Tariffs and Potential Inflation

[jeff_gibbons]

Much to agree with in your post, but you end it with an oxymoron - either the trade is free or it is bounded by tariffs and regulations trying to balance it. So, you have (in gross over simplifications) free trade, no trade or regulated trade. Not sure we have had free trade during the last 500 years. Just various forms and flavors of regulated trade, with each regulation having its own pros/cons but in the end making the aggregate of humanity poorer.

I see your point on it being a contradiction from the lens of free trade being all or none. However, that’s where I disagree with the interpretation.

IMO, we should engage in free trade only when it is reciprocal. Free to dump in US but not sell other way is how China and others have displaced our economy.

We must establish manufacturing supply for strategic and core good within the US. And it’s time people who have become addicted to cheap foreign junk to wake up and realize that the proponents of continued status quo have an agenda.

 

[jeff_gibbons]

Just to be clear, no one has truly followed a Keynesian model, ever. Odd given his name sure comes up a lot.

@Sytes
You might find the below read interesting. It is a little more complicated than we make it here with wages. Case in point, remember Trump asked Apple to make iPhones in US and was told we don’t have the expertise in manufacturing to do it, even if we could accept the wage price differences.

The East-West Wage Gap Not Nearly As Compelling As It Once Was

China has all but lost its low-cost advantage.

www.forbes.com

I disagree. “Keynesian economics is based on the idea that the government can stabilize the economy through intervention.” This is what we’ve seen in bailouts, fed rate manipulation, picking winners etc.

 

[jeff_gibbons]

I agree with this statement.
Preservation, self reliance, and prosperity. That said, global import/export economy that involve differing drastic cost of production from labor standards to minerals is far from United States preservation, self reliance, and prosperity.

In order to embrace the capitalistic ideals of Friedman on a modern global scale, the American labor force would require the equivalent of China.
I doubt U.S. employees would be excited to match Chinese employee standards.

Then there's access to the minerals dominately owned by China... Capitalist global Free Trade is far away from American preservation, self reliance, and prosperity, imo.

I think I agree with your point that trading with partners with lower cogs has the impact of skewing the transaction. But I believe trade can be managed selectively to affect a light touch that achieves the goals I stated.

 

[Sytes]

It is a little more complicated than we make it here with wages.

Agree, that is the reason I addressed this beyond wages. I spoke of labor safety and protections afforded and regulated by FLRA and the likes, the expense involved beyond simple wages.

That said, on the "simple" portion of wages, Chinese workers, in 2023, make less than 1/3rd the wage of a U.S. worker of equivalent work. Then add the expense of our employee federal protections, among other payments employers contribute to aid U.S. employee retirement, etc.

 

[VikingsGuy]

I see your point on it being a contradiction from the lens of free trade being all or none. However, that’s where I disagree with the interpretation.

IMO, we should engage in free trade only when it is reciprocal. Free to dump in US but not sell other way is how China and others have displaced our economy.

We must establish manufacturing supply for strategic and core good within the US. And it’s time people who have become addicted to cheap foreign junk to wake up and realize that the proponents of continued status quo have an agenda.

I don't disagree with your preferences, but that is regulated trade with a robust national industrial policy -- not free trade. And to be clear, the US has not had "free trade" for one minute of our lifetimes. That's OK, but let's be clear we are talking about the degree and nature of regulated trade and not aspirational free trade that undoubtedly would make aggregate humanity better off. What you/we are saying is that we want a random 35 year old American to do better next year than a random 35 yo Japanese woman and better than a random 35 yo Chilean woman, etc. Regulated trade dances with a zero sum pie while creating "frictions" and inefficiencies that unavoidably shrink the pie for every one. But nationalistic trade policy says, I don't care if the pie shrinks for all if I relatively get more than others. I am not saying that is a wrong perspective, but let's at least be honest that it is a slippery slope that in the end limits our human potential in the long run and if done poorly could screw us today.

 

[SAJ-99]

I disagree. “Keynesian economics is based on the idea that the government can stabilize the economy through intervention.” This is what we’ve seen in bailouts, fed rate manipulation, picking winners etc.

That is only half the model. We know the half of the model you mention is correct. We can stabilize the economy during downturns. The other half of the model says once things are stable and the economy is back to normal, you withdraw that stimulus and raise taxes to pay for what you did. The first part every politician agrees with. The second half no politician does.

