Thread: Just a five year tariff on Chinese goods

A "tariff on Chinese goods" would cause both extreme levels of economic and political pain right now. Neither of which we can afford making this the worst suggestion we can come up with just short of cutting off all imported goods in some vain effort to revitalize domestic production and manufacturing.

Economic...

Right off the top we have damaged way too much of the production and manufacturing middle class over the past several decades to all of a sudden try to right the ship via tariffs alone. The main issue being over that time we outsourced the primary economic function of a healthy working middle class in a series of political linked to business profit decisions. On a macroeconomic scale swapped having a economic power level based on domestic production and manufacturing for an economy based on consumer debt. The effect was taking a diminishing production middle class and make them take on an increasing level of debt to call our economy "healthy." In that model you will crash the markets overnight with such a tariff idea.

In doing so we caused a series of problems terminating with a recession. What is left of the middle class is unprepared to all of a sudden take on the complications of a "five year tariff on Chinese goods." For one, the cost increases for all those goods rise overnight basically causing what some may consider a form of tax increase on the population that is your target market. Two, a tariff ignores what would really make an impact in jump starting our depressed production and manufacturing ability. Cost of compliance, cost of tax liability, and cost of labor all here domestically. A tariff is a prop, one that ignores these problems. It is still far cheaper to produce products in China, ship them over here, distribute then sell (thus passing the tariff costs) to the decreasing target market than it is to produce them here for the same distribution.

How do you really adress that? Remove the government red tape, remove the cost of compliance, lower the tax burden making it more economical and tax effective to no longer produce overseas taking advantage of labor costs and conditions we cannot compete with. You hit corporations first (the one's reporting record earnings), not the already damaged middle class (or main contributions to our economic failures today).

You do that then you can hit up domestic labor costs (as well as with all the other costs that come with such as healthcare costs and retirement savings.) down the road. The real issue being that a macroecomic shift back to being based on domesitic production and manufacturing will take time, probably somewhat equal to the time it took to abandon that model. It starts with where the money is and the middle class is the farthest from. The target consumer debt market is still here for us to contend with and you cannot shift economic models that fast without real damage.

Political...

Any tariff discussion basically ignores that over those same decades of economic movement the other consequence was inherently linking the US economy to the Chinese economy. On another level it also linked our two governments beyond what most consider. You cannot ignore that we are now in a position where just to have a government budget each year going forward, we have to borrow well north of $1 Trillion each year as far as we can see. In that we turn to a communist nation to float our budget sending our own politicians over to China with some degree of frequency to ensure their government "we are good for" our spending habits. At the same time China has no choice but to continue funding our stupidity as their economy would be harmed by our failure. Similarly, China would also be harmed by this tariff idea probably taking their continued "investment" in our economy off the table with such a move. Trying to strangle our government by doing this would cause wide spread economic and market impact, all negative and all long term.

So the effect with the tariff is the worst idea you can come up with being both political and economic suicide. Further damage the decreasing middle class with cost increases across the board, and take away the government's ability to spend at a time where tax revenue cannot possibly make up the difference. A real depression would probably occur. You basically take the worst and most weak economic model one could dream up (our present economic condition) and further damage it. Not a very bright idea.

Originally Posted by Brutus

This seems like an excellent liberal idea. We can't compete with the Chinese so all we have to do is impose a tariff on the free market to protect and rebuilt all our manufacturing industries.

The only problem is that in five years our manufactured goods would be far less competitive and far less world class. Its the perfect liberal solution.

ahoy Brutus,

what liberals have suggested this as the perfect solution, matey?

...and how come ye haven't commented on the Tea Party's solution, which would be to lift anchor and launch a pre-emptive nuclear strike on China's major industrial centers as a way 'o levelin' the playin' field?

- MeadHallPirate

Originally Posted by USCitizen

China does have a way to deal with lost revenue.
They bring in at least 25 million farm peasents every year to the big cities and pay them the lowest wages.
They will simply have to bring in more.

It's getting to a point where that door is closing.

In 1979 China implimented a one child per family policy without having any way of knowing thhat they'd become an industrialized manufacturing nation in the early part of the 21st century.

That decision is very quickly going to start biting China in the ass.

It's being estimated that by 2025 China's "15 to 24 year old" labor pool will have fallen to about 65 million below where it is today.

Why does that matter?

Two reasons.

First, it's going to put a crimp in expansion because you can't grow your business if there isn't new labor to plug in to the equation.

Second, it's going to drive up the cost of labor, perhaps expotentially. 15 to 24 year olds don't need to earn an awful lot of money because they don't have an awful lot of responsibility. 24 to 40 year olds need to start thinking about buying homes, feeding families, and educating their children. If they can't do all of thhat by going to work in the industrial economy then they'll move back to the agrarian economy where they might not have as much hope for advancement but where they at least won't have to worry about their kids living in tenements and starving.

It's going to be very interesting to see how this plays out but it's almost certain that China is, or will very soon be, reaching her economic peak. Now, she is certainly here to stay and will absolutely be a force to be reckoned with over the coming century but the phenomenal degree of growth we've seen over the last decade plus is going to start winding down in pretty short order.

Originally Posted by 9aces

Ah yes, all those evil monopolies. Would you be referring to the East India trading company? It's funny isn't it that the list of monopolies throughout history is so small.

Oh and try and work with something current which will demonstrate you actually have some vague comprehension of the forces which affect markets.

You like to focus on the small, which is the amount of damage that occurs from freedom, and ignore the much, which is the amount of damage that occurs from government control.

We all know you want government to control every aspect of our lives and think freedom should be abolished. You can abandon your freedom if you choose, don't choose for mine to be abandoned with yours.

