Upping the Trade War with China

Earlier in 2018, the Office of the US Trade Representative (USTR) imposed a 25% added-value tariff on a set of particular Chinese-made products expected to valued at about $34 billion per year.  A prior notice indicated a plan to increase the 25% tariff to $50 billion worth of goods (an additional $16 billion on Chinese goods ).  Doing the math here – the US is planning here to collect $12.5 billion in tax revenue from the Chinese goods entering into the US. Although a tariff already applied to most Chinese imports, the rate is usually less than 5%.

As expected, in response to the US tariffs, China imposed increased duties on US goods.

The USTR has now proposed upping the bet — this time “in the form of an additional 10 percent ad valorem duty on products of China with an annual trade value of approximately $200 billion.” [FR Notice].   Easy math: the new 10% tax should raise an additional $20 billion in general revenue for the U.S. Government.

China cannot match this added tariff in direct parallel fashion – Since the U.S. only exports about $130 billion to China per year.  However, China could instead collect the $20 billion with a higher duty; impose quotas; or apply some other non-tariff countermeasure (such as by adjusting IP rights owned by US entities).

In addition to each country’s unilateral measures, both countries (as well as our other global trading partners) have taken their cases to the World Trade Organization (WTO) asking for enforcement of the rules of The General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

46 thoughts on “Upping the Trade War with China

  1. 6

    To my surprise, I read in this thread from Greg DeLassus that:

    “The U.S. is not trying to raise revenue here. We are simply trying to discourage the trade with China.”

    In other news, I read that the EU just signed with Japan the world’s biggest yet bilateral trade deal, adding to the deals already made with Canada, Australia, New Zealand and so on.

    I get the feeling that the EU, far from “trying to discourage” trade, is trying to go in the opposite direction. Is this perhaps why President Trump last week condemned the EU as “Worse than China”.

    Greg, do you think that the USA is seriously trying, and on a broad front, “to discourage” international trade. Are you serious?

    1. 6.1

      Look at the countries the EU is signing agreements with. They are countries that can’t provide labor at much different rates than the EU.

      I notice no free trade agreement with Mexico or China.

      1. 6.1.1

        Ah, the labor rates issue. I wonder, is that why the US/EU trade deal negotiations foundered?

        And is it differential labor rates then, that prompts DT to dub the EU “worse than China”? I had no idea!

        Here’s a Link. Alphabetical list of countries with which the EU has a Trade Agreement. As you can see, Mexico since 2000.
        link to ec.europa.eu

        1. 6.1.1.1

          >>The new deal will: scrap high Mexican tariffs on European food and drinks; allow EU firms to sell more services to Mexico;
          pledge to protect workers’ rights and the environment

          There is not a free trade agreement between the EU and Mexico.

          1. 6.1.1.1.1

            Did I write “free”? I don’t know what it means.

            BREXIT types suppose they are going to catch the USA in a “free” trade deal. How deluded is that? Of course, in any “deal” each side aims to succeed in its objective. When there is no equality of arms, the deal is not going to be one that an impartial outside observer would regard as “free”. Pace your assessment of EU vs Mexico. But nevertheless, of its own “free” will, Mexico signed the thing, didn’t it.

            1. 6.1.1.1.1.1

              Way to muddle things MaxDrei.

              Free beer to all!

            2. 6.1.1.1.1.2

              Free trade means free of tariffs and restrictions.

              Not sure what your point is MaxDrei.

              You may be right that the USA will try to take advantage of the UK after Brexit. Maybe not.

              Kind of a joke you know not to consider labor costs, environmental costs, etc.

              My guess is that the UK will do just fine after Brexit and that it is probably better for the UK at least because it will have control of it monetary system.

              1. 6.1.1.1.1.2.1

                Monetary sytem? But the UK is not part of the EURO block. In what way does it not at the moment have “control”?

                1. Max, you really destroy your credibility when you just deny facts.

                  You know that the UK was under heavy pressure to adopt the Euro and that if it stayed in the EU that it almost certainly would have to adopt the Euro.

