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timschochet

TRADE WAR discussion thread UPDATE:: Trump claims there is a secret, additional part of the agreement with Mexico, but Mexico denies it.

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1 minute ago, RedmondLonghorn said:

I don't engage in discussions that link the two, because the two aren't linked. 

Trade policy, tax policy, and things like the social safety net are separate topics. The idea that they are inextricably linked is inaccurate. 

Well if folks are voting against trade deals because they see the rich getting richer while their lives are getting worse, then you have a political problem you need to fix.  Even if your personal view is that the issues are not linked.

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1 minute ago, fatguyinalittlecoat said:

Likely true, but for some reason the working class seems to have enough votes to hijack trade deals but not to stop tax breaks for the rich.

Because, recently anyway, they have been manipulated into that by this wave of right wing populism.

There are also fairly complex psychological reasons why people don't vote in favor of higher taxes for the wealthy. There is also an agency problem, because outside of the most ardent progressives, there are relatively few mainstream politicians who really push for changing tax policy in that way. And those people, for better or worse, also advocate for other positions that makes it hard for them to build a "big tent" among the working class. 

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12 minutes ago, RedmondLonghorn said:

I enjoyed the answer from one economist that was "Strongly Disagree", but only had a confidence level of 3. Either she was really hedging her bets, or she doesn't really understand what "Strongly" means.

I can't find it now, but I think I've seen an explanation before that makes sense of this. Something like: confidence level indicates how certain a person is that they have the direction right, and "Strongly Agree" versus "Agree" indicates how big they think the effect is. Or something like that. So if you're 99% percent certain that there will be positive effect, but you think it will be very small, you might have a high confidence but only "Agree" rather than "Strongly Agree." But if you suspect there will be a huge positive effect but you're not at all sure you're right about that, you could have a low confidence but still "Strongly Agree" rather than just "Agree."

I'm sure I'm botching the explanation, but I think I remember reading something like that.

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1 minute ago, fatguyinalittlecoat said:

Well if folks are voting against trade deals because they see the rich getting richer while their lives are getting worse, then you have a political problem you need to fix.  Even if your personal view is that the issues are not linked.

But people aren't "voting against trade deals". There isn't some groundswell for protectionism, from what I can tell. It is something that really resonates with some people who are desperate for change, but it is just one of a number of things that got Trump elected. I would guess it isn't even in the top handful of things, outside of some specific locations in the Rust Belt. How many members of the House of Reps, in either party, campaigned on a platform in support of protectionism? I don't know the answer, but it can't be a very big number.

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3 minutes ago, RedmondLonghorn said:

But people aren't "voting against trade deals". There isn't some groundswell for protectionism, from what I can tell. It is something that really resonates with some people who are desperate for change, but it is just one of a number of things that got Trump elected. I would guess it isn't even in the top handful of things, outside of some specific locations in the Rust Belt. How many members of the House of Reps, in either party, campaigned on a platform in support of protectionism? I don't know the answer, but it can't be a very big number.

Bernie and Trump both made it a major part of their platforms and both did way better than expected.  

Also, how many candidates ran on a platform favoring free trade?  I don’t think that’s a large number either.

Edited by fatguyinalittlecoat

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Just now, fatguyinalittlecoat said:

Bernie and Trump both made it a major part of their platforms and both did way better than expected.  

That's certainly true. I don't think it was the central appeal of either of them, but it was certainly a prominent feature.

Unfortunately, it is really a question of people being uninformed or, more likely, misinformed by campaigns for cynical reasons.

The fact the US hasn't engaged heavily in protectionism for decades also makes it harder to have "political memory" for the problems with that set of policy tools. Plus people clearly attribute a lot of disparate and complex changes in the economy, that haven't in fact been caused by free trade, to it. We see the same thing with immigration.

 

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17 minutes ago, fatguyinalittlecoat said:

Also, how many candidates ran on a platform favoring free trade?  I don’t think that’s a large number either.

That's the de facto position of mainstream Republicans and Democrats.

There are a lot of things wrong with the mainstream of both major parties, but that ain't one of them.