You are stating that the damage which resulted from the GIGANTIC housing bubble and worthless derivatives was either not relevent or is also insignificant.
A concrete contemporary example of modern freedom and it's horrendous results.
Just because you are not feeling the pain doesn't mean MILLIONS of other Americans are not.

sluggo,
We need intelligent trade agreements to shift the scale back to where America get SOMETHING in return; cheap goods accompanied by massive employment isn't good enough.

No Independent says for one second we could shift sufficient manufacturing back to the US overnight.

Originally Posted by USCitizen

You are stating that the damage which resulted from the GIGANTIC housing bubble and worthless derivatives was either not relevent or is also insignificant.
A concrete contemporary example of modern freedom and it's horrendous results.
Just because you are not feeling the pain doesn't mean MILLIONS of other Americans are not.

The irony of this, in respect to what 9aces was saying, is that we never would have had a GIGANTIC housing bubble or worthless dirivitaves if the government didn't involve itself in the housing market and DEMAND that banks make loans to people who never should have been given loans in the first place.

I don't absolve the financial services industry of all responsibility but in a very real sense the government put a gun to their head and as much as said, "I don't care what you do or how you do it - just get these lower class Americans into McMansions".

Originally Posted by soot

The irony of this, in respect to what 9aces was saying, is that we never would have had a GIGANTIC housing bubble or worthless dirivitaves if the government didn't involve itself in the housing market and DEMAND that banks make loans to people who never should have been given loans in the first place.

I don't absolve the financial services industry of all responsibility but in a very real sense the government put a gun to their head and as much as said, "I don't care what you do or how you do it - just get these lower class Americans into McMansions".

There were many institutions, such as Wells-Fargo and Fidelity, that did not partake in the festivities, whist others, such as Bear, Lehman, Credit and G-S were having a comissions orgy.
Bear was paid back for not participating in the Long Term Capital Markets back in 1990? Whenever; I'm not going to look it up now.

And, of course, you're implicitly stating that the CEOs and Directors who actually engaged in this Free Market activity are BUFFOONS.
Why? Because Wells, amongst others, was willing to take the heat from FNMA rather than go broke or ask for a bail-out later on.

The tax payer lost BIG in terms of as-yet unrealized taxes.

Now tell me which Directors and CEOs lost BIG from the crash.
I asked for this several times and NOBODY has provided an answer.

You CAN handle a multi-dimensional posting, I hope.

Originally Posted by USCitizen

sluggo,
We need intelligent trade agreements to shift the scale back to where America get SOMETHING in return; cheap goods accompanied by massive employment isn't good enough.

No Independent says for one second we could shift sufficient manufacturing back to the US overnight.

Understood but a tariff is not really a trade agreement change, it is just a political prop to situation caused by other reasons. Dropping a tariff into the mix now, with today's economic conditions, would be jump starting the next depression. There has to be a gradual change of getting our own house in order (both economically and politically) before even considering temporary props in some effort to change why (as in all the reasons) we do so much business with China.

Originally Posted by Sluggo

Understood but a tariff is not really a trade agreement change, it is just a political prop to situation caused by other reasons. Dropping a tariff into the mix now, with today's economic conditions, would be jump starting the next depression. There has to be a gradual change of getting our own house in order (both economically and politically) before even considering temporary props in some effort to change why (as in all the reasons) we do so much business with China.

The reasons for doing business with China, actually, conducting our business from China, are obvious if we ignore the human rights issues.

If we are willing to simply admit, and publicize, that the world is our oyster to feast upon, we will at least stop people from waiting around for employment from big corps and perhaps we will start off again as a nation of small businesses.

Originally Posted by USCitizen

You are stating that the damage which resulted from the GIGANTIC housing bubble and worthless derivatives was either not relevent or is also insignificant.
A concrete contemporary example of modern freedom and it's horrendous results.
Just because you are not feeling the pain doesn't mean MILLIONS of other Americans are not.

Actually that was an example of a market correction, caused by the policies of government influencing lending. Do you really think banks are going to make bad loan after bad loan, no collateral, high risk because it's a good idea?

I've said repeatedly corrections in markets are necessary to keep them healthy, when you get into trouble is when governments try and avoid any correction, or try and limit them artificially.

Originally Posted by USCitizen

Now tell me which Directors and CEOs lost BIG from the crash.

all of the firms that went under of course like Bear and Lehman

Originally Posted by USCitizen

There were many institutions, such as Wells-Fargo and Fidelity, that did not partake in the festivities, whist others, such as Bear, Lehman, Credit and G-S were having a comissions orgy.
Bear was paid back for not participating in the Long Term Capital Markets back in 1990? Whenever; I'm not going to look it up now.

And, of course, you're implicitly stating that the CEOs and Directors who actually engaged in this Free Market activity are BUFFOONS.
Why? Because Wells, amongst others, was willing to take the heat from FNMA rather than go broke or ask for a bail-out later on.

The tax payer lost BIG in terms of as-yet unrealized taxes.

Now tell me which Directors and CEOs lost BIG from the crash.
I asked for this several times and NOBODY has provided an answer.

You CAN handle a multi-dimensional posting, I hope.

Frankly I'll be surprised if any Directors and/or CEOs lost big from the crash. Reason...government bailed them out. Why did they? Because they were paid to.

Another reason another correction is a certainty. There were no consequences to those who had the most influence on making it happen. The mortgage companies who participated in the risky lending should have gone broke, and those who had more responsible lending practices would be more attractive options.

Originally Posted by Brutus

all of the firms that went under of course like Bear and Lehman

Alan Greenberg is at AIG, and I'm sure he took care of his confidants, and the Directors at Lehmen took their half million bonuses 3 days before the public announcement.
Once you're in the upper echelons, there's no more suffering with the ordinary folk.

I repeat my request for which Directors and CEOs suffered.