The United States imports from most countries pretty freely. Not all, particularly in agriculture. What generally determines how much we import from any given country is how much Americans want to buy from that country. If those countries want to build factories in the United States, great. 

However, that kind of importation and investment opportunity is not always a two-way street. Cooperation between industry and government here, as big as it feels to us, is not nearly as big as it is in some other countries, particularly Japan and China. Japan was the main issue to us in the seventies and eighties but these days it’s China. 

China doesn’t need to use tariffs (Japan didn’t either) to limit most imports; they just decide centrally to limit imports. This isn’t protectionism in a classical sense in that it doesn’t necessarily involve tariffs but it functions as protectionism. And it can be quite dangerous. 

To illustrate what kind of dangerous, I’ll tell you a story about the American television set manufacturing industry. In the early seventies, the US had a monopoly on color televisions because we invented them. American manufacturers imported cheap black and white sets from Japan to fill out their line. At one point, however, they decided they needed low end color sets so they gave Japan color TV technology. For free. 

When Japan got that technology, the Japanese government immediately made a few decisions. They assigned manufacture to a few companies. They forced banks to loan those manufacturers money but there was no risk involved as the sets would be sold to Japanese customers at high margins with no foreign competition allowed into the country. In this way, Japanese manufacturers developed very competitive economies of scale. To maintain those economies of scale, they needed to manufacture more sets than the Japanese public was buying, so they sold sets below cost - “dumping” - in the US, knowing they’d make up their margins in Japan. 

American manufacturers were now faced with competitors selling more cheaply than they could. The normal reaction would be to dump in Japan to get them to stop, but the Japanese government refused to allow imports. The US government, philosophically in favor of free trade and not understanding the issue, refused to help. Within a year, there were no more American-owned television set manufacturers. They were all driven out of business by unfair international competition. 

When we do business with China, we have a variety of problems. They can build factories here but the only way we’re allowed to build factories there is with major Chinese ownership and the transfer of technology to China. In other words, in order to get a crack at the Chinese market, we have to hand them the ability to outcompete us with our own technology. In addition, there is a distinct lack of respect for intellectual property, meaning patents are not always respected. At least they’ve cracked down on counterfeit American goods. 

Like Japan did, China limits American imports. To what extent? We account for nearly 20% of China’s exports by ourselves. But the other way? China imports well under half from us of what the European Union does. China imports well under half from us of what Canada does. China imports a little over half of what Mexico does. To put things in perspective, Canada has a lower population - and a smaller economy - than California does, while China has roughly one out of every five people on Earth and, these days, a substantial middle class.

The United States has mostly avoided tariffs because free trade is a religion to a lot of people here. However, free trade in only one direction is not real free trade, and there is no reason we shouldn’t be looking out for our own interests. 

On the principle of using tariffs to attempt to rectify the scale of this imbalance, I agree with the President. 

Because we are a way bigger customer of China’s than they are of ours, tariffs will do way more damage to them than to us. Trump is right about this, though he doesn’t generally explain why, so I am. They have way more to lose. 

What tariffs in theory could mean, particularly if they stay in place for a long time rather than successfully getting concessions out of China, is that some American manufacturers would have enough protection to compete with China pricewise within the United States. This could absolutely increase the number of manufacturing jobs, depending in part on the degree of automation in any given industry. 

How China is reacting is by increasing anti-American sentiment in China. They have to do this because they will need to displace the public’s anger at the government if the economy deteriorates due to a drop in exports. It would probably make more economic sense to them to back off, but in terms of having a negotiating position they need to signal Trump that they’re willing to live with this if they have to. Negotiations aren’t over. 

I’m by no means sure that Trump is playing this as well as he could. However, I appreciate that he is playing it at all. This is one of the few things I hoped Trump would do as a result of his business background and as a result of his looking out for America’s economic interests internationally. 

This is not an endorsement of Trump. God knows I wouldn’t do that. However, in this case as a matter of policy, he is doing something that every President since Carter should have at least considered. 

