Trade, Globalization, Strategic Mercantilismm and Globalism itself

[DougMacG]

I see this more as the economic phase of the US China war.

Right.  Economic Mutually Assured Destruction.  He wants China's attention on a number of matters.  He proves he is willing to take the heat of announcing such a bold move, no matter the damage it causes to the US economy and the world.  But then what?

I predicted he is bluffing.  He will delay implementation, scale it down, narrow it.  Or cancel it and say he got the concessions he wanted.

But let's say he doesn't get concessions.  Then what?  He backs down anyway?  Goes ahead with it??

The concessions he is demanding are unspecified.  Maybe Trump's representatives are busily pursuing this with our evil trading partners right now as we write.  

Besides China, he just expanded the fight with Europe on cars.
 
I was in the export business when NAFTA happened.  Someone more honest than Trump can tell me how this was not a great deal for the US, for them to remove their tariffs when we already had virtually none.

China steals our technology.  This addresses that how?  China propped up DPRK.  This motivates them to fix that?  China has been overly and illegally aggressive in the Taiwan to Singapore Sea.  Now they will respect international and sovereign waters??

If Trump was right to do this for the reasons he gave, and the cost isn't that high, why does he ever back off of it?
---------------------
"One of the ironies of trade protectionism is that tariffs and import quotas are what we do to ourselves in times of peace what foreign nations do to u‎s with blockades to keep imports from entering our country in times of war." - Arthur B. Laffer, Lawrence Kudlow and Stephen Moore March 3, 2018
https://www.cnbc.com/2018/03/03/kudlow-mr-president-tariffs-are-really-tax-hikes.html

[Crafty_Dog]

http://money.cnn.com/2018/01/30/news/economy/jinko-solar-us-china-trump/index.html

[G M]

China cannot afford a major economic downturn. It could present a real threat to internal stability.

[DougMacG]

China cannot afford a major economic downturn. It could present a real threat to internal stability.

I agree and if we had a unified national security policy to take down the regime of China for the good of the world this would be it.  China is more dependent on trade than we are and would fall much further if we acted with lasting resolve until they lose power.  But we can't. 

Let's say Trump takes down our own economy by 20% and the result of these policies and trade war takes down China's economy by 40%.  The China regime can't survive that for long, but neither can Trump.  He would lose his fragile popularity instantly.  A president with 30% approval or lower is barely President.  He would lose the agenda, lose on policy, lose the midterms, trigger impeachment and lose reelection - to the Leftists - if he were to make it that far.  The Leftists he would lose to could care less about China gaining world military supremacy or ruling the Asian seas and shipping lanes.  They would reverse enough of the bad trade policies to get us back to stagnation where they seem to be most comfortable, and let China off the hook.

This is either a bluff or a catastrophe as I see it.

[DougMacG]

I've asked our webmaster to merge the threads.

I hope we will retain the "Freedom to trade" part of the name as a reminder that the focus here generally is more on how to keep our individual liberties than to find more ways to expand government powers over our private and consensual activities.

There is a time and a place to curtail our freedom to trade, crucial national security interests for example, but we should still recognize when we do sowe are curtailing the economic liberty to raise our standard of living by buying and selling products and services around the world.

[Crafty_Dog]

So noted.

[Crafty_Dog]

http://thehill.com/homenews/administration/377233-wh-mexico-canada-could-receive-tariff-exemptions?userid=188403

[Crafty_Dog]

How a Trade War Escalates
Europe retaliates against U.S. exports and Republican states.
By The Editorial Board
March 7, 2018 7:04 p.m. ET
81 COMMENTS

The European Union on Wednesday released its target list of retaliatory tariffs on American exports worth $3.5 billion if President Trump pushes ahead with his steel and aluminum tariffs. This is how Mr. Trump’s trade irruptions could imperil American exporters and become a destructive spiral.

The EU is acting with some restraint—for now—in crafting a narrow list of items on which to impose tariffs, including bourbon, orange juice, corn, ladders and motor boats. None are vital to European industry, but they are politically shrewd in targeting exports from states represented by Republicans on Capitol Hill. The point is to punish voters in states Mr. Trump carried in 2016 and Republicans running for re-election this year. Too bad Europe can’t impose a tariff on Wilbur Ross and Peter Navarro, the architects of this fiasco.

The danger for the EU is that this will inspire Mr. Trump to indulge his schoolyard impulses and hit back at the EU again. “The European Union has been particularly tough on the United States. They make it almost impossible for us to do business with them,” Mr. Trump said at a White House presser with Swedish Prime Minister Stefan Löfven. He’s also threatened tariffs on European cars.

Since White House aide Gary Cohn soon won’t be around the White House to explain how unconnected to reality this is, we’ll try. It is not “almost impossible” for American companies to do business in Europe. The bilateral trading relationship between the U.S. and the combined EU states is the largest in the world. In 2016 American companies sold goods worth $270 billion in the EU and services worth $231 billion. America has a bilateral trade deficit in goods with the EU—$147 billion in 2016—but a services surplus of $55 billion.

The flip side of the trade deficit is a substantial flow of investment into the U.S. from Europe. Around half of new direct investment in America (measured as acquisition of an American firm, or creation or expansion of a subsidiary) came from Europe in 2016—nearly $200 billion.

Such investments, made over decades, supported roughly 4.7 million jobs of Americans employed directly by affiliates of European companies as of 2015, according to U.S. Bureau of Economic Analysis data (counting all of Europe, including some countries that aren’t EU members). And that ignores Americans employed by companies that sell to those European affiliates, and those who work for U.S. firms that benefit from European investment in equity markets and so on. This is what economic “winning” looks like.

American leaders at least dating to George Marshall have understood that close economic ties between the U.S. and Europe are necessary to support the trans-Atlantic military alliance. Not coincidentally, the Continent’s most vigorously pro-trade politicians also tend to be its most pro-American. A perverse consequence of Mr. Trump’s trade wrangling is that he’s alienating them. That includes French President Emmanuel Macron, a rare European leader to eschew outright hostility to Mr. Trump.

