52520Andrew
Pro Bowler
Dow has been quite the roller coaster this week with all the China stuff, big rally today
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The Well-Mannered Politics Thread
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52520Andrew
Pro Bowler
Okay this is good
gtalk12
Ravens Ring of Honor
What’s bizarre is Shapiro trying to get neill to admit he’s a leftist - he’s a strong conservative in the uk - tells you how far right conservatives in the us are
Inqui
Pro Bowler
Yeah, there's something pretty rich about someone telling a former Murdoch journalist that "the media" is a homogenous leftist entity. I guess his feelings are more important than facts.
Inqui
Pro Bowler
A lot of the tax cuts last year were temporary so many of those effects will have worn off (there's a reason analysts called it a "sugar hit") and they won't enjoy that windfall this fiscal year. It's crazy how much a couple of Tweets can affect the entire market though.
But I'm sticking with my prediction that they'll strike a deal this year (maybe next year at a push if Trump wants to time it to the election cycle) that may look nice but it won't cover any of the substantial issues that have been complained about over the past several years. China will agree to buy a bunch of things or give token market access to a sector that's already established or something like that. Happy enough to be wrong, but I don't see any eventual payoff being worth the cost of the trade war to date (again as I've been saying for some time about trade wars). Not unlike NAFTA or the North Korea deals.
52520Andrew
Pro Bowler
I think the biggest thing at least this week is trade though, at least in the U.S. markets. Big reason for the rally yesterday was because Mnunchin said the talks with China have been constructive.
Yeah I think this trade war will just hurt all involved. I think the U.S. can manage better than China in this but there will be price increases from these tariffs that will affect consumers. Not to mention the farms needing a bailout.
I think for the most part though this bull market is on borrowed time and the bear isn't far off.
Oldfaithful
Hall of Famer
Anyone who thinks that Ben Shapiro has any credibility is part of the problem. He "destroys" people in arguments that a simple toddler could beat. Any time he's come up against a worthy opponent whether it be a far left or a far right guy, he loses.
Same people who think Shapiro is a far right mongerer are the same people who worship the fuck out of Cenk Uygur, who is just as bad just from a leftist perspective.
Get your news from unbiased sources like the Associated Press or Rueters, or AFP and come to your own conclusions. Pretty much the rest of the news cycle world wide is biased.
Same people who think Shapiro is a far right mongerer are the same people who worship the fuck out of Cenk Uygur, who is just as bad just from a leftist perspective.
Get your news from unbiased sources like the Associated Press or Rueters, or AFP and come to your own conclusions. Pretty much the rest of the news cycle world wide is biased.
Willbacker
Ravens Ring of Honor
What tax cuts were temporary?? Trump is not going to take a deal just to make a deal. According to Trump the Chinese were trying to back off of earlier agreements they had made and then just figgered we'd give them extensions. Trump said f u. A deadline is a deadline. The market straightened out from the earlier tariffs and will do so again. Get rid of all tariffs. THATS FREE MARKET!!!
Willbacker
Ravens Ring of Honor
The farms will be subsidized from the tariffs not a bailout
Inqui
Pro Bowler
If memory serves, the repatriation rates (which were no small part in propping up the balance of trade ahead of the trade war) were a one-time thing. Could be wrong on that though. What I should have said is that the markets have already priced the tax cuts in so there won't be any more share price movements because of that.
I don't care about the goings-on in the process (that's he said, she said. The Chinese have their own statement out and that's no less valid than Trump saying something at a rally). I'm saying trade wars are dumb. Because they are. I mentioned three trade wars/skirmishes at various points in this thread that showed the costs weren't worth the benefits (one of which you agreed with because it was an Obama action) - and the best case scenario usually leaves everyone where they started. What might change my mind is if you can show me a trade war in which the benefits significantly outweighed the costs. That's the level of proof I'll take to change my mind, and this trade war's no different.
