Slap China with a tariff? Why or why not?

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• Tariffs might be the only way to entice some of the larger corporations to bring manufacturing back to this country. It's gotten to the point that any new products developed in the US, are almost immediately subcontracted to an overseas company (does Foxcom come to mind?).

  • If not tariffs then why not tax breaks & onerous regulations? Give them a break for opening a plant in the US, another for hiring US Citizens, dump all/most the BS from all the government agencies.

    • That is my solution. The cost of shipping is very high. Get labor costs in line with the value of the work and make it financially attractive to produce here and there will be a break even point where US production at the expense of Chinese production makes sense.

      • The shipping is very clogged, too. During the Christmas season the main west coast ports get so clogged (LA, Long Beach, Oakland) that they divert ships to Portland, Tacoma, Seattle and even Anchorage. If they didn't their product would never get unloaded in time for Christmas. It's actually faster to unload in Anchorage and truck it down believe if or not.

        Then they end up shipping empties back to China or they'd run out of containers as there's a big imbalance between what goes west vs. what goes East.

        • I know that is a fact from the time I used to work as a truck driver, hauling containers from the port in Newark/Elizabeth NJ, and Staten Island NY.
          The 3 months before the holidays are crazy time. We had to hire extra owner-operators just to pull containers out of the ports and bring them to our yard so the regular drivers could do deliveries. We also had to rent extra lot space to store the loaded containers waiting for delivery, and empties to return to the ports. We would work 14-18 hours a day just trying to get deliveries done on schedule.

      • Not going to happen as long as the unions have a say in it. Once upon a time we had a quality edge, which was quickly eroded by these thugs.

        • Here's what needs to happen on a large scale: Manufacturer needs to ignore the collective bargaining agreement and tell the union to sue or do whatever it has to. At the same time tell the rank and file that they are fired but will be rehired at X% of the bloated union scale. In other words, pay what the job is worth. If Rank and File say no, then they are gone for good and dozens of out of work people will line up to take his place. What could go wrong? :D

        • Seriously, how does an automotive assembly line worker deserve $50-$75 an hour for tightening a freaking nut?
          I can find 30 million or so people that would be more than happy to do that job for $20/hr.

        • Plus amazing benefits!

        • To quote a friend of mine who was an anti-union lawyer. You bargain, bargain, bargain, then give them your best, last and final offer. If they don't take it you fire them and hire replacements. Then you get the strike, death threats, accusations, lies and other assorted BS. Then when they realized their screwed they'll go to the NLRB. (Ask me how I know).

    • That's what countries like China and India are doing, beating us at our own game.

      • We're beating ourselves. That's my larger point.

  • Then without foreign competition they will charge more for their goods because they could.

• Tariffs against a nation that owns much of your debt might be a dumb idea.

  • Yes, and no. The longer we wait, the more our power to deal effectively with them evaporates. Right now, worst scenario where they call in their debts, we'd pay them with an inflated currency, devalued to a certain amount. Wait too long, and there would be civil unrest in the US in response to the much greater inflation we would have to generate to devalue our dollar.

    We're neck deep in the trade deficit hole, and the least we should do is stop digging.

    I think that one of their aims is to eliminate our currency as the de facto world currency. They're most of the way to where they can do that simply by calling in the debt.

• Another thought on tariffs: They are often protectionist. They often alter market realities, and in a pure global economy, that means that less efficient producers get unduly rewarded for bad or unprofitable behavior.

  That isn't necessarily bad IMO. Suppose some country that wants to destroy your country hits upon trade manipulation as a strategy. Whether that is a tariff or under-the table incentives are merely tactics. Supposing they pass subsidies on to their own industries, and in time, create an economic chokehold upon your country. Can't happen? There are lots of countries whose agricultural sector has evaporated completely, or at least, they cannot feed their population without having to have trade lines operating at a high efficiency. . If they make their ag suppliers mad, they are vulnerable to extortion. That's when the economic humping begins...

  Now, of course, we are in a global economy, so we can go elsewhere for what we want -- but it is still within the realm of possibility for a skilled manipulator with the resources of a nation at their disposal to make you very vulnerable. Remember when the Hunt brothers nearly cornered the *world* silver market? That was just a couple of rich guys, and silver passes as *currency*. China has a lot more resources than that.

