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China Is Paying for Most of Trump's Trade War, Research Says
- starik36 8y agoSeeing how they had an $800 billion trading surplus with US, I'd expect that.
- basementcat 8y agoI always thought that for a country with the World’s reserve currency, the USA ought to maximize its trade deficit instead of worrying about reducing it. It gets scarce, useful stuff (iPhones, raw materials, food) in exchange for green bits of paper that the USA can print an unlimited supply of. The green bits of paper are usually invested back into the USA creating jobs and other economic opportunities (no point in hoarding it if it gets inflated).
- toomuchtodo 8y ago> The green bits of paper are usually invested back into the USA creating jobs and other economic opportunities (no point in hoarding it if it gets inflated). The "green bits" are pumped into real estate across the US (not to mention Canada, the UK, and Auckland), inflating housing prices and making it harder for housing consumers to acquire property (kudos Vancouver for your foreign buyer tax!). Jobs are not created with these investment dollars. Warren Buffet warned us of this: https://www.youtube.com/watch?v=bGo_NL-eclw https://www.youtube.com/watch?v=bGo_NL-eclw (trade imbalances lead to serfdom)
- ryan_j_naughton 8y agoWhile increased demand for real estate had definitely played a substantial role, housing costs could be flat or even decrease if we simply increased supply dramatically. There are a limited number of people but there is a cubic amount of space if we build up. If we had policies that encouraged always building then housing prices would collapse and we wouldn't have an affordable housing problem at all, even with foreign investors buying speculative property.
- toomuchtodo 8y agoOr we could curtail speculative investment from a foreign nation's citizens (as other countries do, Thailand and Mexico come to mind) and not have to find ways to radically increase housing supply that we're not able to accomplish regardless. The charade that housing supply momentum can adjust faster than capital movement needs to end. In places that can build more housing, it is done. In places it can't be done, or the local citizens don't want it done, it is not. "Build, baby, build!" is just as ridiculous as "Drill, baby, drill!" [1] We work backwards from those two fundamental truths. [1] https://en.wikipedia.org/wiki/Drill,_baby,_drill https://en.wikipedia.org/wiki/Drill,_baby,_drill
- basementcat 8y agoFor various reasons there seems to be a tendency for those who invest in real estate to exercise their political power in such a way as to maximize the value of their investment. Some of those who look for a reason why affordable housing is scarce in their community may consider looking in the mirror.
- Fjolsvith 8y agoExactly. The wealthy landlords in our small rural community vetoed a Walmart, vetoed a community college and continually try to prevent new home construction.
- ben_w 8y agoIt’s complicated. Sure, there is way more space than people if we want it, but a surprisingly large number want to live in the same few places. If many want to live in Manhattan, and they do, you’ve only got Manhattan to fill up and then the prices rise, which they did.
- shard972 8y ago> housing costs could be flat or even decrease if we simply increased supply dramatically I have a feeling places like SF and NY have already tried this. Considering most of these foreign investors are most interested in these two cities over lets say Nebraska, it's hard to see how NY just needs to "build more supply" is a solution. > If we had policies that encouraged always building We have those in Australia, it's called negative gearing. We also have the most expensive houses when compared to average income and our cities have taken your advice and started to build up at rapid paces. Still hasn't worked. The Aus government is now suggesting we lower our immigration cap from 1% of total pop yearly so maybe that will help.
- basementcat 8y agoHigher real estate prices in the USA generally mean more money for schools, libraries and other local government services.
- acjohnson55 8y agoNot so great if you can't afford to live in the most economically advantageous parts of your country.
- deleted 8y ago[deleted]
- ben_w 8y agoIt also makes those things more expensive, both for the property those services occupy and for the cost of paying high enough salary to attract necessary staff. Also there are other forms of tax besides property tax, so governments don’t need expensive property to fund their services.
- pound 8y agoNot with Prop 13 in California..