As it stands this one is estimated to have cost $19.2 billion so far ($6.9 in loss of efficiency and $12.3 in higher prices - bearing in mind that a tariff is ultimately paid by the consumer). At any rate that was six months ago and the costs will have kept rising since then. And as far as I can see, it doesn't include the cost to exporters from retaliatory tariffs. So if a deal is struck tomorrow the benefits will have to outweigh that.
http://www.princeton.edu/~reddings/papers/CEPR-DP13564.pdf
By the market straightening out I'm assuming you mean the stock market rising above what is was when this started? If so, that's the wrong way to look at it. If the stock market rises by 3%, that doesn't mean the market "straightened out" because there's a good chance it would have risen by 5% without the trade war. And that's before I get into issues like questioning the link between the stock market and how well off a country is, and how some parts of an index (which is how people judge a stock market) are more sensitive to trade than others.
The 3% and 5% thing were made up numbers to show how it works. The point is that the market has to get to where it would have been without the trade war. General growth, inflation and a return to easy monetary policy (sigh) all have impacts on the stock market and they would have happened regardless. This is also why I don't tend to post too much - every off-hand comment requires a paragraph's explanation in response.
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Inqui
Pro Bowler
I agree that the US will probably come out less worse off than China, though getting shrapnel in the other guy's leg doesn't make shooting yourself in the foot a good idea. As you say the tariffs and bailouts (or subsidies or whatever terminology is used) for the main losers get paid for by the US consumer.
It's hard to know where the bull market's at. The bond market's inverted (so short-term debt is now more expensive than medium-term debt), which does tend to signal a recession - though that's notoriously bad at picking the timing of said recession. I've always wondered if we're in for a long era of low growth and low inflation and smaller recessions than usual. I guess we'll see though.
Willbacker
Ravens Ring of Honor
Yep I 100% agree I hate trade wars but this one is nessassary. Thing is we had been watching our manufacturing jobs go overseas for the cheaper labor which is helped tremendously by our low tariffs we had in place here for their goods and then our corporations were being taxed here at a ridiculous 38.5% rate so you basically couldn't blame them at least businesswise. Trump getting it down to 20% was a great start but still not enough imo. Next why is it ok for everybody to tax the crap out of our shit when we ship it over there where it basically makes it unaffordable except for the well off. I mean how much does a Harley cost overseas and since everything is so damn expensive that even over here American goods are higher priced than imported mainly from China and India for example. Hell even Canada was tariffing our dairy at something like 285%. That's just total BS!!The Chinese are even having our companies give them their intellectual intelligence (hope that's the right phrase) so they learn how to make whatever they're making but I more blame that on corporate greed just cuz they want to enter a market. As for higher prices I really haven't seen much of the price increase tbh. I mean a bad winter could make orange prices go up.
So therefore this is mainly for our manufacturing and agricultural businesses to fairly compete and I'm all for it. In the new USMCA when it freakin becomes official we'll begin exporting soybeans to Mexico instead of them buying them from Argentina and wages in American factories that have went down there will go dramatically up ( there will be a minimum per hour ) which helps the people down there and our tariffs will be cut from our dairy being transported to Canada and lumber will be cheaper to get down here. Remember Obama said manufacturing was dead here and what did Trump have a magic wand lol.
Again lets get rid of tariffs completely. Are other countries scared to compete against us fairly or are we just getting stepped on? It makes no sense to me that we get tariffed so highly. Maybe you can explain since I have no idea.
Inqui
Pro Bowler
OK, now you're speaking my language (for the most part). This will be a long post but I'll try to break it up so it's easy to follow. And I hope everyone else finds some interesting stuff out of it too.
Tariffs
Honestly these things are one of the most misunderstood tools in a policymaker's belt. People treat them as a tax on foreign companies to give their own companies an advantage. This is wrong.
As I said before they're actually a consumption tax that work more like a sales tax. They force foreign companies to sell their things at a higher price, so domestic companies do the same thing without having to worry as much about costs. The US putting on tariffs is ultimately bad for the US because it means US buyers have to pay more for the same things (I'll start drifting if I get more into why, but remember that the US companies also raised their prices to bolster their margins and that people are still buying those foreign things at those prices). But it also means that those domestic companies don't have as many reasons to cut costs and make themselves better. Whenever a country puts on tariffs that country is shooting itself in the foot, and I tend to see it as the country's own problem rather than a problem for the foreign companies. Like I say Trump has basically added a sales tax.
When you factor in retaliation, tariffs are really just picking winners. In this case it's trying to bolster manufacturing but at the expense of agriculture (being the sector hit hardest by counter-tariffs).
