Saturday, May 11, 2019

The not-so-scary reality of President Trump's tariffs against China

Corporate agriculture has been ringing alarm bells about President Trump's latest tariff increases against Chinese products, because retaliatory tariffs threaten their exports to that country.  Karl Denninger - no fan of the President - brings the smackdown against such scare tactics.

So over the first seven months [of tariffs] we've collected $41 billion and change in duties over the $22 billion and change last year.  That's $19 billion smackers in additional tariff revenue.

Total ag exports to China are approximately $24 billion a year.

All of them.

Well, so will be the tariffs over a 12 month period.

So with that tariff revenue, should the Chinese decide they would like to try to boycott American agricultural products, we can buy the same amount of said agricultural products and essentially erase a huge amount of starvation in third-world nations by giving the products to them.

It will cost US Treasury zero to do that.

BTW $24 billion is about 0.12% of the US economy.  That is, the cost to you as a consumer of these tariffs is going to be a grand price increase of about 0.12%.  You won't even be able to see that in the price of what you buy -- even more than doubled it will be less than one quarter of one percent in price increase, unless US firms try to gouge you -- and if they do then your correct response is to destroy the firms and executives who do that and ship their body parts over to China to be recycled by swine-flu infected hogs.

There's more at the link.

It's worth noting that Denninger's figures refer to present (i.e. pre-increase) tariff rates.  The new, higher tariff rates will bring in even more.  Therefore, his arguments make an awful lot of sense to me.  If China retaliates against the $10 billion or so of US trade upon which it hasn't yet imposed tariffs, the US has a lot more wiggle room.  Right now, the side exporting the most to the other side has the most to lose from increased tariffs - and the USA is exporting far less to China than the other way around.  For the foreseeable future, tariffs are a weapon the Chinese economy can't match.  If they want to resolve the situation, they can . . . by negotiating in good faith, and proving it with actions, rather than words, instead of trying to renege on previously-agreed points.

The "good faith" aspect is critical.  Any future agreements must be confirmed in operation by mutual inspections, audits, or whatever.  As the late President Reagan said in another context, "Trust . . . but verify."



Divemedic said...

Better idea:
Take the additional tariff's collected, and use them to buy the $24 billion in agricultural products that the Chinese refuse to buy. Eliminate completely the food stamp program, and instead restart the "government cheese" handouts in its place. This will actually SAVE the US taxpayer a lot of money, because EBT cards will no longer be used to buy filet mignon.

Orvan Taurus said...

Having worked retail and seen directly the oft-denied ABUSE of EBT, I fully, completely, utterly (add whatever here..) AGREE with the good Divemedic. Time at a convenience store merely reinforced that as thos who complained the franchise (not Corporate) place didn't take EBt as the Franchise place 120 mi. away (they can travel!) did, yet 'magically' had CASH to buy: alcohol, lotto, tobacco... Yeah, EBT shuttering be annoying, but the most annoyed will DESERVE it. Those after genuine sustenance might actually find their lot *improved* as the parasite 'vaporise'.

Beans said...

China has nowhere else to buy it's food from. They are in the same place now that the Soviets were in the late 70's, failed harvests one after another and a country on the edge of starvation (except for the elite. The elite always eat. Like, well, Cuba, Venezuela, most African nations....)

I am glad that this administration is fighting back. Someone has to. The sons of Han have always been arrogant prigs, and we haven't kicked them in the teeth good since, well, Korea, and then before that, the Boxer Rebellion. I prefer kicking them with trade than with weapons, too.

SiGraybeard said...

BTW $24 billion is about 0.12% of the US economy. That is, the cost to you as a consumer of these tariffs is going to be a grand price increase of about 0.12%. You won't even be able to see that in the price of what you buy -- even more than doubled it will be less than one quarter of one percent in price increase, unless US firms try to gouge you

I don't see where it follows that if the tariffs are 0.12% of the US economy that the consumer will only see a 0.12% increase in their costs. That depends on what they're buying. If they (somehow) bought nothing from China their costs wouldn't go up at all. If they bought more than average amount from China, their cost impacts are greater.

Old NFO said...

+1 on Divemedic...

B said...

Beans has the right of it.

Also, realize that our farmers will still have a market for their goods, just (perhaps) not the Chinese as customers. THe rest of the world will still buy our food products. The CHinese will have to buy their food somewhere. If they buy from other producers, people will still buy ours to replace what the CHinese bought. In the end, there will be no significant change in market prices.

Further, the CHinese need food more than we need their products.

And it will make US products much more salable here in the US....

Since the Chinese won't play by the rules, we get to hold their feet to the fire. US industry wins. Our country is stronger for Trumps actions.

MadMcAl said...

The erasing of starvation in third world countries is actually a pretty bad idea.
The EU tried it, with devastating results in the receiving nations.
Essentially by giving them food for free they increased the starvation there, as strange as that sounds.
Basically the whole economy of these places depends on the agricultural sector.
With the food from the EU for free, said sector collapsed, and took the whole economy with it.
Resulting in much less work, nobody getting paid to distribute the free food, and people starving to death.

Steve Sky said...

Your good faith argument applies even more to the corporate interests here in the United States. Or stated another way, if President Trump raises the tariffs on China, the corporations will raise the prices on goods here in the U.S. to make sure the voters feel the tariff, good and hard. It's known as the Washington Monument Syndrome, and when people complain about the higher prices, the MSM, Liberals, & Corporate interests, (but I repeat myself) will point at President Trump and say, well, he raised the tariffs so what do you expect. I've already been hearing that on the radio on the half hour news, with blurbs about how the tariff is a "tax on American consumers" and the American consumers will have to pay more for goods because of the tariff.

So if it is on the half hour news, I have to assume that it is already in the planning & implementation stages, with President Trump as the bad guy for causing price hikes, due to his tariffs.

Unix-Jedi said...

I don't see how to advance to a specific time, but 9m 10s in, there's a very, very, very good interview. I'm wondering how bad the alternatives were that they put that in.

Tom Bridgeland said...

Grain is like oil. It can be bought anywhere and sold anywhere. Look at how much trouble the US is having stopping Iranian oil exports, and we have a chokehold on their export lines at sea. So China will buy Argentine and Brazilian soybeans, and US soybeans will flow to whoever was previously buying Brazilian. It isn't a perfect game, but the losses are far less than the self-paniced will admit.

It is another tax, which the Dems say we need more of anyway.

Clifton said...

It's funny how those that seem to oppose the tariffs seem to state it's just another tax or something similar without making any comments on the actual number since the first 10% tariffs were enacted. There was an article out this week that showed that consumers actually saved money based on the tariffs, not spent more.

I can't remember who wrote it, but it was a writer who specialized in the economic sector. He laid out the numbers that we as Americans paid for items that were under tariff, as well as the inflation numbers. The final showed that companies were eating any cost adjustments instead of passing them on, since the numbers were so low per product.

There will probably be a rise in the cost of some products due to the new 25% tariff, but that rise in cost will be in pennies, not dollars, for the vast majority of those who purchase products that have any part of the tariffs.