3 ms·

A couple of things: 1) The tariffs are not getting paid by China. That money is coming from American businesses that buy from China. The tariffs just force tho

A couple of things: 1) The tariffs are not getting paid by China. That money is coming from American businesses that buy from China. The tariffs just force those companies to look for cheaper alternatives. 2) The devaluation now makes China that cheaper alternative again even with the tariffs because now the USD goes further. End result now is it makes the tariffs more useless and China continues to disallow American imports.

nostromo 7y ago
Before the devaluing the US consumer was paying the tariffs. But they devalued to compensate for the tariffs. In effect, the tax is now being covered by China’s central bank.
- cromwellian 7y ago
  US exports are also down 12%, the Chinese government embargoed all purchases of US Agricultural goods by State owned Enterprises (SOEs), which constitute about 1/3rd of China's GDP. Thus, the US trade deficit has been made worse, the US will continue to import from China. China's central bank owns a huge chunk of US debt, so in effect, this is being covered by the US government over the long term, i.e. see the _Twin Deficits Hypothesis_ that federal deficits and trade deficits are related. Also, the central bank in China didn't do anything to devalue the yuan, it was propping it up. A tariff decreases demand, ergo, it decreases demand for RMB vs USD, ergo, exchange rates drop and the yuan becomes cheaper from lower demand. There's a "symmetry theorem" in economics that predicts this outcome to restore equilibrium (trade deficits offset by currency adjustment). So let's stop trying to cook up more excuses for Trump's trade policy. His own economic advisers disagree with it, and the fiction that "mexico" or "china" will pay for these tariff actions he's taking is a straight up lie to the citizens of the country.

3 ms·

A couple of things: 1) The tariffs are not getting paid by China. That money is coming from American businesses that buy from China. The tariffs just force tho

by kickopotomus 7y ago

nostromo 7y ago
Before the devaluing the US consumer was paying the tariffs. But they devalued to compensate for the tariffs. In effect, the tax is now being covered by China’s central bank.
- cromwellian 7y ago
  US exports are also down 12%, the Chinese government embargoed all purchases of US Agricultural goods by State owned Enterprises (SOEs), which constitute about 1/3rd of China's GDP. Thus, the US trade deficit has been made worse, the US will continue to import from China. China's central bank owns a huge chunk of US debt, so in effect, this is being covered by the US government over the long term, i.e. see the _Twin Deficits Hypothesis_ that federal deficits and trade deficits are related. Also, the central bank in China didn't do anything to devalue the yuan, it was propping it up. A tariff decreases demand, ergo, it decreases demand for RMB vs USD, ergo, exchange rates drop and the yuan becomes cheaper from lower demand. There's a "symmetry theorem" in economics that predicts this outcome to restore equilibrium (trade deficits offset by currency adjustment). So let's stop trying to cook up more excuses for Trump's trade policy. His own economic advisers disagree with it, and the fiction that "mexico" or "china" will pay for these tariff actions he's taking is a straight up lie to the citizens of the country.