As to why they do it, welcome to one of the biggest sources of frustration among economically liberal policymakers. My fiancee works a lot with other governments (she tends to do statements and treaties rather than trade deals, but she's been in a room with your trade rep Robert Lightizer fwiw) and we spend all kinds of time complaining about protectionism all over the world. There's more than enough blame for Canada, Japan, the EU (don't get me started) and the US isn't as saintly as some will have you believe. It used to be that tariffs were a big source of revenue for governments and they weren't really dismantled wholesale until after WWII with the WTO (more on that later) so there's still some comedown from all that. But also you get domestic pressure groups that governments kinda have to just stare down and take the political heat at home, and that's why the most protectionist sectors tend to be key sectors of national wealth.
It takes a lot of political willpower to really crack those 285% tariffs you mentioned, but it can be done. We're one of the only developed countries in the world that doesn't subsidise agriculture, and NZ's produce is some of the best in the world. The decision looks like a no-brainer now, but the government had to live through years of seeing farmers in tears on TV and the political pressure that comes from that.
The TL;DR version of your question is that the country in question hasn't had a strong enough incentive to open up the protectionist market in question. Over here it took an economic meltdown after a government played fast and loose with fiscal policy in a bid to restore the country to post-WWII greatness. Canada protects its dairy industry because dairy farmers are the second-biggest voting bloc. The US protects its agricultural sector for a similar reason. The EU protects its food industry because it sees it as a health and safety issue and not as a trade issue. And so on.
I don't know what to tell you about not seeing price increases, but that Princeton-CEPR study was able to observe actual prices in real time. Wilbur Ross mentioned how a can of soup will only cost 1 cent more because of aluminium tariffs, but those small price increases quickly add up to hundreds of dollars per household. No disrespect but I'll trust those studies that use actual calculations rather than any one person's observation. The cold winter thing is also fairly easy to isolate - you just seasonally adjust the prices or create a seasonal term and then see whether the actual prices are significantly different to what you'd expect. But now I'm getting into multivariate calculus. Those calculations don't just come from nowhere though.
Trade with China
As far as I can tell, the US has a few major beefs with China (some more than justified, others decidedly less so).
1. Balance of trade. This is pretty simple (exports minus imports) and isn't anything new. You can probably find Egyptian parchments in the pyramids lamenting how much they spend on imports from neighbouring empires. This is the one I've seen Trump talk about the most and it's often easy to lead with in a short newsreel, so that's why I'm expecting this to be the key point in any deal. Unfortunately it's also completely the wrong thing to focus on, especially for a free market economy. You sell what you can and you buy what you want (a trade deficit doesn't mean you just send money off to China or Mexico and that's that. It's a transaction like any other). Anyone who wants to fix the balance of trade also has no right to talk about free markets because the balance of trade is the result from markets doing the most efficient thing available. It's also a year-to-year thing, so fully addressing this means your GDP gets a boost in one year and then that's it.
2. IP abuses. One of the biggest issues with China trade is the regulation that any company doing business in China join a local player and have at least one key person from that local player get a seat on the board. They've also got very weak IP protections (though to be fair a lot of big US moves to protect IP rights have been quite recent). This is hugely anti-competitive and you'll find Japan, Canada and the EU and the executives in their companies all agree that China needs to stop with the bullshit here (again more on that later).
3. Abusing the global trade order. When China joined the WTO it was designated a "developing economy", which was fine at the time because they were still shifting from an agricultural to a manufacturing to an IP-intensive economy. The developing economy status means a country can legally apply tariffs under certain circumstances and they get a lot of protections aimed at helping said country grow - with the idea that it can become more integrated with the other developed economies in time. It's not hard to see that this status is well out of date and China should join the rest of the developed world in this regard.
4. Currency manipulations. I've seen Trump talk about this a bit, but it's mostly been from his advisers ("the best people") who say that China deliberately weakens its currency so its exporters get an advantage. Honestly the kindest thing I can say about this is that it's about 10 years out of date.
5. Lowering internal barriers to trade and investment. This is the tariffs you were getting at earlier, but there are also all kinds of non-tariff barriers like red tape. Again there's a genuine issue here and I expect the trade deal will include some ground being made here (though it won't be as big as it looks - optics ahead of an election being the key). It'll take years for real progress to be made here, but it's the kind of progress that you don't really notice until look back on in 10 years and be impressed by how far things have come. It also dovetails with point 3 though. You fix that and you'll get some nice Ws here.