There’s plenty of scope to improve the U.S.-EU trading relationship. One sore spot on both sides remains agricultural protectionism, often related to dubious safety concerns. Another is Europe’s treatment of American tech companies such as Microsoft , Amazon, Google and Apple on questionable antitrust and tax concerns.

Those and other issues are best addressed through negotiations rather than tariffs. Mr. Trump would better serve American workers and businesses by urging the EU to join him in dusting off stalled free-trade talks. If he persists instead in stoking a trade war with America’s most important strategic and economic partner, he and America will lose—and big.

[Crafty_Dog]

https://www.cnbc.com/2018/03/07/us-steel-reopening-plant-and-bringing-back-jobs-ceo-on-trump-tariffs.html

[DougMacG]

https://www.cnbc.com/2018/03/07/us-steel-reopening-plant-and-bringing-back-jobs-ceo-on-trump-tariffs.html

Building primary metals requires fewer workers than it used to, thanks to technological advancements:

[Crafty_Dog]

A relevant chart, thank you Doug.  It does seem to undercut the argument that the remainder of the US's steel capacity is on the way out, though declining profitability numbers could flesh things out in a way contrary to the visuals of the chart-- I have no idea whether such is the case.

At any rate, as I understand it, part of the argument is that we have only ONE mill left with the capacity to make certain high grade steel of a sort necessary for military application; and only one aluminum smelter capable of making the sort of aluminum necessary for aircraft.

[DougMacG]

A relevant chart, thank you Doug.  It does seem to undercut the argument that the remainder of the US's steel capacity is on the way out, though declining profitability numbers could flesh things out in a way contrary to the visuals of the chart-- I have no idea whether such is the case.

At any rate, as I understand it, part of the argument is that we have only ONE mill left with the capacity to make certain high grade steel of a sort necessary for military application; and only one aluminum smelter capable of making the sort of aluminum necessary for aircraft.

I regret the loss of domestic sources as well but don't see how this can be the solution.

In Japan they protect rice for national security.  The nation can't be shut down by an enemy rice embargo, meanwhile they enter a 3rd decade of zero growth. [I digress.]

More importantly, putting artificial protection on suppliers is the opposite of applying market forces on producers to maximize efficiency.  Domestic producers already have the obvious advantage of shipping costs over China to the US, or the purchase of Chinese steel shipped through other countries to the US.  Paying 25% more for steel doesn't put us back on even footing with China or anyone else!

The chart shows that labor costs aren't the key factor.  The imposition of tariffs isn't an efficient way to gain jobs.  It isn't a net gain in jobs at all.  It isn't a move toward more efficient use of capital. The national security argument isn't very compelling either.  With a limited defense budget, we will build fewer ships, fewer aircraft, fewer submarines, fewer missiles, fewer missile defense sites with more expensive steel and aluminum.  Since military spending is tied to GDP, the collapse in production will be even more dramatic.  Lack of GDP (while they protected local producers) is what sunk the Soviet Union in the arms race with Reagan.  Tariffs by definition put central planning of the public sector above decentralized decision making of the private capital sector.

How does the timing of tariffs work with our big infrastructure idea?  Construction is the number one user of steel.  A trillion in infrastructure now means fewer bridges. How does that help America?

What is dumping?  Our rival and enemy wants us to have essential raw materials below their cost.  Really? They subsidize our military, infrastructure, elevators, automobiles, motorcycles and beer cans?  This hurts us how?

The point where it hurts us is when they stop dumping and start charging higher than market prices due to an acquired monopoly status.  That is hard to imagine right now in a market of over-supply.  "Dumping" hurts us when it stops and the price goes up.  And we want that day to come sooner.  We want higher prices now!

Politically, the next two elections will come down to how well the economy is performing, GDP of the voters measured in ppp - purchasing power parity.  Add a hundred jobs, lose a thousand and drive the cost of everything up for everyone does not get you there.  Republicans damaging the economy means inevitable the return of the Leftists, more central planning, less free markets, a stagnant economy.  As Hillary might say, at this point, with American industries dead, what difference does it make?

I didn't imagine the day would come when I would see Al Gore as a better free market capitalist than an elected Republican (in name only) President:
https://www.youtube.com/watch?v=0fi8OOAKuGQ
http://knowledge.wharton.upenn.edu/article/naftas-impact-u-s-economy-facts/

Krugman, too, more free market than a Republican President:
https://www.nytimes.com/2018/03/03/opinion/the-macroeconomics-of-trade-war.html

Senator Bernie Sanders promised to impose tariffs on China "until they stop dumping steel into the United States" during his 2016 presidential campaign, but his office declined to comment on Trump's tariff proposal.
https://berniesanders.com/press-release/job-killing-trade-deals-hurt-pennsylvania-workers/

Speaking of strange bedfellows, trade barriers were an early part of the Hugo Chavez agenda.  Stratfor 2001:  "Venezuela's trade minister has threatened to impose a range of import quotas and tariffs to stem a rising tide of imports and stimulate domestic industry. The move may bolster President Hugo Chavez's waning domestic political support. But his increasing intervention in the economy will deter private investment and hinder economic growth while deepening Venezuela's international isolation."
https://worldview.stratfor.com/article/venezuela-building-trade-barriers

How's that going?  

A tariff is a tax on the US buyer, not on the foreign seller.  If the tariff is successful and deters the transaction, China avoids the below cost transaction, keeps their iron and steel.  Our businesses and consumers pay more for the same product, buys less, and our government collects no revenue, actually less revenue as costs go up and profits and incomes go down.  That thinking fits the Chavez model better than it does a free market model.

International trade is inevitable and beneficial.  If one doesn't agree with the latter, see the former.   - The late Robert Bartley, WSJ

[Crafty_Dog]

Representing the other side of this conversation:

BEGIN
"What is dumping?  Our rival and enemy wants us to have essential raw materials below their cost.  Really? They subsidize our military, infrastructure, elevators, automobiles, motorcycles and beer cans?  This hurts us how?