 

[Selser363]

This is gold! Haha! +1 for you. Good job!

Heck yea man, I needed to get to 10!

 

[Selser363]

Gotta build up post numbers to sell fake Swarovski binos

I don't sell Bino's, I prefer fake Rolex's

 

[VikingsGuy]

I don't sell Bino's, I prefer fake Rolex's

Sweet - We may have met at Time's Square last month . . . .

 

[SAJ-99]

Agree, that is the reason I addressed this beyond wages. I spoke of labor safety and protections afforded and regulated by FLRA and the likes, the expense involved beyond simple wages.

That said, on the "simple" portion of wages, Chinese workers, in 2023, make less than 1/3rd the wage of a U.S. worker of equivalent work. Then add the expense of our employee federal protections, among other payments employers contribute to aid U.S. employee retirement, etc.

I'm never sure what you are arguing. Do you want 10yr old kids back in factories or tariffs to equalize pay? Ironically, A lot of the basis for what has happened came from Friedman's free-market capitalism sales pitch. Our intent was to raise the rest of the World's (China) middle class up while providing lower prices to an over-consumptive American economy. Success, I guess, but unintended consequences were it suppressed growth in US wages and we lost of a lot of manufacturing expertise. Maybe the main takeaway is nothing works exactly as we think it will. Also, keep in mind the reason a lot of garment production has moved to Vietnam is they have a wage rate 70% lower than China - Americans love deals, and corporate profits.

 

[Sytes]

I am 100% supportive of equitable trade.
I support the current trade war with China that Biden Admin and the Trump Admin had, have, and are continuing to fight.

Simple enough, SAJ?

 

[BigHornRam]

That is only half the model. We know the half of the model you mention is correct. We can stabilize the economy during downturns. The other half of the model says once things are stable and the economy is back to normal, you withdraw that stimulus and raise taxes to pay for what you did. The first part every politician agrees with. The second half no politician does.

To be fair the MSM referred to Yellen as Keynesian or a "New Keynesian".

https://www.reuters.com/article/opinion/yellen-looks-toward-a-keynesian-approach-idUS3115358961/

 

[SAJ-99]

I am 100% supportive of equitable trade.
I support the current trade war with China that Biden Admin and the Trump Admin had, have, and are continuing to fight.

Simple enough, SAJ?

Honestly, and I don't mean to argue, but not really. It sounds like something a politician would say. What is your definition of "equitable". Equal tariffs in $ terms? $ of $? Is equitable they send us rare earth metals and we send them the latest semiconductors we use in military equipment? Equitable gets real squishy. I think the term obfuscates that the benefits both countries have enjoyed from the relationship over the last 40 years. We suppress inflation and they build a middle class. This stuff is very complicated, and my criticism of Peter Navarro is he doesn't understand the full extent of the complexity. But, here we go again. I certainly hope for the best, for eveyones sake. What I am sure of is he will tell us all that China is paying the tariff, and about half of America will believe him, all while digging a little deeper in the wallet to pay for stuff.

To be fair the MSM referred to Yellen as Keynesian or a "New Keynesian".

https://www.reuters.com/article/opinion/yellen-looks-toward-a-keynesian-approach-idUS3115358961/

People can call it whatever they want. That was when she was at the Fed and in control of monetary policy. The fact is monetary policy has been rewritten over the last 20yrs and from this point forward every economic slowdown, even the hint of one, will be met with more stimulus. Fiscal policy remains stuck. Eventually we reach a point where the two have to be addressed together. Or we fail as a republic. We will see which one comes first.

When the people find that they can vote themselves money, that will herald the end of the republic. – Ben Franklin​

 

[VikingsGuy]

I am 100% supportive of equitable trade.
I support the current trade war with China that Biden Admin and the Trump Admin had, have, and are continuing to fight.

Simple enough, SAJ?

Folks in the developing world will make a fairly clear ethical point that any trade framework that leaves US median household income at close to $80,000 a year while over 50% of all the humans on earth live on less than $10 a day can never be viewed as "equitable".