6. Repatriating supply chains back to the US. Good luck with this. Tariffs and taxes have almost nothing to do with why there are so few factory jobs in the US. Manufacturing output has doubled in the US since the 1970s but the number of jobs has halved, which shows the scope of automation. But as for bringing back the jobs that have gone overseas, it's worth looking at the reasons they went overseas in the first place.
- Wages. A lot has been made about China's wage requirements, and you don't want to get involved with that race to the bottom. China's wages have been increasing, so they're actually losing parts of the supply chain to the likes of Vietnam and Cambodia. A surprising amount of jobs have actually come back because of rising wages in other countries (albeit call centres and stuff), but the days of manufacturing being 30% of US GDP are gone until the developing world catches up even more on wages.
- Scope. A few years ago an Apple executive talked about why they have factories in China rather than the US. To start with, it's because all the other factories are in the same city. If they want to try a new type of screw they can basically send an intern down the road to get 2000 screws and then do the same with resistors and rubber casings and so on. They can also open a new factory or department or what have you and it'll take two weeks to fill with enough skilled staff - a search that he said would take about two months in the US.
- Location. You said a few months ago that the US is the biggest economy in the world and this gives Trump a lot of leverage. This is true, but combined the US has nothing on Japan, China, South Korea, Singapore and growing economies Indonesia, Vietnam, Malaysia and the Philippines - all of which are clumped up in the same region. A lot of the jobs that are in China (that weren't automated out) are in China because you save a metric ton on logistics costs when you're also accessing those other markets.
7. Containing China's economic rise. This is self-explanatory and again it's not anything especially new. But this is also why one of Trump's big early mistakes was to pull out of the TPP. That was a massive multilateral deal designed to create a large bloc of trading nations in the region that excluded China and let the US set the rules for the region. A lot of countries signed up to US rules on IP protection and biologics so they could be part of the trading bloc, and it would have given China an ultimatum if they wanted to join.
So that's seven goals, and there's obviously no way to make massive strides in all seven (especially if you want to have a say in non-trade areas like Xinjiang human rights violations, Huawei national security issues, freedom of navigation missions in the South China Sea, Taiwan and so on), and that's before you go into how some of those aims contradict each other. And there's no way China's giving ground on the bigger issues unless they get something in return (which is fair enough). So Trump and co will have to pick the goals they're going after, and that's why I think they'll settle on 1 and some low-hanging fruit with 5 - because those are the easiest ones and it's the easiest way for Trump to claim a victory before the election. If Trump can make genuine headway with areas 2, 3 and 5 I'll join the conversation about whether the trade war has been worth it. You mentioned the trade war as a necessary evil to achieve those aims, but there's a much more productive approach that won't eat away at manufacturing job growth (https://www.bloomberg.com/news/arti...rs-see-trump-tariff-hike-costing-400-000-jobs).
A better way to go about it
1. Pick your goals and be clear about them. The US has thrown forward so many stated goals of what it wants from China that no one knows what the administration actually wants. Like I said, some of these aims are actually in conflict with each other. So to reiterate, make your aims narrower and more coherent.
2. Build a coalition. Like I said the US isn't the only one to have issues with China's IP practices. Get Japan, Canda, the EU, Australia and anyone else on-side and apply joint pressure. China's a big player, but get other big players with the same goal involved and that goal becomes a lot easier. Instead Trump's been attacking those other countries and isolating the US against China. The EU and Japan share a lot of those goals, but they won't come to the table now that they're expecting Trump to turn on them once China makes any concessions. I'd be surprised if the US on its own got any major concessions. The concept of "face" is too important to the Chinese leadership.
3. Don't neglect the WTO. You can make far more progress by controlling and adjusting the trade framework than by whacking on expensive tariffs and launching lose-lose trade wars, but tariffs look good politically and lengthy behind-the-scenes talks and legal actions don't. The Obama administration took China to the WTO 14 times and won every one of its cases - meaning the US was allowed to lay sanctions against China without retaliation. The Trump administration could probably find similar success and then in the bigger picture use that as an avenue to get China to take on "market" status rather than keep calling itself a developing country. But the US has been refusing to appoint new judges and even been talking about dropping out and going back to doing bilateral deals with everyone. The WTO is slow, but it works. That's the whole point of it. And it was designed post-WWII to give the US a string of global advantages. China's abusing WTO rules, so reform the WTO. Again you'd have plenty of backing if Japan and the EU could trust you.