- addicted 8y agoWHich is something that is completely controllable, as the Vancouver example you point to. Irrespective of whether that’s a good thing or not, the point is, the problems with real estate investments isn’t because of the trade deficit, but because the US doesn’t take any steps to prevent the money being invested in real estate.
- ajross 8y ago> I always thought that for a country with the World’s reserve currency, the USA ought to maximize its trade deficit instead of worrying about reducing it Indeed. That was basically post-war US economic policy in a nutshell. The worrying about reducing the trade deficit is a purely political argument. Trump is simply the first person in power to actually believe the nuttery.
- smokeyj 8y agoVenezuela tried that. Now they have petro coin.
- basementcat 8y agoVenezuela doesn’t control the world’s reserve currency.
- polotics 8y agoWell this used to be true. However the Eurodollar futures selloff started. All bets are off.
- makomk 8y agoAnyone who'd been paying attention to the mainstream media would've heard the opposite: that the tariffs would come straight out of US consumer's pockets. See for instance https://www.nytimes.com/2018/08/21/business/economy/trump-china-tariffs-consumers.html https://www.nytimes.com/2018/08/21/business/economy/trump-ch... The impression that that readers of say the New York Times would be left with at this point is that Trump stupidly imposed tariffs that only hit American consumers, whereas China brilliantly targetted tariffs right at Trump's base. This appears to be the precise opposite of the truth: the tariffs on China are mostly affecting China, and whilst the overall impact of the soy tariff isn't clear it was definitely the result of it being one of the few things the US exported to China in significant amounts rather than of ingenious Chinese planning.
- Double_a_92 8y agoThe tariffs do actually come directly out of the importers pocket (i.e. local manufacturers). Since the general public doesn't know what tariffs are, it's right to tell it that way. BUT there is a whole other dynamic attached to tariffs. I.e. the foreign producer lowering it's prices to not lose important clients.
- sanxiyn 8y agoTax collection is not tax incidence. Tariffs are collected from importers. That does not mean tariffs "come out of" importers.
- adventured 8y agoAnd of course the effect is far more dramatic over time than just the direct tariff hits. It's pushing companies to move their supply chains out of China, as few are expecting that this is a short-term trade conflict.[1] This will go on for decades in varying forms. The US wins in all scenarios from that effect. Some limited manufacturing comes back to the US; win. Some manufacturing moves to Mexico, whose labor costs are now often cheaper than China's; win. Some manufacturing moves to China's Asian rivals with cheaper labor costs, such as Vietnam; win. The US will push half a trillion dollars into Vietnam via a trade deficit over the next decade, that they can use to develop with. Every dollar of supply chain the US pushes out of China and into smaller neighboring rivals, is a win for the US strategically. The goal is to dilute China and redistribute trade into numerous other Asian nations that aren't a superpower threat. This isn't just a trade conflict, it's the start of a long-term political contest over whether China is going to acquire hegemony over Asia - something only China has an interest in, which leaves the US with a dozen regional allies against that outcome. The strongest results will be the long-term supply chain shift that will gradually take place over a decade or more. The longer the US keeps up the pressure the better that outcome. [1] https://www.bloomberg.com/news/articles/2018-10-23/companies-say-they-re-ready-to-move-supply-chains-from-china https://www.bloomberg.com/news/articles/2018-10-23/companies...
- adventured 8y ago> Seeing how they had an $800 billion trading surplus with US, I'd expect that. You're doubling the trade surplus. It was $375 billion for 2017. Total trade was $635 billion. China's trade surplus with the US for 2018 is running slightly higher, it'll probably come in near $410b. Mostly due to the US consumer and economy being pretty revved up this year.
- deleted 8y ago[deleted]
- jdkee 8y agoThe highest annual imbalance was $375 billion in 2017. https://www.census.gov/foreign-trade/balance/c5700.html https://www.census.gov/foreign-trade/balance/c5700.html
- socalnate1 8y agoThe actual study is here: http://www.econpol.eu/sites/default/files/2018-11/EconPol_Policy_Brief_11_Zoller_Felbermayr_Tariffs.pdf http://www.econpol.eu/sites/default/files/2018-11/EconPol_Po... It seems that they completely omitted analyzing the impact of the retaliatory tariff's; which is odd - as that can often be a major reason not to impose a tariff in the first place.