The point where it hurts us is when they stop dumping and start charging higher than market prices due to an acquired monopoly status.  That is hard to imagine right now in a market of over-supply.  "Dumping" hurts us when it stops and the price goes up.  And we want that day to come sooner.  We want higher prices now!
END

Remember when the Chinese bullied the Japanese in the South China Sea and threatened to use its Rare Earth Element near monopoly to sink Japanese electronics?  (REE's relevant to missile guidance systems too , , ,)

Separately, industries like steel have substantial barriers to entry and re-entry.  Skilled labor once gone is , , , gone. 

Chinese companies are not just subject to market forces; they are also agents of the Chinese government. 

Some things to think about.

[Crafty_Dog]

second post

https://www.marketwatch.com/story/gm-and-ford-would-suffer-a-1-billion-profit-hit-if-steel-tariffs-are-enacted-says-goldman-2018-03-05?siteid=bnbh&link=sfmw_fb

[DougMacG]

Representing the other side of this conversation:

BEGIN
"What is dumping?  Our rival and enemy wants us to have essential raw materials below their cost.  Really? They subsidize our military, infrastructure, elevators, automobiles, motorcycles and beer cans?  This hurts us how?

The point where it hurts us is when they stop dumping and start charging higher than market prices due to an acquired monopoly status.  That is hard to imagine right now in a market of over-supply.  "Dumping" hurts us when it stops and the price goes up.  And we want that day to come sooner.  We want higher prices now!
END

Remember when the Chinese bullied the Japanese in the South China Sea and threatened to use its Rare Earth Element near monopoly to sink Japanese electronics?  (REE's relevant to missile guidance systems too , , ,)

Separately, industries like steel have substantial barriers to entry and re-entry.  Skilled labor once gone is , , , gone.  

Chinese companies are not just subject to market forces; they are also agents of the Chinese government.  

Some things to think about.

I agree, those points are the test here - and I don't find them persuasive.

Is steel analogous to rare earth elements?  Are the Chinese on a path to monopolize or capable of that?  Could they withhold from us in a way that would hurt our national security?  Could we rebuild our industry fast enough if we faced an embargo?  Could the Chinese pull off an embargo?  I don't see it.

Steel is perhaps the opposite of rare earth elements.  Iron ore is all over northern MN for example and we have the Great Lakes for shipping.  The largest Molybdenum mine in the world, a steel strengthener, is in Leadville Colorado.  

"industries like steel have substantial barriers to entry and re-entry"  

This is an important consideration  Like an oil refinery or a nuclear plant, these large facilities don't just pop up or shut down with a snap of the fingers, but I am reminded of how our economy turned itself inside out to supply a world war effort last time and we have a better capability to do that 80 years later if need be.  Outdated steel mills was our economic problem in the first place.  New ones I assume use new technology.

70% of US steel comes from the US already.  It is not a unique product nor a cornered market.  I'm guessing that figure is misleading because of recycled steel, not the highest quality for certain applications, but neither is steel in many cases.  Plenty of other materials are lighter, stronger, more resilient for certain high end applications.  Economics IS part of steel's strength.  If it was all about weight and strength issues, steel loses for many, many uses.  That we don't have a country without steel (Trump yesterday)is political drivel.  We have a country and we have steel, domestic and foreign, and many other materials.

Why is global demand slowing if steel is so strategic?
"a long-term decline in steel intensity due to technological and environmental factors will continue to weigh on steel demand in the future"
https://www.reuters.com/article/us-steel-demand-global/global-steel-demand-growth-to-slow-in-2018-worldsteel-says-idUSKBN1CL0Q8

When copper prices went up we started making plumbing pipes out of PEX (plastic) and sending information over glass (fiber optics), gained many advantages, never to fully go back.

Trump made the national security argument yesterday as convincing as he could and it fell flat IMHO, then he went on to make other economic arguments that are nothing other than political.  Why do we need the other arguments if the national security argument is fully valid?  

Here is the economic argument:  The tariffs would add 33,000 steel and aluminum jobs, while costing 179,000 jobs in other industries and raising costs for everyone.

Could China corner the market and cut off our supply?  No.  Here are some other places where production could be increased, besides building it ourselves (all over the world):
https://www.worldsteel.org/en/dam/jcr:4af7fffe-1529-4954-86df-7398b050a076/World-Steel-in-Figures-2017-Infographic_web1.jpg
The world makes steel in 44 countries: China, [European Union], Japan, India,  United States, Russia, South Korea, Germany, Turkey, Brazil, Italy, Taiwan, Ukraine, Iran, Mexico, France, Spain, Canada, Poland, Vietnam, Austria, Belgium, United Kingdom, Egypt, Netherlands, South Africa, Australia, Slovakia, Pakistan, Saudi Arabia, Indonesia, Sweden, Argentina, Czech Republic, Thailand, Kazakhstan, Finland, Romania, United Arab Emirates, Malaysia, Qatar, Luxembourg.
Yes, Luxembourg makes steel!  What kind of a world war wouldn't have a good number of these places on OUR side, and how much of the next war, think cyber-war, electronic war, neutron bomb, will be fought with steel?
https://en.wikipedia.org/wiki/List_of_countries_by_steel_production
We are 4th in the world because it is NOT particularly high tech or strategic IMO.

We could buy up Chinese excess steel now while they are 'dumping' if it is strategic and buy us time to open new plants during the (imagined) embargo.

In what situation would China embargo steel against the US and how successful would it be?  China is over-invested in steel and the world has an over-supply problem.  Shutting off their supplies means shutting down their cash register.  Wouldn't we be able to break an embargo like every other country does.  China sells to Europe and we buy from Europe?  Or does China shut down all production and all exports and fights war without money or an economy?  What is the regime of China without exports, without an economy, without money?  Not a powerhouse or a worthy foe.  Have any of the trade protectionists thought this through??