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30 minutes ago, Maurile Tremblay said:

I can't find it now, but I think I've seen an explanation before that makes sense of this. Something like: confidence level indicates how certain a person is that they have the direction right, and "Strongly Agree" versus "Agree" indicates how big they think the effect is. Or something like that. So if you're 99% percent certain that there will be positive effect, but you think it will be very small, you might have a high confidence but only "Agree" rather than "Strongly Agree." But if you suspect there will be a huge positive effect but you're not at all sure you're right about that, you could have a low confidence but still "Strongly Agree" rather than just "Agree."

I'm sure I'm botching the explanation, but I think I remember reading something like that.

It’s definitely not as sophisticated and well implemented as the Offdee scale.

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I found an enlightening explanation of the linkage between trade deficits and budget deficits. Guess which direction the causality is in?

Quote

The United States foreign trade deficit continues to rank near the top of disturbing economic issues. A number of explanations for the trade imbalance have been proffered, including unfair trade practices abroad, the dollar's high international value, financial problems of some large developing countries, and sluggish growth elsewhere in the industrial world. Depending on the explanation selected, alternative remedies have been proposed. Much of the discussion to date, though, has failed to consider the mix of macroeconomic policies—that is, fiscal and monetary policies—in contributing to the recent trade imbalance.

With a few exceptions, little is understood of the relationship between federal government budget deficits and trade deficits. Consequently, solutions to our trade deficit tend to emphasize policy measures that are either impotent or very costly. Typical recommendations include protectionist policies to reduce imports without regard to how our trading partners might respond, or accommodative monetary policy to reduce the dollar's international value without considering its domestic value. These recommendations ignore the consequences of reducing the trade deficit without a corresponding reduction in the budget deficit.

The unpleasant arithmetic of budget and trade deficits shows that, with aggregate savings fixed, large budget deficits inevitably will be accompanied by foreign trade deficits or a slowing in domestic investment. Further, improvement in the trade balance, if achieved with out comparable reductions in the budget deficit, may not necessarily be beneficial. If, for example, improvement comes through import restrictions, it will simply result in growing weakness in private investment. And while accommodative monetary policy may drive down the international value of the dollar, it is not clear that this development, in and of itself, will lead to a significant improvement in the trade balance. In fact, if the economy is at full employment so that aggregate savings are fixed, accommodative monetary policy could worsen the trade balance.

Link to the whole essay

My favorite part of this is that it was written on January 1st...1987.

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2 hours ago, RedmondLonghorn said:

I found an enlightening explanation of the linkage between trade deficits and budget deficits. Guess which direction the causality is in?

Link to the whole essay

My favorite part of this is that it was written on January 1st...1987.

What about purchasing power in terms of % of GDP (we’re on top) or PPP (China is #1)?

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30 minutes ago, Sheriff Bart said:

Pretty sure the trade war with China started with the solar panel tariffs.

The totality of Trump's economic policies are completely psychotic and destined to end very badly.

He is crowing about the stock market and economy now, but at this rate, it will be a major problem in 12-18 months. Hopefully it is a moot point before then.

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2 minutes ago, RedmondLonghorn said:

The totality of Trump's economic policies are completely psychotic and destined to end very badly.

He is crowing about the stock market and economy now, but at this rate, it will be a major problem in 12-18 months. Hopefully it is a moot point before then.

Maybe sooner... 

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19 hours ago, RedmondLonghorn said:

I found an enlightening explanation of the linkage between trade deficits and budget deficits. Guess which direction the causality is in?

Link to the whole essay

My favorite part of this is that it was written on January 1st...1987.

Yeah, I'd never thought about it in explicitly those terms before, but now that I have, it's actually pretty obvious.

Trade imbalances are, in a sense, just an accounting gimmick -- an artifact of the convention that the purchase and sale of goods and services are included, but not capital investments. Buying a car counts, but buying a treasury bill does not. When everything is included, including capital investments, there is no imbalance. Everything is accounted for and the overall ledger is (roughly) square.

So "are we buying more goods and services from foreigners than they're buying from us?" is basically another way of asking "are foreigners investing more capital in our country than we're investing in theirs?"

How much capital foreigners are investing in our country is largely a function of how many government bonds we're issuing, which is a function of the size of our budget deficit. So when we run a bigger budget deficit, we should expect our trade deficit to increase accordingly.

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1 minute ago, Maurile Tremblay said:

Yeah, I'd never thought about it in explicitly those terms before, but now that I have, it's actually pretty obvious.

