TDS Sufferers Can't See Trump's Tariffs May Seem Crazy But There's Method In His Madness

Amusing to see all the TDS victims in mainstream media, both paid journalists and ordinary punters in the comment threads, seem to have forgotten that China, aided and abetted (unintentionally perhaps, we should give them the benefit of the doubt,) by western governments, have been waging economic war for decades.

Well informed economics writers were pointing out during the 2008 / 9 financial crisis that if China chose, it could wreck the global economy by using its vast holdings of US debt (bonds,) to collapse the dollar.

Despite this being well known, western nations have continues to export jobs to the far east, run up more debt and encourage China and other 3rd world nations to dump more and more cheap, shoddy, heavily subsidies consumer goods in western markets.

Trump's tariffs may be a crude and ill considered approach to solving this problem, but no matter how much irrational hatred some people harbour towards him, at least admit his administration has acknowledged that the problem exists and needs to be dealt with. 

Throwing markets into disarray with tariffs one minute and then removing them the next may not seem the ideal recipe for boosting business confidence in both the short and long term. Not only do companies need reasonable assurances that their investments will be profitable, but they also need workers that can fulfill business needs. Trump's policies may seem chaotic but as a businessman he is playing a familiar business game.

Manufacturing is extremely complex these days. Gone are the days of plugging a worker onto an assembly line with only a few hours of training. The machinery is complex. It takes real knowledge and skill now to work in most advanced manufacturing facilities, and the United States’ labor force does not have those skills right now. What this means is that any factories that are re-shored to the United States are not going to be as productive as their off-shore equivalent. Not only with these factories be less productive, but they will also cost more to run as labor costs are significantly higher.

The only way to counter these negative incentives is through reasonable, well-articulated, and consistent tariff and domestic policy, which will include, in some form, tax incentives and/or funds for building factories and training workers. International bureaucracies like the WHO and United Nations may complain but there’s no way of getting around that. Reasonable policy will set guard-rails and co-invest; the market will still dictate what, where, and how to build. Every country that has successfully rebuilt their manufacturing base (Germany, South Korea) has done it with this combination of policies. The United States will not be the exception to this rule. 

Still, as described in Boggart Blog's Currency Wars page, China has been working to undermine the economies of the developed world for at least a decade and probably since around the tirn of the century. Politicians in the liberal democracies have been too afraid of being called protectionist, racist or nationalist to act in defence of domestic economies they have allowed the nations they serve to become dependent on China for far too many essential goods. Thrump's chaotic approach may mean there are painful times ahead but someone had to do something sometime. 

FROM THE ARCHIVES: 

[ Currency Wars ] ... [Living within the conspiracy ] ... [ Humanitas ] ... [ Don't call me a conspiracy theorist ] ... [ Politically corect ]

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The Approach May Have Been Simplistic But Trump Was Right To Impose Tariffs

Donald Trump claimed he was being “kind” when he announced the biggest shift in US trade policy in a century. It was typical Trump bullshit of course, there's nothing kind about a kick in the bollocks, which is what he has delivered to world trade.

But was he right as the headline says? For decades the liberal democracies have been obsessed with free trade and globalisation. Tariffs drag us back to the days of expensive imported goods, long customs delays and obstructive regulations. So how can the move be positive?

The US president said reciprocal tariffs of 20pc on the EU and 34pc on China were the result of carefully calibrated calculations based on “the combined rate of all their tariffs and non-monetary barriers” such as currency manipulation.

A White House official said the calculations encapsulated “the sum of all cheating”.

“We will charge them approximately half of what they have been charging us,” President Trump told an audience in the Rose Garden of the White House.

The Trump administration published what looked like a complex-looking but rather theatrical algebraic formula complete with Greek letters to explain its rationale. But in the end, the tariffs boil down to simple maths, casting doubt on the idea that Sir Keir Starmer’s lobbying efforts in the US had any influence on the outcome.