Important quote from G M: " China cannot afford a major economic downturn. It could present a real threat to internal stability."  

China cannot cut off steel to the world in crisis without setting off a full blown trade war and that would cause them unsurvivable downturn and internal chaos.  They could do that out of unilateral madness but not as a thoughtful, strategic move.

"Chinese companies are not just subject to market forces; they are also agents of the Chinese government."

True but then the Chinese government is subject to market forces at some point.  They cannot devalue their way to prosperity.  They cannot sell anything big below cost in the long run.  They cannot keep making bad loans or prop up large failed industries long term.  Most of all, they cannot strategically match over-capacity with limiting sales.  Their alleged dumping is a sign of weakness, not strength.  They have a day of economic reckoning coming and a number of us here have been watching for signs of that.

Our relationship with China is one of co-dependency as much as it is enemies or rivals.  We could balance our budget and stop borrowing from them if we wanted to.  We could make our own steel if we wanted to.  We could make box store products here and buy cheap stuff from a hundred countries instead.  But take away the US and maybe European markets from China and what is left of their economy?  Shambles.  The day they start a full blown economic war with the US will be the beginning of the end for China.  
 
A few more points:
1) The US constitution gives Congress the power of taxation.  A tariff is a tax!  The national security emergency argument is the only approach Trump can try without Congress so he tried it.  The US constitution also gives Congress the only authority to declare war so national security isn't strictly in the Article Two domain either.  The steel market has been evolving since the 1970s, what is the national emergency today that justifies going around Congress?  There isn't one.  This exact proposal could have been put through Congress over the past 12 months and it wasn't for one reason - because like with Obama's executive orders, it wouldn't have passed.  Ends justify means.  Like gun control, we must do something!  Or at least tell key constituents that we did.
2) Equal treatment under the law. [Who gives a rip about that anymore?!]  Tariffs targeting specific products and industries fail this test, require the central planning of government to cozy up with the selected protected, see Trump's smiling photos with the steel industry.  But the allegation is that the Chinese government meddles in ALL its strategic industries and manipulates its currency relating to ALL its exports.  Answering that with an arbitrary, crony government response of our own is wrong and fails this important constitutional test miserably, IMHO
3)  No mention in all the China allegations, manipulating their currency, subsidizing industries, that we manipulated our currency to the tune of $4.5 trillion over the Obama years and subsidized everything from auto makers to solar.  Oh that.

We can compete with the Chinese by being MORE free, not less, and this if really needed should go through Congress and should apply to all our people and all our industries equally.

[ccp]

The national security angle is persuasive

especially if  "once their gone their gone" is true.

so what if prices rise a penny .

[DougMacG]

"The national security angle is persuasive

especially if  "once they're gone they're gone" is true.

so what if prices rise a penny"
-----------------------------------
The old steel worker jobs are already gone in the plants that were 25% out of date in terms of efficiency.

Save one industry or two, then where does the centrally planned economy begin and end?  If govt can set prices and decide production, why not have them build it?  It isn't a private sector anymore when the government is running it.

I'll take a dynamic economy over government preservation of economic dinosaurs any day, and what about the constitutional argument?  Declare an emergency for an admitted multi-decade trend and have one person decide what the constitution says must go through the deliberative processes of 536 (House plus Senate plus President) of the people's elected representatives?  Are we now "The One"?  We know better? Better than a free market, better than our elected representatives and our constitutional process?
  https://www.youtube.com/watch?v=molWTfv8TYw  (Obama 2008, "We are the ones we have been waiting for.")

Regarding the penny, that's roughly what the tea tax, a tariff, was in Boston, 1773.  

[ccp]

" Regarding the penny, that's roughly what the tea tax, a tariff, was in Boston, 1773.  "

I recall seeing a menu from a late 1700's era tavern .  A steak was listed at 2 cents.

The US mint started producing patterns in 1792 and real cents i 1793 .  Those pennies today even in the worst conditions are hundreds of dollars  on up to a million dollars for the finest.

A penny was real money in those days.

[DougMacG]

" Regarding the penny, that's roughly what the tea tax, a tariff, was in Boston, 1773.  "

I recall seeing a menu from a late 1700's era tavern .  A steak was listed at 2 cents.

The US mint started producing patterns in 1792 and real cents i 1793 .  Those pennies today even in the worst conditions are hundreds of dollars  on up to a million dollars for the finest.

A penny was real money in those days.

IIRC the tea tax was 2 cents per year of ordinary usage.  The war was not about the amount of the tax.

[Crafty_Dog]

Good posts Doug et al.

FWIW, it is not only the quantity of the steel (and aluminum) but the quality of the steel and aluminum.  For example, apparently we have only one plant left that can produce what high tech aircraft need.

Observation: PA has a big congressional race coming up and also note PA Supreme Court is redistricting the state to Reps detriment and that this may play well in PA. 

Observation:  This may also be a warning shot across China's bow a) with regard to the major play coming up with the Norks, and b) President Trump's submission of a "suggestion" that the Chinese should be coming up with a way to trim $100B from their trade surplus with us.

[DougMacG]

FWIW, it is not only the quantity of the steel (and aluminum) but the quality of the steel and aluminum.  For example, apparently we have only one plant left that can produce what high tech aircraft need.

Yes, but the quantity of the high quality material we need for defense purposes is relatively small, well within what we build here right now.  Not a national security emergency.

Observation: PA has a big congressional race coming up and also note PA Supreme Court is redistricting the state to Reps detriment and that this may play well in PA. 

Yes it serves various political purposes including that race.  He gave an economic speech after the Indiana primary.  I disagreed with the whole analysis, bad trade agreements are killing them, but he went on to win Mich, Penn and Wisc in the general election - inside the blue wall.  Rubio, Cruz and others would have lost those states.