Trade imbalances are, in a sense, just an accounting gimmick -- an artifact of the convention that the purchase and sale of goods and services are included, but not capital investments. Buying a car counts, but buying a treasury bill does not. When everything is included, including capital investments, there is no imbalance. Everything is accounted for and the overall ledger is (roughly) square.

So "are we buying more goods and services from foreigners than the're buying from us?" is basically another way of asking "are foreigners investing more capital in our country than we're investing in theirs?"

How much capital foreigners are investing in our country is largely a function of how many government bonds we're issuing, which is a function of the size of our budget deficit. So when we run a bigger budget deficit, we should expect our trade deficit to increase accordingly.

Essentially, yes. Except for your use of the term "roughly".

When you get into the serious :nerd: stuff of the balance of payments, you become aware that the current accounts (which include the trade surplus or deficit) are only half of the equation. There is also the capital account, which must exactly offset whatever occurs in the current account.

I have to admit, while I am pretty solid in my understanding of microeconomics and finance, I even get a little sketchy on macro when it comes to some of this stuff. It can be hard to grasp.

I suspect people glom onto the trade surplus or deficit because it is easier to understand, but, in so doing, they are prone to misinterpretation, because it is only part of the picture.

For instance, a corollary of we have been running a trade deficit for years is we have been running a surplus in the capital account for years. Which one sounds more worrisome?

The reality is, as usual, that neither is necessarily good or bad. There are pros and cons to both. 

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42 minutes ago, RedmondLonghorn said:

Essentially, yes. Except for your use of the term "roughly".

When you get into the serious :nerd: stuff of the balance of payments, you become aware that the current accounts (which include the trade surplus or deficit) are only half of the equation. There is also the capital account, which must exactly offset whatever occurs in the current account.

I have to admit, while I am pretty solid in my understanding of microeconomics and finance, I even get a little sketchy on macro when it comes to some of this stuff. It can be hard to grasp.

I suspect people glom onto the trade surplus or deficit because it is easier to understand, but, in so doing, they are prone to misinterpretation, because it is only part of the picture.

For instance, a corollary of we have been running a trade deficit for years is we have been running a surplus in the capital account for years. Which one sounds more worrisome?

The reality is, as usual, that neither is necessarily good or bad. There are pros and cons to both. 

I appreciate you sharing your expertise in this thread.  If I am not careful I just might have learned something.

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3 minutes ago, Ditkaless Wonders said:

I appreciate you sharing your expertise in this thread.  If I am not careful I just might have learned something.

I have learnt plenty about the law and BBQ from you, old pal.

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14 minutes ago, RedmondLonghorn said:

I have learnt plenty about the law and BBQ from you, old pal.

All I know about either is that if you overcook it try to hide that fact with some good sauce.

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28 minutes ago, msommer said:

Here is what you need to know about the risks of a US trade war

From that bunch of liberals at World Economic Forum

The people who most need to read that almost certainly won't because they have no interest in learning more, would disregard it as globalist/elitist propaganda, or they couldn't read an article that long. Or some combination of the above. 

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Ha ha! You fool! You fell victim to one of the classic blunders - the most famous of which is "never get involved in a trade war in Asia" - but only slightly less well-known is this: "Never go in against a Russian when death is on the line"! Ha ha ha ha ha ha ha!

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24 minutes ago, timschochet said:

It’s on with China starting tomorrow! 

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSKBN1GX20V

No worries though; I’m sure the Chinese will surrender very quickly. They won’t retaliate. 

Not to worry, Larry Kudlow is on top of things:

Quote

"A thought that I have is the United States could lead a coalition of large trading partners and allies against China, or to let China know that they’re breaking the rules left and right… That’s the way I’d like to see. You call it a sort of a trade coalition of the willing." - Kudlow

So far, so good.

There is just one problem:

Quote

Yet Kudlow’s “trade coalition of the willing” is exactly the plan that Trump had abolished at the start of his presidency. The Trans-Pacific Partnership, or TPP, was a US-led trade agreement that includes 12 countries around the Pacific Rim, who together account for about 40% of the world’s GDP, but excludes China. Just three days after his inauguration, Trump, who had argued that the TPP could harm American manufacturing, pulled the US out of the trade deal, just as he promised on the campaign trail.

