Impact of Trade War or will Impact Trade War? Another Chinese bank implodes

[Ponca Dan]

How do you fight back against unfair trade practices of other countries if you do not use tariffs?

The only unfair trade practices that the US needs to address involve the theft of proprietary property. That's one of the main reasons the WTO was established. Almost without fail China has abided by rulings from the WTO.

The other unfair trade practices that get bandied about include a foreign government subsidizing one of its companies to give that company a competitive edge in pricing, and tariffs one country places on another.

So let's look at those one at a time.

A government gets the money to subsidize a politically favored company by taxing its citizens. It takes from its "Joe Sixpacks" and gives it to a politically connected company, which then exports its product to another country and is able to charge lower prices. In other words the South Korean "Joe Sixpacks," for example, are paying a portion of the bill when an American buys one of the subsidized products, say a new washer/dryer. When you understand that you realize the unfair trade practice is actually directed at the taxpayers of the subsidizing government, not the consumers from the country buying the product. So the appropriate solution for the consuming country's government is to do nothing. Maybe cheer them on, because it realizes the bargain its consumers are getting.

As has been discussed ad nauseam on this board a tariff is a tax on the consumers of the country imposing it. It is a hidden tax, if you will, on a government's own citizens. Like with subsidies the appropriate response is to do nothing. Responding with tariffs of your own does nothing but tax your own citizens. It's telling the other country: "Oh, yeah! We'll show you! We'll harm our citizens just as much as you harm yours! That'll show ya!"

 

[Ponca Dan]

He’s already stated that he thinks the WTO should be used.

It’s pretty ironic, IMO, that the anarchist has stated that a global organization should be trusted to deal with unfair trade practices.

Regrettably we don't live in an anarchist world, so one must use the tools available to him. If we did live in an anarchist world, I would contend there would still be a need for organizations like the WTO. And since there would be a need it is certain that such organizations would exist.

 

[windriverrange]

He’s already stated that he thinks the WTO should be used.

It’s pretty ironic, IMO, that the anarchist has stated that a global organization should be trusted to deal with unfair trade practices.

Trapped, it is ironic, but I don't think DJT thinks they will do anything and he is illustrating that by mentioning they should. Kind of like asking the UN to solve a crisis, that's what they are there for and that's what they should do but they don't hardly ever solve anything. If the WTO won't jump in when its obvious that they should, what the heck use are they useful for? I personally think that its far better to work out trade treaties on a per case basis than try to have some corrupt and useless world organization monitor fair trade based on different classifications and nationalistic feelings/wishes. Seriously, how the hell is China still classifies as a "developing nation?"

 

[Headhunter]

The only unfair trade practices that the US needs to address involve the theft of proprietary property. That's one of the main reasons the WTO was established. Almost without fail China has abided by rulings from the WTO.

The other unfair trade practices that get bandied about include a foreign government subsidizing one of its companies to give that company a competitive edge in pricing, and tariffs one country places on another.

So let's look at those one at a time.

A government gets the money to subsidize a politically favored company by taxing its citizens. It takes from its "Joe Sixpacks" and gives it to a politically connected company, which then exports its product to another country and is able to charge lower prices. In other words the South Korean "Joe Sixpacks," for example, are paying a portion of the bill when an American buys one of the subsidized products, say a new washer/dryer. When you understand that you realize the unfair trade practice is actually directed at the taxpayers of the subsidizing government, not the consumers from the country buying the product. So the appropriate solution for the consuming country's government is to do nothing. Maybe cheer them on, because it realizes the bargain its consumers are getting.

As has been discussed ad nauseam on this board a tariff is a tax on the consumers of the country imposing it. It is a hidden tax, if you will, on a government's own citizens. Like with subsidies the appropriate response is to do nothing. Responding with tariffs of your own does nothing but tax your own citizens. It's telling the other country: "Oh, yeah! We'll show you! We'll harm our citizens just as much as you harm yours! That'll show ya!"

What you fail to take into your equation when you claim that tariffs are a tax on the citizens of the country imposing them is that many products are at a price point where they can't be raised or the buyer will go elsewhere or stop buying them completely.