4. The tax code. And I'm not even talking about the base corporate rate here, or cuts that just lead to bulk share buybacks (another big reason the market's been getting propped up btw). I'm talking about the full-blown reform that I said was a lost opportunity after the tax cuts were passed - no idea what page that was though. A much more streamlined tax system to cut costs, carbon pricing, imputations for labour hires, and so on. Take your pick between reform ideas. A lot of these ideas are gaining steam or have been implemented elsewhere with generally positive results, and they're forward-thinking. If you're deadset on taxing imports, a border-adjusted tax would probably have had a similar effect but without the retaliation. And it wouldn't have breached international trade law by using national security as a bad faith defence.
5. Stick with the multilateral system. The current trading system, while far from perfect, is one of the world's great post-war achievements and the US deserves a lot of credit for that. So it's depressing to see talk about a return to bilateral deals. The major tariffs you're talking about tend to be highly concentrated in politically sensitive sectors (it has nothing to do with being afraid of the US, which has its own share of protectionism issues including being a massive subsidiser of horticulture and agriculture even before this dumb trade war). Bilateral deals are just about big countries throwing their weight around over smaller countries without opening up their own sensitive markets. You said Canada was way too protectionist over its dairy sector (and it is), but they actually agreed to open it up and drop the supply management schemes they had as a condition of entry into the TPP. But when Trump pulled the US out, Canada went back on that promise on the deal that went through because Trudeau had almost nothing to gain from it. Those major concessions don't get made in bilateral deals. Think about it like this, what set of circumstances would make China more likely to drop its bollocks "developing" status? A deal with the US, or a combined deal with the US, Japan, Canada, Australia and eight other countries?
You want to get rid of tariffs completely. I agree (and I'm in a country with a huge amount of room to lecture on this). But adding more tariffs and adding volatility to an already stretched bull market isn't the right way to go about it and history shows that approach means the costs are pretty much guaranteed to outweigh the benefits.
There are all kinds of way you can take a much quieter and more constructive approach to updating the current trade framework. A trade war will at best be a wash economically, but a more structured approach within the framework that the US has spent decades building only to spend decades neglecting (and then complaining that it doesn't work) would be far more productive and have much less backlash.
Here endeth my TED talk. I think I just doubled my word count on this site.
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Willbacker
Ravens Ring of Honor
@Inqui I guess when I ask for an explanation I get one lol and man that was a great read. I don't know much about the TPP but if it was anything like NAFTA where we're watching jobs march out of this country then I'm not for it. We have to keep people off the system. The American way is not being dependent on the govt so I cant stress enough the importance of this.
One thing you did touch on was that developing countries were allowed to tariff higher and with China specifically we know that's not the case no more so 2,3 and 5 are what needs worked on and that's what I believe is happening. #6 is self explanatory since I explained the Mexico situation and I heard wages were rising in China (thank goodness just for the people) but we also have added 600,000 manufacturing jobs here ( don't completely quote me on that number ) and more hopefully more will be coming in. I sincerely hope you have to come back and say if it was worth it.
Another thing you made a great point on is the red tape over here just to get permits/licenses and stuff to expand business. There's way to much regulation. This is a major problem!! You're being generous when you say 2 months. 2 years is more like it.
One thing you did touch on was that developing countries were allowed to tariff higher and with China specifically we know that's not the case no more so 2,3 and 5 are what needs worked on and that's what I believe is happening. #6 is self explanatory since I explained the Mexico situation and I heard wages were rising in China (thank goodness just for the people) but we also have added 600,000 manufacturing jobs here ( don't completely quote me on that number ) and more hopefully more will be coming in. I sincerely hope you have to come back and say if it was worth it.
Another thing you made a great point on is the red tape over here just to get permits/licenses and stuff to expand business. There's way to much regulation. This is a major problem!! You're being generous when you say 2 months. 2 years is more like it.
