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Re: Explain the Trade War with China Please
« Reply #45 on: August 24, 2019, 09:01:52 AM »

Offline coco

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Decades ago, Gave them the keys in exchange for greed - cheap labor, big market.

...now, the world can’t sneeze without China’s permission.

I am not surprised.

I am not a Trump fan; but facing China trade issues, might be the only thing we agree on.  Stealing intellectual property is the elephant in the room.

Re: Explain the Trade War with China Please
« Reply #46 on: August 24, 2019, 09:10:08 AM »

Offline coco

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I forgot to mention that tariffs on Chinese imports are a way to make up for the tax breaks given to American companies..

This is an excellent point!

....and goes so under-the-radar; it’s almost criminal.

KUDOS!

Re: Explain the Trade War with China Please
« Reply #47 on: August 24, 2019, 10:26:11 AM »

Offline seancally

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Quote
Take your point, but for what it’s worth, in your post you only quoted the TPP criticism from the Wiki article and none of the support.


I can post tons more, like I said most of these treaties are predicted on the naive notion that people will play by the rules which often does not happen.    Look at the Russians who were violating the IMF treaty and already had the new missile.  Ditto, for Iran with the nuclear weapons.   People will always game the system and China and Russia want to be numero uno and want us to fade.   

https://www.huffpost.com/entry/how-to-tell-tpp-is-a-bad_b_8914388

https://www.ecowatch.com/what-is-the-tpp-and-why-is-it-so-bad-1882047270.html

https://time.com/4065267/trans-pacific-partnership-american-workers/

https://www.theguardian.com/commentisfree/2013/nov/13/trans-pacific-paternership-intellectual-property

Now if Liberal papers are saying it is a bad deal it must be, because they totally supported President Obama.   Finding conservative, stuff is all too easy, as they are usually critical of Pres. Obama.

Here is part of the treaty

https://wikileaks.org/tpp/pressrelease.html

Anything kept that secret, and they try to ram through fast is generally not good.

I’m not so sure. Nuclear treaties are not a great comparison. For any state with the means to produce a nuclear weapon, the benefits greatly outweigh the costs. Nuclear capabilities guarantee leverage where you may have none otherwise. Non-proliferation treaties benefit countries with nukes already in hand.

I agree states will act in their best interest, but trade deals and agreements can still be a tool to enforce fair play. Won’t always work, but it’s a tool.

I have read Trump explored reentry into the new, existing TPP (the one that excludes America). That obviously won’t work, because Trump would ask for more but with less leverage. But makes me wonder if, like I’d originally asked, the TPP would/could have been a better alternative to the current trade war debacle?

« Last Edit: August 24, 2019, 10:34:20 AM by seancally »
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Re: Explain the Trade War with China Please
« Reply #48 on: August 24, 2019, 11:31:09 AM »

Offline td450

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No one did anything for years folks, China has been fleecing us, stealing stuff and taking advantage by weakening their currency.  I try to avoid as much as their stuff as possible but that is not real possible.

No one wins a trade war is a saying.  I think that will be proven true.

Quote
Where would the TPP have left us? My limited understanding is that it was a way to pivot to other East Asian states as trade partners, cutting out / bypassing China. We better off? No? Impossible to tell?

Not good.

Quote
Criticism

Nobel Memorial Prize-winning economist Paul Krugman has said that "there isn't a compelling case for this deal, from either a global or a national point of view."[190]

In February 2016, United Nations' human rights expert Alfred de Zayas argued that the TPP was fundamentally flawed and was based on an outdated model of trade pacts, and that governments should not sign or ratify the TPP.[191][192] According to de Zayas, the international human rights regime imposes binding legal obligations on countries, including the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, and trade must be done under the human rights regime. Under the ISDS in the TPP, investors can sue a government, while a government cannot sue investors. De Zayas argued that this asymmetry made the system unfair. He added that international law, including accountability and transparency, must prevail over trade pacts.[191]
Currency manipulation

