Posted on 03/07/2016 9:01:17 AM PST by reaganaut1
Somebody please tell Donald Trump: A trade deficit isn’t a loss. You could even argue it’s a gain.
The Republican presidential frontrunner has been railing against “bad trade deals” since declaring his candidacy last summer. And he’s amplified the criticism, if that’s possible, in recent weeks. “If you look at China, and you look at Japan, and if you look at Mexico … they’re killing us,” he said during the latest Republican debate on Fox News. “With China we’re going to lose $505 billion in terms of trade …. Mexico, $58 billion. Japan, probably about… $109 billion.”
Trump is talking about the annual U.S. trade deficit with those three countries—but the amounts in question are anything but losses. Trade occurs when one party buys something from another, and trade between countries has the same mutual benefit as trade between an individual consumer and a merchant: each side gets something they want. “They’re sending us goods and we’re sending them green pieces of paper,” says Patrick Newport, U.S. economist for forecasting firm IHS Global Insight. “I don’t see how that’s a loss.”
Trump's numbers, incidentally, are off. Here are the U.S. trade deficits with each country in 2015:
China: $366 billion
Japan: $69 billion
Mexico: $58 billion
Those numbers might seem high, but in an $18 trillion economy, they don't really worry economists. What does worry economists is Trump's plan to slap tariffs of 35% to 45% on imports from China and Mexico, a tax that would be passed along almost entirely to consumers. Trump's logic seems to be this: Low-wage countries where workers get paid a fraction of U.S. wages are basically undercutting American workers, and therefore ought to be punished. But his tariffs would punish Americans too, especially lower-income consumers who benefit most from cheap imports.
(Excerpt) Read more at finance.yahoo.com ...
“Flat screen TV’s are not wealth.”
Oh, then you will give me yours for free then? If it’s not wealth, then you are saying it is worthless.
Cool, if only we had even larger trade deficits we would be growing like crazy.
“China deliberately sells us inferior cheap products to lower our standards of living.”
Nah, demand dictates supply. They would not sell us cheap, inferior products if we were not clamoring to buy them. Obviously the people producing superior, more expensive products didn’t see enough to demand to keep them in business, or you would still be able to find those alternatives.
“Flat screen TV’s are not wealth.”
“Oh, then you will give me yours for free then?”
In two years, yes. Come and take it away!
“If it’s not wealth, then you are saying it is worthless.”
Nope.
It’s not either “wealth” or “worthless”.
Consumer goods are not “wealth”.
Even though they have value (for now), You don’t accumulate wealth by buying flat screen tvs.
Capital, such as the factories that produce the TV’s, or interest/dividend paying wads of cash, is wealth.
>>>Just because it’s called a “deficit” doesn’t mean that there wasn’t an equal exchange.
Well put.
A Smoot-Hawley fan will be along shortly to call you a “free traitor” and a “gloBULList shill” for not supporting taxes on American consumers.
“In two years, yes. Come and take it away!”
No, the ones we are getting right off the boat from China. Those are worthless, according to you, so give me one of those for free.
“It’s not either “wealth” or “worthless”.”
If it’s not “wealth”, then it must be “worthless”. There is no in-between state. This is an absolute binary quality:
http://www.merriam-webster.com/dictionary/wealth
“4 a : all property that has a money value or an exchangeable value
b : all material objects that have economic utility; especially : the stock of useful goods having economic value in existence at any one time (national wealth)”
“Consumer goods are not “wealth”.”
Then give them to me for free.
“Even though they have value (for now), You don’t accumulate wealth by buying flat screen tvs.”
How one “accumulates wealth” is an entirely separate question from the current question, which is whether the trade between China and the US is imbalanced, so your objection is irrelevant.
“Capital, such as the factories that produce the TV’s, or interest/dividend paying wads of cash, is wealth.”
No, capital is capital. Wealth is wealth. I suggest you take a refresher economics course, or just crack open a dictionary.
That would be "insight".
Non sequitur. The 90 million unemployed Americans aren't due to trade with China. They can blame Obamacare and the multitude of other government policies that damage economic activity. Protectionism would only add to the number.
When people have to spend less to get the same goods, they spend more on other things. That generates growth and employment in other areas. But that is diffuse and uncountable, and is always ignored by protectionists.
I’ve been watching this government cut trade deals for thirty years. I have yet to see one that is “good” or “fair” to our side.
“Only a complete dumba$$ thinks the cost reductions of using coolie labor is passed on the consumer.”
If that’s true, then why haven’t you started a company that does pass the cost reduction on to the consumer? You would undercut all the other manufacturers and put them out of business...
Addicted to cheap goods, yes.
Despite your great love for me as your fellow man and American, I am certain that if someone from the next town outbid me on a job you would jump on that deal. How is this any different.
If we default on our debt, China is the least of our problems. Everyone here talks about how China will take the nation as collateral for the debt. That is not how treasuries work. Even if it did, yes they have a giant army but one aircraft carrier and no logistical means to move and supply a million man army half way around the world. Besides, much of what they have is made in China and will break shortly after its initial use.
They want our dollars, otherwise they would not trade with us or the price would be stupid high. Bastiat said, “Where goods and services cross the border, armies don’t.”
That is the point why would any of them lower their price. The stockholders would have none of it. The cost savings is small anyway, 3-5% of retail.
I will will start a manufacturing company when you loan me 50 million.
Is a corporations going to move 12,000 miles to save 5% on labor then give it back to the consumer? What would be the point?
There are both licit and illicit reserve currency functions. The former is obvious, the most notable being petrodollars. The latter is mostly drug money, which is actually a substantial amount of the total currency stock.
Yep, the populists want an easy solution though. They don’t want to address the underlying problems. However, tariffs won’t work as a “quick fix”. If the real causes that drive away business aren’t addressed, then tariffs would just add to our misery.
Why do so few get this, especially on FR as supposedly “conservative” website?
I mean the market economy free of government interference is fundamental freedom in action. Aren’t “conservatives” supposed to be for limited constitutional government and individual freedom?
Here on FR, so many defend government interference and decry freedom. I don’t get it. It certainly is not a good sign for the rest of our country if a “conservative” site is like this. Our country needs a re-education on what freedom from government is really all about and why it should be defended at all costs. Lord, help us.
“The former is obvious, the most notable being petrodollars. The latter is mostly drug money, which is actually a substantial amount of the total currency stock.”
Hmmm. Somadollars? It doesn’t quite have the right ring to become a buzz-word to parallel petrodollars. You like puns. Maybe you can come up with good one.
LOL. You really can’t parody Trumpsters, because no matter how ludicrous a statement you can imagine, they have already said worse.
“That is the point why would any of them lower their price.”
Because, as I said, they would undercut everyone who isn’t and put all of their competition out of business.
“The stockholders would have none of it.”
You think stockholders would balk at increasing their market share to 100%?!?
“I will will start a manufacturing company when you loan me 50 million.”
Ok, forget we are talking about you then. Why hasn’t anybody done this, then? Why wouldn’t a single company take advantage of such a ripe opportunity to liquidate all of their competition?
“Why do so few get this, especially on FR as supposedly “conservative” website?”
Because they don’t want to “get it”. They are thinking emotionally, like liberals do. That’s why logic doesn’t seem to penetrate. You can’t argue logically with someone who is clinging to a notion because it pleases them emotionally.
Ridicule is just about the only thing I know of that can counteract that. You have to fight emotions with stronger emotions.
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