Sunday, July 6, 2014

Beware of the Anti-China Rhetoric

Beware of the Anti-China Rhetoric of Donald Trump with His Emphasis on the Threats of 25% Tariffs on Imported Goods! A Lot of People Are Applauding Donald Trump's Proposal Without Realizing How it Would Directly Hurt Them Lex Contributor Network . Careful what you wish for when it comes to anti free trade rhetoric and policy. Donald Trump has been making a populist argument against the Chinese government for being an "unfair trading partner." To Give Donald Trump credit that maybe partly true that the Chinese government is not playing fair in the realm of free trade but the argument that their currency is manipulated by being fixed to a US dollar valuation is going a bit too far considering that there is no currency as manipulated on earth as much as the US dollar. A dollar is worth less than 98 percent of what it was back in the year 1900 and it got there with incremental annual inflation that compounded year over year. The Chinese peg to the dollar is really nothing more than a convenience some and an inconvenience for others. It is not real to expect the Chinese dollar to be worth a whole lot more than it is in a post communist basket case economy where the average person in the county is likely to earn less than $1000 US dollars a year in annual income. China has printing presses and creates its own inflation that floods their country with money the same way ours does giving us the constantly devaluing dollar. Not even the Chinese communist government can go in and re-value their currency against the US dollar so that the average Chinese worker earns $20,000 a year in closer parity to US worker annual wages. The Chinese currency peg to the dollar is not what makes Chinese people work for less money than workers in the US nor is it what makes them poor enough to accept wages as low as a couple of US dollars a day. Unfair Chinese trade policies are real but the idea that their currency having more real value than it presently has is absurd. If Trumps goal is to put hundreds of millions of Chinese workers out of work because no capitalist would be able to pay them that would have disastrous consequences not just for China but also for the USA because China would instantly become highly unstable with unemployment that would lead to mass starvation. The Trump quick fix is nonsense even assuming that his plan for a 25% across the board tariff on all Chinese imports did not have to be realized as only a threat that he intended to get other results from the Chinese making concessions. The 25 percent across the board tariff on all Chinese imports and possibly imports from any other country Donald Trump has in mind is a classic trade war of the worst type. It is also a warning sign to sell all stocks in advance of a real coming economic depression in the USA not the staged sort we experienced that helped President Obama get elected. It was just that sort of foreign trade regulation that is known to be the number one cause of the great depression experienced in the USA in the 1930s. More than 99 percent of economist pin most of the blame on the great depression on the US Congress putting into effect high international tariffs to protect us industries and workers. The results were an unmitigated disaster. The policy designed to level the playing field with tariffs was an economic backfiring that was unprecedented . It was catastrophic. It was catastrophic not just for the USA but for much of the rest of the major world economies at the time. The US may have only been responding to foreign governments doing the same thing when our congress passed their Smoot Hawley Bill. Imagine the stupidity of that happening again. Donald Trump has a point about American businessmen being patsy's when it comes to negotiating with the Chinese. The solution to that problem is not tariffs or even just the threats of tariffs. A 20-25 percent tariff is actually a very extremely high rate for any tariff. Trump knows it practically puts the Chinese export business to the US out of business but the tax is not one that is going to be paid for by the Chinese industrialists. No this is the same exact thing as a tax assessed ultimately on American consumers who will have to pay the higher prices. Imagine all prices going up at Walmart and similar stores that carry a lot of Chinese made goods. It is whole sale prices going up with tariffs not retail prices. Those could go up more than 40% as a consequence of retailers feeling they will be selling less and needing to sell fewer items at a higher prices just to be able to keep paying their rent. Americans are completely ill prepared for a 25% plus increase in dry goods prices. Trump is demagoging the issue to say that as such a smart financier that he does not know that a tariff is exactly the same thing as a tax paid by American Consumers and industry that still purchases Chinese made goods after the tariffs apply. It is almost the exact same thing as secret VAT (value added tax) of foreign made goods. American Industry that can compete by making goods to compete with the suddenly higher priced Chinese goods are not likely to be offering a lower price. Because they have lost productive capacity by shipping many of their manufacturing floor plants to places like China it will take many of them years to rebuild capacity to supply demand. Their prices will have to be a bit higher than Chinese junk just to appear to be a higher quality product. That is not where the trade war that Donald Trump as our future president ends. No it just begins with US Tariffs because foreign countries will impose tariffs on US exports immediately and this could mean that US farmers would not be easily be able to sell grain overseas. It means the price of bread and flour could fall and farmers and many other industries also find their export markets are cut off. That could lead to mass bankruptcies. It also leads to loads of bad debt that once again collapses the banking system.. If that does not seem bad enough we will still have the federal reserve that will again be forced to start saving banks by destroying any remaining