For example US farm subsidies are significant and supply management is common in many areas, but the rhetoric around Canadian dairy supply management recently has been amplified far beyond even it's wildest possible impact. And this with a country with extraordinarily balanced trade, if anything probably a deficit. The history of trade between the two countries is littered with spats about US protecting this, Canada protecting that, but on the whole very balanced. Pretending otherwise may make for good politics (i guess that remains to be seen) but it isn't based on evidence or good policy work.
Of course there are huge problems with this -- what happens if whomever makes your food goes tits up, involuntarily (natural disasters, coups, ...) or voluntarily (maliciously attacking)? Who guarantees the system? How? Etc... --, if there weren't I wouldn't call it utopia. But I think raising the costs of war beyond the unreasonable is a net gain.
Note: I'm fully aware that this is an extremist and probably next to impossible position, no one has to remind me that. I just contest the fact that the objection "but then we could not go around and kill people" isn't a particularly good counter-argument for no trade barriers.
There are no tariffs on food, steel or similar between the member states. All states subsidise food production, but not steel.
If you mean you'd like to see the US and those countries both drop tariffs and protections, I can see you argument - but that's the opposite of the direction things are going today so I don't see the relevance. Even if it were not, it's hard to argue against a countries legitimate security concerns in some areas, although clearly that argument can be abused (again, cf current rhetoric).
The EU is a really good example here of how a single currency puts everyone on the same economic accounting basis and so eliminates the ability of a country to 'fudge' the numbers through either internal subsidies or currency manipulation.
The reason you need a single currency is that if you're going to sell barrels of wheat from country X to country Y, and country Y buys televisions from country X. How many units of currency is a television worth relative to a barrel of wheat? If those values are tied to the same currency, then the economic incentive to grow wheat or build televisions will be on the same footing.
In general, freely floating currencies fix all problems you mention.
Tariffs and currency manipulation are a sovereign response to prevent efficient markets that would render local labor noncompetitive.
And as I mentioned earlier, a single currency makes such manipulations ineffective and you get Greece. They can't bring their productivity up to the level of Germany or France and their economy suffers for it because all of the capital goes elsewhere.
In a single-currency market, it is the responsibility of strong players to shore up the economies of weak players, or risk popular discontent in the weaker economy and the democratic dissolution of the common currency. German politicians have paid lip service to this but have not really put German resources to use in building up the PIGS economies because such a policy is unpopular with the German voting public, which wants to see those resources stay in Germany and to the nearsighted benefit of German taxpayers. This is the real root of the Euro crisis. There were always going to be weaker players in the EU, and it doesn't matter if it's Greece, it could very easily have been some other country. The question is what do stronger players do.
The US doesn't suffer from this issue because, to use an oversimplified example, California voters aren't discontent with FEMA funds used in hurricane disaster recovery areas. Californians are Americans before they're Californians, by and large.
This is true, however there were quite strict criteria (the Maastricht criteria) put in place to try and prevent this from being too bigger problem. In hindsight, those criteria weren't sufficient, in one way or another.
I believe it's correct to say those weaker economies benefited from adopting the Euro the short term, and that they wanted to join the Euro.
As a twist, the Euro was somewhat unpopular in Germany when it was introduced, because it made things more expensive. So there is a feeling that Germany "paid" the price of adopting the Euro - whether this is true or not is irrelevant for the sake of policy-making.
A tariff is a way to adjust this economic cost externally which takes it out of the market's hands and put it into a political realm and one step removed from the actual economy that should be adjusting.
You need look no further than the USA's gaping trade deficits.
A “trade deficit” is just another name for a capital inflow surplus.
If you want a smaller trade deficit, reduce the degree to which you systematically favor capital.
Of course, what policymakers usually justify based on a trade deficit is increased support for domestically headquartered firms and other supports for capital invested in the country, which results in more net foreign investment and higher trade deficit, which is used to support more capital-serving policy, which results in more capital inflows, etc.
These numbers include items made in China, by Chinese jobs, using Chinese components, under a US company name. It uses total sales, and not net revenue, which would change the picture by a great deal.
I'm confused. What do you mean by that?
jeromegv said there was no trade deficit with Canada, so I assumed good faith and responded to him/her under the pretense that they were referring to the "aggregate sales surplus" figure that has been in the news recently.
Can you please help me understand how I have ignored facts and acted in bad faith? I would like to fix this problem, but I do not understand where to begin.
It seems that US and Canada trade is globally balanced.