Observation:  This may also be a warning shot across China's bow a) with regard to the major play coming up with the Norks, and b) President Trump's submission of a "suggestion" that the Chinese should be coming up with a way to trim $100B from their trade surplus with us.

I agree this is Trump negotiating.  It moves him from defense to offense with all negotiating parties.  Not just China, it puts him in a stronger position with Kim Jung Un.  He is willing to take bold action against Xi and Merkel and everyone else, he is most certainly able to order a major strike on a belligerent DPRK including the Presidential palace where he will sleep tonight.  He doesn't care what others think.  Can't say that about his predecessors BHO, GWB and WJC.  He defies his top economics adviser on economics, he most certainly can defy his top military brass and diplomats on NK.  With trade he says no trade war then threatens one.  He just wants better deals with countries.  He says he can take countries on or off the list and change the rate anytime he wants.  That puts him in a very strong position in negotiations - until some judge tells him he doesn't have that kind of power.  Even if a court puts a constraint on Trump's power, it makes him look strong to take such bold action.  He means what he says, no matter how wrong.

The success of this administration will be measured by how quickly he can declare victory on trade and reverse this before it does real damage..

[Crafty_Dog]

You make excellent points Doug.  

I offer one more for your consideration:  You analysis is limited to the economic, but when dealing with mercantilist/fascist states such as China, a free market analysis alone is insufficient.

[Crafty_Dog]

http://thehill.com/policy/finance/377680-trade-adviser-ascends-in-trump-white-house?userid=188403

[DougMacG]

..."Your analysis is limited to the economic, but when dealing with mercantilist/fascist states such as China, a free market analysis alone is insufficient."

Good point.  We are sick of having our lunch eaten by China.  Elon Musk pointed it out this way, not even counting the tech theft problem:  China applies a 25% tariff to his car sold in China.  US levies a 2.5% tariff on Chinese electric cars sold here -while they openly try to dominate the world market for electric cars.  That is wrong - by TENFOLD!  And something should be done about.  Bold action from our side to force change on their side.

But IF you buy this part:
"the quantity of the high quality material we need for defense purposes is relatively small, well within what we build here right now..."
Then there is not a national security emergency right now and therefore the constitutional power of taxation by choice and for strategic positioning comes back to Congress.  Yes we are at a disadvantage playing hardball with totalitarian regimes while working within an open and consensual form of government.  Does that make extra-constitutional tactics right?

I hear no one else making this argument.  Am I missing something?

[Crafty_Dog]

President Trump is acting with statutory authority.  What is the basis of your assertion that what he is doing is unconstitutional.

[DougMacG]

President Trump is acting with statutory authority.  What is the basis of your assertion that what he is doing is unconstitutional.

Article I, Section 8, Clause 1: The Congress shall have Power to lay and collect Taxes, Duties,

[Crafty_Dog]

Right!  And President Trump is using statutorily granted authority-- so what is the problem?

[DougMacG]

Right!  And President Trump is using statutorily granted authority-- so what is the problem?

I assume you mean this:

Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) authorizes the Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the United States.

Section 232 investigations help to determine the effects of imports on America’s national security and give the President the ability to address any threats to national security by restricting imports through tariffs.
https://www.whitehouse.gov/briefings-statements/need-know-section-232-investigations-tariffs/

This is a national security threat and that clause of that act negates the constitution?  

This is a national security threat (to me) about like Filburn cornered the world grain market by feeding his own chickens.  If they say it's interstate commerce, then it's interstate commerce.  Or is it?  If we declare it a national security threat, it's a national security threat.

[Crafty_Dog]

I'm guessing the judicial level of review would be "reasonable basis" (contrast "strict scrutiny") and it is easy enough to say that there is a reasonable basis for saying the US needs a domestic capability for steel and aluminum, especially high grade for military and aerospace capabilities.

[DougMacG]

Can the 87th Congress legislate away the constitutional authority of the 115th Congress?  

If so, Sen. Mike Lee wants to correct that:  His Bill Would Help Restore Congressional Authority on Tariffs
http://dailysignal.com/2018/03/12/bill-help-restore-congressional-authority-tariffs/

[Crafty_Dog]

A bit of a "wife beater" quality to the phrasing of the question, but the short answer is "yes"-- it's called legislation.  The answer is , , , drum roll , , , legislation changing that, which is exactly what Sen. Lee is proposing.

[DougMacG]

As you might guess, it's a pet peeve of mine.  Thanks for the explanations.

[DougMacG]

https://www.wsj.com/articles/the-national-security-tariff-ruse-1520897310
"No President has used 232 since the World Trade Organization was created in 1995."
Not even the Pentagon buys the national security argument.  Matthis: “As noted in both Section 232 reports, however, the U.S. military requirements for steel and aluminum each only represent about three percent of U.S. production. Therefore, DoD does not believe that the findings in the reports impact the ability of DoD programs to acquire the steel·or aluminum necessary to meet national defense requirements.”

"Mini-mills can throttle back when demand slows without losing a lot of money, and thus can endure lower capacity use. This is one reason mini-mills have captured two-thirds of domestic production. Nucor , the largest U.S. mini-mill operator, turned in its largest quarterly profit in eight years in the first three months of 2017."   [So let's raise the price 25%.]

WSJ Opinion: "The Trump Administration has pulled the 232 stunt because it gives the President power to act unilaterally. "

Doug:  Constitutionally dubious.

[DougMacG]

https://mobile.nytimes.com/2018/03/13/opinion/rubio-china-trade-tariffs.html?rref=collection%2Fsectioncollection%2Fopinion&action=click&contentCollection=opinion&region=rank&module=package&version=highlights&contentPlacement=1&pgtype=sectionfront&referer=https://www.realclearpolitics.com/

[Crafty_Dog]

Sounds good to me!

[DougMacG]

[Rubio plan] Sounds good to me!

Yes.  Trump needs to apply his pressure and get his negotiating wins quickly, and get us back to free and freer trade.  His Presidential power will not survive economic downturn or Obama-like stagnation. 

