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Trump's Tariffs

Maybe Just-Doing-Starfish-Float Trump is onto something.

Now emperor Xi Jiping offers to open car imports from the USA and a more strict control of technology theft.

The strategy of Trump isn't 100% senseless. Basically, in a time of diluted power and confusion he is ditching the bleeding multilateralism of this time (something the very USA promoted by proposing the old GATT) an embracing bilateralism, with the hope to have it all his way in sight of the tremendous asymmetries when you pair any country with the USA.
 
So, in the latest news about how easy it is to win trade wars....

China Has Stopped Buying American Soybeans

Back in early April, China’s government sent a ripple of panic through the American Midwest by announcing plans to slap a 25 percent tariff on US-grown soybeans in response to President Donald Trump’s threatened levy on Chinese steel. While these tit-for-tat tariffs remain theoretical, China has embarked on a real-world attack on the US farm belt—it has quietly stopped buying US soybeans, Bloomberg reports, citing US-based grain-trading giant Bunge.

“Whatever they’re buying is non-U.S.,” Bunge Ltd. Chief Executive Officer Soren Schroder said in a telephone interview Wednesday. “They’re buying beans in Canada, in Brazil, mostly Brazil, but very deliberately not buying anything from the U.S.”

....
The soybean ice-out isn’t the first time China has slammed the US heartland while reacting to Trump’s saber-rattling on the subject of steel. In mid-April, the nation imposed a 179 percent tariff on US-grown sorghum, putting the brakes on a nearly $1 billion market for farmers in two deep-red states, Texas and Kansas.

The effect was immediate. “Several ships carrying cargoes of sorghum from the United States to China have changed course since Beijing slapped hefty anti-dumping deposits on U.S. imports of the grain,” Reuters reported on April 19.

Presumably, Trump initiated this trade feud in hopes that China would back down, giving him a victory he could brandish ahead of the mid-term elections. So far, his plan is backfiring.
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https://www.motherjones.com/politics/2018/05/china-has-stopped-buying-american-soybeans/
 
Thailand sends one of its generals to Washington to suck-up to Trump last month (our "borrowed" watch guy - he explained how he's been photographed wearing about a million bucks worth of different watches as "I borrowed them from friends who are now dead") and over the weekend Washington announced that Thailand are exempt from the steel/aluminum barriers.

Who's left on that list? Anyone?
 
Fudbucker said:
The argument isn't that we should take advantage, but that the playing field should be somewhat level. Of course, there's no perfect equalibrium, but the huge deficits we've been running up don't seem healthy in the long-term.
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Trade deficits go hand in hand with capital accounts surpluses. The US must run a trade deficit because it’s corporations make huge amounts of money outside the US and the US itself is the recipient of huge amounts of investment from around the world. This creates a capital accounts surplus and because balance of payments are zero sum, having a capital accounts surplus forces a trade deficit.

If/when the US is no longer a desirable place to invest and it's corporations stop making huge profits in other countries the US trade deficit will disappear on it's own, until then the US will run a trade deficit.
 
aleCcowaN said:
Trump did the first move. The EU, Mexico and Canada responded. So far, 40 billions in international trade to be affected.
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So, here's what I was thinking this morning, please tell me where it is insane:

So, Canadian steel exports to the US will have a 25% import tax imposed, for the ostensible reason of raising the price of steel in the US, to encourage their native steel companies to expand their production.

So, why doesn't Canada offer instead to impose a 25% export tax on steel exported to the US? It produces the same price increase, producing the same effective incentive on US steel producers. But, it keeps that money here in Canada, even though it's still the US end customer who ends up paying. Canadian producers who abhor the tax are incentivized to look for new markets to replace the US sales, which would happen anyways.

Since all the other effects are the same, why wouldn't we want to keep the tax dollars here?
 
Horatius said:
So, why doesn't Canada offer instead to impose a 25% export tax on steel exported to the US?
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Besides in your world transport and insurance being free, equality before the law non-existent and the disenfranchised eager to take the role of their oppressors who in turn are willing to renounce to economical advantages, I find no problem with your notion.
 
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lomiller said:
Trade deficits go hand in hand with capital accounts surpluses.
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Well, yeah, sort of. The Balance of Paymets (BoP), as an identity, sums to zero. The BoP consists of the current account, the capital account and the financial account. What you mean by capital account is formally the financial account in the System of National Accounts. The capital account is largely irrelevant as it only records acquisitions and disposals of nonproduced nonfinancial assets and some such (for example, the US net capital account was about zero in 2016).

lomiller said:
The US must run a trade deficit because it’s corporations make huge amounts of money outside the US and the US itself is the recipient of huge amounts of investment from around the world. This creates a capital accounts surplus and because balance of payments are zero sum, having a capital accounts surplus forces a trade deficit.
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This is completely backwards however. The financial account (your capital account) does not force any such thing to the trade deficit. You are attributing causality where it does not apply. It may as well be the other way around: a trade deficit (current account deficit) will lead to a financial account surplus, ceteris paribus … that's because the financial account records the monetary transaction of such trade.