How would Canada like to run a $800 billion trade deficit with the US over the next 17 years? You know, just to make things fair over time. Didn't think so.
On the upside, the trade deficit has narrowed from a common $30 billion five years ago, to more like $10 to $15 billion. That's a pretty happy result if you're the US, given it's a consumption engine (lower domestic savings at the median, higher consumption rate, which pushes up demand for imports in most cases).
What is generally accepted though, is that internationally speaking the US and Canada are one of the most balanced know of, over long periods, and for major trading partners.
Pretending otherwise is just serving partisan politics at this point.
Every country involved has industries which won't allow this. For example, all the countries in the G8 have agricultural sectors which will not allow elimination of trade barriers.
So, even if you want "free trade," you start with each country's list of stuff where there is not going to be free trade, and move forward from there.
The only time the president mentioned lower tariffs was an offhand comment at the G7. All of his other positions imply he disagrees with you and thinks trade is bad.
Intellectual property rights/copyright laws, both linchpins of US policy, are the very definition of government intervention.
The US aerospace and manufacturing industry is overwhelmingly subsidized by the military complex, a lot of it done under the auspices of "national security". For the US to complain about Airbus or Bombardier is simply incredible.
US agriculture is outrageously subsidized. I'll go into a specific example in a moment, but the notion that that the US is trying to play fair is simply incredible.
The US loses at the US-created WTO time and time again (see: Canadian softwood) and simply ignores the rulings.
"but when your "allies" have had non reciprocal tariffs"
I don't know what example you're thinking of, but let's consider the case of Canada (a country that the US has a trade surplus with). Canada has supply management for dairy to ensure a supply that matches demand to ensure food security. To protect this, Canada applies a high tariff for imports above the quota.
"So unfair to US farmers!" yells Trump.
Only here's the problem with his ignorant, easily swayed vision.
Canada exports less dairy to the US than vice versa. Like, 1/2 as much. The whole point of supply management is that it doesn't generate an excess, and for that small industry the exports and imports are generally only for very specialized things.
US dairy, in contrast, is hugely subsidized. To the tune of 74% of US dairy income comes, directly and indirectly, from the US government (0% in Canada comes from the government). Hence US farmers grossly overproduce and then look to dump it elsewhere, destroying production elsewhere. Just as US corn production is essentially a government enterprise, flooding the world with corn by-products and HFCSs.
Who is the villain here? Trump can rattle off some scary number to his clueless fans (I'd steer clear of the pejoratives, but given that Trump is a lifetime grifter and con man, whose virtually every statement is an outrageous lie, it is incredible that someone can be called his fan), but Canada has nothing at all, whatsoever, to do with those poor American farmers. It certainly isn't Canadian milk on American shelves causing their ills, because Canadian milk isn't on their shelves.
Nor did China cause the US poor to live in such dire straights. This is just the latest example of the US becoming more and more polarized, while convincing the poorest that it's always some external reason why they live in destitution in the richest nation on Earth.
Yeah, corn. That's why everything is HFCS heavy in the US. And I do mean everything.
Things that didn't need to have so much sugar like bread, ketchup, other sauces, soup, etc.
It's easier to get it than to avoid it.
And american's health suffer for it.
We need to do this because China steals 300 billion dollars in IP from American corporations every year, in addition to illegally subsidizing their companies to steal global market share
The point is that the tariffs will be removed IF China stops stealing IP
I'd not heard that argument at all so far.
It's not just steel, it's basically any product due to NAFTA.
http://thehill.com/blogs/pundits-blog/economy-budget/344621-...
https://www.reuters.com/article/us-trade-nafta/nafta-meeting...
If people are discussing in good faith, why aren't they willing to do it on an account that matters to them?
muh russia! You should be proud to be paid for this idiocy, because otherwise you'd be that gullible and that would be tragic.
Edit: I'm dismayed to see that you've been crossing repeatedly into incivility and name-calling in other threads as well. Please (re-)read https://news.ycombinator.com/newsguidelines.html and stop doing this if you want to keep posting here. Hacker News is for thoughtful conversation, not belittling enemies.
The fact you assume anyone you don't agree with or who provides information contrary to mainstream opinion a bot is the sign of a stunted mind.
Worse, you went into personal attack. Since you've already been violating the site guidelines by using HN primarily for political battle (see https://news.ycombinator.com/newsguidelines.html), I've banned this account.
If you don't want to be banned, you're welcome to email [email protected] and give us reason to believe that you'll use the site as intended in the future.
What does this have to do with anything?