Some critics and even supporters of the TPP wanted the deal to contain measures that would crack down on nations who engage in alleged currency manipulation, notably China.[193] However, Daniel Drezner, professor of international politics at Tufts University, has argued that the trade deal was never likely to include restrictions on currency manipulation, as it would have restricted U.S. monetary policy.[194] Harvard economist Jeffrey Frankel has argued that the inclusion of currency manipulation language in TPP would be a mistake.[195] Frankel noted that currency manipulation would be hard to enforce (in part because it is impossible to tell whether a currency is overvalued or undervalued); "currency manipulation" can often be legitimate; China, often alleged to be a major currency manipulator, is not party to the TPP; currency manipulation accusations are often meritless; and because it would restrict U.S. monetary policy.[195]
Length and complexity

Donald Trump has criticized the TPP agreement for being too long and complicated, saying, "t’s 5,600 pages long, so complex that nobody’s read it."[196] Senator Bernie Sanders has charged that the "TPP is much more than a ‘free trade’ agreement."[197]

However, Georgetown University Professor Marc L. Busch and McGill University Professor Krzysztof J. Pelc note that modern trade deals are long and complex because they often tackle non-tariff barriers to trade, such as different standards and regulations, in addition to tariffs. Due to steadily decreasing tariff barriers since WWII, countries have become increasingly likely to enact trade barriers in the form of non-tariff barriers. National firms often lobby their own governments to enact regulations that are designed to keep out foreign firms. The TPP addresses many of these "disguised restrictions on trade" by, for instance, "basing these measures on agreed-upon science; making the process of formulating regulations more transparent; and giving foreign exporters opportunities to offer substantive input in the formulation of these measures."[198]
Secrecy of negotiations

As with many trade agreements, until being finalized, negotiations for the TPP were conducted with significant secrecy. Drafts of the agreement were kept classified during negotiations, and access to the working text was significantly restricted even for government officials and business representatives involved in the talks.[199] Despite this, some sections of TPP drafts were leaked to the public by WikiLeaks, which published an intellectual property chapter draft in 2013,[200][201] an environmental chapter draft in 2014,[202] and the final intellectual property chapter in 2014.[203]

In 2012, critics such as Public Citizen's Global Trade Watch, a consumer advocacy group, called for more open negotiations in regard to the agreement. U.S. Trade Representative Ron Kirk responded that he believes the Office of the United States Trade Representative (USTR) conducted "the most engaged and transparent process as we possibly could", but that "some measure of discretion and confidentiality" are needed "to preserve negotiating strength and to encourage our partners to be willing to put issues on the table they may not otherwise."[204] He dismissed the "tension" as natural and noted that when the Free Trade Area of the Americas drafts were released, negotiators were subsequently unable to reach a final agreement.[204]

On 23 May 2012, U.S. Senator Ron Wyden, Democrat of Oregon, introduced S. 3225, which would have required the Office of the U.S. Trade Representative to disclose its TPP documents to all members of Congress.[205] Had it passed, Wyden said that the bill would increase Congressional access to information about USTR activity.[206]

Michael R. Wessel, former commissioner on the U.S. Trade Deficit Review Commission claimed in May 2015 that "cleared advisors" like himself were "prohibited from sharing publicly the criticisms we’ve lodged about specific proposals and approaches". He claimed that only portions of the text had been provided, "to be read under the watchful eye of a USTR official", that access on secure government-run website did not contain the most-up-to-date information, and that for cleared advisors to get that information, he had "to travel to certain government facilities and sign in to read the materials" and "even then, the administration determines what we can and cannot review and, often, they provide carefully edited summaries rather than the actual underlying text, which is critical to really understanding the consequences of the agreement."[207]

In June 2015, U.S. Senator Rand Paul, Republican of Kentucky, opposed the bill to fast-track the congressional ratification of the TPP on the basis of the trade agreement's secrecy.[208]
Industry influence

U.S. Senator Elizabeth Warren, Democrat of Massachusetts, has alleged that corporations and industry exert disproportionate influence on U.S. trade negotiators.[209] She asserted in July 2016 that 85% of seats on U.S. trade advisory committees were held by "senior corporation executives or industry lobbyists", and that the members of the committees "whisper in the ear" of negotiators.[209]

