Tuesday, April 10, 2018

Save The Tariff Panic

While many on the conservative spectrum were wailing and rending their garments over the announced tariffs on Chinese goods (Smoot-Hawley!), it sort of seems to me that the entire thing might have been a negotiating tactic. For example today Chinese President Xi Jinping announced a cut to Chinese tariffs on imported automobiles:

Xi said Beijing will "significantly lower" tariffs on auto imports this year and ease restrictions on foreign ownership in the auto industry as soon as possible.

China charges total duties of 25 percent on most imported cars -- a 10 percent customs tariff plus a 15 percent auto tax. Since December 2016, Beijing also has charged an additional 10 percent on "super-luxury" vehicles priced above $200,000.

So the Chinese already levy a tariff on imported cars, which of course includes American cars built with cheap Chinese steel. Weird how that works. The problem with a lot of "free trade" rhetoric is that it is based in theory and examples from 100 years ago. The reality is that many of the nations we trade with are already engaged in one-sided trade restrictions so "free trade" really means we buy their often subsidized goods at regular price, which employs workers in other countries and clerks in American Wal-Marts, and they in turn levy duties and tariffs on our goods making them less competitive for their consumers to buy. Factor in the disparate standard of living in the U.S. and you get the $65,000,000,000 trade deficit with China through February of this year. On average we import $300 billion more than we export to China, a nation with the world's most numerous population of 1.3 billion people.

I don't think Trump is really all that interested in tariffs for the sake of tariffs but is using them instead for leverage with China, to renegotiate NAFTA, etc. So instead of passing the smelling salts because of panic over "trade wars", let's see what is really happening behind the scenes. It sort of seems like there is a method to the madness after all.

No comments:

Post a Comment