The TPP requires members to commit to heightened standards in areas like labor law, environmental protection, and intellectual property (IP), in addition to lowering tariffs. Former US president Barack Obama framed the TPP, one of his signature foreign-policy initiatives, as an effort to set free-trade standards in Asia ahead of China. If China were to join the partnership, it would have to crack down on all the things Trump has complained about, from dumping to stealing American IP.

Oh.

Edited by RedmondLonghorn
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US - “We’re hitting you with $60 billion in tariffs”

China - “Let me pull that out of my couch cushions”

Americans - “Why am I payin more for my iPad and Nike’s?”

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46 minutes ago, lakerstan said:

US - “We’re hitting you with $60 billion in tariffs”

China - “Let me pull that out of my couch cushions”

Americans - “Why am I payin more for my iPad and Nike’s?”

While amusing, the bolded isn't exactly true. China has lots of problems. They have a really serious debt problem, for one thing. That doesn't make them unique, since it is nearly universal, but they are in the soup too.

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1 hour ago, RedmondLonghorn said:

While amusing, the bolded isn't exactly true. China has lots of problems. They have a really serious debt problem, for one thing. That doesn't make them unique, since it is nearly universal, but they are in the soup too.

Maybe they can sell some of the 3 trillion dollars worth of US treasury bonds they have accumulated to help.

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8 hours ago, timschochet said:

It’s on with China starting tomorrow! 

https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSKBN1GX20V

No worries though; I’m sure the Chinese will surrender very quickly. They won’t retaliate. 

China, pfft!  They only look short term, not hundreds of years down the road like we do. They'll crumble at the first inconvenience. 

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8 hours ago, RedmondLonghorn said:

Not to worry, Larry Kudlow is on top of things:

Quote

"A thought that I have is the United States could lead a coalition of large trading partners and allies against China, or to let China know that they’re breaking the rules left and right… That’s the way I’d like to see. You call it a sort of a trade coalition of the willing." - Kudlow

So far, so good.

There is just one problem:

Quote

Yet Kudlow’s “trade coalition of the willing” is exactly the plan that Trump had abolished at the start of his presidency. The Trans-Pacific Partnership, or TPP, was a US-led trade agreement that includes 12 countries around the Pacific Rim, who together account for about 40% of the world’s GDP, but excludes China. Just three days after his inauguration, Trump, who had argued that the TPP could harm American manufacturing, pulled the US out of the trade deal, just as he promised on the campaign trail.

The TPP requires members to commit to heightened standards in areas like labor law, environmental protection, and intellectual property (IP), in addition to lowering tariffs. Former US president Barack Obama framed the TPP, one of his signature foreign-policy initiatives, as an effort to set free-trade standards in Asia ahead of China. If China were to join the partnership, it would have to crack down on all the things Trump has complained about, from dumping to stealing American IP.

Oh.

Can't help but laugh at this bafoon. 

Donnie Two Scoops:  "Oh yeah, me and my buddies will take our ball and go home".

"Buddies":  :oldunsure: "Um...you talking about us?  You told us you don't want to play with us anymore"

 

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Indications are China will retaliate against Boeing, Apple, and California almond growers (our leading crop.): 

https://www.google.com/amp/s/www.cnbc.com/amp/2018/03/22/trumps-big-tariff-blow-on-china-may-cause-a-backlash-against-boeing.html

Boeing is responsible for 24% of the Dow’s increase since 2016. China is pledged to purchase a trillion dollars of aircraft- but they could easily switch over to Airbus in retaliation. 

Nope- nothing to see here folks. 

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18 minutes ago, timschochet said:

Indications are China will retaliate against Boeing, Apple, and California almond growers (our leading crop.): 

https://www.google.com/amp/s/www.cnbc.com/amp/2018/03/22/trumps-big-tariff-blow-on-china-may-cause-a-backlash-against-boeing.html

Boeing is responsible for 24% of the Dow’s increase since 2016. China is pledged to purchase a trillion dollars of aircraft- but they could easily switch over to Airbus in retaliation. 

Nope- nothing to see here folks. 

Aerospace exports are the biggest export for the State of Washington by a factor of over 10x ($42 bln vs. the next largest at $3.7 bln). It is also pretty big for South Carolina. 