                2. Night I wonder at your retort. It goes without saying, that if the UK exits and then seeks to re-join the EU the price of re-entry would probably incluse joining the Euro Zone.

                  But that ongoing membership is conditional on entering the Euro-zone I have never heard of.

        2. 6.1.1.2

          MaxDrei, I used to work and live in Germany. I like it much better than the USA.

          I am not sure why the US can’t make cars to compete with Germany cars. Probably it is because the Germans give the workers peace of mind so you can focus on the work.

          1. 6.1.1.2.1

            What do you mean that U.S. cars cannot compete with German cars? U.S. cars compete just fine. Last year, the U.S. big three (GM, Ford, & Chrysler) accounted together for ~46% of the U.S. auto market. By contrast, VW & Daimler accounted together for ~6%. I dare say that it would be a surprise to those German manufacturers to discover that they are outcompeting the U.S. manufacturers.

            1. 6.1.1.2.1.1

              Greg, the Germans are selling the high-profit cars. What percentage of the profits went to the Germans? I am sure it is much higher than 6%.

              1. 6.1.1.2.1.1.1

                Here in Germany, we are told that the German car makers are the USA’s biggest car expüorters. Apparently, an awful lot of BMW’s. Mercedes etc are assembled inside the USA, and then exported.

                And China consumes about 40% of VW’s entire output, I understand. VW = Volkswagen = “the car of the people”.

                But Germany can’t make real high performance cars can it. I mean, the Mercedes works team for Formula 1 racing does what all the other Formula 1 teams do – get their racing cars designed and built in England. All except Ferrari, that is.

                Your explanation “peace of mind” is an interesting one. Perhaps that’s why Mercedes put their Formula 1 work out to England. There surely is very little “peace of mind” in the tooth and claw racing duel between Mercedes and Ferrari.

                1. I thought you were in the UK Max. I didn’t know you lived in Germany.

                  Probably the way to think about what has happened in the US is that as income disparity has increased the profit from the luxury cars has increased and the profit from the rest has decreased.

                  I am not sure what the number is but I think I read that 40 % of all the profits from cars in the US goes to VW, Mercedes and BMW.

    2. 6.2

      and on a broad front, “to discourage” international trade.

      What reason do you see to expand the battle with China (one country) into some such overarching position?

      Or are you just throwing C R P against the wall again to see what sticks?

      1. 6.2.1

        What reason? 1. The failure of the TTIP negotiations and 2. DT’s assertion that the EU, on trade, is even “worse than China”.

        link to edition.cnn.com

        1. 6.2.1.1

          TTIP failure was a whole ‘nother animal, unconnected to the discussion here – entirely different drivers.

          Basing things on “DT’s comments” is perilous at best, as the man operated without a filter, so more than half (probably much more) can be tossed as pure posturing without real intent.

          1. 6.2.1.1.1

            No real intent? Entirely different driver? I had thought up to now that it was in the context of a product called “steel”, and exports of it, by both China and the EU, that the EU was deemed “worse than China”. US import duties are now in place, are they not, against imports from both those producer locations.

            It strikes me this is more than mere posturing, more than mere “intent”, and not “different” at all.

            Is EU steel so much cheaper than US steel? Better value for money. More bang for your buck? If so, how come? Perhaps because, these days, much of the EU’s steel industry is Indian-owned?

    3. 6.3

      Greg, do you think that the USA is seriously trying, and on a broad front, “to discourage” international trade. Are you serious?

      I am surprised that you question the assertion. What else is a 25% tariff for, if not to discourage trade?

      I do not mean to imply support for this course of action. I am daily appalled at many of the steps that my nation is presently taking. I am merely stating—as a dispassionate fact—that the current U.S. actions are intended to reduce the volume of international trade in general, and in particular the volume of bilateral trade between the U.S. and the China.

    4. 6.4

      To my surprise, I read in this thread from Greg DeLassus that:

      “The U.S. is not trying to raise revenue here. We are simply trying to discourage the trade with China.”