- rm2889 8y agoUnder normal circumstances retaliatory tariffs may be important, but I think because of the relatively asymmetric nature of US-China trade (the US's massive trade deficit to China), I'm definitely more interested in how the tariffs are affecting the Chinese manufacturers and American consumers. But yes a more complete analysis should look at both sides.
- mc32 8y agoI’ve often wondered why given our position vis a vis China, economically, previous presidents have been reluctant and unwilling to take these steps. Before Obama and Busch, it was Reagan and Busch senior who were reluctant to tske steps against Japan. We had the upper hand and also had logic and trade law on our side, but other than token measures were weak in this regard. Were they just too deferential to short term concerns and or offshoring interests?
- ryanwaggoner 8y agoIt’s “Bush”, on the off chance that you didn’t know that.
- bluGill 8y agoReagan and Bush believed in free trade - maybe not completely, but it was something like believed would turn out better for the long run. Note that nobody worries about Japan taking our jobs anymore. Since we don't have parallel universes to play with we can never experiment to see which approach is better.
- dis-sys 8y agoTypical strawman. Trump started the trade war because the _deficit_ is huge, not because China's exporters have higher profit margins. The mentioned "research" concluded that the trade war is going to "lower the bilateral trade deficit by 17 percent" after imposing tariff on $250 billion worth of imports from China. As the deficit is increasing every month, reduce it by 17% is like moving back to say one year ago.
- shard972 8y agoSource? I know ive heard trump say they are profiting off the US unfairly many times.
- burtonator 8y agoFake news... doesn't confirm my bias. this is how it works, right Trump?
- Upper_Onion 8y agoMake America Great Again!
- whateveracct 8y agoPretty telling of our industry that pro-Trump stuff is typically the only politics that frontpages HN.
- bhengaij 8y agoIt seems from a few comments that some people would rather US suffer than Trump be proven right.
- w0utert 8y agoProven right on what account? The article only says China affected negatively more than the US is affected negatively. Both still are still being hurt, and nobody is 'winning' anything. The article only compares consumer prices increases, and fails to mention whole sectors needing government handouts (soybean farmers) or business moving out.
- makomk 8y agoThe confident assertion of Trump critics everywhere was that US consumers would end up paying for his tariffs and that the whole thing was just a horribly regressive tax on Americans.
- w0utert 8y agoAnd it seems like this is the case, right? 5% price increase in the US vs 20% price increase in China. So who is benefiting? Let me make clear that I'm absolutely not a proponent of China's global economic policies, so I'm not choosing sides here. But one-sided tariffs like they have been instituted by the Trump administration really do not benefit anyone. Hurting less than the other party hardly seems like a win to me.
- zip1234 8y agoMy understanding is that the desired outcome is for China to get rid of tariffs and other policies that prop up their local industries at the expense of other countries. The problem before was that China had policies and tariffs that were one-sided and nobody could do anything about it. The US is big enough to do something about it.
- talltimtom 8y agoIf you feel like you aren’t paying more for something when you pay 5$ more just because I pay 20$ more, then have some magic beans to sell you. China is “paying for the war” or “losing” in the sense that more of their soldiers are dying (more increase in cost), but at the end of the day no one is better of in the middle of a war than in peace and soldiers are dying on both sides. Also, at the end of it they may end up winning the war even if they do have larger losses along the way.
- rataata_jr 8y agoTough to swallow pills.
- gscott 8y agoChina's swine flu is caused by trying to substitute soybeans from pigs meal and has caused a big problem. China is certainly paying a high price for boycotting US soybean. Chinese buyers are too afraid to buy US Soybean.. not because the Chinese tariff makes it too expensive but because of the feared repercussions from the government.
