patrick.net

QUOTE:

David Weinstein also found that almost all of the cost of the tariffs was being paid by U.S. consumers and companies. That contradicts Trump’s claim that China is paying the tariffs.

Weinstein said in an interview. “It’s pretty unclear that this trade war is a net win for the economy at this point.’’

We'll see how this plays out. Trump is close to making a trade deal with China and as far as I know, Trump says China is hurting worse than we are by far.

SEE: https://www.straitstimes.com/world/united-states/donald-trump-says-tariffs-are-working-us-and-china-are-talking

Question: Why can't these companies find a better deal with an American company? Is it because China is the only one that makes the product they want?

Will Powers

WillPowers says

Question: Why can't these companies find a better deal with an American company? Is it because China is the only one that makes the product they want?

There are no "better" deals with an American company, only higher end costs to the finished product since a lot of the components are not made in this country anymore.

Even the components that are made here are getting hurt by the tariffs on steel and aluminum - mostly those beloved Mom and Pops - the small businesses that are the backbone of America.

WillPowers says

Trump is close to making a trade deal with China and as far as I know, Trump says China is hurting worse than we are by far.

The administration is feeding a daily release of teaser comments concerning the trade deal to stroke the stock market but not much else of meaningful substance

It would be extremely prudent not to take whatever comes from the administration at face value - wait until the dust settles which won't be for some time to come.

Expect more in the line of spiffy headlines to make the supporters believe more has been accomplished than actually has since they won't be bothered to check the details and will follow the Golden Golem to the next distraction.

Tariff war cost US companies and consumers US$4.4 billion a month in 2018

Economists find those who were exposed to the duties overseas ‘paid none of the bill’ – which was passed on to American importers and consumers - They say the US economy has been damaged by the dispute that has seen tariffs applied on about US$283 billion of imports

Washington’s tariff war against its trading partners, particularly China, cost American companies and consumers US$4.4 billion a month last year, according to researchers.
Economists from the New York Federal Reserve and Princeton and Columbia universities assessed the impact of the duties on prices and welfare in the United States, concluding that those who were exposed to the duties overseas “paid none of the bill”.

The research paper was released as the US and China, the world’s two largest economies, are reportedly close to a trade agreement that could see most or all of the tariffs lifted. Chinese President Xi Jinping and his American counterpart Donald Trump are expected to meet in Florida in late March to seal the deal.

It also comes after US Federal Reserve chairman Jerome Powell last week warned of a slowing US economy this year and other risks, including a global slowdown, volatile financial markets and uncertainty over American trade policy.

In the paper, titled “The impact of the 2018 trade war on US prices and welfare”, Mary Amiti, Stephen Redding and David Weinstein said fallout from the dispute – which has seen tariffs applied on about US$283 billion of American imports – had damaged the economy.

They said it had cost US consumers and the firms that import foreign goods an extra US$3 billion per month in added tax costs and another US$1.4 billion a month in deadweight losses – overall welfare costs to society.

The tit-for-tat exchange of duties had plunged the US into its “first episode of large-scale competitive tariff protection since the Great Depression of the 1930s”, according to the paper.

Based on conventional trade models, the researchers found that “the deleterious impacts of the tariffs have been largely in line with what one might have predicted based on a simple supply and demand framework”.

They said the US economy had experienced “substantial increases in the prices of intermediates and final goods, large changes to its supply chain network, reductions in availability of imported varieties, and complete pass-through of the tariffs into domestic prices of imported goods”.

“The entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters,” the economists said.
With the tariffs applied, US producers responded to reduced import competition by raising their prices, according to the paper.

Those prices were found to have gone up by an average 1 percentage point last year – nearly half the annual average rate of producer price inflation from 1990 to 2018.
Goods subject to tariffs saw prices rise 10 per cent to 30 per cent, the researchers said
.
“Given that these numbers are comparable in magnitude to tariffs that were applied, it suggests that much of the tariffs were passed on to US importers and consumers,” the paper said.

Giving the example of washing machines, the economists said the “US import tariffs had an almost immediate effect on prices in the US economy”.

Trump announced the first wave of US tariffs in January 2018, imposing duties of 20 per cent to 50 per cent on imported washing machines and 30 per cent on solar panels.
After those duties were instituted, the cost of major appliances sharply increased after prices had fallen steadily in the previous years.

They were followed by a second wave of tariffs in March on US$18 billion of steel and aluminium imports, and a third round in June on another US$22 billion of steel and aluminium products.

But those duties were dwarfed by the tariffs Washington went on to impose on US$250 billion worth of Chinese goods, starting from July.
How Apple prevailed in the US-China trade war

Over the course of 2018, the US applied duties ranging from 10 to 50 per cent on some US$283 billion of imports. In response, US trading partners – especially China – have retaliated with tariffs averaging 16 per cent on about US$121 billion of American exports.

The economists said they had also seen evidence of the large impact of US and retaliatory tariffs on global supply chains.

https://www.scmp.com/news/china/diplomacy/article/2188610/tariff-war-cost-us-companies-and-consumers-us44-billion-month

“The impact of the 2018 trade war on US prices and welfare” 41 pages. Cited in the article above

http://www.princeton.edu/~reddings/papers/CEPR-DP13564.pdf

WillPowers says

Question: Why can't these companies find a better deal with an American company? Is it because China is the only one that makes the product they want?

