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Damage from Trump's trade wars won't heal quickly: analysts

17 Comments
By Eve SZEFTEL

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"The trade war was basically inevitable given China's economic rise and persistence with high levels of state intervention rather than adoption of market forces"

"The differences between Trump and Biden on trade are smaller than on many other issues"

Above is not in line with the headline. If Biden will continue with Trump's trade policies with respect to China then why blame Trump for starting the trade war? Sure you can blame him for saying that 'trade wars are easy to win' which showed a lack of understanding of macroeconomics but someone had to take the tough line on China.

-3 ( +0 / -3 )

As Sen. Harris told VP Pence, they started the trade war with China, and they lost it.

Since Trump started the trade war by unilaterally imposing tariffs on goods imported to the US from China, he or Biden can end the trade war by unilaterally removing those same tariffs. If China does not then remove the tariffs that they imposed on goods imported from the US after a reasonable amount of time, the issue can be re-visited.

The trade wars with China, Canada, and Europe have been a lose-lose proposition for all sides. It is time to end the madness.

2 ( +4 / -2 )

As Sen. Harris told VP Pence, they started the trade war with China, and they lost it.

And she is a noted economics expert, as we can see from California's situation.

-3 ( +1 / -4 )

After four years in office, Donald Trump...

Amazing - the first seven words of this article is a lie. Trump has been president for 3 years and 9 months, not 4 years.

Damage from Trump's trade wars

Yeah, the benefits way outweigh the damage. The tariffs finally got China's attention. Trump is the first U.S. president to stand up to China. In May last year Joe Biden said China is "not competition for us." Jeez...

-4 ( +2 / -6 )

The article does not give a single example of how trade sanctions on China helped US businesses.

What it does say is that the US trade deficit increased. Direct imports from China simply switched to other intermediaries.

3 ( +3 / -0 )

Serrano. You are 100% correct but the JT readers are left leaning live in denial. China is an undemocratic threat and the USA needs to massively diversify its imports and the rest of the world needs to reduce their interdependence with China. Hardly anyone is turning up at Biden's rallies. No one believes the Main Stream Medias polls. Trump will win!

-5 ( +0 / -5 )

"Damage from Trump's trade wars won't heal quickly..."

One could also say that about his actions on the pandemic, and on the environment. In short, he is a much better reality star than decision maker and leader.

4 ( +4 / -0 )

The US trade deficit will not fall unless and until the US runs at a minimum balanced budgets or preferably small surpluses for many years consecutively. The very debt instruments the US issues to finance its national debt are the tools the US trading nations use to keep the terms of trade favorable to them and unfavorable to the US. This is a lesson from the late 1980s/early 1990s trade war with Japan that has been forgotten.

Ordinarily, nations exchange currencies with trading goods and services. If trade is balanced no nation's currency accumulates in surplus or is in shortage. But if a nation starts to run a trade deficit with other nations, it's currency will accumulate abroad. Money is like any other commodity in that if it's in surplus it will lose value. When that happens, that nation's goods become less expensive in trade while the goods from the nations with the trade surplus become more expensive in trade. Changing currency values and the price changes they drive should make trade imbalances self correcting.

But the US also runs annual current accounts deficits. It finances these annual debts by selling US treasury notes. Guess who buys much of these? The US trade partners. They have learned (because the Reagan administration taught them this btw) that if they buy US treasuries, it soaks up their excess US dollars. That keeps the value of the US dollar high in trade and makes the terms of trade unfavorable for the US. For the US, it allows Congress to keep taxes artificially low (the US tax burden is 10% below the OECD average) while cheap imports have kept consumer inflation low despite the high debt load. The rub is that US consumer goods manufacturing has all but disappeared. As an economist with an interest in international trade and money supply it is no surprise that as the current administration has cut taxes and increased deficit spending the trade deficit has likewise grown.

No amount of tariffs will solve this problem. Only by running balanced budgets at the very least and slowing retiring the US debt can the US return to balanced trade. The US created this problem and only the US can solve this problem. Badmouthing other nations accomplishes absolutely nothing.

3 ( +3 / -0 )

I want to ad that the Reagan administration did this for a good reason, but that reason is long past. Consider the context of the Cold War where it wasn't just a military competition but an ideological one as well. The West claimed that elected representative government combined with market capitalism led to a better way of life. But that narrative would collapse of too many western nations were viewed as poorer and less comfortable than the Soviet Bloc nations. Also to the extent that western nations had strong economies they could afford stronger military forces to contribute to the mutual defense of the western world.

