Trump Launches $50bn in Tariffs, Says China is "Out of Control"

Mish

Supposedly it's payback time. That's what the Trump Administration says about a new round of tariffs.

Following an intellectual property (IP) review, Trump Announces $50 billion in China Tariffs.

The US plans to impose roughly $50 billion in tariffs on Chinese goods and limit the country's investment activity in the US as payback for what it alleges is years of intellectual property theft.

The White House said it has prepared a list of more than 1,000 products that could be targeted by tariffs. Businesses will have the opportunity to comment before the final list goes into effect.

US Trade Deficit With China

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"Out Of Control"

The Wall Street Journal reports U.S. to Apply Tariffs on About $60 Billion of Chinese Imports.

“It’s out of control,” said Mr. Trump, referring to the trade deficit with China.

The Trump administration complains that the Chinese use intimidation and subterfuge to acquire U.S. technology, put U.S. firms in China at a disadvantage through unfair licensing deals and siphon away U.S. jobs. Mr. Trump sees confrontation as the way to get results, feeling that past administrations haven’t been tough enough, said senior White House officials.

China contends it has improved its protection of intellectual property and that it is moving fast to further liberalize its economy. It also is putting together a package of retaliatory measures against U.S. tariffs.

The $50 billion figure equals about 10% of U.S. imports from China. U.S. officials said the amount is roughly equal to its calculations of annual lost earnings by U.S. companies in China as a result of forced joint ventures and technology transfers.

“Holding China accountable for refusing to follow global trading rules is important and necessary,” said a statement by National Retail Federation President Matthew Shay, “But instead, the tariffs proposed by the administration will punish ordinary Americans for China’s violations.”

Retaliation Coming

One might think China has nothing to retaliate over, but think again as China Ratchets Up Rhetoric, Vowing Action Against U.S. Tariffs.

“China absolutely won’t sit back and allow its legitimate rights and interests to be harmed and will take all necessary measures to protect” them, a Commerce Ministry statement said. A Foreign Ministry spokeswoman criticized the White House’s rhetoric, particularly the labeling of Chinese trade practices as “economic aggression,” calling such remarks “irresponsible.”

“Upholding economic stability serves the interests of the two sides,” Chinese Foreign Ministry spokeswoman Hua Chunying told reporters at a routine media briefing.

“Everybody knows that when it comes to trade, absolute reciprocity is not possible,” Ms. Hua said. “The U.S. on the one hand requires China to buy its products. On the other hand, it refuses to allow China to buy what it wants to buy from the U.S. Is this fair?”​

A World Trade Organization ruling on Wednesday further fueled tensions. In the ruling, the global trade body largely sided with China’s complaint against the U.S. for slapping tariffs on Chinese solar panels, kitchen shelves and other products.

Punching Back

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​Worrying Thought

U.S. Trade Representative Robert Lighthizer told members of Congress on Wednesday that the WTO has proven “wholly inadequate” in dealing with China’s state-driven economy.

Payback Time

The US wants to "payback" China and China wants to "payback" the US.

The WTO agreed with China on solar panels, and so do I. More importantly, it's idiotic to turn away free goods.

Angry Gods

On Cafe Hayek, Don Boudreax sums things up nicely with a parable:

A protectionist is someone who upon learning that god dispensed manna from heaven to the Israelites (as they wandered in the desert after their exodus from Egypt), concludes that god must have been mighty angry at his chosen people.  After all, only a god furious at his people would punish them by “dumping” on them nutritious and tasty food at a price – zero! – far below that at which Israelite hunters, gatherers, or farmers could profitably compete.

Definition of Winning

Eurointelligence founder Wolfgang Münchau believes as Trump does, that Trade wars are winnable.

These people must have curious definitions of winning.

  • Upon "winning" US citizens will pay more for goods and services.
  • US manufacturers will pay more for steel and other imports.
  • There can be no free manna from heaven.

Apparently "winning" means hurting others more than they hurt you.

After all, We Must Destroy Free Trade to Have Free Trade.

Mike "Mish" Shedlock

Comments (26)
No. 1-26
MntGoat
MntGoat

Only 8% of USA GDP comes from exports. EU and China MUCH higher % of their GDP comes from exports. They need to sell stuff to us more then we need to sell stuff to them. Why wouldn't we use this leverage to negotiate better trade deals?

