, as discussed upthread. Right now China has unhealthy near-monopoly on certain key goods and components, especially the cheaper ones, and thus is able to hold the low-to-mid earning americans hostage via the implicit threat of price hikes.
Once diversification progresses sufficiently - i.e., a significant chunk of the sourcing and manufacturing moves out of China and into other countries, like India, Vietnam etc. - the USA will be able to negotiate trade with China on much more equal and equitable terms.
The diversification of supply and manufacturing will strengthen all the sides.
One casualty you do not mention is the actual physical goods that consumers do not get as a result of the tariff 'war'.
That is, consumers spend the same amount of money, but get fewer goods in return. This is an economic loss for the consumers.
Put another way, the "no money is magically destroyed; instead it changes hands - between the private sector and the government" argument taken to the obvious limit would imply that there is no problem with the government just confiscating everything. While some people do think that, the empirical evidence seems to be that this is a bad idea: standards of living drop a good bit when this happens. So on its own this argument is not sufficient to prove that a policy is not causing hits to standards of living.
>would imply that there is no problem with the government just confiscating everything
I am unhappy you condensed my points down to something akin "taxation is theft mkay".
On the point of taxation (of which import/export tariffs are a form of), I prefer as little as practical, and consider it a proper thing to do in general. It's matter of degree, to be decided via normal democratic processes.
However the gist of my post was not immediate monetary costs or returns; instead it's about a long-term balance of strengths in the trade exchanges. Right now certain sectors of american economy are very reliant on single source of resources, components and complete products. This gives the source - China - an undue influence on the prices. Fixing that problem by diversifying sourcing & manufacturing will bring long-term prosperity to americans.
Given the points raised upthread - that the tariffs seem to burden chinese more than american economy - it's more of a game of chicken than a shooting war. The first one to blink ends up picking up the tab - in case of this tariff 'war' that'll mean returning to the bargaining table, ready to make some concessions.
> I am unhappy you condensed my points down to something akin "taxation is theft mkay".
I was definitely not aiming at that, and I'm sorry if that's how my comment came across. I was trying to point out that saying "this just moves money around; money is not created or destroyed" is not a logical argument for anything. The real issue is what happens with actual goods or services as a result of the new distribution of money.
I largely agree with you on the long-term implications here, for what it's worth.
> in case of this tariff 'war' that'll mean returning to the bargaining table, ready to make some concessions
That's one plausible outcome, yes. Another one, though, is that we just keep on as we are, with somewhat reduced standards of living in the US in exchange for a stronger geopolitical position. This might well be worth it, but I think it's important to be clear that this is the real tradeoff we're making here.
Right, but like in physical war, even the winning side is expected to have casualties, and those casualties are the price to pay for (hopefully) a better net outcome than not going to war.
And it seems like this is the case, right? 5% price increase in the US vs 20% price increase in China. So who is benefiting? Let me make clear that I'm absolutely not a proponent of China's global economic policies, so I'm not choosing sides here. But one-sided tariffs like they have been instituted by the Trump administration really do not benefit anyone. Hurting less than the other party hardly seems like a win to me.
My understanding is that the desired outcome is for China to get rid of tariffs and other policies that prop up their local industries at the expense of other countries. The problem before was that China had policies and tariffs that were one-sided and nobody could do anything about it. The US is big enough to do something about it.
For many people, Trump is a stop word that makes their brain slip a gear and descend into mindless rage. Trump could say the sky is blue and those people would claim otherwise.
It's still pretty bad here, as you can see with many discussions the CNN-type opinion tends to be prevalent. What is nice is that discussions here often involve intelligent, analytical discussion around such talking points; a degree less hivemind regurgitation here perhaps.
I'm sure there is a heck of a lot less reputation management and astroturfing here. That is probably down to the size of this forum though.
This is certain. It's impossible to have any kind of discussion on Reddit, outside of a few places like /r/conservative and /r/tuesday. It's one big echo chamber. Hacker News definitely is better than that.
Typical strawman. Trump started the trade war because the _deficit_ is huge, not because China's exporters have higher profit margins. The mentioned "research" concluded that the trade war is going to "lower the bilateral trade deficit by 17 percent" after imposing tariff on $250 billion worth of imports from China. As the deficit is increasing every month, reduce it by 17% is like moving back to say one year ago.
China's swine flu is caused by trying to substitute soybeans from pigs meal and has caused a big problem. China is certainly paying a high price for boycotting US soybean. Chinese buyers are too afraid to buy US Soybean.. not because the Chinese tariff makes it too expensive but because of the feared repercussions from the government.
It seems that they completely omitted analyzing the impact of the retaliatory tariff's; which is odd - as that can often be a major reason not to impose a tariff in the first place.