Could do doesn't mean are doing.
> Some of the most compelling jobs to bring back to the US are the so-called “last screw” system integration operations.
Somewhat. The system integration operations are tedious and human-labor intensive. Those operations could still move to other cheaper labored countries such as Vietnam, India, etc. And if the operations can be automated, these operations will be reshored. The point of the tariffs exercise is to encourage manufacturing to move out of China and into other countries or reshored, to punish China for stealing IP and unfair business practices.
> I’ve examined the tariff lists (List 1 and List 2), and it taxes the import of basic components, tools and sub-assemblies, while giving fully assembled goods a free pass.
Trump just announced he is starting an additional $200 billion tariff on Chinese goods. That will definitely cover some fully assembled goods since the trade deficit is only around $330 billion, and there is already tariffs on $50 billion https://www.washingtonpost.com/business/economy/trump-escala...
> While stiff tariffs on the import of microchips drove investment in local chip companies, trade barriers meant the local companies didn’t have to be as competitive.
True in some ways. However, there will always be competition pressures and anti-monopoly pressures. It really depends on the shape of the market. And in technology, there are always the threat of obsolete/disruptive innovations to keep companies on their toes.
> New Tariffs Hurt Educators and Makers
If educators and makers really wanted cheap standalone components to play with, and there is a market, there will be a market sooner or later born in US for them. the $250 billion tariffs (and any subsequent ones) will make sure of that. If manufacturing can be reshored to China in 15 years, it can be reshored back to US in less time than that, with US economy booming 4% this quarter, massive capital inflow, and robotics technology growing.
Which sane person would make such an investment?
And yet other countries never seem to entertain the idea of both sides getting rid of all their tariffs, which is something Trump suggested at that G7 summit.
Everyone goes nuts when the US suggests implementing tariffs against countries that already have tariffs against us. You gotta admit, the message seems to be that other countries are allowed to protect their domestic industry via tariffs and the US is just supposed to deal with it, don’t wanna start a trade war!
It's not a question of 'fairness', it's a question of what will actually improve our economy. Nothing out there suggests tariffs will do that; in fact, all data points to just the opposite.
But you've basically ignored the OP in any case; do you have a response to the rather realistic and obvious projection that, given the nature of these, assembly jobs will move out of the US, since the fully assembled goods are not subject to tariffs, but the parts are?
"The fact is that there is a strong feeling in the developing world that trade rules do not apply equally. Indeed, Washington lost the moral high ground earlier this year when it slapped steep tariffs on steel imports and locked in subsidies for its farmers. As well, the US has in place a sophisticated regime of non-tariff barriers such as anti-dumping laws that exporters from developing countries have found difficult, if not downright impossible, to circumvent. "
(The "non-tariff barriers" are important - all kinds of environmental and safety standards could be considered as these, and they can be far more difficult to deal with than simply paying an import duty. This is another thing a lot of Brexiteers haven't realised)
I'm glad the US has environmental and safety standards and enforces those (to some degree) on imports. Those actually accomplish some good and have positive externalities.
It's also worth noting that other countries have significant non tariff barriers as well, perhaps more significant than the US, and ones with less positive effects. Some Chinese examples are the Great Firewall (https://www.nytimes.com/2016/04/08/business/international/ch...) and fact that a large part of the Chinese economy is still state-owned (and could be politically directed to avoid importing American products without any need for a tariff).
You do know the US is already heavily protectionist and many tariffs are protections against the US's price dumping due to its heavy subsidies, right?
And that the US already has plenty of tariffs to boot?
The USA became the world's largest evonomy with massive tariffs on basically all imports. Smoot Hawley Act anyone? Those were removed gradualy starting in the 1970's and lo and behold the trade deficit sky rocketted while the manufacturing economy plummeted.
and here's an article arguing why there's no US-EU trade deficit, in German, though: http://www.sueddeutsche.de/wirtschaft/handelsstreit-usa-eu-h...
what they argue for: sure, looking at goods, there's a deficit for the US. But once you take services and primary and secondary income into account, then the US actually cuts the better deal with the EU.
imv, trump/the current US gov are twisting the numbers to get a better deal.
> trade deficit sky rocketted
Is a trade deficit important to not have?
> manufacturing economy plummeted.
By which metric?
Having Saudi Oil Sheiks own all the Soccer teams in England is the result of the UK trade deficit.
Having chineese bussinessmen buy up all the valuable real estate in our biggest cities is a result of the trade deficit.