value of the US dollar all of this subsidized by taxpayers. The outcome of the Trump Plan is international trade pandemonium and probably an international great depression. People need to think about the consequences of going beyond just getting tough with the Chinese or in providing them a discount to spend their US treasury reserve notes now instead of later. China is a country we should be proud of that has become an important integral part of our own economy at a capitalist level just as we have been telling them to do for the duration of their communist experiments. China is not the enemy and if we let people like Trump make them into an enemy of convenience in rhetoric they will do more than the same for us in their country. There is no better propaganda tool than having Trump pumping out the new yellow peril rhetoric. There is no evidence that China is putting the US out of business. It is however quickly showing us where our natural competitive advantages are and where they are not. It is extremely foolish for us to complete against the Chinese in areas where we cannot compete with them. It means we may be sustaining failed state enterprises the way the communists used to do as a pretense to keep a bunch of obsolete jobs.US companies move their manufacturing to places like china for really obvious reasons that have nothing to do with the manipulation of Chinese currency . Although low Chinese wages are an issue a lot of US manufacturing is more competitive than ever because of new technologies including computer controls and robotics. The US also happens to have lower real prices for energy than china does which is a big plus here. Where the US instantly becomes uncompetitive and send jobs to china is because of stupid over regulatory environmental laws including costs imposed especially on us industries to make them uncompetitive here. Add the tort lawyer climate from hell in the US and a country with out any rule of law like china seems worth the risk. Add to that the lower rates of insurance to do business in china because litigation is nothing like what we endure in the US, The US is the cause of it's own uncompetitiveness being one of the only major industrial countries with double taxation applied to our companies including the capital gains tax and since obama came to office special taxes on overseas assets . Taxes , regulations, labor laws, tort lawyers out of control , environmental kook regulations and stupid procedures to just stay in business with these environmental laws with impact plans everywhere is why one can say any us industries are failing. The city of Detroit's biggest industries were practically destroyed by the labor unions that now own them which is no better than the people's republic of china army owning and controlling key industries in China except for the lack of forced child labor in some re-education camps for state enterprises there. On it's face Donald Trump's proposal sounds good but in reality it will be us who pay the tariffs as a sort of secret tax. The higher prices in stores will destroy demand which will mean lower tax revenues for government depending on rising income. More jobs in the US would likely be lost than gained if the Trump Proposal became law. Not at all a good idea. If Donald Trump only means to scare the Chinese into economic submission he really does not understand the Chinese who know they had a more advanced civilization before we ever did. It is better to be friends with the Chinese than their enemies and work to adjust our economy to take advantage of what they can offer us. There is plenty of evidence that Chinese success and bluster in world markets upstaging the US won't last any longer than the Japanese scare of the 1970s and 1980s. More economic freedom in the US than in Japan gave us an upper hand. Japanese imports helped out economy out grow theirs. I might still consider voting for Trump for president if dropped the anti Chinese trade rhetoric and discussed instead issues like why we are being forced by our government to comply with regulations that will make our energy excessively inefficient and expensive just because someone calls it alternative. If trump talked about putting real limits on the excessive tort lawyers litigation in this country and was calling for lower taxes, an end to the capital gains tax, end to nonsense environmental regulations for the sake of competitiveness He might actually get my vote. I definitely don't want to see all imports go up in price 25% or more and then as a result see the products we export become unsellable. Donald Trump needs to go back and re-examine the anti=-Chinese rhetoric he is using and check his historic facts on the real consequences of sudden tariffs on the world economy. The evidence I have seen shows that the the countries with most free trade have the best economies at the expense of the countries with the most trade regulations. It you believe what you read in most of the media they believe Castro's conclusions that the USA is the cause of Cuba's disastrous economy. The US trade barriers to do business with Cuba do not prevent the Canadians , Europe, Asia and Latin America from doing business with Cuba. Cuba is at fault not the USA. Any US goods they want can just be exported to Mexico and then resold to Cuba which is proof positive that Cuba takes all the blame for it's economy not the US. Us new media people always take the Cuban point of view on this subject seeing the US as to blame but as explained that is completely absurd. Cuba's trade laws and lack of economic freedoms is the whole cause of their own economic mess. Much of what Trump proposes to do with Countries like China is just what Cuba has done to itself. Not a good idea. The more economic freedom people have the better the economy will be. So what would Trump be planning to do with all the extra cash the US government gets in 25 percent mark ups on the cost of importing goods from china? Who cares. It is the same as a 25% increase in taxes on a non progressive basis on our entire population on a large variety of goods. . Close

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