ALL BLOG POSTS AND COMMENTS COPYRIGHT (C) 2003-2018 VOX DAY. ALL RIGHTS RESERVED. REPRODUCTION WITHOUT WRITTEN PERMISSION IS EXPRESSLY PROHIBITED.

Tuesday, March 06, 2018

The Trump tariffs and economic independence

Pat Buchanan figured all this out long before I did. And he's been remarkably consistent all along in his correct argument that free trade is economically destructive for the United States. He was right about this in 1992 and he is right about this today.
The hysteria that greeted Trump’s idea of a 25 percent tariff on steel and 10 percent tariff on aluminum suggest that restoring this nation’s economic independence is going to be a rocky road.

In 2017, the U.S. ran a trade deficit in goods of almost $800 billion, $375 billion of that with China, a trade surplus that easily covered Xi Jinping’s entire defense budget.

If we are to turn our $800 billion trade deficit in goods into an $800 billion surplus, and stop the looting of America’s industrial base and the gutting of our cities and towns, sacrifices will have to be made.

But if we are not up to it, we will lose our independence, as the countries of the EU have lost theirs.

Specifically, we need to shift taxes off goods produced in the USA, and impose taxes on goods imported into the USA.

As we import nearly $2.5 trillion in goods, a tariff on imported goods, rising gradually to 20 percent, would initially produce $500 billion in revenue.

All that tariff revenue could be used to eliminate and replace all taxes on production inside the USA.

As the price of foreign goods rose, U.S. products would replace foreign-made products. There’s nothing in the world that we cannot produce here. And if it can be made in America, it should be made in America.

Consider. Assume a Lexus cost $50,000 in the U.S., and a 20 percent tariff were imposed, raising the price to $60,000.

What would the Japanese producers of Lexus do?

They could accept the loss in sales in the world’s greatest market, the USA. They could cut their prices to hold their U.S. market share. Or they could shift production to the United States, building their cars here and keeping their market.
I have already proved that free trade is totally incompatible with nationalism, national sovereignty, and the future survival of the nation due to the labor mobility required by it. Now I will prove that even complete autarky would, in the present circumstances, be of material benefit to the United States economy.

First, what passes for the macroeconomic facts, courtesy of the BEA:
  • Q4 2017 GDP was $19,386.2 billion.
  • Net exports were $2,420.7 billion
  • Net imports were $3,020.8 billion
Now, let us accept the free trade advocates' standard argumentum ad absurdum and suppose that Donald Trump actually does shut down all international trade going forward. Let us suppose that China, Japan, and the EU all retaliate with 100-percent tariffs and refuse to sell into the world's most profitable consumer market. What does this mean in statistical terms?

It means the US economy loses $2.4 trillion in exports and gains $3.0 trillion in imports. Remember, GDP is calculated by the following formula: C+I+G+(x-m). So, this much-feared trade war, at its theoretical worst, would result in the instantaneous growth of the US economy from $19,386.2 billion to $19,986.3 billion GDP.

That is three percent annual growth, which is faster economic growth than the USA has enjoyed since the 1990s. In other words, the very worst scenario that the free traders can envision actually guarantees a bigger and better economy growing faster than the USA has seen for more than 20 years. And given the fact that US manufacturing prices are more expensive, the actual GDP growth will probably be in excess of that.

And just to be fair to the less intelligent, a word of warning to free traders before they resort to the obvious and anticipated rebuttals. Be very, very careful on what basis you attempt to pull your "yeah, but" arguments out of a hat. Remember, any assumption you negate here will also be negated in your own pro-free trade arguments. To put it plainly, I am hoisting you on your own macroeconomic petards.

In answer to the specific question, the Trump tariffs are a very small, but positive first step towards Americans regaining their economic independence from their globalist financial rapists.

Labels: ,

124 Comments:

Blogger Ominous Cowherd March 06, 2018 8:09 AM  

You put the case well.

Blogger Resident Moron™ March 06, 2018 8:11 AM  

You’re confusing me with this reality thing.

Again.

Blogger Lukas Brunnor March 06, 2018 8:19 AM  

The anti-tariff people are nothing but unthinking parrots who mimic only what they've heard from the so-called and constantly wrong "economic experts" of the last 35 years.

But either way, the infiltrated courts won't let Trump do it.

Blogger Looking Glass March 06, 2018 8:21 AM  

Into this comes the fact that the USA will likely be the world's largest Oil producer by the end of the year. Removal of US exports would mean a massive rise in International Natural Gas & Oil, while causing a drop in local NG and minor rise in Oil/Gas.

This is why Trump spent the first 3 months of the Presidency selling Oil & Gas to anyone that was buying. Now he has all of the leverage.

Anonymous Anonymous March 06, 2018 8:21 AM  

Prior to reading you in '10 I was convinced free trade was the way to go. You have long since then convinced me it's bs.

Those jobs lost that Buchanan talks about? The gf was one of them. She used to be in manufacturing.

Just like the majority of OBs don't know how many sperm are in an ejaculation (that's per a friend that is one; she said 90%+ don't know), I'd assume the majority of economists don't know free trade is bs.

Blogger Looking Glass March 06, 2018 8:24 AM  

In more global macroeconomic news, North Korea is willing to start playing ball.

https://www.nytimes.com/2018/03/06/world/asia/north-korea-south-nuclear-weapons.html

HAHA. I love winning.

Blogger James Dixon March 06, 2018 8:25 AM  

And this completely ignores the national security reasons for the tariffs, which I believe were Trump's primary justification for them.

Blogger Looking Glass March 06, 2018 8:26 AM  

@5 Überdeplorable Psychedelic Cat Grass

Majority of economists don't believe anything that'll lose them their job. If they're willing to whore themselves out, they'll get invited to the good parties. This is known as "The Krugman", because if you think his public profile is because he's really good at his job, I have beach front property in Wyoming to sell you.

Blogger Looking Glass March 06, 2018 8:29 AM  

@7 James Dixon

The Commerce Department's findings & recommendations to the President:

https://theconservativetreehouse.com/2018/02/17/commerce-secretary-wilbur-ross-completes-section-232-steel-and-aluminum-reports-recommends-tariffs/

"Each of these remedies is intended to increase domestic steel production from its present 73% of capacity to approximately an 80% operating rate, the minimum rate needed for the long-term viability of the industry. "

Blogger ReluctantMessiah March 06, 2018 8:36 AM  

Lesson learned. If the adjective being used is "free", it most certainly is not

Blogger Robert What? March 06, 2018 8:36 AM  

Vox, your point about reducing taxes on US made steel, cars, etc, is well taken. Part of the theory, I believe, is that prices of these products would decrease in the US. But we all know how unions work. They would see that price differential as an opportunity to demand higher wages and benefits so as to bring the prices of the US made products up to those of the highly taxed imported products.

Blogger Nate March 06, 2018 8:38 AM  

see... this is why I say Macroeconomics is is entirely fiction made up to make economists more relevant.