 

[elkduds]

I'm never sure what you are arguing. Do you want 10yr old kids back in factories or tariffs to equalize pay? Ironically, A lot of the basis for what has happened came from Friedman's free-market capitalism sales pitch. Our intent was to raise the rest of the World's (China) middle class up while providing lower prices to an over-consumptive American economy. Success, I guess, but unintended consequences were it suppressed growth in US wages and we lost of a lot of manufacturing expertise. Maybe the main takeaway is nothing works exactly as we think it will. Also, keep in mind the reason a lot of garment production has moved to Vietnam is they have a wage rate 70% lower than China - Americans love deals, and corporate profits.

If Americans had to pay the real, whole cost without gov't subsidies for wheat, corn, beef, minerals, oil, gas, vehicles and energy, we'd all be riding e-bikes to the thrift store.

 

[brymoore]

I support equitable trade. Quote me where I said I support free trade with China. You're feeding off another for mis representing my statements.

The humor... heh!



How do you, @brymoore , support a global scale of capitalism without drastically dropping American employee labor standards to reach a competitive level with China?

Such tariff nonsense.

What did Scotland do to the United States? A 25% tariff was imposed on Scotch. Why?

The EU? Japan? Canada? Supposedly our allies. This more than the trade war was started with China by the United States in 2018.

The 2018 tariffs imposed $80B in prices increases (hidden tax) to the American citizens. The 2025 tariffs will do the same with no benefit. Why should American citizens have to suffer from bad economics of tariffs?

Frankly, the tariffs against China solved nothing and the further sword rattling by T is making it worse.

Free trade is the answer. If there are defense type issues with China, it can be handled by other measures than putting a tariff on Walmart products.

 

[SAJ-99]

If Americans had to pay the real, whole cost without gov't subsidies for wheat, corn, beef, minerals, oil, gas, vehicles and energy, we'd all be riding e-bikes to the thrift store.

Nah. We would get it delivered and then make a Tweet complaining about the price.

Joining retailers like Walmart, Dollar General launches same-day delivery at some stores

Dollar General began offering same-day delivery at 75 of its locations in September.

www.usatoday.com

 

[D_Walt]

If Americans had to pay the real, whole cost without gov't subsidies for wheat, corn, beef, minerals, oil, gas, vehicles and energy, we'd all be riding e-bikes to the thrift store.

where does the government get the money to subsidize the items above? Subsidies are just a way to “equitably” distribute “wealth”; or tax dollars and borrowed money.

 

[elkduds]

Subsidies often come as discounted lease fees to grazers and natural resource extractors. If producers paid private land market ratesfor those subsidized leases, the true cost of beef, lumber, gas, oil and minerals would be passed to the consumer. These less visible subsidies don't actually get paid for by the Treasury, however they greatly reduce the lease incomes that would otherwise enrich the Treasury. That would reduce taxes to individuals but increase the costs of all goods concerned. Per Friedman, "there's no such thing as a free lunch."

 

[Sytes]

Folks in the developing world will make a fairly clear ethical point that any trade framework that leaves US median household income at close to $80,000 a year while over 50% of all the humans on earth live on less than $10 a day can never be viewed as "equitable".

Imports received by a country are based on the tariff / duty that country sets. If a country who's citizens makes $8 a day has auto dealerships that desire to sell U.S. Ram 1500 Limited $90k p/u trucks... really? Let's not play the $8 dollar a day for goods manufactured in the U.S. bit. It is available for the market ability to sell. Supply and Demand.
As for markets that compete with goods from America - yes! 100% equitable international trade.

****************

American position on international trade, as an American?
National security interests?
Protecting American production?
Fair U.S. labor standards?

All questions each person should inquire of themselves, as Americans within a debate about international trade. If not, cheers.

To quote 2018 Nobel Prize Economist, Deaton;

I am much more skeptical of the benefits of free trade to American workers and am even skeptical of the claim, which I and others have made in the past, that globalization was responsible for the vast reduction in global poverty over the past 30 years. I also no longer defend the idea that the harm done to working Americans by globalization was a reasonable price to pay for global poverty reduction because workers in America are so much better off than the global poor. I believe that the reduction in poverty in India had little to do with world trade. And poverty reduction in China could have happened with less damage to workers in rich countries if Chinese policies caused it to save less of its national income, allowing more of its manufacturing growth to be absorbed at home. I had also seriously underthought my ethical judgments about trade-offs between domestic and foreign workers. We certainly have a duty to aid those in distress, but we have additional obligations to our fellow citizens that we do not have to others.