KGOldWolf

All political sides should read this opinion piece from MarketWatch (a respected investment publication). I found it factual and unbiased with a very good recommendation.

Does Trump’s trade war court American humiliation? -

https://on.mktw.net/2tBvx06

Steven Seward Loc: Cleveland, Ohio

I think this article perpetuates some of the misinformation about trade wars that is often thought of as common knowledge.

1. It is automatically assumed that a country can gain some sort of advantage by simply putting tariffs on imported goods. This may give a competitive advantage to the one specific industry in that country that is competing with the foreign tariffed goods, but it forces everybody else in the country to pay higher prices for the goods thereby reducing their standard of living. When the second country retaliates by issuing their own tariffs, they suffer the same fate, and both sides end up losing. The only winners are a tiny minority of workers who are now getting overpaid at the expense of the general public.

2. There is no such thing as a trade deficit. All trades between countries are voluntary exchanges of one thing for another which are considered of equal value by the trading partners. We give you corn, and you give us an equal value of TV sets. The misinformation comes when economists point out that the United States is importing more than we export to China, for instance. THIS IS NONSENSE! We are importing more gadgets and low-tech items from them than they are importing from us. However, they are buying more of our savings bonds and investing in our businesses than we are doing with them. The economists rarely point this out.

If it were really the case that we are importing way more stuff from China than they are importing from us, then we would be unimaginably richer. The Chinese would have to get up early in the morning, go to the factory and work long hours making stuff, and then ship it off to the United States. The United States would just have to give them back some worthless pieces of paper with dead Presidents pictures. We could just sit back and enjoy the fruits of Chinese labor without having to get up early in the morning and work at the factory ourselves. The Chinese goods would be essentially free.

Blurryeyed Loc: NC Mountains.

I have been saying from the start of this that Trump is playing a very dangerous game, I have also been saying that he is correct that someone has to stand up for the US economy as well as the American worker as we have seen so many industries die and jobs exported.

Yours is a good article, Trump's administration has been a bit haphazard and impulsive, it seems as if he is trying to take on the developed world + China all at once and that seems dangerous to me, a high stakes poker game if you will. Setting Canada aside, Europe is not trading fairly with the US, and China is not only unfair in their trade practices they are criminal in their theft of technology and trade secrets and they must be dealt with. It is very unclear if Trump will be effective in his efforts and the down side of his losing such a battle will be costly for the American people, but at least we have an administration that will not simply look the other way as those who proceeded him have done.

Thank you for posting an article that although critical of Trump's method recognizes the underlying factors contributing to his actions and the damage to this country that precipitated his actions. It is kinda rare to see such balance in the media these days.

Kraken Loc: Barry's Bay

Blurryeyed Loc: NC Mountains.

Steven, I don't take issue with what you have said here other than in my opinion it does not take a full accounting for the results of running huge trade deficits year over year and deficits do cause the exportation of American wealth.

The selling of our debt does allow the Chinese and others to exact a certain amount of control on the US, if the Chinese decided to flood the bond market with a trillion dollars in US treasuries then interest rates in this country would shoot through the roof causing great damage to our economy. I also think that when considering economics from a classical liberal perspective, as I feel your post does, that the government has confused the model by selling federal debt on the scale that it does, something that I am not sure that Mises, Hayak, and others took into their economic models, distorts things.

As far the exchange between the two countries and the balancing of that trade, they purchase more than just treasuries, they also purchase productive and other hard assets transferring wealth out of our country.

And then, there is something that has been increasingly been bothering me, we are losing the ability to be self sufficient by integrating potential enemies into our economy in such a manner that it would be highly disruptive to our society if something happened that caused an abrupt withdraw from that relationship. China is becoming more and more belligerent not only in trade but they are becoming more and more aggressive with their military as well, we are funding a large portion of this.

KGOldWolf

I agree, this article agrees with the beliefs you’ve consistently posted here. I’m glad you enjoyed the article.

KGOldWolf

While we often disagree, we are in complete agreement on every one of your points.

I’ve often said the amount of Treasury debt China has accumulated is a far more effective weapon than their growing, modern military including their Deng Fong - 21 (aka their ballistic “carrier killer” anti-ship missile)

Steven Seward Loc: Cleveland, Ohio

You brought up important issues like the Chinese holding inordinate amounts of our federal debt, which can be a potential threat against us. However, there is no "transfer of wealth" out of the country due to trade. It is still an equal exchange of assets between the two countries.

I think the more important issue with the Chinese is the stealing of copyrights and nor respecting intellectual property rights and computer hacking. This is not a trade issue per se, but kind of a law-and-order issue. On this front, they are playing unfairly.

KGOldWolf

Steven, perhaps I'm being a bit simple here but I do see a major transfer of money due to the trade imbalance. While there is an asset equation, our payments are liquid assets going to them in exchange for hard assets which US companies sell to regain their money. That net outflow of US of cash is in turn used by the Chinese to: 1) buy US debt, 2) fund expansion of their military, and 3) create binding agreements with developing nations creating debt on their part which is again an economic weapon to compel favorable terms. For instance they are developing a port on the east coast of Africa that will be military strength. I believe the greatest influx of funds for China is from the US, far more than other countries. The effect is that the greed for greater US corporate profits is a weapon we are giving our enemy.

I agree that the theft of American technology is a major problem. For instance, it extends to the great similarity of design between the US F35 and the Chinese J-21. (The top picture is the Chinese J21, the bottom is the US F35. They are believed to have VERY similar flight and fight characteristics.)

Not to mention the stringent, unilateral requirements for American companies to partner with Chinese companies in order to access the Chinese market. This too is an indirect theft of corporate proprietary knowledge.

I'll be interested in your refutation as, if I misunderstand, I'll be learning something.

Steven Seward Loc: Cleveland, Ohio

I take it you mean we buy hard assets from the Chinese (toys, gadgets, machine parts etc...) and they buy soft assets from us (savings bonds and stocks).

That sounds about right to me. Any items they can trade with us or any other country will increase their wealth and standard of living and may be used for increasing their military as well. We could slow them down by not trading with them, but it will slow us down by the same amount.

If I'm not mistaken, Europe as a whole, or the European Union, trades about the same volume with China as we do. I'm too lazy to look it up right now. You are right that trade is an enhancement that could easily be turned into a weapon, but like I said in the last paragraph, it goes both ways. Either we trade and both grow, or we don't trade and we both stagnate. I'll take slight issue on your pinning this on corporate profits and greed. First, everyone in our country profits from trading with China, not just corporations. I happen to shop at an inner-city Wal-Mart in Cleveland. The sheer amount of stuff that lower income people are able to afford nowadays is staggering. When I was growing up you couldn't afford to buy 1/4 the appliances that you can today. Poor people can live in relative luxury in the U.S. compared to the rest of the World. All because other countries are able to make the stuff for way less money. The American workers who used to make this stuff are out of a job, but many more jobs have opened up to sell different stuff that other countries are willing to pay for. For instance we provide much of the World's food, crude oil, civilian aircraft, industrial machines, almost all the computers and almost all the pharmaceuticals.

Cykdelic Loc: Now outside of Chiraq & Santa Fe, NM

Do note the Chinese only hold about 5% of our overall debt.