Blogger Bob Ramar March 06, 2018 8:39 AM  

Vox: I have personally watched the effect of imported goods on an industry. I used to work as a buyer for a major department store company in the '80's. I remember the first shipment of trench coats that were imported from China for a Christmas promotion. They were poorly made, smelled bad, but were very cheap. I remember thinking that they were the vanguard of something terrible. Since then old, long established companies like Hagar, Farah, Munsingwear, Arrow, have disappeared or have product made under their name imported from China or other second-world countries. Meanwhile in the US, whole towns have been depopulated as the factory or factories upon which their economies depended have closed. Vermont for instance has a plethora of crossroads that used to be thriving villages and towns when the US had a textile and garment production industry. The town in which I live lost furniture manufacturing (three companies), machine production (Outboard boat engines), and textiles (cotton fabric production). Three quarters of our workforce got laid off within four years between 1999 - 2002. Drug use and crime became rampant; many moved and some, like me found a new career. If people only knew how much a role 'their' party politicians (Democrat and Republican) played in selling them out and sending potential employment overseas (chasing 'profit'), they would rise up en mass and burn Washington to the ground.

Just my two cents, for the good of the whole.

Blogger Richard Holmes March 06, 2018 8:42 AM  

If your business depends on taking advantage of people of a certain group or a country, this is bad business. Sooner or later people wake up to the fact they are being taken advantage of. Once they do that they look for ways to get around you or go somewhere else. Or stop buying all together. Your business folds rapidly. I am betting a lot of countries will suffer economically. Watch for a lot of foreign bankruptcies?

Blogger Wynn Lloyd March 06, 2018 8:46 AM  

CNN, MSNBC, etc. need to be trolled ruthlessly when they fail to report this.

Blogger pyrrhus March 06, 2018 8:50 AM  

Indeed, as other commentators have noted, many countries have been impoverished by free trade. India, perhaps the richest nation in the world in 1750, became one of the poorest after two centuries of free trade with the British Empire....

Blogger Looking Glass March 06, 2018 8:53 AM  

@11 Nate

"Macroeconomics" as a descriptor exists; as a proper field of study, it doesn't yet exist. The Weather has as much effect on domestic production as the government system.

Blogger pyrrhus March 06, 2018 8:54 AM  

@4 US may be largest producer of gas and oil, but it is still a net importer of around 10 million bpd...Alaska needs to be opened up.

Blogger Looking Glass March 06, 2018 8:56 AM  

@14 pyrrhus

"Free Trade" in the undeveloped world means their ruling elite can live close to Western standards, while everyone else gets poorer, but at least they can steal some of the products they build for the rest of the world.

It'll be a while, but I'm pretty sure the "low cost producers" actually lose Net Value when you take it all together, but it creates a great world of graft, corruption and wealth that the ruling elites can use. (This has the secondary benefit of keeping the elites in local power and out of the hair of other nations. So that objective is met for the people pushing "Free Trade".)

Blogger ReluctantMessiah March 06, 2018 9:03 AM  

@15 So you're saying the rain dance is as effective at predicting domestic production as macroeconomics

Blogger Timmy3 March 06, 2018 9:11 AM  

This is why I didn’t panic when I heard about the steel and aluminum tariffs. It isn’t much and the outcry is out of proportion to reality. Interesting that China didn’t retaliate YET. Perhaps they know something.

Blogger Looking Glass March 06, 2018 9:13 AM  

@16 pyrrhus

Right, but most of it comes from Canada. Canada can't afford to start a trade war with the only country they border. And even a full-scale removal of foreign oil would only cause a crunch for a bit while a massive drilling campaign happened.

Though it does have to be noted that the USA provides the military support to the country we import the most from, and the country that'll be #3 (Saudi Arabia). They can't cut us off from oil, but they can shoot themselves in the foot.

Blogger Looking Glass March 06, 2018 9:14 AM  

@18 ReluctantMessiah

Given historic norms, I'd take the rain dancing shaman over the entire Economics Department at Harvard.

Blogger Nate March 06, 2018 9:15 AM  

literally every president from Reagan to Obama has done this. Yet when Trump talks about it.... everyone flips out like its a crazy thing that no one would ever consider.

Blogger Peaceful Poster March 06, 2018 9:19 AM  

Free trade is the top story in Canada right now. Their politicians are attempting to put on a brave face, but it ain't working. Trudeau's cuck face cannot be disguised.

Everyone knows Canada has no leverage. If the USA cuts them off, they're f-cked.



Blogger Heian-kyo Dreams March 06, 2018 9:23 AM  

Manufacturing ilk, how long will it take for US steel companies to ramp up production?

The "jobs ain't coming back, Americans can't ramp up production" is the most common argument I've heard from the low energy set.

Blogger Fenris Wulf March 06, 2018 9:24 AM  

I've known that free trade was a lie since the early 90's, when Chinese consumer goods started dominating the market, and I
observed that the lower prices were more than offset by the incredibly poor quality. Nobody bought these goods by choice, they were forced on us by the deliberate destruction of domestic manufacturing.

US manufacturing is heavily taxed and regulated, while Chinese manufacturing is totally unregulated, stealing our IP, couterfeiting goods, and poisoning children with impunity. it's the same situation as immigration: foreigners have total freedom while citizens have none. This is quite deliberate and it's engineered by people who hate Americans and hate America.

The ideal solution is to liberate our economy so the Chinese have no hope of competing with us. Barring that, I'm more than happy to settle for tarriffs.

Blogger Resident Moron™ March 06, 2018 9:24 AM  

@Looking Glass

Rising oil prices will also benefit our bogeyman du jour, Russia. Oops.

I was convinced Trump was on the right track when I saw who was howling in oitraged agony at the very thought of any assertion of economic nationalism.

(I never did understand how people who will happily send your armies to destroy entire nations “in the national interest” can simultaneously object to economic policies based on the same assertion, but I’ve never met any ideologues who are embarrassed by intellectual incoherence.

Blogger rondolf March 06, 2018 9:25 AM  

"It means the US economy loses $2.4 billion in exports and gains $3.0 billion in imports."

It also means we stop trying to make up the deficit by selling away land and assets in our country, which is suicidal in the best of times. But when dealing with your major competitor and probable future opponent in war....is there a descriptor worse than suicidal?

Blogger Josh (the sexiest thing here) March 06, 2018 9:27 AM  

"Each of these remedies is intended to increase domestic steel production from its present 73% of capacity to approximately an 80% operating rate, the minimum rate needed for the long-term viability of the industry. "

From page 45 of the 232 steel report, average capacity utilization of the top 20 steel exporters to the US is 67%. Only South Korea and Japan are at 80%. China is at 69%. If capacity utilization is the correct metric for long term viability of the steel industry, the US steel industry is more viable than almost every other country's, including China.

Blogger seeingsights March 06, 2018 9:33 AM  

I'll try to give a different and hopefully interesting angle on this topic.

The EU globslists took a blow from the recent Italian election. Trump's actions concerning tariffs would be another blow to the Globalists. Low taxes within the US and tariffs on foreign goods would mean that the countries under the EU would lose capital to the US. This is additional pressure on the EU, hastening its demise.

Blogger Stg58/Animal Mother March 06, 2018 9:39 AM  

And...here...we...go....again...