A trade war means a contraction and he has less than two quarters to show great economic momentum.  People aren't going to support him for just his personality. 

[DougMacG]

"Observation: PA has a big congressional race coming up and also note PA Supreme Court is redistricting the state to Reps detriment and that this may play well in PA. "

Tariffs (taxes) being mostly a Democrat tool, the Dem in the race effortlessly sided with Trump on the tariffs, neutralized the issue and won the race. 
-------------------------------------

The tariffs are just two tenths of a percent the US economy (pennies), not counting the ripple (or spiral out of control) effect:

https://www.realclearpolitics.com/articles/2018/03/07/trumps_tariffs--a_triumph_of_pride_over_policy_136462.html
Two tenths of a percent of lost economic growth might be the difference between Republicans or Democrats winning the next two elections and setting the future direction of the country.
--------------------------------------
The European Union has announced plans to retaliate against US exports, but in the end the EU may negotiate – and agree to reduce current tariffs on US products that exceed US tariffs on European products.
https://www.project-syndicate.org/commentary/trump-steel-tariffs-targeting-china-by-martin-feldstein-2018-03

If so, then one part of this mission is accomplished.  When will we get positive news on this?  Who has the authority to reduce tariffs at the EU?

From the Martin Feldstein link above, he sees the steel/aluminum tariffs as a way of getting other concessions from China, "US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China’s government to abandon the policy of “voluntary” technology transfers."

"Because the tariffs are being levied under a provision of US trade law that applies to national security, rather than dumping or import surges, it will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China and avoiding the risk of a broader trade war. The administration has not yet said that it will focus the tariffs in this way; but, given that they are being introduced with a phase-in period, during which trade partners may seek exemptions, such targeting seems to be the likeliest scenario.

For the US, the most important trade issue with China concerns technology transfers, not Chinese exports of subsidized steel and aluminum. Although such subsidies hurt US producers of steel and aluminum, the resulting low prices also help US firms that use steel and aluminum, as well as US consumers that buy those products. But China unambiguously hurts US interests when it steals technology developed by US firms.

Until a few years ago, the Chinese government was using the Peoples Liberation Army’s (PLA) sophisticated cyber skills to infiltrate American companies and steal technology. Chinese officials denied all wrongdoing until President Barack Obama and President Xi Jinping met in California in June 2013. Obama showed Xi detailed proof that the US had obtained through its own cyber espionage. Xi then agreed that the Chinese government would no longer use the PLA or other government agencies to steal US technology. Although it is difficult to know with certainty, it appears that such cyber theft has been reduced dramatically.

The current technology theft takes a different form. American firms that want to do business in China are often required to transfer their technology to Chinese firms as a condition of market entry. These firms “voluntarily” transfer production knowhow because they want access to a market of 1.3 billion people and an economy as large as that of the US.

These firms complain that the requirement of technology transfer is a form of extortion. Moreover, they worry that the Chinese government often delays their market access long enough for domestic firms to use their newly acquired technology to gain market share.

The US cannot use traditional remedies for trade disputes or World Trade Organization procedures to stop China’s behavior. Nor can the US threaten to take Chinese technology or require Chinese firms to transfer it to American firms, because the Chinese do not have the kind of leading-edge technology that US firms have.

So, what can US policymakers do to help level the playing field?

This brings us back to the proposed tariffs on steel and aluminum. In my view (Feldstein), US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China’s government to abandon the policy of “voluntary” technology transfers. If that happens, and US firms can do business in China without being compelled to pay such a steep competitive price, the threat of tariffs will have been a very successful tool of trade policy."

[Crafty_Dog]

Thanks for the Feldstein piece.

[Crafty_Dog]

http://www.aei.org/publication/the-first-lesson-that-larry-kudlow-should-deliver-to-trump-trade-deficits-are-made-in-the-usa/?mkt_tok=eyJpIjoiTldSa1ptWXdZVFkzTjJWaSIsInQiOiJmRlpBVTVaRG8rZlBUT3FEUW51Z25pa1Z6RDZoNDRiNFFaeENCVU9QUittMXNMZzBUMmtVS0RoNUNyYTduOTQ5UVk5WHVsYmI4K1dKXC9oNGdNcGlxSlA0c0VpcE0wNHVpMnV0RDM0XC9SMWc0enk4Vm91V3Q4V1k3K1Q5TTlJRndiIn0%3D

[Crafty_Dog]

Tackling China’s Protectionism
A better way than tariffs to challenge Beijing’s mercantilism.
Shipping containers sit stacked in Container Terminal 9 at Kwai Tsing Container Terminals in Hong Kong, Jan. 30.
Shipping containers sit stacked in Container Terminal 9 at Kwai Tsing Container Terminals in Hong Kong, Jan. 30. Photo: Anthony Kwan/Bloomberg News
By The Editorial Board
March 20, 2018 6:32 p.m. ET
81 COMMENTS

The Trump Administration is expected to announce more tariffs as early as this week in an attempt to reduce China’s trade surplus with the U.S. While these taxes are a mistake, as is Mr. Trump’s obsession with trade deficits, there’s no denying that Beijing’s mercantilism has fueled the political backlash against free trade.

China’s increasingly predatory behavior, especially intellectual-property theft, poses a particular problem to a sustainable trading system. The question is how to respond in a way that encourages better Chinese behavior without harming the global economy and American companies and workers. It isn’t clear that the Trump Administration has given this much careful thought, and the danger is a tariff tit-for-tat that harms everyone.

U.S officials say tariffs will provide leverage to get China to agree to change its behavior. But past experience suggests that Beijing is more likely to respond in kind at such a broad public assault on its goods. China’s accession to the World Trade Organization (WTO) in 2001 initially led to lower tariffs, but its recent record of noncompliance is miserable. Nontariff barriers and subsidies have proliferated.