Why has there been no increase in the price of Chinese products? Matter of fact prices have actually decreased in a few months.

China is paying these tariffs not the American consumer.

 

[Ponca Dan]

Trapped, it is ironic, but I don't think DJT thinks they will do anything and he is illustrating that by mentioning they should. Kind of like asking the UN to solve a crisis, that's what they are there for and that's what they should do but they don't hardly ever solve anything. If the WTO won't jump in when its obvious that they should, what the heck use are they useful for? I personally think that its far better to work out trade treaties on a per case basis than try to have some corrupt and useless world organization monitor fair trade based on different classifications and nationalistic feelings/wishes. Seriously, how the hell is China still classifies as a "developing nation?"

The error in your thinking is the Trump administration is not bringing complaints before the WTO. It has done so only once, the WTO ruled in America’s favor, and China stopped doing what it was doing. It is unfair of you to say the WTO “won’t jump in” if it’s bylaws don’t allow it to jump in unless an offended country brings a case before it.

As I understand it the WTO does not negotiate trade agreements between countries. It’s main purpose is to adjudicate disagreements in trade practices and violation of trade agreements between the participating countries. China virtually got on its knees and begged to be admitted into the WTO. Membership is crucial to them. The WTO enjoys tremendous leverage over them. And as a result it has followed its rulings almost every time. It makes no sense that the Trump administration refuses to go to the WTO. As I said earlier one can’t help but think the administration does not want to resolve issues, because it can leverage its talking points to convince a large portion of the public that it is fighting an enemy on its behalf.

 

[Ponca Dan]

What you fail to take into your equation when you claim that tariffs are a tax on the citizens of the country imposing them is that many products are at a price point where they can't be raised or the buyer will go elsewhere or stop buying them completely.

Why has there been no increase in the price of Chinese products? Matter of fact prices have actually decreased in a few months.

China is paying these tariffs not the American consumer.

I’m sure you will pooh-pooh the source, but this was the first thing that popped up after a quick google search. In fact China is not paying the tariffs.

https://www.newsweek.com/trump-trade-war-china-tariffs-study-1453160

I agree that producers have been terrified to raise prices out of fear of overpricing the market. Manufacturers have absorbed the cost of the tariffs in large part for precisely that reason. However, with this new round of tariffs they are having no choice but to raise their prices. I think we will indeed see prices rise over the next few months, and Trump will attempt to stall inflation by manipulating our currency with the same tactic he has condemned China. And the condemnation is deserved. But if it’s wrong for China to do it it is wrong for America, don’t you agree?

Now, I’ve got to get to work!

 

[windriverrange]

The error in your thinking is the Trump administration is not bringing complaints before the WTO. It has done so only once, the WTO ruled in America’s favor, and China stopped doing what it was doing. It is unfair of you to say the WTO “won’t jump in” if it’s bylaws don’t allow it to jump in unless an offended country brings a case before it.

As I understand it the WTO does not negotiate trade agreements between countries. It’s main purpose is to adjudicate disagreements in trade practices and violation of trade agreements between the participating countries. China virtually got on its knees and begged to be admitted into the WTO. Membership is crucial to them. The WTO enjoys tremendous leverage over them. And as a result it has followed its rulings almost every time. It makes no sense that the Trump administration refuses to go to the WTO. As I said earlier one can’t help but think the administration does not want to resolve issues, because it can leverage its talking points to convince a large portion of the public that it is fighting an enemy on its behalf.

So no American President has ever brought charges to the WTO against China regarding theft of intellectual property? PD I really don't care for these monolithic entities charged with keeping everyone playing from the same page. Like I said, how in the world can China be considered a "developing country?" They are trying to put men on the moon, they have hypersonic missiles etc etc. I envision Eritrea as a "developing nation" not China, that in and of itself allows them to blur the lines and be held less accountable.

If Trump wants to try to bring them to their knees, so be it, no big deal to me. This is a multi-marathon event not a sprint. As Headhunter said, the short term pain is going to be more than made up by long term gains.

Additionally, China is in a bigger bind now with the protests in HK. They can't pull a Tiananmen Square deal this time as repercussions of heavy handedness will resonate world wide.