Blogger dienw March 06, 2018 9:47 AM  

(I never did understand how people who will happily send your armies to destroy entire nations “in the national interest” can simultaneously object to economic policies based on the same assertion, but I’ve never met any ideologues who are embarrassed by intellectual incoherence.

It all depends on (((who's national interest))) is meant: neocons are not referring to the United State's national interest when they use the term; it is esoteric vs exoteric understanding of the term.

Blogger SidVic March 06, 2018 9:50 AM  

I can remember the shitty cars Detroit was making in the 70s- until japan forced them to up their game. I like my toyota made by OCD japanese with their clever little fingers. So there is that. OTOH retaining some key strategic industries for the eventuality of a big war seems prudent. It has been a while; we are due for a big one.

Blogger tz March 06, 2018 9:50 AM  

Alternatively, we could send OSHA, the EPA, NLRB, and the EEOC to China and Mexico and start levying fines for violating US laws on labor, environment, etc. I think the 20 trillion debt would be gone in a few years. You can access our markets IFF you obey our regs.

First, there were no free trade deals, as they were 10,000 pages long. My point above is the longstanding argument that it is "free trade" to buy things at half WalMart charges by going to shoplifting ring. Let's not ask WHY the goods are cheaper, just say something about the deplorable lazy white male workers.

It also went back to something like the "civility" v.s. what we have now. When we were trading with Canada, Australia, England, Germany, etc. the common culture meant common rules so the advantages were small even to the point that Michigan v.s. Ontario car production was not unlike Michigan v.s. Ohio before 1970. Our trading partners were like us. I didn't mention Japan intentionally because there you see the Eastern Civilization cut-throat competition, where they don't play fair. So we see what happened, but they got hoisted on their own petard once China became cheaper, and the Koreans were a parallel economic power.

We now have "trade" with the 3rd world labor and environmental standards. And politics. We would rarely trade with Russia, and there was the boycott South Africa movement over Apartheid which was the first experiment in Civic Naionalism. See Loren Souther's horror documentaries to see how that turned out - but we don't want to end trade in that nightmare tyranny that is looking like Rawanda, nor accept white refugees (hey! Send the Somalis to South Africa, and we'll take their whites).

Blogger Stg58/Animal Mother March 06, 2018 9:50 AM  

Heiyan,

The US steel industry is a caged lion, a freight train, waiting to be unleashed. The plants are there, the people are ready, the mighty steel towns of Pittsburgh and Wheeling, the same towns that rolled out one Liberty Ship a week, they're ready to roar back to life.

When Wheeling Pittsburgh Steel shut down, Providence in the form of Markwest, Williams Midstream, Blue Racer Midstream and the others were there to scoop the people up the next week.

When the steel industry comes back to life, it will compete for qualified people with the oil and gas industry. Wages will rise. New jobs will be created. Steel mills will be modernized, which in and of itself will bring jobs, capital projects, manufacturing orders, etc.

Educational partnerships will be started with local trade and technical colleges, to get more qualified people trained up. The Rust Belt will shine again. America will stand on its own two feet again and shake off the parasites and vampires and globalists who have been sucking her dry.

Get out of our way, or be steamrolled.

Blogger Azimus March 06, 2018 9:51 AM  

If tariffs really hurt only the nation that raises them, why are other nations raising tariffs in response? If Trump is that far off-base on his gamble, why not let your precious free trade dogma prove him wrong?

Blogger tz March 06, 2018 9:57 AM  

@31 By 1970 the US auto industry was so regulated that no one could get into business within the USA (or Canada). Have you ever thought why no American company started making high quality cars here (Japan's award is the Edward Deming prize)?.

The equivalent is to break some major bone of every athlete we send to the Olympics, then wonder why they never get even a Bronze. I guess they are just lazy or don't try hard enough.

Also there were other quality differences, but American cars were larger and cheaper, which worked until the Arab Oil Embargo when Gasoline became expensive and scarce - and Toyotas and Datsuns (Nissans) and VW Bugs got 2-3x the MPG since fuel was expensive in their home countries. Also many worked for the US companies or suppliers so got a discount for buying their own brand, and it was a significant market in itself.

Except we are now heading to be a net exporter, consider that Electric cars are not very practical, even hybrids, but if there was a similar fuel shortage with Gas lines for $10/gallon, a plug in EV would make sense.

Blogger tz March 06, 2018 9:59 AM  

Another background problem (4d chess) is what do we build our military weapons with when we have to import it from China? This is already a problem with the Rare Earths.

Blogger Stg58/Animal Mother March 06, 2018 10:02 AM  

Tz,

The free trade tariff haters wouldn't even acknowledge that question as valid.
They might even start calling you names to distract you.

Blogger Uncle John's Band March 06, 2018 10:02 AM  

Free trade benefits from rhetorical slipperiness - free speech, free stuff, free love, freedom, etc. are all morally different, but Americans, and the West in general, has been conditioned to respond favorably to the word "free."

The gulf between free trade and the current global system is so great that cognitive dissonance alone can't explain its persistent advocacy. If you are so committed to this phantasm that you find yourself opposing Trump's defense of national sovereignty, you need to take a good look at your allies in this fight. About those "principles..."

Blogger Stg58/Animal Mother March 06, 2018 10:05 AM  

Josh is the free trading-est thing here.

Blogger Josh (the sexiest thing here) March 06, 2018 10:07 AM  

Josh is the free trading-est thing here.

I would have to support free trade in order for your statement to be accurate.

Blogger Looking Glass March 06, 2018 10:09 AM  

@26 Resident Moron™

Foreign Wars = MIC makes money
Foreign Trade = Globalist Class makes money

For those howling, they're propaganda outfits to the Leftist group that pays the most.

Blogger LES March 06, 2018 10:10 AM  

Net exports were $2,420.7 billion
Net imports were $3,020.8 billion

Let us suppose that China, Japan, and the EU all retaliate with 100-percent tariffs and refuse to sell into the world's most profitable consumer market.

It means the US economy loses $2.4 billion in exports and gains $3.0 billion in imports.

I don't mind being the slow one in class. How can we gain imports if countries refuse to sell to us?

Blogger Nate March 06, 2018 10:12 AM  

The Free Trade scam is easily seen when you look at how the supposed negative effects are only applied to America.

Somehow japan and china are magically immune to these super evil bad effects.

Blogger Peaceful Poster March 06, 2018 10:13 AM  

The God Emperor has been extremely impressive on the trade issue. He's taking heat from all sides but refuses to back down.

Incredible.

Blogger Lazarus March 06, 2018 10:13 AM  

@4

International Energy Agency says not til 2023.

U.S. crude production is expected to reach a record of 12.1 million barrels a day in 2023, up from 10.6 million a day this year, said the International Energy Agency, which advises governments and corporations on industry trends. American oil output will surge past Russia, currently the world’s largest crude producer at roughly 11 million barrels a day.

http://thedailydan.tumblr.com/post/171573533621/us-will-be-the-worlds-largest-oil-producer-by

Blogger Stg58/Animal Mother March 06, 2018 10:13 AM  

Domestic production increases by that amount to replace imports.