This Article Explains Why Apple Makes iPhones In China And Why The US Is Screwed

https://www.businessinsider.com/you-simply-must-read-this-article-that-explains-why-apple-makes-iphones-in-china-and-why-the-us-is-screwed-2012-1

A Tiny Screw Shows Why iPhones Won’t Be ‘Assembled in U.S.A.’

https://www.nytimes.com/2019/01/28/technology/iphones-apple-china-made.html

Kakistocracy says

There are no "better" deals with an American company, only higher end costs to the finished product since a lot of the components are not made in this country anymore.

They just printed trillions of money because of costs being too low. Could have just raised some tariffs and solved it.

The media is full of garbage propaganda that will blame "Trump's trade war" for any slowdown in the economy, even if most of it is normal payback for the tax-cut and a consumer slowdown in China.

The establishment is desperate to continue to make economic gains (for the rich) by ditching the interests of the majority of Americans.

Kakistocracy says

mostly those beloved Mom and Pops - the small businesses that are the backbone of America.

When the left raises the minimum wage, the extra costs are far worse for small businesses in America than whatever caused by tariffs.

Are Elgato and Kaki in favor of higher minimum wages? We want to know.

Elgatouno says

Not to mention all the retaliatory tariffs.

Considering the asymmetry of exports-imports in this country, it is a bit specious to worry about this, is it not?

Half a trillion dollar trade deficit. The last thing to worry about is retaliatory tariffs.

God Forbid the Silly Con Valley Billionaires do a little manufacturing in the Country that made their companies possible, and paid for ALL the underpinning R&D via the Defense Industry.

The America Last/World First mentality. Or, the Americant Mentality. Even though Germany and China do the very opposite of us, with massive trade barriers, tariff and non-tariff.

"It's not FREE TRADE that Causes our Problems!" It sure is. The Trade Deficit also ties strongly into the Budget Deficit. Manufacturing Abroad = Less Taxes.

Oops, AD!!! Great Minds think alike! Interesting correlation:

Debt to GDP:

Total Gov Debt:

Manufacturing at home also means a balance must be sought between a strong and weak dollar.

When a trade deficit blooms, the demand is for a strong dollar, because both finance and importers want it to maximize their incomes.

Which leads to a budget deficit, which finance also wants paid back in strong dollars.

Weaken the dollar helps increase exports, makes imports more expensive, and allows the paying back of debts in weak dollars.

That's to America's General Interest - just not the interest of Amazon and Citigroup.

Elgatouno says

The whole point of tariffs was to close the gap between exports and imports. The gap has widened not closed. This is in part due to the retaliatory tariffs. $3 billion decline in exports just for fruit and nuts. Mental genius he is not.

Trade deficit has been decreasing. Need to wait another year or two to see its impact. Its too soon to make a judgment.

https://tradingeconomics.com/united-states/balance-of-trade

Elgatouno says

The whole point of tariffs was to close the gap between exports and imports. The gap has widened not closed.

You have to look at what were the countries targeted and how trade with these countries was affected. I believe a lot of the tariffs have been deferred while negotiating or canceled after deals.
The current increase of the trade deficit is mostly driven by the tax cut.

Bloomberg can try to lie, he still ain’t beating Trump.

Elgatouno says

The whole point of tariffs was to close the gap between exports and imports. The gap has widened not closed. This is in part due to the retaliatory tariffs. $3 billion decline in exports just for fruit and nuts. Mental genius he is not.

The tariff imposition on our #1 Importer has been delayed.

The downward spiral is that BECAUSE the economy is humming along with low unemployment, that better off people buy imported goods, instead of buying domestic goods, thus increasing the trade deficit.

Tariffs will require a few years to start producing results.

96% of US imports are value-added goods. The average tariff is 2%. That's right, 2%, and half of all imports aren't tariffed at all.

The average tariff rate for the EU is more than three times higher at 6.5%. For Agra, it's 16%!

That's not including the massive, extensive, and detailed German-driven Standards which exclude many manufactured products, either. Those standards exclude most of the world's manufactured goods and are regularly updated to stay modernized exclude new competitive imports

Tariffs work great for Germany and China.

Of course there are going to be short-term problems. The main question is that can the USA be positioned better for trade in the future?

Renegotiating bad trade deals is something that should have occurred gradually over the last 20 or 30 years. Unfortunately, no past presidents have been willing to do this, so Trump is trying to force many changes in a short time period.

People complaining that tariffs are hurting some Americans are probably right. However, that's the price we pay to get better long-term trading terms. It's also not clear that Americans paying tariffs is any worse than Americans paying taxes.

Elgatouno says

Maybe, but then again maybe the results won't out weigh these initial costs. Point is Trump thought he could institute tariffs without retaliations. He just isn't that smart. Why do you think he doesn't want anyone to know how he did in school?

Like it was said earlier, with repeated and ever-growing (over the long term) Trade Deficits, now more than half a trillion, retaliation is not the problem.