  I think within reason, government has to bend the economic curve in order to keep their citizenry safe. I think when it goes too far, it turns into more of the corporate welfare we despise. However, it's like Catullus said about having a strong military: "You don't need to carry a sword in order to die upon one."

  A tariff for China depends upon whether or not you believe they are wielding an economic sword against us. If you do, then really the question is: What are we going to do about it?

  • I do agree on the matter of economic sword. I've used the dagger-in-belly metaphor a few times in this discussion, as they are bleeding us like a sleeping cow (in this regard, we don't even rate paper tiger anymore). I realize this is all irrational imagery, but proper rage requires it

    I recall you said something earlier in the other thread about how much money China--as central planners--spends in order to achieve its economic goals and shape its trade program. The caveat i have to this, which i don't often see discussed, is that they create money for this end. In a normal trade imbalance, of the kind we suffer under, their currency should naturally rise against ours, as Dollars are exchanged in markets for Renminbi to capitalize on their gains and fund internal investment. However, for years before QE1 was a practical dream of the Fed, the People's Bank has short-circuited those markets and simply printed up new money to absorb the incoming surplus dollars, both freeing up those dollars for further investment, and suppressing the value of their currency.

    Bernanke wrongly attributed this to some glut theory about the savings rates of Asian nations, in order to explain the seemingly massive amounts of investment they can partake in our bond and real-estate markets. But he missed the huge injections of foreign fiat behind the scenes

    While our fiat is based on the full faith and credit of the U.S. government and economy, theirs is based--in large part--on faith in the structural trade deficits they have so skillfully maintained with the U.S. I would first tip my hat to them for the manuever, and then draw my sword..

  • I could care less about a global economy, I care about our economy and I think this would help us instead of others.

    Many American companies are heavily invested in foreign manufacturing so slap a 50% import tariff on all imported goods. Cut the corporate tax rate to 15% to encourage American companies to bring those jobs back to the United States.

    Nothing Apple sells here is made here, few cars sold here are made here anymore, most of what consumers in America need is manufactured in foreign countries and imported here. Tax the hell out of the imports, cut the tax rate for domestic production, and within a few years Made in America will mean something again. It will help our economy by bringing back jobs, which means more employees paying taxes. It would be a win for Americans instead of everyone else in the world.

    If that sounds protectionist so be it, that is what I am. America has been helping the rest of the world since the end of WWI and the reason we had the resources to do it was because of our exceptionalism, our willingness to work, our constantly growing economy. What have we had the last 30 years? A shrinking middle class, manufacturing jobs going overseas because of excessive gooberment regulations and taxes, more people on the public dole because of the lack of job growth, the systematic destruction of the American dream while we watch decent paying jobs go to other countries instead of staying here. It's time to stop the insanity and make America the shining beacon of light we used to be.

• OK, I will chime in on this one now.
  I have seen tariffs work to their intended goal.
  In around 1981/82 Harley Davidson was bought out by a group of investors led by Vaughn Beales and Willie G Davidson, in an attempt to save the company from horrible mismanagement by AMF. In order to give the company a chance to compete with the Japanese big bike market, they asked the ITC and President Reagan to place a tariff on large displacement motorcycles that would make them approximately the same cost as the Harley line. These tariffs were applied to all large displacement motorcycles, regardless of country of origin, but there were small amounts of bikes from certain countries that were exempt from the tariff based on the volume of bikes they shipped to the US, the lower the number, the more they could ship tariff free.
  *Note* Japan was dumping large bikes on the US market at a price that was nearly as low as the much smaller line, in an attempt to kill Harley and take over the big bike market.
  The ITC and Reagan agreed to the tariffs for a 5 year, decreasing tariff, schedule:

  To provide relief, the ITC recommended the following five-year tariff plan for heavyweight motorcycles: Raise the current tariff of 4.4 percent to 49.4 percent and keep it there for a year; lower the rate to 39.4 percent in the second year, to 24.4 percent in the third year, to 19.4 percent in the fourth year, and to 14.4 percent in the fifth year. After the fifth year the tariff is to return to 4.4 percent.
  http://www.cato.org/pubs/pas/pa032.html

  This gave Harley Davidson the time they needed to retool and return to profitability. It worked.