Blogger Stg58/Animal Mother March 06, 2018 10:14 AM  

When you're right, and you love America, you're right.

Blogger Snidely Whiplash March 06, 2018 10:24 AM  

I renenber my Datsun B210, with about 50k miles, that deposited a connecting rod in my lap while driving down the road.
Anyone else remember Daihatsu?
The Japanese captured the market by producing higher milage cars, not higher quality cars.

Blogger ReluctantMessiah March 06, 2018 10:25 AM  

@42, Imports and Exports both go to zero. No countries trade with each other. However, this helps us because we import more than we export. We net $600 billion

Blogger rumpole5 March 06, 2018 10:47 AM  

By all meani, bring back the days of "Trenton makes, the world takes" when most items were huge, weighed a ton, stamped made in Chicago, and were marketed by prancing, big boobed, blond ladies with wind blown hair.

Blogger JACIII March 06, 2018 10:50 AM  

Steel has been ramping up. There a new plant in mobile and one going up in missouri.

Blogger Monty March 06, 2018 10:52 AM  

I believe it was the late, great, Jerry Pournelle who said somewhere in his Imperial Stars series that we'd do better with Court Astrologers than a board of economic advisors because we'd be less likely to take them seriously.

Blogger Are W March 06, 2018 10:55 AM  

So Ross Perot was correct about the "Giant Sucking Sound"?

Anonymous Anonymous March 06, 2018 10:56 AM  

Why did the Bush steel tariffs fail? (Or why is the media saying they were a disaster?)

Blogger Nate March 06, 2018 10:58 AM  

"The Japanese captured the market by producing higher milage cars, not higher quality cars."

The cars were cheap. very cheap. that's how they got into the market. Americans knew they were cheap so americans took care of them and did all the routine maintanence out of fear. They didn't take care of their american cars the same way because they thought they were higher quality.

Then the jap cars started lasting longer... because duh... someone actually bothered to change the oil.

Blogger Looking Glass March 06, 2018 10:59 AM  

@53 Are W

Yup. And Trump is pretty much Ross Perot 2.0 on a lot of topics.


@54 vfm360

Steel "laundering" through Canada & Mexico. That's why NAFTA has to go. It's been a backdoor through protective measures from evil actions by other actors.

Blogger Azimus March 06, 2018 11:13 AM  

50. rumpole5 March 06, 2018 10:47 AM
By all meani, bring back the days of "Trenton makes, the world takes" when most items were huge, weighed a ton, stamped made in Chicago, and were marketed by prancing, big boobed, blond ladies with wind blown hair.


Do I catch a whiff of nostalgia in there?

Blogger Heian-kyo Dreams March 06, 2018 11:14 AM  

@33 Stg58

Toot toot! All aboard the American steel train!

Blogger Jack Amok March 06, 2018 11:41 AM  

The Japanese captured the market by producing higher milage cars, not higher quality cars.

Yep. And raise your hand if you're old enough to remember back in the 80's when they launched the Acura, Infinity and Lexus nameplates because they didn't think Americans would pay high prices for Hondas, Nissans and Toyotas.

The real collapse in quality of US cars came after the Japanese had established themselves and the ruinous union contracts of the 60's finally hit home with retirement benefits and GM ceased being a car company and instead became a retirement fund that happened to own a car company.

The Japanese meanwhile did improve their quality. Unlike the Chinese, the Japs do have a history of pride in craftsmanship.

Blogger Andrew March 06, 2018 11:43 AM  

Why did the Bush steel tariffs fail? (Or why is the media saying they were a disaster?)

I believe our trading partners filed suit with WTO which then promptly levied a couple billion in sanctions against U.S. and so Dubya cucked and backed off the tariffs.

Blogger Zapp Brannigan March 06, 2018 11:57 AM  

I was born in the 70's, when America still built many of its own products. The intervening decades that brought the flood of cheap Chinese goods into America slipped past my notice as I was more focused on more quotidian concerns like girls, getting my drivers license, and finishing college.

But now, as a father with three young children, it is absolutely amazing to me how much JUNK finds its way to our shores from China. Birthday parties, school events, neighborhood/community gatherings, theme parties, doctors visits, sporting events...they all seem to come with goodie bags filled with molded Chinese plastic and cheap sugar.

It's an avalanche of useless crap. There's no way to really play with any of it, because a lot if times there's no real point to the item. How do you play with a plastic emoji? A tiny, poorly formed dinosaur figurine? A flimsy ball-bearing-in-plastic-maze that cost less than a penny to make and hardly holds the attention for more than a minute? Yet our house gets filled with this useless stuff because America can't seem to say no to China and is addicted to low prices, even if they're attached to products that have no real purpose.

Contra Kevin Williamson, I would be happy to live in a country without the flood of cheap Chinese crap and where Japanese televisions were 20% more expensive, but my fellow countrymen were gainfully employed and raising families.

Blogger Al March 06, 2018 12:04 PM  

A friend of mine just told me this:

(((Shapiro))) is pounding the drum against this tariff, daily. That was my first signal that tariffs were a major strike against the globalists.

(((Shapiro))) hated Trump, until Trump completely capitulated on Israel. Now, (((Shapiro))) is neutral.

Blogger Peaceful Poster March 06, 2018 12:10 PM  

The most frequent argument against tariffs that I hear is that it will causes prices to increase.

If true, I say so what? It would be a small price to pay for the preservation of our nation.

And it may not be true, at least in real terms, if incomes also increase thanks to all those newly employed American workers.

Blogger Stg58/Animal Mother March 06, 2018 12:11 PM  

Heian-kyo Dreams wrote:@33 Stg58

Toot toot! All aboard the American steel train!


I am slightly passionate about America.

Blogger Allen L. March 06, 2018 12:15 PM  

The naysayers always focus on lower cost raw materials. But when you roll in the total societal costs due to idled employees in these industries it's a whole different picture. The absolute same thing is true for illegal immigrants.

Solid jobs for these folks are a win for them, and a win for the United States. I don't particularly care if my next pick-up truck costs me 1-2% more due to higher raw material costs if it means I'm helping pay for that. Buy American.

Blogger TM Lutas March 06, 2018 12:16 PM  

There's this funny economic concept called "doing without" which seems to be absent in this post and that absence renders the analysis suspect (to put it mildly).

We spend on domestic and foreign goods and services plenty of money that is discretionary. In fact, the vast majority of economic activity the world over is discretionary. This should not be controversial.

Basic common sense and conventional economic analysis says that when something gets more expensive, a certain portion of the previous purchasers decide that it's not worth the extra expense and cease to demand that good or service at that higher price. Shifting suppliers from the lowest cost in the world to the lowest cost domestically will increase prices.

Now you can argue, as @61 does that the inexpensive goods coming in from abroad is "cheap crap" that does not merit circulation in our markets. But let's not be coy about it. When you make that argument you're just putting up one more variant of the "I know better than you" argument.

No, you don't know better.

