“ChIIInah!”
~ Donald Trump
Guest post from Bryan Lutz, Editor at Dollarcollapse.com:
Have you noticed what almost every politician’s promises focus on?
They focus on immediate results…
The instant impact.
Especially when those promises are about the economy.
Biden says he won’t raise taxes on the middle class…
And he’ll protect the working class.
While Trump says he’ll raise tariffs…
And he’ll protect the working class.
Both focus on the immediate impact of their promise, but both have spent the past eight years doing what Trump started – raising tariffs.
Recently, Trump even floated the idea to replace federal income tax with tariffs.
But the math didn’t add up.
It would have been too much for too little.
But Trump still believes tariffs will do the job.
He first implemented them in late 2018…
Because Trump feared China(and still does).
Here’s how the tariffs went(red line is China):
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You can see that after Trump’s tariffs(and later Biden’s) were implemented trade balances between the United States and China have been going up overall.
The drop in 2022 was the result of interest rate raises…
Nevertheless, the media, and main stream economists continue to persist with the idea that Trump’s(and Biden’s) protectionism over free market trade will benefit the United States.
Bloomberg writes:
US Tariffs at 60% Would Halve China’s Growth Rate, UBS Says
“New tariffs of 60% on all Chinese exports to the US would more than halve China’s annual growth rate, according to new research from UBS Group AG, underscoring the risks for Beijing if former President Donald Trump returns to the White House.
Trump was reported earlier this year to be considering a flat 60% tariff on Chinese imports. If that happened, it would cut 2.5 percentage points from China’s gross domestic product in the year that follows, according to a report from UBS economists published Monday. Beijing is seeking to reach about 5% growth this year after the economy expanded 5.2% in 2023.”
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Yes, it drove down trade for a moment, but then increased the value of that trade.
Post-pandemic value increased to almost $60 Billion.
China raised prices.
American companies raised prices…
Then after everything is said and done, the average American pays the cost.
So, tariffs effectively become a tax far from the job protection, Trump or Biden are promising.
Prices move up while wages stagnate.
Government action is never about the instant impact of policies. It’s always what happens later, in the secondary and tertierary effect…
They become another version of the broken window fallacy.
By protecting Americans from job loss, they are preventing them from producing something else to trade, which could be higher quality and greater value through specialization.
For example, in Adam Smith’s The Wealth of Nations, he writes:
“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.
The tailor does not attempt to make his own shoes, but buys them of the shoemaker.
The shoemaker does not attempt to make his own clothes, but employs a tailor.
The farmer attempts to make neither the one nor the other, but employs those different artificers.
All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbors, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever they have occasion for.”
You see, if you focus on the instant impact there becomes no benefit from the specialization, expertise, or cost effectiveness of one country producing one thing, and one country producing the other thing.
With a focus on protectionism, you get…
Now that the Chinese have more money in their pockets, they will be able to purchase more products from the United States.
Products US companies specialize in and would cost more to produce in China (like tech innovations).
But truly free markets won’t be the solution if Trump wins the predicted landslide election.
Trump’s VP pick, JD Vance also believes China is the #1 threat to America.
Bloomberg reports:
Trump VP Pick Vance Says China Is the ‘Biggest Threat’ to US
“JD Vance branded China the biggest threat to America in one of his first interviews since being named Donald Trump’s running mate, underscoring the likely hawkish stance of their administration toward Beijing if elected.
The Ohio senator made the remarks in an interview with Fox News’ Sean Hannity on Monday. When asked about the war in Ukraine, Vance said Trump would negotiate with Moscow and Kyiv to “bring this thing to a rapid close so America can focus on the real issue, which is China.”
“That’s the biggest threat to our country and we are completely distracted from it,” he said, shortly after joining the Republican presidential ticket.”
Those that were hoping Trump would revive the US economy in 2025 may be right about America’s energy sector, but maybe not when it comes to international trade.
Guest post from Bryan Lutz, Editor at Dollarcollapse.com.
