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Wednesday, January 25, 2017

We would win a trade war with China

The Communist Leader of the world -- Chinese President Xi Jinping -- declared last week: “No one will emerge as a winner in a trade war.”

The American press agreed because they do not like the Leader of the Free World -- President Trump.

But once again the American press is wrong.

Let us look at the numbers. The best available data is from 2015 as the December numbers are not yet available from the U.S. Census Bureau, Economic Indicator Division.

In 2015:
     The U.S. exported $2.3 trillion in goods and services ($2,261,163,000,000).
     The U.S. imported $2.8 trillion in goods and services ($2,761,525,000,000)
     The trade deficit was $500,361,000,000.
Also in 2015:
     Exports to China were $116,071,800,000 -- 5% of our total exports.
     Imports from China were $483,244,700,000 -- 17.5% of our total imports.
     The balance of payments with China was negative $367,172,900,000 -- 73% of our trade deficit.
Thus by reducing our exports by 5%, we would reduce our trade deficit by 73%.

Sounds good, but of course there are many mitigating factors.

First there is that $116 billion in goods and services that we lose. While less than 0.7% of the economy, that is a big hit nevertheless to the economic growth.

But China theoretically would still have demand for those products and services, and would acquire them elsewhere, which would shrink the supply. Price would rise. But U.S. producers would find new markets for their products -- at higher prices.

However, that also works for Chinese exports. The U.S. would pay more. But U.S. producers of the goods and services China now sells here would have a new market for their product -- their homeland.

On top of that, we would cut our trade deficit to its lowest level since 1998.

Meanwhile, who will buy China's products? Red China is far more reliant on selling exports than the United States. Roughly 12% of the U.S. economy is exports, while 21% of the Chinese economy is exports.

And the United States is China's No. 1 customer. We represent 3.6% of the Chinese economy (vs. their representing 0.7% of ours).

President Trump could shut down Red China tomorrow.


Who else would buy $4 worth of Chinese stuff for every $1 China spends?

This is not free trade. China does not open its doors to us. The Chamber of Commerce, both political parties, and the last two presidents are wrong.

The imbalance of payments represents a daily subsidy of $1 billion to the largest Communist country in the world.

Why are we doing this?

Trade with China is a one-way street. Continuing this deal undermines our future.

Xi Jinping lied when he said: “No one will emerge as a winner in a trade war.”

The United States would win. Big time.

From Pat Buchanan:
   By increasingly relying upon foreign nations for our national needs, and by outsourcing production, we are outsourcing America’s future.
     After Munich in 1938, Neville Chamberlain and Lord Halifax visited Italy to wean Mussolini away from Hitler. The Italian dictator observed his guests closely and remarked to his foreign minister:
    “These men are not made of the same stuff as the Francis Drakes and the other magnificent adventurers who created the empire. These, after all, are the tired sons of a long line of rich men, and they will lose their empire.”
     If the present regime is not replaced, something like that will be said of this generation of Americans.
Protectionism was Republican Party policy from Lincoln through Reagan.

President Trump brought that policy back.

And if China wants to retaliate by slapping tariffs on our products, let it. Don't buy our coal. India will.

The worst that can happen in a trade war with Red China is we cut our trade deficit by 73%.



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  1. "By increasingly relying upon foreign nations for our national needs, and by outsourcing production, we are outsourcing America’s future."

    Bingo! Products that are made In America may cost more but that extra cost goes to pay American workers, not Communist Chinese workers. That allows American workers to purchase more goods, preferably American-made. American products are, as a general rule, much better made than Communist Chinese products. World War II was won because our factories were able to quickly change over to producing war materiel. Without a large industrial base we would be at a definite disadvantage in a crisis. And that base is built, maintained, and grown from one generation to the next. It is indeed critical to our future. - Elric

  2. It's all summed up in what every successful Mom and Pop establishment has always known.

    "Da books gotta balance!"