Michelle Ye Hee Lee, a fact-checker for The Washington Post, wrote that Warren used "misleading language" in describing the TPP. While Warren implied that "28 trade advisory committees were formed" specifically to influence the TPP, the advisory committees were actually created as part of the Trade Act of 1974; only the membership of the trade committees had changed during the Obama administration and the early phases of the TPP. Regarding Warren's claim that trade advisers secretly "whisper in the ear of our trade negotiators", Lee wrote: "while the direct meetings take place in private, committees still have to submit written reports to Congress and provide written recommendations and advice that are made public."[209] Furthermore, Lee wrote, "it is true that industry representatives make up a large number of the total membership, but it is worth noting that there is a labor committee in the second tier, labor representatives in the first tier and that the industry groups have a narrow focus (to give technical advice)."[209]

In response to criticisms about transparency and the large representation from industry representatives, USTR announced it would create a Public Interest Trade Advisory Committee.[209]
Non-compete clause

Dean Baker argued that Article 18.78, under which countries should ensure that they protect trade secrets and impose criminal procedures for violators, could be used to enforce non-compete agreements.[210] Baker points out that California's success can partly be attributed to the fact that the state did not allow for the enforcement of non-compete agreements, making it easy for tech workers to quit their jobs and start to work for another company.[210]
Criticisms from politicians and activists

In 2014, linguist and political activist Noam Chomsky warned that the TPP is "designed to carry forward the neoliberal project to maximize profit and domination, and to set the working people in the world in competition with one another so as to lower wages to increase insecurity."[211] Senator Bernie Sanders (I-VT) argues that trade agreements like the TPP "have ended up devastating working families and enriching large corporations."[212] Professor Robert Reich contends that the TPP is a "Trojan horse in a global race to the bottom."[213][214][215]

https://en.wikipedia.org/wiki/Trans-Pacific_Partnership

As one can see, it was not going to be a great success.    The trouble you make a treaty all parties should honor that, but how often does that happen?  Almost, never, but you'll hear of this as the media loved anything Saint Pres. Obama did and that is still the case.

Just how does devaluing currency take advantage of anything? It is basically a way to reduce the prices of your country's products; to sell them for less than they are really worth.

The only danger to this is if a country gains control of industrial production, and turns on their trading partners and jacks up pricing once they have lost the capacity to compete. That just hasn't happened.

They do this for the same reason any store does. They are accepting less profit so they can get more business and provide more jobs. We have very very low unemployment. What are you complaining about here?

The more realistic view is that we have more prosperity because China needed to work itself out of desperate poverty, and we were able to get them to do all the stuff we don't want to do, all while keeping much of the profit. That is known as a win/win.

As for the TPP, there are a number of good arguments for why trade agreements shouldn't be structured this way, but that is not why Trump rejected it. He actually used many of those supposedly bad ideas in the US/Canada/Mexico proposed trade deal. Trump doesn't understand any of this stuff. He just gets angry at bilateral trade imbalances.

Re: Explain the Trade War with China Please
« Reply #49 on: August 24, 2019, 02:01:51 PM »

Offline NKY fan

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Most people comment that China steals intellectual property. Can someone provide a specific example? Like you don’t have to mention names and companies but an example of how it has happened and still is happening ..

Also USA “steals” (attracts)  the brightest brains from China and most other countries. This is something that trump has never bothered to comment on.

If you follow his and his supporters “logic” (oxymoronic) ... USA will be better off keeping all production here including all intellectual property in exchange of higher prices and no bright people moving in...

Re: Explain the Trade War with China Please
« Reply #50 on: August 24, 2019, 03:44:45 PM »

Offline hwangjini_1

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this is a complex issue, to say the least. the economies of each side are deeply intertwined and the back and forth trade has greatly benefited both sides, even if assymetrically. it is beyond simply sending products back and forth.

for example, china holds $1.11 trillion in US Treasury securities. if one side's economy drops, both sides drop. that is the nature of global economics now. here is an article that shows some of this.

https://www.aljazeera.com/ajimpact/markets-sink-trump-presses-companies-leave-china-190823165734640.html

but this more important than just trade with china.