The experience of foreign companies doing business in China shows there is a better approach than broad and scattershot tariffs. Instead of relying on contracts, they constantly monitor the behavior of their Chinese joint-venture partners and suppliers. When problems arise, they take immediate, proportionate action to restore mutual respect and trust.

How would this model apply to trade? First consider how Beijing has turned to mercantilism over the last decade. In 2011 the Chinese government picked seven “strategic emerging industries” to support with public investment. The plan called for the industries to grow to 15% of GDP by 2020, up from 5% in 2010. The government gives subsidies in several forms, including loans from state-owned banks on easy terms and low interest rates.

Four years later the initiative grew into the “Made in China 2025” plan, which seeks to make China the global leader in 10 industries, including electric vehicles and biotechnology. Along with subsidies and government help in acquiring foreign companies, the policy explicitly requires foreign companies to transfer intellectual property in return for access to the Chinese market. The goal is to reduce the foreign-supplied value in Chinese manufactured goods below 30%.

Beijing has also stepped up its use of regulations to discriminate against foreign companies. For example, officials use the 2008 Antimonopoly Law to pressure firms to transfer intellectual property that gives them a dominant market position in China.

All of these policies violate WTO agreements, but China’s trading partners have struggled to bring cases at the WTO. Chinese officials threaten to retaliate against foreign companies if they participate in complaints. The organization’s rules on how to enforce its agreements are outdated and lawsuits proceed slowly.

Bringing cases can still have value, but another mechanism is needed to deter Beijing’s protectionism without destroying the WTO. That mechanism would quickly identify Chinese policies that break trade agreements, coordinate with the governments of other affected economies and come up with responses that would be withdrawn once Beijing backs down.

The remedies should be based on the principle of reciprocity. If Beijing pressures multinational car companies to build electric cars in China, the U.S., EU and Japan could impose a tariff on Chinese-made vehicles and restrict the transfer of related technology.

This would avoid the Trump Administration’s approach of tariffs on a wide variety of goods, a policy that alienates allies and raises the risk of a wider trade war. A targeted approach would limit damage to the U.S. economy, since affected industries would remain open to competition from other countries. It could even strengthen the WTO as China would have an interest in modernizing and using the organization’s courts to resolve the disputes.
***

We believe in the free-trade principle that if China wants to subsidize cheap goods for U.S. consumers, then Americans benefit at the expense of Chinese taxpayers. The damage from cheaper Chinese goods since Beijing entered the WTO is overstated and in any case is mostly complete. Tariffs on Chinese goods won’t rebuild U.S. industry and are likely to shift foreign production to other countries that will still export to the U.S.

The China problem now is the predatory use of government power to punish foreign competitors to benefit Chinese companies. These columns have warned China for years that this behavior has eroded goodwill in the U.S. and Europe, and it now threatens political support for free trade. This justifies some U.S. government response.

The Trump Administration is right to take a tougher line, but it also needs a smarter approach than its new steel and aluminum tariffs. The Chinese think strategically for the long term, and so should the U.S.

Appeared in the March 21, 2018, print edition.

[DougMacG]

http://www.aei.org/publication/the-first-lesson-that-larry-kudlow-should-deliver-to-trump-trade-deficits-are-made-in-the-usa/?mkt_tok=eyJpIjoiTldSa1ptWXdZVFkzTjJWaSIsInQiOiJmRlpBVTVaRG8rZlBUT3FEUW51Z25pa1Z6RDZoNDRiNFFaeENCVU9QUittMXNMZzBUMmtVS0RoNUNyYTduOTQ5UVk5WHVsYmI4K1dKXC9oNGdNcGlxSlA0c0VpcE0wNHVpMnV0RDM0XC9SMWc0enk4Vm91V3Q4V1k3K1Q5TTlJRndiIn0%3D

(Imports – Exports) ≡ (Private Investment – Private Savings) + (Government Spending – Taxes)

Funny how balancing our federal budget (or lack thereof) which necessarily means getting federal spending under control keeps rearing its ugly head.  For what economic reason are we spending more than we take in - at alleged full employment?

[DougMacG]

https://www.wsj.com/articles/trumps-losing-trade-gambit-1521397553

Trump administration’s failure to grasp the complexity of the supply chains that interconnect the global economy.
...
Brazil is in the line of fire. It’s the second-largest supplier of steel to the U.S., according to the January Commerce Department report that the administration wrote to justify the import protection. China, by the way, is No. 11.
...
U.S. would lose 18 jobs for every job created in steel and aluminum, for a net loss of nearly 470,000
...
large net employment losses in the states in which the steel and aluminum sector figures prominently: Illinois (-17,950), Indiana (-7,282), Michigan (-14,021), Ohio (-15,718), Pennsylvania (-16,535) and Wisconsin (-8,964)
...
Even if Brasília does not retaliate, the American coal industry could lose big in Brazil. According to the U.S. Energy Information Administration, Brazil was the second largest export market for American coal in 2016. Brazil uses coal to make steel; less steel production means less coal consumption.  Brazil could also buy its coal elsewhere.
-----------------
Like India, isn't Brazil one of those (large) countries that OUGHT TO BE close allies of the United States?

[Crafty_Dog]

Trump’s China Tariffs
Stocks fall as markets doubt the White House has a trade strategy.
Laborers work in the steel market in Yichang in central China's Hubei province in 2016.
Laborers work in the steel market in Yichang in central China's Hubei province in 2016. Photo: /Associated Press
By The Editorial Board
March 22, 2018 7:26 p.m. ET
343 COMMENTS

President Trump announced his long-awaited trade assault on China Thursday, and this time at least he is closer to the right target. But his decision seems unconnected to any larger trade strategy, and his main remedy of tariffs will harm American consumers and businesses as much as they will the People’s Republic.

No one should be surprised by the $60 billion in border taxes on China, given that Mr. Trump campaigned on worse. He is also responding to the genuine problem of Chinese mercantilism. China’s government steals the intellectual property of U.S. companies or forces them to turn it over, and Beijing uses regulation to discriminate against foreign firms.