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On the news they’re asking, “Will China start a trade war as a result of these tariffs?”

Trump started the trade war, just now. China can’t start a trade war; they’ve already been fired upon. All they can do is either capitulate or  respond in kind. 

Now word comes that in addition to almonds and Boeing, they may decide to punish soybean imports. 

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Lutherman2112 said:


Every time I see this thread I can't help but think of this song. Instead of a trade war, I hear gay bar.


I picture Eric Cartman running down the hallway yelling "TRADE WARRRRR!!!"

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1 hour ago, timschochet said:

On the news they’re asking, “Will China start a trade war as a result of these tariffs?”

Trump started the trade war, just now. China can’t start a trade war; they’ve already been fired upon. All they can do is either capitulate or  respond in kind. 

Now word comes that in addition to almonds and Boeing, they may decide to punish soybean imports. 

Overheard in Germany in 1939:

On the news they're asking, "Will Britain start a war as a result of these land expansion polices?"

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2 hours ago, timschochet said:

Indications are China will retaliate against Boeing, Apple, and California almond growers (our leading crop.): 

https://www.google.com/amp/s/www.cnbc.com/amp/2018/03/22/trumps-big-tariff-blow-on-china-may-cause-a-backlash-against-boeing.html

Boeing is responsible for 24% of the Dow’s increase since 2016. China is pledged to purchase a trillion dollars of aircraft- but they could easily switch over to Airbus in retaliation. 

Nope- nothing to see here folks. 

Make Airbus Great Again. Actually, China's endgame is to break the Boeing/Airbus dominance with Comac, their airline maker.

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I think sometimes it's easy to look at politics as a sort of everlasting football game: you root for your "team" as it moves up and down the field, you cheer and groan, but it doesn't really affect you; you're just a spectator. The Russian scandal is like this.

Every once in a while though, something happens that reminds us that it's all very real, and that what Trump does really can have a direct effect on how you and I live. This is one of those times. There was no urgent reason for these tariffs, and they're going to punish much of America.

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6 minutes ago, timschochet said:

I think sometimes it's easy to look at politics as a sort of everlasting football game: you root for your "team" as it moves up and down the field, you cheer and groan, but it doesn't really affect you; you're just a spectator. The Russian scandal is like this.

Wrong-o.

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Just now, Gr00vus said:

Wrong-o.

I used the word "like", Gr00vus. I realize that it actually affects me as well, but you don't see it affect you on a daily basis so it's easier to be detached.

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6 minutes ago, timschochet said:

I used the word "like", Gr00vus. I realize that it actually affects me as well, but you don't see it affect you on a daily basis so it's easier to be detached.

Russians cracking our infrastructure doesn't affect me on a daily basis? Beyond that, if the Russians actually did meddle into our election to the extent that Trump isn't a legitimate holder of office, that definitely effects me on a daily basis.

i know what you're getting at, find a better example. How about immigration, nope, shipping out all the cheap labor will cause prices of goods to go up. Lets think of another one....taxes, nope...maybe the whole U.S. embassy in Israel thing, oh wait, I'm Jewish...uhhh lets see, ####### with the football players protesting, i think that's a winner for me since I barely watch the NFL anymore and always skip the national anthem. Winner!

Edited by Gr00vus

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19 minutes ago, Gr00vus said:

Russians cracking our infrastructure doesn't affect me on a daily basis? Beyond that, if the Russians actually did meddle into our election to the extent that Trump isn't a legitimate holder of office, that definitely effects me on a daily basis.

i know what you're getting at, find a better example. How about immigration, nope, shipping out all the cheap labor will cause prices of goods to go up. Lets think of another one....taxes, nope...maybe the whole U.S. embassy in Israel thing, oh wait, I'm Jewish...uhhh lets see, ####### with the football players protesting, i think that's a winner for me since I barely watch the NFL anymore and always skip the national anthem. Winner!

:lol:

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48 minutes ago, timschochet said:

Dow now down 700 points.

So you are going to use a one day movement to judge the effectiveness of this tariff...

Edited by Weebs210

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Just now, Weebs210 said:

So you are going to use a one day forecast to judge the effectiveness of this tariff...

Oh no. I think it will have a far worse effect than just a 700 point drop in the Dow. This is just the start. It's going to be very very bad. I hope I'm wrong, obviously.

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