US economic wealth depends, indeed assumes, a global market place with set rules and expectations for participation from leading countries. trump, in his childish and simplistic approach, is dissolving and eroding the very system that has placed the US in the world lead. this involves more than a trade war with China. through trump's heavy handed approaches to economics with europe and see that the world system of economics is being compromised by his decisions. the talks in europe among the G-7 are crucial right now since at stake is not trade, but the global system that underpins the rules and behavior for global trade.

next, on the topic of technological flows. this too is complex. it is not correct at all to say all of China's growth in technology is from stealing. indeed, to state so is to be show profound ignorance of a complex process.

globally, technology by leading countries has intentionally been handed off/pirated/copied for centuries by less technologically skilled nations. this is a good thing overall.

as originally articulated by the japanese economist Akamatsu in the 1920s, in terms of technology that drives economic sectors, the world NEEDS a variety of countries to be located differently. for example, if EVERYONE produces cars, where does the food come from? textiles? the world needs a variety of countries that produce a variety of goods.

simply stated, the product cycle (i used to devote weeks of a grad courses to teaching this crap) is agriculture=>light industry=>heavy industry=>consumer durables=>high tech. different nations align on different sectors of this process.

as countries move through the product cycle, they  cast off older technology and followers snap it up. as the US stopped needing advanced tech in textiles, it sold/cast off that technology and focused more on heavy industry (steel) which is more profitable. this allows a division of labor to take place, which is good for the global economy over all. sometimes this technology is given, other times copied, other times stolen.

oh, and it is quite common for the new-adapter of an old technology to improve on it and take it further than it was originally designed to be. innovation.

further, unless lesser developed nations (called "late starters" in this theory) get benefits such as cast off tech, they have no incentive to joint the world system. if they dont join, the system fails. if the system fails, more advanced countries' economics struggle.

even the US went through this tech transfer less than two centuries ago. the US industrial revolution of the 1800's was made possible by US technology piracy at the time. the US stole the secrets of textiles production from the Brits. this paved the way for light industrialization, which lead to heavy industrialization over time.

something else to keep in mind is that from 1946 on, japan has frequently copied and stolen technology from the US.* but since the US likes Japan as an ally, it allowed such behavior to take place. China is not an ally, so now the US objects.

it is NOT that china is "stealing" and unfair that has suddenly outraged US leaders. it is that the US does not view china as an ally politically. as such, the US is less tolerant of the behavior.

*(by the way, the practice of "dumping" was pioneered by the US long before Japan and China did it. Indeed, US business leaders in the 1940s after WWII, showed and told Japanese corporations how to dump products. they did so since the US wanted the japanese economy to grow VERY quickly and help the US in its Cold War against communism.)
« Last Edit: August 24, 2019, 03:53:47 PM by hwangjini_1 »
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Re: Explain the Trade War with China Please
« Reply #51 on: August 25, 2019, 02:27:19 PM »

Online Celtics4ever

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Well. educate us on the currency manipulation do you have a defense of that?  Is that ok?   Also why are they doing all the things like dumping and currency manipulation?   Just to be like us, or to get ahead?  I think China is a sovereign country and have a right to do what is best for them but so do we ?  I would like to hear what the official propaganda line is for the Chinese Government....

Quote

for example, china holds $1.11 trillion in US Treasury securities. if one side's economy drops, both sides drop. that is the nature of global economics now. here is an article that shows some of this.

True, no one wins a trade war.  We should bill them for this amount for ending the Japanese occupation of World War 2 of their country.   Wait, we don't that, right.

How do you feel about their building islands to impinge on free shipping?  Are they doing that to be like someone because most of the world does not care for that, except maybe Russia who like to do the same kind of things.  I would love to hear your rationalization since these are in international waters.

Also, for the rosy picture you paint, how do you feel about what China does in terms of censorship and human rights?   I am sure other folks would like you to rationalize some of those events and policies.   I know America is not perfect, we had slavery etc, but so did China, for many years and some of their workers are still practically slaves, so you don't get to use that one.

As for the developing country stuff, just because other countries did it first, doesn't make it right.   Developing countries don't get to steal or pirate things and this should not be seen as ok.  By your rationale should countries go back to slavery because other countries did it. Certainly, not and that excuse does not hold water.