Massive underemployment (more baristas fewer mechanics) is a result of the trade deficit.
>Having Saudi Oil Sheiks own all the Soccer teams in England is the result of the UK trade deficit.
More English soccer teams are owned by Americans than all the russians oligarchs and arab sheiks combined.
>foreign direct investment
>sheiks owning the sports teams and chineese businessman owning all the prime housing
We're saying the same thing
That's because you still haven't answered the original question:
>>> Is a trade deficit important to not have?
E.g., consider your examples:
>sheiks owning the sports teams and chineese businessman owning all the prime housing
Given that I'm not the type of person who buys sports teams and prime housing (of the sort purchased by Chinese businessmen), why should I care about that style of FDI? I mean, I guess it must suck for the American ultra-rich that they now have to compete with the Chinese ultra-rich for access to ultra-veblen goods like owning sports teams, but... why the hell should the rest of us care which mega-rich person owns the local sports team!? What possible material impact could that ever have on us?
The only type of FDI that effects my life is FDI in productive assets, like factories, and those are strictly good for me (more and better-paying jobs).
"So we lost the Toyota factory but on the plus side the sports team isn't owned by a Sheik" seems like a really dumb trade-off. What am I missing here...?
generally regarded as making the depression worse.
I don't think I've ever seen someone defend that.
Get back to the original point: why is it acceptable for other countries to levy tariffs against the US but not the other way around?
The country we have the least trade barriers in the world is Canada. He started a trade war with them.
He ran on a platform of ending free trade agreements & protectionist policies. He’s enacting them. So it’s hard to take him serious when he suggests a free trade agreement with the g7 as a throwaway talking point.
Really, cause they described Trudeau as stabbing them in the back and said there is a special place in hell for people like him. He said Canada would respond with tariffs after Trump put in tariffs.
Here is a perspective from the Norwegian foreign minister [1], with google translate [2].
The key word here is uncertainty and unpredictability.
[1]https://www.nrk.no/urix/_-vi-ma-jobbe-annerledes-med-donald-...
[2]https://translate.google.com/translate?sl=auto&tl=en&js=y&pr...
e.g. Sebastian Kurz, a few days ago (1): "The American President is unconventional and American politics has become unpredictable. [...] This is a challenging geopolitical situation."
(1) German Interview - https://derstandard.at/2000081642343/Kanzler-Kurz-Wer-auf-Or...
China has gone from a $1 trillion to a $13 trillion economy in 20 years, with vast barriers to trade (into their country) and extreme domestic protectionist policies (eg barring majority domestic business ownership, and most foreign acquisitions).
China is the greatest one-way mercantilist economic result in recorded history. There's very little trust in any relationship with China, they do literally whatever they decide fits their nationalist aims, whether that's annexing territory, stealing corporations (Ant Financial), forcing technology transfers, blockading foreign ownership, whatever it takes to buy time until China is impossible to resist. China is already buying up Eastern Europe, and buying votes within the EU (eg bribing Greece for favorable voting). Is that a premise of trust? Of course not, they're using their increasing might strategically wherever they can, and it's going to get a lot worse.
The fact is, all nations should pursue their self interest. When the US decides to act as everyone else does and pursue its economic self interest, it's denounced. And there's China parroting that they're in favor of free trade, while being aggressively against free trade in practice, and hardly being called out for the hypocrisy internationally.
The reason the US is denounced, is because the export gravy train is coming to an end, the easy exports into the US that many other large economies have enjoyed are going to get more expensive going forward. If that wasn't the case, all of these other nations wouldn't be upset about the US change in behavior: they all know the US is an immense global consumption engine that powers their domestic production.
Responding to psergeant's comment below:
> I wonder if you could help me understand Trump trying to rescue ZTE in terms of what you’ve just said?
The US got China to immediately sign off on the Qualcomm acquisition of NXP in exchange for the ZTE deal. That's an extremely valuable acquisition for the US tech industry.
Simultaneously the US has received $2.2 billion in fines from ZTE over time for their violations of US sanctions. Further on top of that, the US is getting even more compliance pledges from ZTE.
It's a substantial self interest win for the US. The US gets to eat one of Europe's valuable tech companies (of which they have relatively few), which then reduces Europe as a tech competitor over time. I'd call the ZTE deal a win, win, win, win arrangement.
This leads to hugely destructive wars. The history of the post-war order has been trying to build common interest through multilateral institutions.
>> This leads to hugely destructive wars.
> Nonsense. Self-interest != hostility.