In my own judgment, there is indeed a large amount of "cheap crap" for sale. But that's a judgment I have for my own economic life and may share it with those I care about and of whom I know their circumstances. To try to impose it on somebody else who I don't know and can't imagine their economic possibilities strikes me as both arrogant and stupid.

You don't know me. You will never know me well enough to plan out my economic life for me. Stop trying to do that.

Blogger TM Lutas March 06, 2018 12:28 PM  

@65 in a hypothetical world, we'd all have fat savings balances to tide us over as we retrain into a different field or started a business to employ ourselves and others.

We do not live in that world, but hopefully we can agree that this would be a nice world to live in and represents a currently unachievable plan A.

So what's the achievable plan B?

You want us to freeze things so that people don't have to make the adjustment. But that's just as unattainable. The social losses of having idled factory workers happen domestically too and actually happen more frequently domestically.

Disrupters of the current order happen from every direction.

So unless you're arguing for economic stasis (don't laugh, I've met people like that, the fools) then your complaint boils down to there being too much disruption to handle given our current prosperity levels.

This is not an invalid argument. But it's one that's slightly different than what you're laying out and the differences will tend to lead you to a different solution too.

We are short on entrepreneurs inventing new goods and services. Too many people have been miseducated into believing that the factory world of the 1950s still exists and that it's safe to try to enter that world because it is more secure that creating your own business. They need to be convinced otherwise in every country in the world. That the process is too cruel at present is a reasonable objection. But too kind and the change won't happen at all.

Blogger Andrew March 06, 2018 12:33 PM  

You don't know me. You will never know me well enough to plan out my economic life for me. Stop trying to do that.

Huh? The point of all this discussion is that there is no such thing as "free trade" between different nations. It's fundamentally a political question not an economic one.

Blogger Dirk Manly March 06, 2018 12:34 PM  

@31

US-made, Japanese-branded cars are just as good as those made in Japan... because they aren't UAW shops.

Blogger Matthew Funk March 06, 2018 12:44 PM  

It means the US economy loses $2.4 billion in exports and gains $3.0 billion in imports

You mean trillion, right?

Blogger Lance E March 06, 2018 12:46 PM  

But but but, free trade is raising the standard of living for billions of third-world peasants! Whatever will we do about them? If we don't use our wealth and productivity to artificially lift them out of the poverty they created over thousands of years of tribal warfare and economic stagnation, who will?

Blogger Desdichado March 06, 2018 12:51 PM  

But let's not be coy about it. When you make that argument you're just putting up one more variant of the "I know better than you" argument.

No, you don't know better.

In my own judgment, there is indeed a large amount of "cheap crap" for sale. But that's a judgment I have for my own economic life and may share it with those I care about and of whom I know their circumstances. To try to impose it on somebody else who I don't know and can't imagine their economic possibilities strikes me as both arrogant and stupid.

You don't know me. You will never know me well enough to plan out my economic life for me. Stop trying to do that.


Speaking of not being coy, let's be honest about what you're asking for: the destruction of our nation to gratify your desire to buy cheap crap.

When put in its proper context, it's not hard to see why you'll meet resistance to that proposition. Eventually, violent resistance if you don't relent.

Blogger VD March 06, 2018 12:54 PM  

So unless you're arguing for economic stasis (don't laugh, I've met people like that, the fools) then your complaint boils down to there being too much disruption to handle given our current prosperity levels.

No, he's not. Stop constructing strawman arguments. Either you're not sufficiently competent or you're not sufficiently honest to correctly summarize your opponent's arguments.

Blogger Allen L. March 06, 2018 1:01 PM  

TM Lutas, that wasn't really my argument. I can certainly see how you get there though. My argument was much more narrow, I was assuming that there is some stasis in steel and aluminum demand through some near term time frame.

Blogger Looking Glass March 06, 2018 1:08 PM  

The entrance of ultra-low "cost" Chinese manufacturers shattered a good number of markets, moving production off shore for two decades. Over those two decades, costs have actually risen to close to the original nominal levels as China's currency differential has normalized from increase trade.

Each market has its own elasticity and domestic vs foreign production costs are somewhat unknown because of the imbalanced production cost due to both currency rates and regulations. A normalization of the both major production issues will produce a new, currently unknown cost-base upon which wholesalers and suppliers would be operating.

Which is a long way of saying that subsidized Chinese production ran at negative margins to run out domestic production, and they are now selling at more proper margins. They captured market share by cheating, which is not viable in the long run. (Chinese Steel utilization is likely a whole lot lower than 60%. They have massive overcapacity, as steel production is fairly easy to scale these days, if there's a market for it.)

Blogger peppermint88 March 06, 2018 1:16 PM  

Koreans have always imitated the people on their borders since ancient times. In the new nationalist world, the Koreans imitate the Chinese, Japanese, Russians, and Americans by being nationalist.

Blogger peppermint88 March 06, 2018 1:21 PM  

Rare earths are only a pretend problem in the US due to regulations enacted to destroy miners and make sure everyone knows regulators have more job security and should get more pussy than people who merely scratch atoms away from dirt. Five years after regulations become reasonable we won't have a problem. Also we could become self-sufficient in microchip manufacturing in that same time frame, and the rest of computer equipment even faster. All we need is the will.

Blogger Stilicho March 06, 2018 1:57 PM  

Re: Buchanan-- a prophet is not without honor, except in his own country.

Blogger James Dixon March 06, 2018 3:09 PM  

> consider that Electric cars are not very practical, even hybrids

Other than the cost of the batteries, what exactly is impractical about a hybrid?

> I don't mind being the slow one in class. How can we gain imports if countries refuse to sell to us?

We make $2.4T less in export sales, but we save $3T in import purchases. I.e., we lose $2.4T but gain $3T. For a net gain of $600B. Which is roughly equal to our current deficit, I should note.

> So Ross Perot was correct about the "Giant Sucking Sound"?

Yes. There was a reason I voted for him.

> So what's the achievable plan B?

It's called unemployment insurance. You may have heard of it. It gives you a basic income while you retrain or find another job.

Blogger Azure Amaranthine March 06, 2018 3:20 PM  

I think there are some trillions there that ought to be billions. Perhaps I'm just missing something obvious though.

"I have beach front property in Wyoming to sell you."

Which reservoir?

Blogger Duke Norfolk March 06, 2018 3:37 PM  

Zapp Brannigan wrote:it is absolutely amazing to me how much JUNK finds its way to our shores from China. Birthday parties, school events, neighborhood/community gatherings, theme parties, doctors visits, sporting events...they all seem to come with goodie bags filled with molded Chinese plastic and cheap sugar.

Yep. There are some of us who have been saying this for decades. Very lonely and to no avail.

It sure would be good to see this sentiment really get traction, finally.

Blogger tuberman March 06, 2018 4:25 PM  

Looking Glass wrote:The entrance of ultra-low "cost" Chinese manufacturers shattered a good number of markets, moving production off shore for two decades. Over those two decades, costs have actually risen to close to the original nominal levels as China's currency differential has normalized from increase trade.

Each market has its own elasticity and domestic vs foreign production costs are somewhat unknown because of the imbalanced production cost due to both currency rates and regulations. A normalization of the both major production issues will produce a new, currently unknown cost-base upon which wholesalers and suppliers would be operating.