Do they pay $3.6O an hour for the average factory worker, because we did that in the 1960s and once again they are passing where we were in time and developing.   Do you think US countries go there  to make things because they have cheap labor that they can exploit?  Aren't labor unions illegal there?  Can workers go to prison there for protesting low wages?

https://borgenproject.org/facts-about-workers-rights-in-china/




Re: Explain the Trade War with China Please
« Reply #52 on: August 25, 2019, 07:33:55 PM »

Offline hwangjini_1

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Well. educate us on the currency manipulation do you have a defense of that?  Is that ok?   Also why are they doing all the things like dumping and currency manipulation?   Just to be like us, or to get ahead?  I think China is a sovereign country and have a right to do what is best for them but so do we ?  I would like to hear what the official propaganda line is for the Chinese Government....

Quote

for example, china holds $1.11 trillion in US Treasury securities. if one side's economy drops, both sides drop. that is the nature of global economics now. here is an article that shows some of this.

True, no one wins a trade war.  We should bill them for this amount for ending the Japanese occupation of World War 2 of their country.   Wait, we don't that, right.

How do you feel about their building islands to impinge on free shipping?  Are they doing that to be like someone because most of the world does not care for that, except maybe Russia who like to do the same kind of things.  I would love to hear your rationalization since these are in international waters.

Also, for the rosy picture you paint, how do you feel about what China does in terms of censorship and human rights?   I am sure other folks would like you to rationalize some of those events and policies.   I know America is not perfect, we had slavery etc, but so did China, for many years and some of their workers are still practically slaves, so you don't get to use that one.

As for the developing country stuff, just because other countries did it first, doesn't make it right.   Developing countries don't get to steal or pirate things and this should not be seen as ok.  By your rationale should countries go back to slavery because other countries did it. Certainly, not and that excuse does not hold water.

Do they pay $3.6O an hour for the average factory worker, because we did that in the 1960s and once again they are passing where we were in time and developing.   Do you think US countries go there  to make things because they have cheap labor that they can exploit?  Aren't labor unions illegal there?  Can workers go to prison there for protesting low wages?

https://borgenproject.org/facts-about-workers-rights-in-china/
i thought the thread was about US/china trade and i put it all in a larger theoretical context.

but if you prefer to focus on a litiney of their evil doings, we can do that too. but dont stop at economics. that is small peanuts and Japan did worse for decades without the US objecting. never forget the uygers. or the cultural revolution, that was over 20,000,000 human beings dead. no justification is possible for that. what is going on in hong kong is also terrible. no good excuse exists. all of this is awful and hard to swallow.

just as it is for the US genocide of native americans. or US manipulation of markets and currency in the past. or US weaning nursing mothers off breast feeding in africa so as to make money off of baby formula. or US interference in internal China politics during and after WWII to stop the communists (the US was fighting japan for the US, not China. and the US helped the Republic of China, the kuomindang. please read up on chinese history a bit more.) US help of right wing death squads in latin america for decades after WWII. the US slaughter in Korea. the US slaughter in Vietnam. the US setting up military bases in over 130 countries now and it spending more on its military than the next 7 countries combined. all of it is awful and hard to swallow.

no one country is responsible directly for more deaths in other countries than any other country since WWII. the US has the greatest wealth and still lets tens of millions of its people go without health care, let them sink into bankruptcy. again, hard to swallow. but i dont list all this, or more, since i was making a different point.

we both can go on and on with such lists. but it is a distraction, unless your purpose to establish a "good versus evil" dichotomy as the basis for the thread. if so, go ahead, but it doenst strike me as an interesting approach.

all of these misses the point of the conversation, better understanding and explaining the china/US trade and trying to understand why each side is doing what it is doing and what it means for the world. i was hoping to move beyond a zero-sum, us versus them dichotomy for part of this conversation. such a framing of the conversation will get us no where.

if you want to hear the official propaganda line for the PRC, it is not hard to find. try the people's daily. though why you want to read it is beyond me.