The reciprocal rates are simply based on each country’s goods trade surplus with America relative to how much they send to the world’s biggest economy. Nothing more, nothing less.

On paper global free trade under United Nations and World Trade Organisation rules looks a great idea, but free trade involves everybody playing according to the same rules. And some nations are notorious for making u their own rules as they go along.  I'm sure it would be superfluous to name the main culprits, but it is not a new game and the current rule benders not originate this technique for boosting their economy. 

While the USA has suffered somewhat, as issuer of the main reserve currency Washington has been able to protect US interests by manipulating exchange rates. Ironically this is one of the sins they now accuse China of. But don't feel sorry for China, in collaboration with Russia, Iran and a few other eastern nations thy have been working for years to dislodge the US dollar from its dominant position.

In a sense, Trump has already won his trade war, as the Cinese Communist PartyCCP) has massively expanded “export subsidies” to favoured manufacturers so that they dont have to pass Trump tariffs on to customers. In the first two months of this year export subsidies have already amounted  to the billions of Yuan. So the people who toil away in CCP controlled factories for CCP mandated wage rates are directly subsidising the western consumers as will their children with the epic CCP central bank expansion in money supply, to keep the CCP command economy above water.  

WTO rules exist to ensure subsidies do not distort international competition or confer an unfair benefit on domestic producers. These rules are ultimately about protecting free and fair international trade and competition, so that one country's exports do not hold an unfair advantage over another. 

 In attacking Trump tariffs the TDS sufferers in Europe and around the world are missing the point. The EU, for example, is a vast protectionist regime with EU-wide and state subsidies distorting the actual price of its goods. For example, the CAP, the devaluation of the Deutsche euro as a currency for Germany, the subsidies to steel and other industrial goods, the EU tariff regime per se. This has allowed EU goods to be sold at reduced prices and has allowed the EU to accumulate a trade surplus with the USA. Are Trump's tariffs not a corrective measure and a negotiating starting point? 

Same goes for China, their mssive subsidies to industry plus low labour costs because the government (The Party) controls wages and prices because as the leadership has made blatantly clear, China intends to dominate world trade in the not too distant future. 

In view of these considerations Trump's impostion of tariffs are understandable and if (it's a bif IF,) they have the long term consequence of persuading all parties to observe the WTO rules by complying to, rather than bending them, it could benefit us all.

FROM THE ARCHIVES: 

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While US President Donald Trump’s recent announcement that his administration will impose trade protection measures – specifically tariffs on steel and aluminum imports – provoked howls of protest from globalists and nations or single markets which impose much higher traiffs on US goods, particularly China and the European Union, Germany’s Alternative for Deutschland (AfD) party has taken a more understanding and supportive stance.

Kay Gottschalk, a member of the German Bundestag, who also serves as the AfD party’s deputy trade and industry spokesman, defended Trump’s import tariffs, while describing his strategy as "clever." She said, "Trump bluffs a lot, it's a strategy he uses to make deals."

"The EU Commission is shouting loudly because Trump charges punitive tariffs. It raises itself as the grail-keeper of free world trade, defending indirectly the abominable consequences of globalization: pollution, wage dumping and tax avoidance of large corporations. Trump's clever strategy is obvious. He destroys existing contracts so that he can replace them with new and better ones," Mr. Gottschalk was quoted as saying by an official AfD press release."

Gottschalk went on to suggest that Trump levied the tariffs in response to the EU’s own trade protectionist policies – such as the tariffs imposed on all foreign exports into the economic union and may consider exempting the EU if they also exempt US exports from tariffs.

"The truth is that the EU has created insurmountable hurdles for the export of foreign nations, such as Africa, South America and the United States. Before you judge Trump, you should have the courage to question your own decisions as critically as those of others," Mr. Gottschalk concluded.

Just hours after the AfD published the press release containing comment from Ms. Gottschalk, his theory was proven correct, with President Trump tweeting that he would drop the tariffs if the EU and other trade partners also "drop their horrific barriers and tariffs on US products."

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