Which is a long way of saying that subsidized Chinese production ran at negative margins to run out domestic production, and they are now selling at more proper margins. They captured market share by cheating, which is not viable in the long run. (Chinese Steel utilization is likely a whole lot lower than 60%. They have massive overcapacity, as steel production is fairly easy to scale these days, if there's a market for it.)


Not only that, the Chinese have been supplying very low-grade steel to the USA's military. Nudge, nudge, ya know what I mean. Certain insustries have to be controlled at home because of basic security.

Blogger Lance Fish March 06, 2018 4:51 PM  

That's because we import tge rwally easy to refine sweet oil from saudi, the oil we produce is harder to refone than theirs

Blogger Zapp Brannigan March 06, 2018 5:25 PM  

@66

"Now you can argue, as @61 does that the inexpensive goods coming in from abroad is "cheap crap" that does not merit circulation in our markets. But let's not be coy about it. When you make that argument you're just putting up one more variant of the "I know better than you" argument."

No.

Nowhere am I making the argument that I know better. I stated a fact that the U.S. is bringing in a flood of useless crap from China. And then I stated my opinion this is a lousy deal for the U.S.

As I said above, I dislike the amount of cheaply made, and USELESS, products. This is my opinion, but it's backed up by actual reality. Of the $462B in imports from China in 2016, 5% of it was for toys and miscellaneous amusements. Doesn't sound like much until you consider how many 1-cent pieces of molded plastic $24B can buy. And I didn't even mention the fact that this category includes larger equipment like bikes, scooters, baseball gloves, and playground equipment. At least those things have a purpose, but their quality is not very high and, more importantly, we have the means to build all of them here.

My assertion is that our country would be better off if we made a better effort to keep the manufacturing jobs, and the capital which supports them, here in the states, even if it means higher prices due to costlier domestic labor and/or tariffs on foreign imports. I believe this to be true for the reasons VD points out in his original post. But also because a man needs a useful role to play in society in order to forge his identity and flourish, and we have sold out the men of this country for cheap electronics. The effects of this economic ruin to Middle America can be seen in the opioid crisis (64K deaths in 2016), rising out-of-wedlock births among non-college Whites, and an entrenched dependence on government welfare in rural areas. Now, there are obviously many contributing factors to this ongoing societal train wreck, but a lack of good jobs is a big one. If a man can't find a job, he can't make enough money to support himself, much less a family. And without career and family to give a man a sense of purpose, he's more likely to wander dark paths.

Blogger NeoNietzsche: March 06, 2018 5:41 PM  

@44 "The God Emperor has been extremely impressive on the trade issue. He's taking heat from all sides but refuses to back down.
Incredible."

We need to TELL HIM! Tweet it or email it or actually mail it! Let him know he's not alone on the roof of the Benghazi embassy!!!

Blogger NeoNietzsche: March 06, 2018 5:46 PM  

@59 "the Acura, Infinity and Lexus nameplates ... Hondas, Nissans and Toyotas. "

Oh, ow. Yah got me! Family of origin had two Toys; I've have FOUR Accords; my husband had a Nissan, and then he and I had an Acura and a Lexus; and after he died, I've had a Hyundai and now have a KIA...

(Does that make me a traitor -- or just unwilling to support unions?)

Anonymous Anonymous March 06, 2018 6:10 PM  

@86

(Does that make me a traitor -- or just unwilling to support unions?)

I'll go with #2 (since I'm in the same boat as you ;).

My first two cars were Saturns, which drove all over the country until they literally fell apart. My current vehicle is a Corolla (because I couldn't buy a Saturn); when I got it, it had 9000 miles on it (basically, it was turned in about the time there was that Toyota brake scare during the Obama administration).

Blogger xavier March 06, 2018 6:42 PM  

And that's bad how? Personally it inject the realism that's sorely lacking. Further it would spur the more entrepreneurial to find new domestic markets.
Indeed one of the pardoxes of free trade with the US is that the same products cost 30%. I don't buy it's the healthcare premium.
There's rentier

Blogger SirHamster March 06, 2018 6:47 PM  

James Dixon wrote:Other than the cost of the batteries, what exactly is impractical about a hybrid?

Isn't it the batteries? Bulky, expensive to replace, extra weight on your car.

Last I looked, it's something like 10 years to see the gas savings to outweigh the cost premium, ignoring the cost of battery replacement.

Blogger Crew March 06, 2018 6:59 PM  

Bloomberg tells us it's all our fault!

https://www.bloomberg.com/view/articles/2018-03-05/steel-history-shows-how-america-lost-ground-to-europe

Blogger Snidely Whiplash March 06, 2018 7:04 PM  

SirHamster wrote:ignoring the cost of battery replacement.
Since the batteries are good for about 5 years (depending on use and recharging habits), that's a lot of inefficiency.

Blogger Ominous Cowherd March 06, 2018 7:35 PM  

Snidely Whiplash wrote:SirHamster wrote:ignoring the cost of battery replacement.

Since the batteries are good for about 5 years (depending on use and recharging habits), that's a lot of inefficiency.


I'm sure with an electric vehicle you will be acutely aware of your battery's deterioration after 5 years. With a hybrid vehicle, over time you'll just run out of battery boost sooner, and it might not be so noticeable as with the EV. It would be quite a surprise to me if any lithium-anything battery bank lasted 10 years.

If it weren't for my aversion to cranking, I wouldn't even want a starting battery in my trucks.

Blogger CoolHand March 06, 2018 7:59 PM  

Ominous Cowherd wrote:If it weren't for my aversion to cranking, I wouldn't even want a starting battery in my trucks.

The diesel engine in my truck has a compression ratio of something like 22:1, I couldn't crank that damned thing over if I wanted to.

Maybe a little pull start gasoline pony motor to crank the big'ne over like back in the day with the big hit-n-miss stationary engines?

That'd be great, gotta yank start the ol' Tecumseh pony motor to get yer truck goin' in the morning.

Imagine what the parking lot outside a medium sized white collar corp would look like at quitting time. It'd be glorious, and funny enough to broadcast at a profit.

Blogger William Hughes March 06, 2018 8:11 PM  

I don't recall the exact figures but almost all US trade is internal. 98% of it? This tariff will affect a very small number of transactions, proportionally. Most trades in steel is internal, and the price will be set internally.

Blogger Snidely Whiplash March 06, 2018 8:12 PM  

CoolHand wrote:That'd be great, gotta yank start the ol' Tecumseh pony motor to get yer truck goin' in the morning.
Talk about introducing inefficiencies....

Blogger CoolHand March 06, 2018 8:57 PM  

Snidely Whiplash wrote:
Talk about introducing inefficiencies....


Well yeah, but you're missing the side benefits.

. . . Like everyone who drives developing one super ripped arm like rodeo bull riders (bull riders always have one giant bulging arm and one little floppy T-Rex arm) from pull starting their pony motors all the time.

Just think of it man, it'd be like living in a society composed chiefly of fiddler crabs.