China is doing a LOT of evil things. So is the US. listing these evil deeds doesnt get us too far in this conversation. and p.s. when it comes to manipulating the rules of international trade, NO ONE has done it more often with more vigor than the US. it was the US after WWII that set up the rules, and we did so to favor ourselves. it was a rigged game against the poorer nations and they have said so for decades.

but, again, it is best to see this as the result of a larger system, not a personal grudge or battle between two opponents.
I believe Gandhi is the only person who knew about real democracy — not democracy as the right to go and buy what you want, but democracy as the responsibility to be accountable to everyone around you. Democracy begins with freedom from hunger, freedom from unemployment, freedom from fear, and freedom from hatred.
- Vandana Shiva

Re: Explain the Trade War with China Please
« Reply #53 on: August 25, 2019, 07:57:14 PM »

Offline Jvalin

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Please don’t link lengthy articles.
Here's an interesting take (at least imo). It's not a lengthy article. Just a two and a half minute video.
 
https://www.youtube.com/watch?v=r8vF_1bOQ7g

Re: Explain the Trade War with China Please
« Reply #54 on: August 25, 2019, 10:48:46 PM »

Offline Tr1boy

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This is a sincere request for a “dummy” explanation of what is happening between the US and China, how we got here, Trump’s strategy, and outcomes that would be beneficial or detrimental to the US and/or world.

I believe there is some consensus among Dems and Republicans that America has been in an unfavorable trade position in with China for a long time. There seems to be disagreement about whether Trump’s tariffs are a correct approach. Lately, there have been reports that a trade deal is close.  Does this mean Trump’s strategy is working?  What are the trade deal features that would indicate a true win for the US (we know Trump will claim it is the best deal regardless). Conversely, what would be the indicators that the deal is closer to status quo or not worth the cost of the tariff strategy.

Please respond with this in mind:  I (and perhaps I speak for others) have remarkably little understanding of economics, especially global economics.  I am starting this thread in an attempt to find a concise, practical way to understand. Please don’t link lengthy articles - I’ve tried and I’m not really getting it.  Try the “explain it to me like I am 8” approach.

Trump doesn't really care about the world

he cares about himself and the US.... and also wherever he has investment in

China per his opinion will leapfrog the US in about 10-15 years ....

Because not only are they manufacturing most the innovation out of the US, but also taking a bite out of these innovation (mandatory joint ventures).  At some point ,  China innovation could surpass the US.... invests, loans all kinds of money around the world (influence). 

Re: Explain the Trade War with China Please
« Reply #55 on: August 26, 2019, 12:19:55 AM »

Offline GetLucky

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My understanding:

China pays laborers less than the US, making their costs to produce goods cheaper. That makes their final goods cheaper for consumers and lets them undercut US businesses (who have to pay their employees a much higher minimum wage and comply with stricter regulations). This led to an outsourcing of factories and the jobs that come with them.

China has also been stealing US intellectual property (ie making high-quality knock offs of luxury brands/goods), which weakens US companies’ margins and reduces the # of jobs in the US.

This led to a trade deficit (US importing more goods from China than it exports to China). Trump has a problem with this.

To offset this pricing difference (and thus try to decrease imports and increase US domestic consumption and exports), Trump decided to tax imports from China (tariffs) so that, in theory, Chinese-produced items will be closer in price to US-produced goods. This would, in theory (along with corporate tax breaks), incentivize companies to keep jobs in the US and lead to more economic growth and more job opportunities.

In the short term, these things seem to bear out, but there are a few factors at play here to offset these advantages:

1) Many companies import PARTS from China. This makes products more expensive (because the cost of producing these goods goes up), which ends up being built into the cost of goods. This means the US consumer loses in the long run. A prime example of this is New Balance. They supported the tariffs until very recently, when rubber became a tariffed hood, which affects their bottom line significantly.

