Posted on 03/07/2019 8:45:15 PM PST by cba123
Where are the 25% tariffs Trump promised us?
We need to erect high tariffs while the USA re industrializes.
I repeat: Adam Smith would have been hung if he suggested any of that.
Every dollar of trade deficit represents about 20 cents in lost US wages.
The trade imbalance is not sovereign. The trade imbalance results from American individuals and companies buying more from China than they sell. It is not the result of the US government trading with the chinese government.
The word worst was used. Actually, largest or greatest is the proper term. The trade imbalance with china is an indicator that Americans like to import and buy Chinese. The imbalance thus is not good or bad, not best or worst.
President Trump has several lines of attack in progress. His primary route of attack will apparently reduce the imbalance by increasing American sales (and thus American jobs) rather than decreasing Chinese sales.
In the event china resists, there will be punishment in the form of tariffs which are taxes on Americans purchasing chinese goods. The tariffs must be great enough to cause purchase to be from american vendors or other foreign vendors.
The loss of business must be great enough to china companies to force the government to change their ways.
Bring it on. Make sure you put your affairs in order before you try.
Who said anything about Adam Smith or corporations?
If you adjust for inflation (purchasing power), or look at it as a percentage of the total US economy (about $20 trillion), it is far from a record.
In fact, as a percentage of GDP, it is somewhat unremarkable (in 2006 it was -6%):
As a percentage of GDP, we ran a smaller trade deficit in 2017 than the UK, Canada or New Zealand.
“The difference is microeconomics are reality while macroeconomics are political voodoo”
So when Reagan’s team used macroeconomic modelling to develop their supply side program they were engaged in ‘voodoo’. That’s the econ equivalent of flat earth theory, but thanks for playing.
” The trade imbalance results from American individuals and companies buying more from China than they sell. It is not the result of the US government trading with the chinese government.”
Please explain why you think individual vs gov’t buying makes a difference.
The GDP equation certainly makes no such distinction. Maybe you are breaking new ground.
GDP = C + I + G + (X – M) or GDP = private consumption + gross investment + government investment + government spending + (exports – imports).
What central-va is alluding to is David Ricardo’s doctrine of comparative advantage rather than Adam Smith.
It’s one of the classical principles of international free trade.
And the reason why comparative advantage isn’t applicable to current US-China trade is because what is going on is international labor arbitrage with China using non tariff barriers to keep their domestic market closed to foreign competition.
So, our economy is growing and in ratio so does our imports.
Well, gosh, I guess Trump should just tank the economy to drive down imports.
That works only because you have a trade surplus with your employer.
It’s okay to have a trade deficit with one trade partner as long as you also have surpluses with other partners and your net trade isn’t negative.
If you have a net deficit, then you’re purchasing by borrowing from you credit card and that’s not sustainable.
Supply side economics was a rejection of prevailing macroeconomic theory—namely, Keynesianism. It was also a somewhat held-baked theory in its own right, but at least happened to get it right in calling for lower taxes and regulation. The problem with it is that it concedes the argument that lower taxes and less regulation require an economic justification, when many of us would say they are a moral imperative.
No question that China doesn’t play fair and needs to be made to play fair. But we would still have a trade surplus with China even without China’s barriers to trade. And there is nothing wrong with that, nor is there anything wrong with Americans investing their money in other countries.
You assume I have a job and an employer. That happens to be true, but my “trade surplus with my employer” and borrowing are not the only ways I receive money to pay Amazon.
Likewise, there are other ways to zero out balance of payments than borrowing. Such as returns on foreign investments, for example.
Of course, all of this disregards the fact that domestic trade dwarfs international trade in the US economy. Our entire foreign trade deficit is about 2.5% of GDP. Even if it is a problem, it is a minor one.
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