Blogger Thomas777 March 06, 2018 9:30 PM  

Is that you, Avalanche? If so, great to see you posting.

Blogger TM Lutas March 06, 2018 9:45 PM  

@73 I'll admit to not being able to nail down for sure what his particular argument was and thought it *might* be a variant of a stasis argument.

I'm not seeing option three after an argument for economic stasis and an argument against too much economic disruption due to progress and you didn't mention it yourself. Perhaps I'm too dull to "get it", but I don't think so. This is not a stupid straw man game I'm playing.

We're currently suffering from a deficit of successful entrepreneurial company formation. That's why the supply of good paying jobs is too low. The fix for that is not tariffs in established sectors. The fix for that is to stop miseducating our youth for large factory jobs that aren't going to come back (due to automation and technological progress allowing market fragmentation) and stop making crony capitalism a realistic option to keep bad companies going by knocking out new entrants.

I want to see us having full employment at good wages. Tariffs are a dead end for that goal over the long run as are the subsidies that the PRC uses to keep the revolutionary wolves from the CCP's door. They are extremely vulnerable to people honestly calculating how much those subsidies are costing and *thanking* China for all the below cost stuff we get out of the deal while they pay the subsidy.

At some point, people will start doing that. It's not expensive at all.

Blogger Snidely Whiplash March 06, 2018 9:53 PM  

@TM Lutas,
You're seriously suggesting that cheap stuff from China is worth the destruction of the working class?

This is why I fucking hate Austrians.

Blogger TM Lutas March 06, 2018 9:54 PM  

@74 Thank you. I'm agnostic on how sticky demand is for metals. We're awash in the stuff because of political decisions around the world. These political decisions are expensive. Preserving our domestic industry on national security grounds is a reasonable expense in the face of those political decisions but that's only defense and eventually such a defense only strategy will collapse.

Communicating directly with the people paying for those political decisions and causing trouble politically for those who are trying to preserve a glut of capacity in metals is how to go on the offense, at which point the tariffs should be removed and market discipline restored.

You do a lot of crazy stuff that doesn't make economic sense in a war. That includes trade wars.

The right thing to do is to acknowledge that it's crazy but necessary and then move on to try to shift things so you don't have to continue doing crazy, expedient things. This article doesn't acknowledge that tariffs are crazy and tries skip past the reality that higher prices reduce demand in order to justify a costly tariff policy.

Blogger TM Lutas March 06, 2018 9:59 PM  

@99 I'm suggesting that high employment at good wages is sustainable if we reconfigure our fundamentally busted education system and that we should go do that. Until we do, a set of temporary tariffs are a reasonable crutch because the destruction of the working class is worth spending money to avoid.

I just don't think that we should pretend that tariffs are an economic gain in and of themselves. That would lead to inefficiency and bad economic and political decisions on our part.

I think that it's heartless Austrians that have little else in their hearts *other* than economics that you're actually upset at. Those of us that think the Austrian school economic calculations are right but that economics isn't everything are a much more reasonable lot.

Blogger Jack Amok March 06, 2018 11:16 PM  

Does that make me a traitor -- or just unwilling to support unions?

I have a Mitsubishi, a Toyota, and two Chevys. Real happy with all of them. Now, if you had a krautwagon, I might object.

Blogger Snidely Whiplash March 06, 2018 11:30 PM  

@TM Lutas,
Fair enough. I withdraw ny complaint against you.
But the idea that anyone will in the future will think the trade policies of the last 50 years were wise or even excusable is ludicrous.

Blogger Duke Norfolk March 07, 2018 7:14 AM  

Thomas777 wrote:Is that you, Avalanche? If so, great to see you posting.

It's not hard to tell, is it? LOL

Blogger Not a lefty March 07, 2018 7:32 AM  

I don't have a problem bringing that type of marketing back. It sure beats what they're force feeding us today.

Blogger Not a lefty March 07, 2018 7:42 AM  

And they're mostly automated.

Blogger TM Lutas March 07, 2018 9:08 AM  

@106 At the risk of incurring your displeasure again, Nixon cut a deal with China to split the communists into two weaker blocs that the US could defeat instead of potentially one larger bloc that the US could not.

He did a similar attempt with Romania and Most Favored Nation status.

I still worry about the USA being down wind of the world's first major civil war that goes nuclear. Economics is a lot but it's not everything.

Blogger James Dixon March 07, 2018 9:19 AM  

> Isn't it the batteries? Bulky, expensive to replace, extra weight on your car.

Yes, but it sounded like he had other arguments too. Since the only ones I know of are the cost of the batteries, I asked.

> Last I looked, it's something like 10 years to see the gas savings to outweigh the cost premium, ignoring the cost of battery replacement.

I own a Prius C. I did the math. At the time I got the Pruis C, I broke even on the extra cost over a Yaris in a bit over four years. Now admittedly, that was when gas was $3+ per gallon and going up. But the maintenance cost savings have a pleasant surprise. It's been about half the cost of our previous Yaris.

> Since the batteries are good for about 5 years (depending on use and recharging habits), that's a lot of inefficiency.

When you run about 40K miles/year, that's about the lifespan of a vehicle. At the time I bought the Prius, it was closer to 60K/year.

Blogger Ominous Cowherd March 07, 2018 10:17 AM  

CoolHand wrote:The diesel engine in my truck has a compression ratio of something like 22:1, I couldn't crank that damned thing over if I wanted to.

Maybe a little pull start gasoline pony motor to crank the big'ne over like back in the day with the big hit-n-miss stationary engines?


That reminds me of a WWII era D8. It had a two cylinder gas pony motor with a magneto, a clutch and a two speed transmission. To start it in the winter, you would give the pony a whiff of ether, choke it and crank like mad. Once the pony caught, you would let it warm up a minute, then turn off the main engine fuel, open the compression release on the main engine, put the main transmission in neutral and the pony transmission in low, and let out the clutch. At this point, you have won the battle: the big engine is going to start in the end. Now you go inside and make a cup of coffee while the big engine slowly rolls over and the warm coolant from the pony warms the big block.

After you've brewed and drunk your coffee, you come back out, put the pony motor transmission in high, let out the clutch again, and then open the fuel valve and close the compression release. The big engine starts. No electricity, no glow plugs.

Blogger Snidely Whiplash March 07, 2018 12:37 PM  

<>When you run about 40K miles/year, that's about the lifespan of a vehicle. At the time I bought the Prius, it was closer to 60K/year.<>
Well, a hybrid goes through a lit fewer charging cycles than an EV, and the mileage doesnt go directly on the battery, particularly with highway use.
An EV would not make it two years at that duty cycle, if you could even keep it charged.

Anonymous Anonymous March 07, 2018 12:52 PM  

Might have guessed he'd go from impressed to fighting back. Trump was involved.

And fighting back takes the form of "There's a whole lot that is missing from that argument, including the fact that the dreaded imports are in fact inputs to many things we make, including stuff we export. Cut off imports and the damage will be widespread."

Blogger James Dixon March 07, 2018 3:00 PM  

> An EV would not make it two years at that duty cycle, if you could even keep it charged.