2) Trumps other policies offset the tariff effects. For example, keeping interest rates artificially low is increasing foreign and domestic investment. This demand for the dollar (because it is comparatively cheaper to take a loan out in USD- ie a 2% interest rate versus the 4.5% in China) makes it stronger currency. This makes our goods comparatively more expensive than foreign goods. This is why China intentionally depreciated the yuan- to exacerbate this effect. As napkin math, say 1 USD used to = 6.5 yuan. Tariffs made US sneakers 100 USD and China sneakers 650 yuan, or 100 USD. But now, 1 USD = 7 yuan. This means that the 650 yuan sneaker now costs 92 USD, and the 100 USD sneaker now costs 700 yuan. Other policies, such as tax cuts, also increase the deficit because tax cuts increase consumer spending, and consumers will buy the cheapest comparable good. This cycle of increased spending as foreign goods get cheaper due to the dollar’s strength is counteracting tariffs.

3) bilateral trade deficits/surpluses  aren’t that important. I linked an article below to explain why. Basically, Trump is losing the war (higher average prices for consumers) to win a battle (closing the trade deficit completely). It was a problem, but it’s nkt worth tanking the economy over.

Essentially, economists are seeing average prices rise while Chinese goods are still cheaper than US goods. Essentially, everyone is losing because US companies’ bottom lines are being hurt. That is my understanding.

Here’s a great article (I know you said not to but hear me out) that uses really simple analogies to explain why bilateral trade deficits don’t necessarily matter:
https://www.google.com/amp/s/www.nytimes.com/2018/10/05/business/surprising-truths-about-trade-deficits.amp.html

Apologies for any typos- I typed this on a phone.

Re: Explain the Trade War with China Please
« Reply #56 on: August 26, 2019, 06:20:23 AM »

Online The Oracle

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My understanding:

China pays laborers less than the US, making their costs to produce goods cheaper. That makes their final goods cheaper for consumers and lets them undercut US businesses (who have to pay their employees a much higher minimum wage and comply with stricter regulations). This led to an outsourcing of factories and the jobs that come with them.

China has also been stealing US intellectual property (ie making high-quality knock offs of luxury brands/goods), which weakens US companies’ margins and reduces the # of jobs in the US.

This led to a trade deficit (US importing more goods from China than it exports to China). Trump has a problem with this.

To offset this pricing difference (and thus try to decrease imports and increase US domestic consumption and exports), Trump decided to tax imports from China (tariffs) so that, in theory, Chinese-produced items will be closer in price to US-produced goods. This would, in theory (along with corporate tax breaks), incentivize companies to keep jobs in the US and lead to more economic growth and more job opportunities.

In the short term, these things seem to bear out, but there are a few factors at play here to offset these advantages:

1) Many companies import PARTS from China. This makes products more expensive (because the cost of producing these goods goes up), which ends up being built into the cost of goods. This means the US consumer loses in the long run. A prime example of this is New Balance. They supported the tariffs until very recently, when rubber became a tariffed hood, which affects their bottom line significantly.

2) Trumps other policies offset the tariff effects. For example, keeping interest rates artificially low is increasing foreign and domestic investment. This demand for the dollar (because it is comparatively cheaper to take a loan out in USD- ie a 2% interest rate versus the 4.5% in China) makes it stronger currency. This makes our goods comparatively more expensive than foreign goods. This is why China intentionally depreciated the yuan- to exacerbate this effect. As napkin math, say 1 USD used to = 6.5 yuan. Tariffs made US sneakers 100 USD and China sneakers 650 yuan, or 100 USD. But now, 1 USD = 7 yuan. This means that the 650 yuan sneaker now costs 92 USD, and the 100 USD sneaker now costs 700 yuan. Other policies, such as tax cuts, also increase the deficit because tax cuts increase consumer spending, and consumers will buy the cheapest comparable good. This cycle of increased spending as foreign goods get cheaper due to the dollar’s strength is counteracting tariffs.

3) bilateral trade deficits/surpluses  aren’t that important. I linked an article below to explain why. Basically, Trump is losing the war (higher average prices for consumers) to win a battle (closing the trade deficit completely). It was a problem, but it’s nkt worth tanking the economy over.

Essentially, economists are seeing average prices rise while Chinese goods are still cheaper than US goods. Essentially, everyone is losing because US companies’ bottom lines are being hurt. That is my understanding.