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Comment by moki ikom on May 22, 2019 at 12:55pm

Thanks K for more fully explaining how you relate to Republican tariff dreams, which relation i understand of you is favorable; and from the way i see it, just as fantastically fanciful.  Please correct me if I'm wrong:  You are suggesting, inferring, that a result of Trump's tariffs is likely to result in an  economic quality-of-life improvement for "the working poor" among us who concurrently and necessarily anxiously juggle working two, three or more employments just to keep from getting irrevocably sucked into the capitalist blackhole of despair so lovingly fostered by the corporate/state institutions of this fiscally and morally bankrupt economy (nation?) of ours. 

In tandem to trickle-down economic ideology is the fantUSy of Republican tariffs being that after tariffs are in place capitalists (foreign oligarchs and corporations included of course, especially if they register their business through Delaware, or maybe just through Biden himself would do) will build job-creating enterprises here in the U.S. as opposed to doing so outside the U.S.  Is it necessarily true that more manufacturing jobs means more good jobs, a good job being a single job with labor and benefit compensations from a single source that adequately and sustainably meets an employee's needs?  When a person stops working two or more jobs in favor of working just one job, that creates as many job openings as that person quits in order to work just one job?  Who is to fill those resulting job openings? 

Comment by koshersalaami on May 22, 2019 at 1:09pm

Manufacturing jobs usually pay better than service jobs. Of course, if what Trump is doing works as an incentive for China to open its market more, we see an increase in jobs because of an increase in exports. I’m not sure that tariffs would be generally favored these days by the trickle-down crowd because they can already invest overseas. 

Now, I’m not saying that Trump is especially good at using tariffs - in my experience, he’s not - but I’m glad to see that he’s not averse to using them where we need them, and I think we need them in some form in dealing with China if we see the continuation of an artificially supported (from the Chinese end) trade imbalance. A trade imbalance is to be expected, but this kind of trade imbalance isn’t created by an imbalance of demand but by an imbalance of access to markets. 

Comment by J.P. Hart on May 22, 2019 at 2:53pm

Now, I’m not saying that Trump is especially good at using tariffs
A sharper thumbtack on cork board would have had some address to China's environmental insouciance. And neither sovereign giant has ever devoted the passion nor resource certainly toward alleviation of 3rd world deprivation. Look no further than the creative expertise and unbridled humanism of Howard Buffett.
Avant-garde macro-agriculturist futurist.

Let's do a two step Google: daily starvation:

here, the hour is late:
25,000: The average number of children dying each day is 25,000

Comment by Ron Powell on May 22, 2019 at 4:11pm

"It can’t be right because Trump came up with it? You can get politically killed thinking like that."

Look again...

That's precisely the kind of thinking that is winning elections for Tea Party Republicans viz a viz Obama and the ACA.

It's the kind of thinking that got Trump into the White House....

Comment by koshersalaami on May 22, 2019 at 8:10pm

It did work for them. I don’t think it works for us. We’re not symmetrical. 

It’s also unnecessary. There is so much wrong with Trump that relying on tariffs to attack him is ludicrous. The way the Tea Party went after President Obama is how Doc goes after him: by making stuff up. They needed to because they didn’t have enough facts to demonize him with. We have a surplus of facts to demonize Trump with and we get more every day. Why mount a weak attack when there are dozens of strong ones? 

Comment by moki ikom on May 23, 2019 at 1:01am

again here kosh: "Who is to fill those resulting (low paying service) job openings" if not immigrants?  Our Mid-western Trump-loving red-state white-folks' teenage kids are going to be initiated into the u.s. work force to fill the gap as we deport those who'd otherwise do the service-job like grateful, compliant slaves because where they were born was or became (no small thanks to u.s. terrorUSt$)  hell and will be double that if they are forced to return to the region u.s. terrorUSt$ policies made of their society/culture?

Comment by koshersalaami on May 23, 2019 at 4:34am

What do tariffs have to do with deporting anyone? 


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