Right. Just because someone is looking out for their own self interest doesn't mean that they are constantly "winning" a zero-sum game with someone else. In fact, sometimes cooperating is the most self-interested move you can make...
Which is exactly why all of these other nations might be "upset about the US change in behavior" without necessarily prescribing any course of action that isn't also in the US's best interest.
Okay, why should North Korea cooperate with Trump?
Why should Iran?
He says one thing then turns around and does another. How do you come to an agreement with that sort of person on anything?
It's not about having good or bad policies. It's about being able to do any sort of good faith negotiation.
— The NY Times
China’s weight average tariffs are 3x higher than the United States, approximately 10% vs 3.5%.
"Once value-added taxes and sales taxes are included in an international comparison, America’s taxes on imports are much lower than those of almost every other country."[1]
The point still stands when not considering VAT, but the difference is far less pronounced. Though I am hesitant to trust the authors' research given the above.
[1] https://www.nytimes.com/interactive/2017/business/trade-chin..., also https://tradediversion.net/2017/03/08/on-the-nyts-building-t...
U.S. exports to the European Union enjoy an average tariff of just three percent.
Source: https://www.export.gov/article?id=European-union-Import-Tari...
In 2016, according to the World Bank, the average applied U.S. tariff across all products was 1.61%; that was about the same as the average rate of 1.6% for the 28-nation EU
Source: http://www.pewresearch.org/fact-tank/2018/03/22/u-s-tariffs-...
US to EU average import tariffs differ only by ~1.4%, sure the US tariff is (slightly) lower but it's hardly a huge imbalance.
Edit: just picking up from morsch's comment, these are international trade tariff figures which is what Trump is imposing. What countries do internally when it comes to sales or Value Added Tax is a whole different thing; these types of taxes apply to all goods and services sold within that country, regardless of origin (i.e. regardless of whether a pencil is manufactured in the UK or the US, it will still attract a domestic sales/VAT of 17.5% if sold in the UK).
Talking about fairness, it is fair for US to print their own currency and buy goods around the world, while other countries can't do the same? The reserve status of dollar doesn't come by itself, there is a price to pay, you can't have the cake and eat it.
Japan has nearly 200% higher agriculture tariffs than the US.
Which have a lot of holes in them. The US sends thousands of tons of un-tariffed rice to Japan every year, which they then lock into a shed and let rot. Which is their prerogative, I guess.
I see this comment a lot, I think Trump also said this, but I wonder what specific tariffs is this talking about?
My country (Netherlands) has a negative trade balance with the US, we buy a lot of software, entertainment and (heavily subsidized) Tesla's from the US. Even the "German" car I drive (a BMW) is manufactured in the US because of US trade demands. Also many international trade laws are heavily influenced by US policies that mostly benefit the US (i.e. IP, drugs).
It seems pretty clear that Trump started this trade war because he didn't like the existing equilibrium. And because he is who he is, other countries must be to blame.
I think US people will have to get used to the idea that maybe the US economy is not competitive and US people have been living above their means for a long time now. There are a lot of things the US can do to improve their competitiveness: education, health, corruption, equality, finance all have real impact on the economic competitiveness of a country and you can't make a mess out of it without it having real consequences.
US companies also will have to learn to deal with the fact that the US no longer is the single biggest economy in the world, and the US can't set the rules unilaterally. Trump is helping a lot weeding out the diplomatic goodwill that the US historically enjoyed.
US business is spoiled with their huge home market and seems to find it very hard to adapt to smaller country's rules. In order to export successfully in a more level world, you have to play it by their rules. If my country want to export flowers to Japan, and they allow them only when sterile and without a grain of sand, and they only like bright colors, then we will make them so.
Your car was built in the US because the labor is cheaper and 40 percent of their cars are sold in the US and China (shipping to China from the US is basically free, better off being here).
The reason for starting it was explained in completely different ways. Therefore it's not clear. It's both for security reasons as well as being easy to win as well as a supposed unfair imbalance. There's no consistency.
There is no need to be going into a trade war against not only traditionally our rivals but also our allies now too.
The economy is recovering and I believe it may now be heading toward a recession.
Here's the quick data on job created in raw number without the quality of the job to show that it is recovering since the 2008 recession:
https://www.washingtonpost.com/news/fact-checker/wp/2017/12/...
So the question is why do we need this tradewar? It only introduce instability and fear in our market and we have never really recover from 2008 recession yet. The quality of job suck by the way.
It's protectionism and it does not make our country competitive at all.