  My point being that if tariffs are carefully handled and not indescriminately applied, they can be a useful tool. Permanent tariffs on all goods from one source are punitive and destructive, but carefully applied and controlled, like in the motorcycle case, they are not unfair.

  • I think Harley and AMF is an excellent example here for both sides of the argument. However, I think what it really shows is where our values as a nation are. If we want to alter market reality to fit what we want, as long as we understand what it is we are doing, and understand that the price paid, tariff inefficiencies and issues are simply the price we pay for having what we want.

    Look at air travel for another example. Back when they were regulated, there were lots of airlines profitably competing for our business, and the Stewards/Stewardesses were hot. Now most of them look like Manet Reno, we're nearly down to two airlines, and they treat us more like cattle.

    Another example of where tariffs/government interference did a lot of good was in the match industry. Way back when, they used a type of phosphorus in the tips to make them work that was unbelievably nasty. Google "phossy jaw" to get an idea. Basically, the employees would get necrosis of their facial bones due to prolonged exposure. Without government interference, even people who had highly ethical standards (Quakers) had to use this type of phosphorus in their factories, or go bankrupt. It took an international trade agreement that severely restricted trade to put a stop to it.

• Not to over simplify but tariffs used to be how countries financed their governments before the advent of income taxes. Now that we have income taxes, tariffs act as a redundant tax on consumers in the imposing state as in the targeted one. China is a bad actor. I understand that but until WE reform our tax code and make it attractive for Apple to make its stuff here, until we call off the EPA and allow factories to manufacture, until we become energy independent and finally convince our semi-skilled work force that given the realities in the global economy their days of union-inflated salaries are over (either they’re outsourced or never hired because the union scale reduces employment levels) we will be China’s battered wife. We need to fix us before we punish them.

  • We should levy enugh tax or tariff or penalties or whatever you want to call iot, that comanies cannot make a cheaer product outside the US. Period. We should not be exporting our jobs to other countries, simply because they can hire starving people at 1/10th the cost of hiring an American in America.

• I’d like to take a moment to talk about tariffs.

  We get taught in B-school that “Tariffs are bad”. To me, that’s like saying “opiates are bad”. Kind of depends upon the situation. They can lead to horrible situations, and they can lead to a relief of suffering. Just depends upon the application, and whether or not it is controlled.

  If you don’t believe that the trade warfare that China has practiced over the years hasn’t had an impact, go into Sears, and try to buy US-made hand tools. They don’t exist.

  The classic example of tariff damage happened in Civil War times — high tariffs on imported goods led to retaliation upon goods exported from the US to those countries — devastating the South, and adding to their list of grievances. The threat of retaliation presupposes that trade is at an equitable level. The assumption from idiotic Congressmen is that the trade will remain on an equitable level after the tariff is imposed.

  What happens if trade isn’t at an equitable level? What happens if China has taken a page out of the Colonial Powers’ playbook, and is using trade as a weapon to extract power and natural resources from the US, shaping the very nature and composition of our economy? What happens if the chief export from the US is dollars, and the imports devastate American Industry?

  I know that we could take a page out of post-war Japan’s book and use the devastation to write off entire industries in order to grow dramatically at a later date in a new direction — but I’d like to remind anyone thinking about that as a positive, that life in 1950′s Japan was bleak indeed.

  While I know that most economists would say that tariffs are universally bad — but I can’t help wondering if they say that because it makes it hard to keep score. Our current lack of tariffs has taken advantage of a global economy — and arguably, has financed the craziness in the Middle East, too. Just because both sides benefit doesn’t mean that this will continue, or even that both sides *should* benefit.

  A China goods tariff is crazy like a fox IMO — while China loses market share in the US, they have to do something about their trade deficits they’ve been using to wage war on us to counter. That’s the biggest issue I see here — they are using the world economy as a way to pass through the costs of wrecking our economy onto others — who would have traded with the US directly if the Chinese subsidies weren’t there in the first place.

  You see, I see what China’s doing as another form of a tariff — where they create an artificial incentive to enhance trade for a non-trade-based reason. We need to think carefully about their reasons before blindly sticking our hands out asking for more. It was, after all, communists who crowed that they would sell us the rope to hang ourselves with.