Correct. Which is why I've really considered an EV for my use. We tried one for my wife once (a Gem: https://infogalactic.com/info/Global_Electric_Motorcars), as we figured it would meet her needs for getting into town and back. The third time the electrical system in it fried completely we gave up.

Blogger James Dixon March 07, 2018 4:50 PM  

Grump. Never really considered. I can't read my own typing today.

Blogger SirHamster March 07, 2018 7:03 PM  

James Dixon wrote:I own a Prius C. I did the math. At the time I got the Pruis C, I broke even on the extra cost over a Yaris in a bit over four years. Now admittedly, that was when gas was $3+ per gallon and going up. But the maintenance cost savings have a pleasant surprise. It's been about half the cost of our previous Yaris.

My bad, I remembered wrong, the cost calc was for an EV vs. a gas equivalent.

Hybrid practicality is solid. EV wasn't at that time.

Blogger James Dixon March 08, 2018 10:54 AM  

> My bad, I remembered wrong, the cost calc was for an EV vs. a gas equivalent.

De nada. We all make mistakes.

Blogger Elie Challita March 08, 2018 12:20 PM  

The trade deficit, or even the GDP, tells you nothing about the interconnection between imported goods, local industry, and exports. At best it's a simplistic zero-sum game that ignores qualitative factors. A trade deficit might look bad on paper, but it might be tremendously beneficial for your country because the imported goods allow local industry to thrive and thus drive your economy far beyond what it could otherwise achieve.

The US is one of the few countries that is geographically vast and diverse enough to be able to pull off complete autarky, but that doesn't mean that it would benefit from it: It simply means that might be able to do it without regressing back to the dark ages. All other countries, meanwhile, would rapidly outstrip the US because they do benefit from a much larger economic playing field.

Blogger James Dixon March 08, 2018 3:45 PM  

> All other countries, meanwhile, would rapidly outstrip the US because they do benefit from a much larger economic playing field.

Prove it. Historically that has not been the case.

Blogger Ty March 08, 2018 7:43 PM  

This comment has been removed by the author.

Blogger Ty March 08, 2018 8:13 PM  

VD: "Q4 2017 GDP was $19,386.2 billion…Net exports were $2,420.7 billion…Net imports were $3,020.8 billion”
...So, this much-feared trade war, at its theoretical worst, would result in the instantaneous growth of the US economy from $19,386.2 billion to $19,986.3 billion GDP."

As noted, GDP is calculated by the following formula: GDP = C+I+G+(x-m). This implies that imports (m) reduce GDP and therefore eliminating them will increase GDP. But doesn’t Consumption (C) include imports. And since imports don’t actually add to GDP, it then becomes necessary to subtract them out.

If I am correct, then:

It might be clearer to say that GDP = Non-Import Consumption + I + G + x.

Putting real numbers into the calculation yields this: $20.3tr + ($2.4tr – $3.0) = $19.7tr of GDP. $20.3 trillion is the sum of C, I, and G.

If we eliminate all imports, C is reduced by $3tr and imports are 0. So the calculation is: $17.3 + (2.4 – 0) = 19.7 tr.
Mathematically, no effect on GDP.

If we eliminate all imports and exports, the calculation is: $17.3tr + (0 – 0) = $17.3tr, which is a decrease of $2.4tr.

Of course this equation fails to account for the fact that a lot of the $3 trillion spent on imports would presumably be spent on domestically produced (but more expensive) goods…right?

So the trick is to find a way to replace the $3 trillion of imports with at least $3 trillion of trade and domestic production. Because the domestic import replacement products would be higher, the real effect would be to add something less to GDP than the dollar value of the replacement products. The current equation doesn't make provision for that, of course.

Anyhow, I can't seem to find a clear answer to this and it's way too long since my economics classes...

Regardless of the math, I'm ambivalent about purported free trade for the simple reason that it creates more losers than winners (in raw numbers). The losers then vote Democrat. Whatever benefit the economy might get from "free trade" is more than offset by the damage caused by letting the Democrats run the country for any length of time. I'm willing to pay more for crap I don't need from Wal-Mart if blue collar whites (which are 3x the number of blacks) will mostly vote Republican. How much more, I don't know. But eliminating the Blue Wall is worth a lot.

And I’m not sure that free trade is anywhere near as beneficial to a continent-sized nation that can literally produce everything it needs, as opposed to islands like Japan or the UK.

Blogger James Dixon March 09, 2018 10:54 AM  

> But doesn’t Consumption (C) include imports.

No. If it did there would be no reason to add it in the first place.

Blogger Ty March 12, 2018 10:50 AM  

James Dixon – We have to remember that GDP is a rough measure of a nation’s expenditures on domestic goods, services and investments. It tells us very little about the health of a nation’s economy. It is also subject to numerous artificial distortions.

Anyhow, apparently "Consumption" DOES mean all consumption, including consumption of imported goods. Since imports don't increase GDP, they then have to be subtracted. I have no idea why they don’t simply define Consumption as Consumption of Domestic Goods/Services. I suspect also that Government Spending includes spending on imported goods.

The GDP current formula implies that reducing imports will increase GDP. It won't, at least not within the confines of the equation. Mathematically, eliminating imports has no effect on GDP.

That is, of course, absurd. As I noted, if you eliminated ALL imports in 2017, the $3 trillion of purchasing power that was used to buy imports wouldn't have just evaporated. It would presumably have been used to buy domestic goods instead, at a higher price.

You could assume that the entire $3 trillion would be used to buy domestic goods. In that case, the GDP *would* rise by $3 trillion. But that assumption is questionable since production, purchasing and investment decisions are generally very price sensitive. If you eliminated all imports of raw material X, domestic producers might continue to buy X locally at higher prices. Or they might shift to an alternative raw material. Or eliminate production of the widget because there are alternative widgets that are now cheaper. Or all three, depending on what the customers do.

And of course, serious contraction of imports would probably result in serious contraction of exports. Exports DO add to GDP so reducing them would reduce GDP. But again, it’s absurd to simply assume that reducing exports reduces the size of the economy. The production capacity used to make export goods wouldn’t evaporate. Some of it – I bet most of it – would be repurposed to make domestic goods.

Also, both import and exports are exchanges. If I buy a milling machine from Harbor Freight for $600, I have spent $600 on an import. Yet I am not $600 poorer. I have simply replaced one asset worth $600 (the $600 in cash) with another asset worth $600 (the milling machine). If I make and sell a $600 machine to a customer in China, I am not $600 richer. The costs I paid to make this machine must be subtracted from the wealth I gained. The GDP formula is useless for telling us how much wealth I have.

The best you can say about the GDP formula is that’s it’s an artificial construct that VERY roughly measures national spending on domestic goods and services. This is a decent guide to the size of a nation’s economy. But it tells us nothing about a country’s economic health. Using GDP for that would be like trying to gauge a business’s health by looking solely at its expenses.

At the end of the day, I think a very strong case can be made against purportedly free trade without getting into GDP.

Post a Comment

Rules of the blog
Please do not comment as "Anonymous". Comments by "Anonymous" will be spammed.

<< Home

Newer Posts Older Posts