This might have been tolerable when China was a smaller economy trying to reform, and the U.S. made a reasonable bet in 2001 when it let China enter the World Trade Organization. The gamble was that China would continue to reform, adapt to global trade norms, and eventually become a genuine market economy.

That hope showed early promise but has become forlorn as President Xi Jinping has pushed “national champions” like Huawei and Tencent. Facebook still can’t operate in China, and Tesla is punished with a 25% tariff on imported electric cars. The U.S. tariff on cars from China is 2.5%. China’s predatory behavior has eroded political support in the West for the very free-trade rules that have lifted hundreds of millions of Chinese out of poverty.
***

In typical Trumpian fashion, however, the President combines a useful focus on these practices with nonsense trade economics. He said Thursday that he’s asked China to “reduce the trade deficit” with the U.S. “immediately by $100 billion,” as if that would be a political or economic victory.

The reality is that the $375 billion annual U.S. trade deficit with China has many causes, and it is the reverse of America’s capital surplus. Faster growth under Mr. Trump’s policies will attract more global capital, which under national trade accounting means a larger trade deficit. Someone in America is buying that $100 billion in goods, and those Americans would suffer if they suddenly couldn’t.

Apple’s iPhones are assembled in China, for example, but China’s contribution is mainly labor. Most of the value, including the phone’s design from California, is imported from elsewhere and then re-exported by China to the U.S. Yet the trade figures count most of the value of the iPhone as part of the U.S.-China deficit.

Is Mr. Trump going to impose a tariff on iPhones? Mr. Trump has given his trade rep, Robert Lighthizer, 15 days to come up with a list of tariff targets. Presumably Apple has enough clout to win an exemption.

But the tariff process is inherently political and introduces new uncertainty to investment decisions. Over time Apple and other companies could adapt their global supply chains to reduce their exports from China, but then other countries would supply that $100 billion in goods. The overall trade deficit wouldn’t change much.

Then there’s the matter of how China will retaliate. Beijing officials have easy targets among the $130 billion in annual U.S. exports. One will be U.S. farm goods that have a large market share in China but also have global competition. U.S. farmers sell $12.4 billion in soybeans to China that Brazil could replace. Ditto for $1 billion in pork exports that Canada or Europe could supply.

The collateral damage in a tariff war with China is likely to include the economies of states that supplied Mr. Trump with his Electoral College victory: Iowa, Indiana, Wisconsin, Michigan and Texas. Other victims are likely to be companies that Mr. Trump touts as the winners from his tax and regulatory reform. Boeing fell more than 5% Thursday amid investor worries about the trade fallout. China can always buy Airbus planes.
***

Which brings us to Mr. Trump’s overall trade strategy, which is hard to discern. If bad Chinese practices are his main target, then he’ll need allies in Europe and Asia to present a united front. Yet the President began his protectionist barrage this year by announcing a global tariff on steel and aluminum imports. Mr. Trump then exempted Canada and Mexico, and Thursday he added the European Union, Australia, Argentina, Brazil and South Korea to the exemption list. But then why alienate these trading partners in the first place?

The economic worry is that Mr. Trump has no real strategy other than to show he’s “tough” on trade. Liu He, China’s main economic policy maker, visited Washington recently to negotiate on trade but found no one willing or able to make decisions.

The President’s trade hawks, led by White House aide Peter Navarro, want to punish China more than they want to change its behavior. Mr. Navarro really does believe that China today is the equivalent of Germany a century ago. Mr. Trump said Thursday that this tariff action would be “the first of many.”

This is the mentality that could lead to a trade war and economic damage for everyone. Equity markets reflected that worry Thursday by falling nearly 3% on the day, and 724 points on the Dow Jones Industrial Average.

If Mr. Trump is smart, he’ll take this market reaction as a useful warning. Investors sent him a similar jolt when he announced his steel tariffs, and markets recovered as he allowed exemptions. But the stock rally that followed the Republican triumph on tax reform has essentially ended amid fears of a trade war.
***

A rising and aggressive China poses considerable risks to world order, but persuading its leaders to conform to trading norms requires more than scattershot tariffs. It demands patient, sophisticated American leadership to rally other nations to join the effort.

Appeared in the March 23, 2018, print edition.

[Crafty_Dog]

http://www.alloutdoor.com/2018/03/19/cold-steels-steel-switch-might-mean-knife-industry/?utm_source=Newsletter&utm_medium=Email&utm_content=2018-03-24&utm_campaign=Weekly+Newsletter

[Crafty_Dog]

BREAKING NEWS
President Trump secured his first major trade deal: a pact with South Korea. It may have been driven by looming talks with North Korea.

Tuesday, March 27, 2018 9:08 PM EST


The deal, which could be formally announced on Wednesday, opens South Korea’s market to American autos by lifting existing limits on manufacturers like Ford Motor and General Motors, extends tariffs for South Korean truck exports and restricts, by nearly a third, the amount of steel that the South can export to the United States. President Trump used his threat of stiff steel and aluminum tariffs as a cudgel to extract the concessions he wanted, helping produce an agreement that had stalled amid disagreements this year.
But winning the deal may have had more to do with the geopolitical realities confronting the United States and South Korea as America embarks on tricky nuclear discussions with North Korea. The United States cannot afford a protracted trade standoff at a moment when it needs the South as an ally.

[DougMacG]

1. Make a great new free trade agreement with the new Brexit Britain, best trade agreement ever.
2. Offer that deal to others in exchange for dropping the tariffs.

[Crafty_Dog]

That is very good thinking!!!

[Crafty_Dog]

http://discovery.economist.com/features/21730406-what-can-be-done-help-them-globalisation-has-marginalised-many-regions-rich-world-149855071

[DougMacG]

How are your stocks doing there Mr. Smoot?

I was wrong, Trump will lose power before Xi will in a trade standoff.

[ccp]

Who is Mr Smoot?