Example: When a US company buys a machine from a German company, that trade is recorded in the current account. Assuming no other thing happens, then that becomes a trade deficit for the US and a trade surplus for Germany. That same trade has "caused" the US surplus in the financial account. That means, for example, that the German company's bank account in a US bank has been credited for the price of the machine sold. And that deposit account will be defined as other investments in the US, recorded in the financial account. But that basically just means that a US bank now owes the German company the equivalent sum of the US trade deficit caused by the trade.

Also, income from investments abroad is recorded in the current account.

lomiller said:
If/when the US is no longer a desirable place to invest and it's corporations stop making huge profits in other countries the US trade deficit will disappear on it's own, until then the US will run a trade deficit.
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Here's the net international investment position (NIIP) for the US:

fredgraph.png
 
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Belz... said:
Creating jobs is one thing, but do you want to pay double the current price for your clothes?
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At least it could put an end to enormously wasteful habits. I know people that don't even bother anymore to wash or repair their clothes, they just buy new ones!
 
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The Koch Brothers are now wading in on the tariff situation:

Powerful US billionaire brothers Charles and David Koch are funding a multi-million dollar campaign against President Donald Trump's trade tariffs.

Three political groups backed by the brothers say they will use advertising, lobbying and grassroots campaigns to push the benefits of free trade.
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IIRC they have always been uncomfortable with President Trump, though no doubt happy about the tax breaks.

https://www.bbc.co.uk/news/business-44366737
 
aleCcowaN said:
Besides in your world transport and insurance being free, equality before the law non-existent and the disenfranchised eager to take the role of their oppressors who in turn are willing to renounce to economical advantages, I find no problem with your notion.
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What does any of that have to do with imposing an export tax? What about that implies that transport and insurance are "free"? Why would this impact equality before the law? Targeted taxation is pretty much the whole point of tariffs.

Now, yes, this might, if you squinted just right, look like "the disenfranchised eager to take the role of their oppressors", but since we're going to get screwed either way, we might as well be screwed by someone we like who will buy us stuff.

https://www.britannica.com/topic/tariff#ref592273

Sure, they're not very common nowadays, but they have along history of use. Why not dust them off for this specific use?
 
Horatius said:
What does any of that have to do with imposing an export tax?
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Everything


Horatius said:
What about that implies that transport and insurance are "free"?
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Tariffs are applied on CIF values, export taxes are applied on FOB values


Horatius said:
Why would this impact equality before the law?
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Since the purpose of export taxes is making goods available cheaper in the domestic market, not re-directing exports onto new markets, you'll have to point the piece of Canadian legislation that allows to do that on those goods affected by Trump and not the other goods.


Horatius said:
Now, yes, this might, if you squinted just right, look like "the disenfranchised eager to take the role of their oppressors", but since we're going to get screwed either way, we might as well be screwed by someone we like who will buy us stuff.
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The practical result would be double-screwing (or getting the manufacturers totally screwed).
 
Pedant: I'm not sure I even understand the points being made/countered, but US CBP assess duty on imports based on the FOB value, not C&F or CIF.
 
lupus_in_fabula said:
It may as well be the other way around: a trade deficit (current account deficit) will lead to a financial account surplus, ceteris paribus … that's because the financial account records the monetary transaction of such trade.
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The relationship works both ways. In the case of the US, the strong dollar suggest capital flows are driving the trade deficit.
lupus_in_fabula said:
Example: When a US company buys a machine from a German company, that trade is recorded in the current account. Assuming no other thing happens, then that becomes a trade deficit for the US and a trade surplus for Germany. That same trade has "caused" the US surplus in the financial account. That means, for example, that the German company's bank account in a US bank has been credited for the price of the machine sold. And that deposit account will be defined as other investments in the US, recorded in the financial account. But that basically just means that a US bank now owes the German company the equivalent sum of the US trade deficit caused by the trade.
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The German company is going to want German currency, and the exchange is going to create downward pressure on the USD. The USD remains strong, however, which tells us there is a demand above and beyond the amount required to buy US goods. I’m broadly referring to this as “investment” for simplicity sake in introducing the concept to people not familiar with it.
 
aleCcowaN said:
Tariffs are applied on CIF values, export taxes are applied on FOB values
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Okay, so having Googled those terms, this just seems to be a matter of how much tax to impose to produce the same cost at the end of the transaction. That seems to me to be a minor problem of mathematics.


Since the purpose of export taxes is making goods available cheaper in the domestic market, not re-directing exports onto new markets, you'll have to point the piece of Canadian legislation that allows to do that on those goods affected by Trump and not the other goods.
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We're the Government. If there's no law that allows this, we can just pass a law. That's why it's fun to be the government.
 
lomiller said:
The relationship works both ways. In the case of the US, the strong dollar suggest capital flows are driving the trade deficit.
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The relationship is merely that of an accounting identity, not one of causality. There is nothing "driving" here. Simply looking at the scorecard of a game does not drive the players to score.

Either the firms trade with each other or they don't. There is nothing in the financial account, by itself, that makes them trade with each other.
 
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