- Gustomaximus 8y agoI don't understand the link from soybeans to swine flu. Is this because you feel swill feeding increases the disease risk? I read a few articles... this seems the best. None seemed to make the same connection. https://www.google.com.au/amp/s/www.wired.com/story/african-swine-fever-scientists-should-track/amp https://www.google.com.au/amp/s/www.wired.com/story/african-...
- gscott 8y agoI was reading an article that some Russian feed was the cause and it was substituting soybeans. It wasn't the normal feed the farmers buy.
- SomewhatLikely 8y agoThe article seems to assume that only seeing a 5% price increase on items tarrifed at 25% must mean the foreign manufacturer taking a 20% hit. However, if domestic producers become profitable at the 5% higher level then we could just buy all our goods domestically and the foreign producer can stop manufacturing. In that scenario they aren't 'paying' anything except the lost profits on goods they no longer make. If their profit margin is under 20% then they aren't paying "the other 20%". Nobody is. Consumers are just paying 5% more for goods produced domestically. If we impose a tarrif of one thousand percent and prices go up 10%, nobody is paying for the other 990%.
- writepub 8y ago> In that scenario they aren't 'paying' anything except the lost profits on goods they no longer make. But they are paying a high price by losing market share. Profits are one thing, but revenues are a whole other. Revenues support jobs, higher revenues typically offer all sorts of "economy of scale" benefits, etc. If Chinese manufacturers lose access to their American consumers, they have a high price to pay
- atomi 8y ago> Consumers are just paying 5% more And also, buying fewer.
- nine_k 8y agoThe lost profits on goods they no longer make and sell = no money to repay, or maybe even service, their debt, or return investments. This may be a big deal if the amount of stopped exports is significant for a manufacturer.
- nicodjimenez 8y agoChina already has had an effective tariff on digital imports so China was sort of asking for a trade fight. They got it.
- sushid 8y agoNot just a tariff. They have essentially an embargo on web companies.
- tchaffee 8y agoI wonder how much it matters who is paying more? A more important factor might be who can last longer. A president with a fickle base used to the many comforts of a highly developed country? Who will vote again in two short years? Or the Chinese people already used to the government deciding what's best for them?
- hummingurban 8y agoWhoever simply makes more money from the goods they export. In this case, China has more to lose. You forget that in China, you have a dictator who uses violence and fear to keep people in check. They are stuck with his foreign policy abilities, which many analysts will conclude, Xi fucking sucks, including those around him who aren't happy about him being a dictator and praising Mao (has anything ever good come out of ppl who idolize Mao?) The US is on it's way to prosecuting a Russian KGB asset who has been compromised and being blackmailed to willfully corrupt in order to launder the billions that Putin and his buddies stole from his own fucking country. Thankfully, the US president doesn't have absolute power, cannot stay in power indefinitely, is not immune from the institutions that the American forefathers have created to keep the President in check, a continuity in all the core national security organs such as the CIA and NSA which prevents somebody like Xi from ever pulling the same shit, and cannot just roll over people with tanks and then make a stupid song about how much people love the Tianmen square. In China, the trade war is having a far more profound impact on society and economy but you will never hear this and neither will the vast majority of citizens in China because information cannot flow freely and it's censored. If China seems invulnerable and powerful, it's only because they specifically crafted their image in that manner. The fact is China is dysfunctional by and large and anyone who had exposure to their political system knows it can't continue no matter how many active measures they take.
- tchaffee 8y agoYou seem to agree with me that a dictatorship can last longer in a trade war? Your gripe seems to be with what a horrible place China is. That might be true. Having lived there and done business there I think it's more nuanced than you're making it out to be. But let's say it really is that bad. Does that win a trade war before the next US elections in 2 years when US consumers might already be frustrated with higher prices?
- askaboutit 8y agoIsn’t the GFW the biggest tariff of all?