      As I look at the phrase you chose to quote, I wonder if your surprise stems from that “we.” If so, please let me assure you that I am not on board with these tariffs. The “we” is not intended to signal that this is something that I would choose to do. As it happens, however, I am a U.S. citizen (and grateful to be so), and it is my nation that is taking these actions. That is all that I mean when I say that “we” are trying to discourage trade.

      I wish that we were not doing so, but it nevertheless remains that such is what we (citizens of the U.S. republic) are doing.

  2. 5

    Or… China could just stop buying U.S. Government Debt.

    1. 5.1

      Excellent point.

  3. 4

    “I was talking about the lack of rain! I said nothing about a drought.”

    So it goes in the very serious world of those who carry water for idi 0tic @ holes.

    1. 4.1

      ?

  4. 3

    Meanwhile:

    link to usa.streetsblog.org

    A group of senators led by South Dakota Republican John Thune wants to let companies rush self-driving cars to market before any federal safety standards related to autonomous systems have been drafted.

    A coalition of 65 consumer advocacy and street safety organizations has warned against the bill known as AV START, which would preempt state and local safety regulations of self-driving cars without spelling out any federal safety rules (although it would allow U.S. DOT to draft some). In addition, the bill would exempt AVs from many safety standards that apply to all other cars. Each manufacturer would get an allotment of 100,000 vehicles to sell for use on public streets within three years.

    What could go wrong? A few deaths here and there.

    “The tree of s00per techn0 progress must be watered with the blood of taxpayers who can’t afford the tech!” — MM’s Law

    1. 3.1

      MM Rant would be the better attribution.

      Your “blood” comment simply is hyperbolic – unless of course you ALSO want to eliminate ALL cars based on the same rationale (compare the number of deaths each year – no matter how you want to normalize the data – between auto related deaths and transportation deaths BEFORE the automobile.

      How many pairs of sabots do you own? Don’t you get tired of throwing them into the machine of innovation? (Not even mentioning the constant cognitive dissonance that you must be battling…)

      1. 3.1.1

        Your “blood” comment simply is hyperbolic

        ROTFLMAO

        unless of course you ALSO want to eliminate ALL cars based on the same rationale

        LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL

        He’s a very serious person, f0lks!

        Meanwhile:

        Dave Wasserman of Cook Political Report: “Most Republican members are willing to admit POTUS doesn’t operate in reality, but know they’re doomed in their next primary if they say so publicly. As long as that’s true, we’re headed for a world w/ zero accountability.”

        But Hillary gave a speech to some bankers. So, both sides.

        Glibertarians really are the st 00 pi test @ h0les on the planet.

        1. 3.1.1.1

          ?

          Your response is untethered to anything that I have actually said.

          Maybe you want to try to stay on point, instead of running off on tangents and into the weeds of your “one-bucketing”…

        2. 3.1.1.2

          ““Most Republican members are willing to admit POTUS doesn’t operate in reality, but know they’re doomed in their next primary if they say so publicly. As long as that’s true, we’re headed for a world w/ zero accountability.””

          NOICE!

          Except for leftists of course, they’ll get plenty of accountability. They have much to account for.

      2. 3.1.2

        Kavanaugh’s belief, argued in an article that he authored in 2008 for the Minnesota Law Review, that “the President should be excused from some of the burdens of ordinary citizenship while serving in office” is well-known. He argued there that the executive basically can’t be indicted, sued, or even investigated. Because he (and it will probably always be “he” in Kavanaugh’s world) is president. Period.

        And remember, folks: “anon” (who cast a “protest vote” in the last Prez election because he’s very, very serious!) remarked just the other day that one of the best aspects of Brett (R-Hack) Kav’s intellect was his appreciation for the “separation of powers.” Which apparently means absolute power for one of the branches (presumably only applies when a rich conservative white misogynist @ h0le is in the office).

        1. 3.1.2.1

          Which apparently means absolute power for one of the branaches

          Apparently…?

          Do you not EVER bother to read what people actually say?

          My position has always been one of NOT having any one single branch as your attempted spin has it here.