  3. China holds $1.12T in US debt, about equal to the holdings by Japan, which is also a huge creditor. That may trump any immediate changes in trade policy. China can't dump all that paper at once, but the US has to keep turning it over to refinance our outstanding debt of $20T. And don't forget, the Fed will be raising interest rates throughout the coming year, so refinancing that huge debt is going to become more expensive and represent a bigger chunk in the fiscal 2018 Federal budget, which will be the first budget that's solely prepared by the Trump administration.

  4. Given that the previous occupant of the Oval Office ... what WAS that guy's name again? ... was mostly concerned with toilets, it's nice to have a man in there who can repeatedly hit 'em out of the park.

    In fact, policy objective wise, you might say that the joint has suddenly gone from doo-doo can to can-do.

  5. We also should make major changes to our nation's agricultural production systems that are oriented around providing US-taxpayer subsidized grains to China. Corn and soybeans. We apply huge amounts of fertilizers to our water and land systems, and beat them up pretty good with the high-intensity corn and soybean production systems. This creates a lot of local and national-level water quality problems (nitrate levels, and hypoxia). These crops would not make it without US taxpayer subsidies. The taxpayer also subsidizes the inland waterway system in order to ship them to Asia / China. It really is a great system -- for China. Maybe Trump can take on big ag, too.

    1. Yes, Farm Boy. The first thing Mr. Trump needs to do agriculturally is just end this ethanol bullshit. It's wrecking our car engines and making a pound of ground beef $5, which is ridiculous. It's our corn. Sure, Archer Daniels may complain but I don't give a shit. Cut off all overseas food trade and give me a nice burger for 99 cents again. Let's do it.

    2. Screw ADM, they are part of the problem. These millionaire corporate agribusiness executives have been sponging off the taxpayer, and promoting a too-intensive monoculture cropping system that is bad for our soil and water systems -- with taxpayer $$$. This is one of those sweet corporate America deals that Trump needs to steamroller. The ethanol mandate is beyond retarted and is right out of the Soviet 5-year central planning model of ag productivity and innovation. Using corn to produce fuel while we have all of these new shale resources? Corporate agribusiness and every politician in the Corn Belt would crucify me for saying this. But it's the truth. time to reorient and grow more crops for local production and that don't pollute our water supplies (nitrate levels in midwestern groundwater are horrible).

    3. Whenever I am over in St. Albans I stop by Oliver Fuels and Oils and fill up with non-ethanol gas. It costs a bit more per gallon but my pickup truck runs a lot better and gets better gas mileage. The ethanol mandate has driven up the prices food, gasoline, and almost everything else, since almost everything you buy is delivered by truck. The ethanol mandate has to go. - Elric

  6. A slight change of subject, still trade, but reference the Keystone Pipeline. Three groups fought Keystone, greenies, Buffett(keep the trains full), OPEC nations, in particular those Muslim nations at war with us. In my opinion we are involved in WW4-currently we are losing. Shale oil and gas has won our first major victory by driving down the price of oil. Keystone will further aid that war. Most of the produce from the Gulf Coast Refiners of the Canadian crude will then export to the world-further wacking OPEC. We may see a slight lowering of gas price but not much. We will get jobs building, maintaining and operating the pipeline and refining the crude plus any tanker jobs moving the refined product to the world. Sounds good to me. Note it is my opinion the boy king, President Obo, opposed Keystone to protect muslim nation more than for the greenies - but we know what he got credit for.

    1. Good comment. It will become clearer and clearer, over time, that Barack Obama never gave a rat's ass about this country, or us. And now Mr. Trump is messaging American steel plants to start building some pipe! How'd the market do today? Pretty dang well, thank you...

    2. We should, and will, go deep with shale and fracking. Nothing is risk-free but this is a proven and relatively safe process that has tremendous benefits. The costs need to be recognized -- if a well pad is set up next door, that is a helluva racket 24/7 and the roads get beat up and there is lots of dust. Those costs have to be compensated, but they are relatively small in the big picture.

  7. When you owe the bank 20 grand they own you. If you owe the bank a few hundred billion you own the bank. China, like Mexico, needs us one hell of a lot more than we need them.