To speed the development of US allies both for the sake of bolstering their defense and their visible prosperity, the US encouraged export led growth. To US also wanted to expand its own military rapidly without raising taxes massively and choking the economy. So the deal was struck that US trade partners buy US debt. In the context of the Cold War it was an acceptable trade. But with the collapse of the USSR there was no longer any justification for the ongoing budget deficits and the trade imbalance they were perpetuating.

3 ( +3 / -0 )

The current unfit occupant of the White House has caused serious damage to the United States of America and the world, not only in trade, but almost all other aspects.

It will take decades, if ever, to repair the mess created by this narcissist and by his cower- ed enablers.

2 ( +2 / -0 )

The article does not give a single example of how trade sanctions on China helped US businesses.

The Wall Street Journal had an extensive article yesterday that the trade war has not added any jobs in America and there has been no increase in American manufacturing.

And the trade deficit has gone higher.

People and politicians who believed and believe Trump have been duped by a con man political animal who is wrong about every single thing. Everything.

American companies pay the tariffs to import Chinese goods and American consumers pay higher prices after that. Anyone who doesn't understand that shouldn't be allowed to vote.

It's cheaper for retail companies to pay the tariffs than build a factory to build a product. That's why American companies abandoned American workers and went to China to have them build products at for 90% less.

3 ( +3 / -0 )

Just an opinion here full of emotionally charged disinformation. Give me facts and I will make up my mind if the President's trade war is helping or not. Media sources are not facts or even truthful fact checkers. We need to look at government stats.

-1 ( +0 / -1 )

Of course they were not a success. But the world needs to decouple from China in the long run and if Trump administration has started the process then I would give them some credit for that.

I'll give that credit as well. China was slowly turning up the heat in the pot, and Trump was the frog who pointed out that it's getting hot.

1 ( +2 / -1 )

Just an opinion here full of emotionally charged disinformation. Give me facts and I will make up my mind if the President's trade war is helping or not. Media sources are not facts or even truthful fact checkers. We need to look at government stats.

Studying economics will teach you that all tariffs accomplish is to raise the price of the good or service which is the subject of the tariff. Increasing the price of a good or service reduces the amount consumers can buy as the higher price drives some consumers from the market. Any government revenues generated by a tariff come out of both the consumers disposable income and the producers profit. How much each looses depends on the shapes of the supply and demand curves. The reduction in output caused by the increase in price is a deadweight loss to the economy. Tariffs tend to protect and reward inefficient business practices and/or obsolete products or services. A productive economy with efficient energetic and innovative businesses does not need tariff protection to thrive.

2 ( +2 / -0 )

For that to happen US government will have to reduce its discretionary spending, and as you have pointed out before cutting down on military spending is not an option. Actually, I was surprised to learn that the mandatory programs like Social Security and unemployment benefits take up so much of the US budget but those things once rolled out are hard to cut down in democratic countries.

The overall tax burden for the US, meaning government revenues from all sources for all levels of government, state, local and Federal, are about 28% of the US GDP. The average tax burden of the three dozen most developed nations, meaning the members of the OECD, is about 36% of GDP. Government spending in the US approaches 36% of GDP so I would argue there is scope to raise revenues significantly before there needs to be major cuts in programs. Example, how come only about $137,000 of annual income is subject to Social Security Taxation? Why not all of one's income? Why aren't capital gains taxed as earned income? Why aren't the marginal tax rates for individuals earning over $250,000 a year higher?

I could write paragraphs about how the US taxpayer is getting bent over by the big defense contractors. We spend huge amounts of money on defense because defense contractors game the system so effectively and have elected representatives who protect them from accountability. There are organizations within the DoD who could design, prototype, test and build new weapons and sensors in house but Congress won't permit it and the big defense contractors know how to work the courts to get their way.

2 ( +2 / -0 )

DT, you make a lot of sense. I would just point out that Social Security is fully funded, and prefunded, by Social Security taxes, and does not add one penny to the national debt.

1 ( +1 / -0 )

I would just point out that Social Security is fully funded.

Actually it is not and will run out of money to pay full benefits in the future if annual revenues are not increased. This has been a looming problem recognized for many years. As the Baby Boomers retire the proportion of the total US population drawing Social Security will increase significantly. Wage earners will be a smaller proportion of the population and there won't be enough revenues flowing in to keep Social Security solvent unless changes are made.

0 ( +0 / -0 )

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