          You introduce a select new point (one in which I have never commented upon), create “an argument” (which does not even fit my known positions), only to knock that fabricated “argument” down.

          This is the epitome of a strawman.

          Apparently, you actually staying on point to what I actually say does not support your position, so you have to resort to dissembling.

          1. 3.1.2.1.1

            You introduce a select new point (one in which I have never commented upon)

            In fact you did comment upon Brett’s alleged love for a “strong” separation of powers which was bizarre enough. Brett doesn’t care about “separation of powers.” Brett cares about power, period. And specifically he cares about power for rich white Christian men aka The Most Important People Ever (according to the @ h0le ign0 r@mi slithering around inside the Ferdlerist Society Ces sp00l).

            1. 3.1.2.1.1.1

              In fact you did comment upon…

              In fact, you notice that you have switched what I did comment upon with something that I did NOT comment upon….

              Strawman.

        2. 3.1.2.2

          “He argued there that the executive basically can’t be indicted, sued, or even investigated. Because he (and it will probably always be “he” in Kavanaugh’s world) is president. ”

          Only while he is in office, and congress can impeach him anytime he does anything too bad so he could face charges.

    2. 3.2

      “What could go wrong? A few deaths here and there.”

      While saving how many others, JayMM?

  5. 2

    [T]he US is planning here to collect $12.5 billion in tax revenue from the Chinese goods entering into the US. Although a tariff already applied to most Chinese imports.

    Two quick points:

    (1) The U.S. is not going to collect an extra $12.5 billion.
    (2) The U.S. is not expecting to collect an extra $12.5 billion.

    If you increase the price of a good by 25%, you should not and do not expect that demand for the good will remain constant. If imported Chinese [X] sees that sharp and sudden a price increase, people will simply stop buying imported Chinese [X], at which point the actual revenue collected will be 25% of $0—which is $0—or near enough as makes no difference.

    The U.S. is not trying to raise revenue here. We are simply trying to discourage the trade with China.

    1. 2.1

      But that assumes that either the imported product has a domestic [unlikely] or other source, or that it is a non-essential discretionary-purchase product.

      1. 2.1.1

        Yes, my assertion is predicated on the presupposition that there is a non-CN alternative source, but my understanding (based on stories I have heard on NPR’s Marketplace) that there are non-CN sources for all affected goods (not many with domestic sources, however, as you suggest).

    2. 2.2

      Good points both.

      I lean towards Greg’s view here: this is NOT an intended mechanism for increased revenues for the US government. While there may be some items that fall into Paul’s areas of exceptions, I can easily believe that the far larger share of items will in fact be items that have other sources (be that domestic or otherwise) AND that can be classified as non-essential discretionary-purchase products (I am not aware of any targeted items that fall into an ‘essential purchase’ type of category).

  6. 1

    Would like to see how “or apply some other non-tariff countermeasure (such as by adjusting IP rights owned by US entities).” would be done without violating treaties.**

    Especially given the next paragraph in the story above (I am reminded of the “equity” adage of those seeking relief through equity must come to the table with clean hands).

    **Further, unlike certain other countries, China has been strengthening their patent protections of late, and this would not likely (or lightly) turn around and mess those up, even for the political chess match.

    1. 1.1

      chess match

      Anybody who thinks that M@ ngo H@ir b@ll is “playing chess” is a f ing id i0t.

      1. 1.1.1

        Mindless ad hominem…

        And quite misses the point.

        As usual.

        1. 1.1.1.1

          (Malcolm – it is hilarious that in your efforts to rant on your political feelings, that you make yourself out to be the best example of the person that you wish to malign.

          You really are the “Trump” of these boards.

          It’s downright stultifying.

          1. 1.1.1.1.1

            You really are the “Trump” of these boards.

            Nope. Keep projecting. It’s what dust-kicking entitled dipshirts like you and your bff Night Wiper have always excelled at.

            1. 1.1.1.1.1.1

              I am not the one projecting – the Accuse Others meme is all yours, baby.

              It’s your number one meme.

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