Gasmire
Gasmire

My family has no problem with inexpensive goods and services, but we are weary of the cheap flavors, foreign and domestic.

MntGoat
MntGoat

Many things have become cheaper over the last 30-40 yrs, but made with much cheaper materials, last far less time, look worse, lower craftsmanship (clothing, household items, furniture). Just walk though Walmart, IKEA.... its full of cheap flimsy crap. Things like car engines, electronics have improved a lot though of course. But yeah no question, China has given us a choice to buy a lot of cheap junk now in Walmart, and has gone from being a 3rd world nation 40 yrs ago to a world super power, pretty much exclusively by selling us mostly cheap, poorly made junk.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

(deleted message)

A gripe on IP. That I agree with. But is it the US or individual companies to do something about it? If US companies think they are getting a bad deal, they should not enter the agreements!

jiminy
jiminy

Tariffs will put more pressure on interest rates. Rates will head higher than predicted by the fed unless their is a resolution to the trade problem.

Jojo
Jojo

The problem with accepting those cheap goods dumped on the USA is that doing so destroys our own industries that produce the same goods, because they cannot compete with the lower labor costs in say, China. Which then takes away the middle class jobs of workers who were in those now decimated industries, leaving a big hole in the economy that eventually gets someone like Trump elected by the dissatisfied, out-of-work, former middle class workers.

The problem was that as the USA industries were being displaced/destroyed by cheaper imports, the business community and political arms did little to nothing to retrain the displaced workers so they could work in other industries, especially if they happened to be older workers.

Oh sure, there were some efforts to retrain but the focus was always almost exclusively on out-of-work, younger, high school graduates interested in vocational work. That didn't work for middle-aged white collar workers and they are the ones who helped Trump become president.

Too few people look at the big picture. Again, cheap/free goods form overseas are nice, but they come at a high economic expense.

hmk
hmk

I agree that tariffs are usually a losing proposition. I don't understand how any foreign company would agree to allow the Chinese to take a 50% or greater interest in a company and then steal their IP. They have been doing this for years so why hasn't the WTO sanctioned them for this and more importantly why would any of the international companies doing business put up with this crap. They should have all agreed to hold they line and not stand for this. Probably because they would be accused of collusion or monopolizing?

HAL9000
HAL9000

This nicely tanked some of my investments this morning.

klausmkl
klausmkl

this is why being a trader is nice. We could care less about drama , as long as price moves nothing else matters, providing you are on the right side of course.

Runner Dan
Runner Dan

Cheap goods from overseas are NOT the problem. Rather, a domestic economy where only part of the market is “free” is the problem. If the middle class factory worker loses his job along with the rest of the town, then prices in that town should fall, as the price of goods and services can only be what people can afford or are willing to spend. Instead, the average ex-factory worker along with every unsubsidized private sector employee finds out he has to participate in a game where the rules are stacked against him. Food, housing, higher education, and healthcare – all rigged to extract as much wealth as possible with no rules to tilt the board in the favor of the “maker” class. Trump should focus on eliminating the existing (and very prodigious) false rigging presently distorting the market instead of adding to its complexity.

truthseeker
truthseeker

Off Topic: Does the increase in Libor or the Fed having to add 2.5 billion to the mortgage backed security market mean any thing at all today?

Ambrose_Bierce
Ambrose_Bierce

Looks like pork chops are going to be on sale

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Take a look at the market reaction both yesterday and today. This yield bounce may be over already

stillCJ
stillCJ

Editor

It certainly would be nice to find a way to stop China from stealing US technology, but I don't see how tariffs will accomplish that. Mr. Market obviously does not like the tariffs although I'm not sure why Market waited until today to register that when it has been known for some time the tariffs would happen. Maybe if Mr. Market had made it's displeasure known sooner, The Donald would have reconsidered.