Here’s a great article (I know you said not to but hear me out) that uses really simple analogies to explain why bilateral trade deficits don’t necessarily matter:
https://www.google.com/amp/s/www.nytimes.com/2018/10/05/business/surprising-truths-about-trade-deficits.amp.html

Apologies for any typos- I typed this on a phone.
In reference to the N.Y. Times article.  They discuss how bilateral trade deficits don't matter which is true if you are talking about 2 countries with free and fair trade opportunities where there isn't a demand for products from 1 country but there is from the other.  In said situation I would agree that there is no justification nor need to want to force equal trade. 

This is NOT what is happening in regard to China.  The U.S exported $120.3 billion in total goods to China while importing $539.5 billion in 2018.  The trade deficit is a such that it is for the U.S. because of massive theft by the Chinese and not because there isn't a want for American products by the Chinese people.  It is impossible to measure what the losses are to businesses in this country because of the intellectual theft and unfair practices by the Chinese but no doubt they are astronomical.  Imagine if every product sold in China that pretends to be an American good was such and not some bogus knockoff.  As an example I read an article a while back that in 1 province in China there was 1 official Apple store and 5 other authorized dealers.  In that same province there were more than 30 fake Apple stores many of which were designed in every detail to look exactly like the real thing.  If the situation is remotely similar throughout China imagine the lost/stolen revenue for Apple let alone the 100's of other American products that China turns a blind eye to. 

China should have been taken to task decades ago, as is there is very little if anything we as a country need from them or cant get elsewhere.  If they do not want to conduct themselves in a manner that is acceptable then cut them out rather than enrich and legitimize them. 

Re: Explain the Trade War with China Please
« Reply #57 on: August 26, 2019, 09:50:45 AM »

Offline NKY fan

  • Al Horford
  • Posts: 511
  • Tommy Points: 25
Quote from: The Oracle

This is NOT what is happening in regard to China.  The U.S exported $120.3 billion in total goods to China while importing $539.5 billion in 2018.  The trade deficit is a such that it is for the U.S. because of massive theft by the Chinese and not because there isn't a want for American products by the Chinese people.  It is impossible to measure what the losses are to businesses in this country because of the intellectual theft and unfair practices by the Chinese but no doubt they are astronomical.  Imagine if every product sold in China that pretends to be an American good was such and not some bogus knockoff.  As an example I read an article a while back that in 1 province in China there was 1 official Apple store and 5 other authorized dealers.  In that same province there were more than 30 fake Apple stores many of which were designed in every detail to look exactly like the real thing.  If the situation is remotely similar throughout China imagine the lost/stolen revenue for Apple let alone the 100's of other American products that China turns a blind eye to. 

China should have been taken to task decades ago, as is there is very little if anything we as a country need from them or cant get elsewhere.  If they do not want to conduct themselves in a manner that is acceptable then cut them out rather than enrich and legitimize them.
I’m not sure this is a good example. If apple prices weren’t so inflated there would be no need for fake apple stores as they can just sell the real thing that cost as much as it is to produce.
I know you can buy you a “real” breitling or stuff like that in China for fraction of the price . Well what all that means is that the American or western consumer pays the profit for corporations like apple..and that the consumer pays too much

Re: Explain the Trade War with China Please
« Reply #58 on: August 26, 2019, 10:26:59 AM »

Offline GreenCoffeeBean

  • Al Horford
  • Posts: 616
  • Tommy Points: 35
China wants Tatum and Brown for Beal but the US is only willing to give up one of them.

Re: Explain the Trade War with China Please
« Reply #59 on: August 26, 2019, 01:21:19 PM »

Offline mmmmm

  • Antoine Walker
  • ****
  • Posts: 4063
  • Tommy Points: 689
U.S. lobstermen taking it on the chin:

https://www.seafoodsource.com/news/supply-trade/maine-s-lobster-exports-to-china-plunge-84-percent-in-wake-of-trade-war

Meanwhile, Canada exports of lobsters to China have jumped way up as China simply turned to them for supply.   

Is Susan Collins hearing from her constituents?
NBA Officiating - Corrupt?  Incompetent?  Which is worse?  Does it matter?  It sucks.

 

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