Inqui
Pro Bowler
Glad you liked it. I don't feel like I could ever be accused of being anti-capitalist (whenever I do critique it it's more like Ravens fans talking about things that don't work about the team), and economics, finance and free trade is a big area of interest for me - not that you could tell lol. You don't need to sell me on the gains of free trade, and there's actually quite a bit to like about Trump's aims with China. I just find his approach so mind-blowingly frustrating because it's almost a playbook of what not to do. Fwiw though, this news did drop a day or two ago so maybe someone in the administration is a closet Purple Flock reader:
https://www.bloomberg.com/news/arti...-delay-auto-tariffs-amid-eu-japan-trade-talks
It's honestly hard to say whether any deal is a job killer because the gains from trade are always so spread out. It's easy to see a factory close down and count 1000 jobs being lost. But it's harder to see people having more money to spend as a result of things being a little bit cheaper, and that leading to 1200 jobs being created in other areas as a result. But that's what happens when you have free trade - it's the free market on a global scale. And it sucks for the people who lose out, but in the long run everyone comes out better off than they were.
And if you want Canada to not be a bag of dicks about their dairy sector, their government has to get something in return for pissing off the second biggest voting bloc in Canada. It's like how you can't trade for Zeke Elliott in fantasy football without giving up Deandre Hopkins. And the multilateral trading order (which the US seems deadset on abandoning) lets a bunch of countries pool a bunch of average WRs together to create a Deandre Hopkins.
One thing I'll say is that "worth it" is a matter of opinion, so if your approach is to do whatever it takes to bring as many manufacturing jobs back as possible we've probably got different views on where the "worth it" line is. I did see that manufacturing output has grown about 7% over two years compared with the broader economy growing at around 6% to 6.5% in the same time. The economy added about 470,000 manufacturing jobs in Trump's term (https://data.bls.gov/timeseries/CES3000000001), so not miles off 600,000. Assuming every one of those jobs came because of the trade war (which I can guarantee wasn't the case), they'd have cost the US taxpayer $42,000 each and that's just from the trade war so far. That $20 billion is out of date by at least six months but probably closer to a year. I'd say that's underselling the costs and overselling the gains by quite a bit.
And I haven't gone into the cost to the agricultural sector (bankruptcies have doubled https://www.marketwatch.com/story/f...r-midwest-have-jumped-in-one-chart-2018-11-27 and https://www.wsj.com/articles/this-o...arm-belt-bankruptcies-are-soaring-11549468759) and the impact on China selling US debt in the form of higher interest rates and fewer US exports (https://www.reuters.com/article/us-...-in-nearly-two-and-a-half-years-idUSKCN1SL2U4). Obama did something similar and each job added ended up costing taxpayers about $900,000 as the US and China only went one for one in tariffs. Like I said that's jobs being created by a sales tax on US consumers, so whether that's worth it is up to you.
One final thought that I didn't touch on earlier in that the concept of "face" matters a lot to China. We agree that China's abusing the trade rules, so it's time to update the rules so you can frame it as China moving forward and acting like a good global citizen rather than having to give major concessions in a trade war. That's why this administration needs to stop neglecting the WTO because it's actually an avenue to get constructive results without these additional costs. And it's more likely to get results than trying to humiliate China, which is happy to punish parts of its own economy (https://www.economist.com/graphic-d...04U47nGdfpR8bz9bjTxZKeUBo82aGn4LEP4zUm42r2zDM).
Like I say, going after China for its practices is the right call. It's just that there are some much better ways to go about it that don't tend to play very well politically because they're long and complicated and don't play out very publicly.
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Tank
Hall of Famer
They have some really nice public golf courses too.
Inqui
Pro Bowler
I read somewhere that if a woman gets raped and has an abortion she can now get punished more severely than the rapist. That's horrendous.
in georgia it is now a legal requirement for doctors to reinsert embryos into the uterus in cases of ectopic pregnancy (where the fertilised egg attaches outside the womb) - that medical procedure by the way doesnt even exist let alone the moral implications and psychological impact of such a procedure etc.
the whole thing is outrageous - basically in georgia a woman can miss the "abortion-deadline" because she's 2 weeks late on her period - and most doctors dont even allow patients to come in for scans because there'd be nothing to see until well after the deadline set by georgia now...
it's all horrendous - legislation that restricts the potential autonomy of half the population is inherently awful
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