Quixote2
Quixote2

Reportedly, China owns about $1.2 trillion in treasury bonds. Why doesn't China offer to buy gold for $1500 per troy ounce, then when supply dries up, offer $1500 per oz then $2000, 2500, etc payable in US treasury bonds/dollars. The $1.2 trillion would buy 18,700 metric tons of gold at an average of $2000 per ounce. The last I heard, gold is a good substitute for US treasury bonds or dollars as security.

Murk Le Sneak
Murk Le Sneak

“It’s out of control,” said Mr. Trump.

Remind me, didn't he appear on "libertarian" Infowars, posing as a trendy minarchist? http://www.youtube.com/watch?v=FJqLAleEnKw

Isn't things being OUT of government control exactly what these people should want? Why do "libertarians" talk about building walls, taxing trade and putting things under "control"?

I call BS. They dress in borrowed robes!

Jojo
Jojo

Well what do you expect when a manufacturer builds a plant in China? At least 20 years ago I was posting that building plants overseas was a sure way to lose any technology advantages that we had. But the mantra of CHEAPER PRODUCTS caused everyone to plug their ears.

When you offshore your plant or technology, you have to share the construction with the workers in the country you are in. Even if you were able to black box your essential technology, someone in the foreign country is going to be able to figure out how to get access to one and then copy the technology. China and France, among numerous others are famous for commercial/industrial espionage. And China has the added advantage where the government monitors and generally knows much of what goes on in the country.

pgp
pgp

Trade wars and subsequently tariffs are one way to stimulate inflation on a global basis... Don't just blame Trump, he's not the only puppet/oligarch greasing the wheels of the train wreck.

kimstring
kimstring

More expensive goods from China will be positive for the U.S., especially with new restrictions on exporting waste -- we are already drowning in stuff we don't really need.

Murk Le Sneak
Murk Le Sneak

@Mish I'll refrain from cussing back at you - I think you've misunderstood. This is precisely my point: American political discourse has become so mixed up that labels don't make sense any more. People use labels incorrectly and then masses of people believe them.

Alex Jones has spent years claiming to be a libertarian - he sponsored Ron Paul and the early Tea Party and has built a career on ranting about "total control" and hatred of taxes and central government. But I agree with you, he is categorically not a libertarian. Then there is the word "liberal" which somehow has come to mean "left wing" - an idea that would raise a snort of disbelief in much of the rest of the world.

My real point here is that political labels have become twisted, misused and hijacked and this is preventing proper political discourse in the US. "Libertarian" has become code for "nationalist"; "liberal" has come to mean "left". And the rest of the world, looks on confused as to what is going on - and how this came to be. It almost feels as if tribal hatred has become so important that the proper meaning of labels has become irrelevant - just so long as the "two sides" can continue to spew poison at each other.

Stuki
Stuki

The problem with someone stealing your stuff, is that you no longer have it. If some poor dude could “steal” my car, without me at the same time losing it, him “stealing” it wouldn’t be much of a problem; now would it?

But I guess if one is sufficiently clueless, uncritical and indoctrinated by ambulance chasers and idle regulation riders; some guy looking at an Ahnold poster, and getting motivated to drag his fat self to the gym to do curls, is somehow “stealing” Ahnold’s biceps….. And we need The Great Father Trump In Washington to impose tariffs on him…

KidHorn
KidHorn

I'm guessing the chinese are going to hope the democrats get back in charge. Wouldn't it be ironic if the chinese did things that helped democrats get elected? There would be no probes or accusations of collusion ala Mueller. Mainstream media outside of FOX would ignore it or even say it was a good thing that foreign countries have an interest in our political process.

whirlaway
whirlaway

We already tried for 40 years, the path that you and your ilk proposed - that of trickle-down economics. There was no trickle-down. Instead there was a flood - of jobs heading out of the country. Not only did you not feel that was a problem, you lauded it as a feature of your "brilliant" solution.

The American people have had it with the likes of you. They have almost nothing to lose. You can cry yourself hoarse that this will make things worse. They will not listen. They know how wrong you were when you said things will get better when we went your way. They have nothing to lose and the fact that you may have a lot to lose is not going to give them any pause. Deal with it!

Happy Bliss
Happy Bliss

Definition of winning= not empowering your ideological enemy for the sake of profiteers. It's time Boomers get some principles in order rather than sell the farm for their own comfort and indulgence!


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