Link: From a friend on the trade war...

Well, coming from a person who’s company has had intellectual property stolen, guess we should just chalk that up to whatever,,,,,Good Luck to the US.

TIDE-HSV said:

LINK

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Outstanding post. It explains that a trade deficit is not necessarily a bad thing and how negative the tariffs are for both the US and China. The only possible positive is if it helps Trump lose the next election. We are in very dangerous waters.

a Radio address from Reagan in 1988, it is somewhat hysterical to me that the right both worships this guy and also completely rejects so much of his ideologies.

My fellow Americans:
This week, as we prepared for Thanksgiving, Canada held an important election, and I'm pleased to again send my congratulations to Prime Minister Mulroney. One of the important issues in the Canadian election was trade. And like our own citizens earlier this month, our neighbors have sent a strong message, rejecting protectionism and reaffirming that more trade, not less, is the wave of the future.
Here in America, as we reflect on the many things we have to be grateful for, we should take a moment to recognize that one of the key factors behind our nation's great prosperity is the open trade policy that allows the American people to freely exchange goods and services with free people around the world. The freedom to trade is not a new issue for America. In 1776 our Founding Fathers signed the Declaration of Independence, charging the British with a number of offenses, among them, and I quote, "cutting off our trade with all parts of the world," end quote.
And that same year, a Scottish economist named Adam Smith launched another revolution with a book entitled "The Wealth of Nations," which exposed for all time the folly of protectionism. Over the past 200 years, not only has the argument against tariffs and trade barriers won nearly universal agreement among economists but it has also proven itself in the real world, where we have seen free-trading nations prosper while protectionist countries fall behind.
America's most recent experiment with protectionism was a disaster for the working men and women of this country. When Congress passed the Smoot-Hawley tariff in 1930, we were told that it would protect America from foreign competition and save jobs in this country—the same line we hear today. The actual result was the Great Depression, the worst economic catastrophe in our history; one out of four Americans were thrown out of work. Two years later, when I cast my first ballot for President, I voted for Franklin Delano Roosevelt, who opposed protectionism and called for the repeal of that disastrous tariff.
Ever since that time, the American people have stayed true to our heritage by rejecting the siren song of protectionism. In recent years, the trade deficit led some misguided politicians to call for protectionism, warning that otherwise we would lose jobs. But they were wrong again. In fact, the United States not only didn't lose jobs, we created more jobs than all the countries of Western Europe, Canada, and Japan combined. The record is clear that when America's total trade has increased, American jobs have also increased. And when our total trade has declined, so have the number of jobs.
Part of the difficulty in accepting the good news about trade is in our words. We too often talk about trade while using the vocabulary of war. In war, for one side to win, the other must lose. But commerce is not warfare. Trade is an economic alliance that benefits both countries. There are no losers, only winners. And trade helps strengthen the free world.
Yet today protectionism is being used by some American politicians as a cheap form of nationalism, a fig leaf for those unwilling to maintain America's military strength and who lack the resolve to stand up to real enemies—countries that would use violence against us or our allies. Our peaceful trading partners are not our enemies; they are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends—weakening our economy, our national security, and the entire free world—all while cynically waving the American flag. The expansion of the international economy is not a foreign invasion; it is an American triumph, one we worked hard to achieve, and something central to our vision of a peaceful and prosperous world of freedom.
After the Second World War, America led the way to dismantle trade barriers and create a world trading system that set the stage for decades of unparalleled economic growth. And in one week, when important multilateral trade talks are held in Montreal, we will be in the forefront of efforts to improve this system. We want to open more markets for our products, to see to it that all nations play by the rules, and to seek improvement in such areas as dispute resolution and agriculture. We also want to bring the benefits of free trade to new areas, including services, investment, and the protection of intellectual property. Our negotiators will be working hard for all of us.
Yes, back in 1776, our Founding Fathers believed that free trade was worth fighting for. And we can celebrate their victory because today trade is at the core of the alliance that secure the peace and guarantee our freedom; it is the source of our prosperity and the path to an even brighter future for America.

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TIDE-HSV said:

And another friend's comment on Tim's post:

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Descending from the economics of international trade to the topic of the cost of making steel and the importance of a domestic steel industry. It has long been known that China has subsidized its steel making and the down stream manufacturers of fabricated steel products.

The important point to realize is that it cost as much to produce steel in China as in the United States when one considers the cost of materials ie iron ore, natural gas and other raw materials, the cost of technology likely purchased from Germany and the cost of capital. Labor cost, which is obviously much less in China, only comprises around 12% of the total cost which is offset by the total cost of shipping around the globe.

I would tend to argue that what we are seeing in this process is that cost are effectively being deferred into the future through environmental degradation and the long term cost associated with servicing the debt to China and Japan which was essentially gained through economic warfare.

Economist tend to argue that trade balances have little to do with wealth creation against a backdrop of Japan then China gaining tremendous wealth through their export of strategic goods.

I do not agree or trust Trump's approach at all. It isn't built on a sound plan to begin to solve a problem that has developed over fifty years but it is important to understand the basic facts of why goods appear to cost less when built in China.

Jon said:

a Radio address from Reagan in 1988, it is somewhat hysterical to me that the right both worships this guy and also completely rejects so much of his ideologies.

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what they worship is the strong and reassuring daddy that was the character he was playing a lot of the time

Go Bama said:

Outstanding post. It explains that a trade deficit is not necessarily a bad thing and how negative the tariffs are for both the US and China. The only possible positive is if it helps Trump lose the next election. We are in very dangerous waters.

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I agree that Trump's initiation of a trade war is more likely to end with negative outcomes for the world economy than not. One could say the same with the economic impact of reducing the world oil supply through the embargo being placed on purchase of Iranian produced oil. Nothing much of his domestic or foreign policy makes sense to anyone outside of Trump's orb. I would say however that those making the case for free trade with China clearly are not members of the groups who have lost their business, lost their jobs or had their technology pirated by China. In actual fact we have had a one way trade war in process for years with China creating an artificial advantage. I would much prefer that we as a country begin to discuss how we move to a free and fair trade position rather than the effort to create winners and losers that is the Trump way.

TIDE-HSV said:

His approach is simple because he's a simpleton. The twin issues of government subsidy and protection of IP are the really important issues and they don't seem to be getting the attention the soybeans v. steel issue balance of trade is. Seven years after China bowed to the WTO and promised to level the ground in China for American credit card companies there, the situation is unchanged. This morning I heard that they were willing to make certain concessions but didn't want to place them in writing...

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Many thoughts on the issue of trade with China but I land on the fact that the Chinese leadership is likely to be thinking about how much economic pain they can endure until Trump disappears from the scene. Ultimately they are looking to transition away from US Dollar based trade with the rest of the world and gain leverage in key markets in Africa and Asia. They are engaged in a multi-dimensional chess match and Trump believes he is engaged in a one time deal similar to purchasing a piece of real estate.

TIDE-HSV said:

There's no hope for his seeing or understanding the big picture. As you allowed, he only understands the bilateral win/lose picture. After his scribbled "TRADE IS BAD" in his script margin, what is to be expected? Just a couple of days ago, he returned to his 1950's vision of a smokestack in every village when he said that we could just go back to making everything over here again "just like we used to." And he really thinks it's possible. I think we're in the same boat as the Chinese - just wait him out...

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When my Dad passed, I switched my investments, IRA, etc with my Dad's financial adviser with Raymond James.

He is of the opinion that China will come around because their economy isn't doing very well, either. That this hiccup is short term.

Needless to say, I had a huge CD come due, and I kept that baby in money market for the time being.