The Twit’s Tariffs — a bad idea, he should try thinking once

Let’s examine the twit’s justification for the tariff on steel and aluminum. There seem to be three threads. 1) we need to have this capability for national defense, 2) We need to keep jobs in America, and 3) we are being treated unfairly by other countries and taken advantage of by them.

By imposing a 25% tariff on steel, this means that the 180,000 or so steelworkers and the handful of corporations will indeed remain n business and perhaps even grow a bit. However, the imposition of the tariff will increase the steel components across every industry in American that uses steel by 25%, a cost that is passed on to the buyers of these goods and services. Let’s suppose this impacts 1,000,000 workers directly and indirectly. The employment in those industries will decrease by at least 180,000 jobs and the costs of products will go up with fewer people purchasing them so there will likely be even more unemployment in those steel and aluminum using industrious. So, to maintain the capacity for national defense, the twit has ensured that we will have lower overall production and employment and higher costs, not to mention the increased costs of all goods using steel. It would be cheaper for the country if we simply subsidized the steel industry and kept the production levels where they meet defense needs and stockpile their output until needed, if ever. By subsidizing steel and aluminum we would not incur the unemployment in industries using steel and aluminum as inputs and increase the cost of their goods which increases the cost of goods to the American Consumer. Subsidize is the more rational and economically sound approach to maintaining steel and aluminum production capabilities for national defense (armament) purposes.

Keeping job in America is a hot-button issue. Unfortunately, when tariffs are involved, fewer jobs remain in America as they are lost not to foreign competition but to increased prices of the output of those jobs remaining here that need the tariff to protect them. So, under the guise of keeping jobs in America, tariffs actually increase the decline of jobs. Reread the prior paragraph.

The twit alleges often and loudly that foreign countries are taking advantage of America and that there isn’t an even playing field. However, I have never heard him explain how foreign countries are taking advantage of American in trade. The closest the twit has come to illustrate this is to point at the trade deficit that results when we spend more in country x than country x spends here. What that means is that country x uses its resources and labor to produce things that we get from them in exchange for our currency (probably electronic bookkeeping entries). So we get real things and they get money. Remember there is nothing backing our money except faith that it is money. So we get something for an idea (money) of value. Unfortunately, if the countries with a positive trade balance of our dollars ever figure out they are giving us something for nothing in return our easy life will come to a sudden end. The twit is really not quite understanding that we win when we have a deficit, we win big. And he wants to put a stop to that by claiming unfair trade practices that he can’t explain or name.

 

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The Twit’s Tariffs

 

Another day, another tariff as the twit in the White House tries to reduce the US trade deficit. Unfortunately, things are often not what they seem nor as bad as they sound. Specifically, trade deficits are not what they seem nor as bad as they sound. Unfortunately, the twit in the White House, who claims to be a rich guy, does not seem to understand money. He seems to think our dollars paid for China’s development to our detriment. Let’s look at the facts.

 

 

China sends good to America in exchange for US Dollars. The goods that China sells in America require raw material inputs and labor to fashion them. Since we run a trade deficit with China that means they sell us more goods than we sell to them so the extra goods they sell to us require we ship them US Dollars (a good percentage of which are electronic entries in financial accounts. the rest of pieces of paper with printing on them).

 

 

Take a look at a US Dollar. What backs it up, Gold? NO, nothing backs it up. You will find that the law, as printed on the front, mandates that ‘this note is legal tender for all debts public and private.’ It is fiat money. It is money because the US Government says it is and because almost all Americans think it is money. However, the law requiring one accept it as payment stops at our borders (and the borders of countries using the US Dollar as currency). Yet, the Chinese and almost all other nations accept our US Dollars in payment. If you think about it foreign nations and nationals accepting US Dollars in payment is very strange.

 

 

The US issues a lot of US Dollars on a virtually continuous basis. One would think that would create inflation. However, sufficient US Dollars go to foreign entities who sell us goods and services in exchange for those dollars. So, one break on inflation is the sheer volume of dollars flowing overseas. Then too, some exchanges (market) are traded in US Dollars, oil springs to mind. The international oil market is cleared with US Dollars. With a significant portion of the US Money Supply tied up in the international oil market, we have another break on inflation.

 

 

So let’s take the twit’s logic and stop the flow of money abroad. That means we will enter an inflationary cycle. America will be awash in money, as the twit calls it, coming home. The domestic value of the US Dollar will plummet (and so will the value of the dollar in financial markets).

 

 

At the same time the twit’s tariffs will kick in and the price of goods Americans, individuals and firms, will increase by at least the value of the tariffs (not to mention the inflationary impact of the flush of dollars driving all prices up, remember, inflation?). Americans will be able to afford less of the goods they have been purchasing. When prices go up, standards of living go down and Americans can not afford the domestic products the tariffs are supposed to generate.

 

 

Obviously there is more. But this is enough for today.