Can US companies compete in a trade war? (buy, tax, money)
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US is the largest exporter of food in the world, if they get into a trade war and if the US withholds food, the rest of the world would literally starve
The US share of the world food export market is about 5%, and the US share of the world food import market is about 4%. Our exports exceeded imports by $19 billion last year, out of an export market of $149 billion. In a trade war, fresh vegetables would almost disappear from markets in the winter, and the price would increase 1000%. I hope you like potatoes.
One thing that seems to be missed is that globalization and the persistent high trade deficit are largely responsible for the great disparity in income and wealth. Median real wages have been basically flat since the late 70s. In the prior 40 years they rose nearly 200%, keeping pace with productivity.
People also tend to overestimate how much we import (in % of total expenses) and how much it would cost to produce those goods here. Our big expenses have always been domestic; rent, utilities, fuel, food, healthcare, etc. Domestic production increases would be highly automated like it is in other developed countries (like Germany for instance who is still a net exporter of manufactured goods) and would not cost that much more. The problem is that the economy is so geared to trade that it would take a massive investment to alter it on that scale. Massive investment is good for jobs and wages, but bad for profits.
It wouldn't be the best way to improve worker wages, but it may be better than what we are currently doing. If we wanted a system that benefited the average person the most it would be *freer* global trade, only with a lower US$ exchange value, which would naturally close the trade gap.
That has been true for the last 40 years though, and it hasn't happened for good reason. The oligarchs have been using globalization, deficit trade, and finance to suck up an unprecedented share of the pie. They aren't going to give that up.
First. we aren't going to produce much of anything here again. Much more likely is targeted tariffs which ultimately if high enough would draw manufacturing to some other third or fourth world hole that doesn't have a tariff. It would take a decade or so to get it all rolling but no one is coming back here that isn't already producing here and there is zero chance we see a blanket tariff on everyone. There is no reason what so ever to pick the USA over any other third or fourth world hole for manufacturing most things now.
Imports are only a tiny portion of the issue. Trade wars impact everything from consumer demand, exports, imports to jobs at the port, transportation etc.. It is all one big chain. Start ramping up prices 15% or more and get reciprocating raises in other countries and it all goes to really fast.
As for wages, it isn't trade that has killed wages. Corporations and their rise to power have killed wages, in addition to wages being flat and costs for basics like education, medical, housing have skyrocketed. There are jobs out there for people, companies are simply not paying enough for their workers and are exploiting productivity to offset poor growth in many industries to pad profits.
You also have a ton of apathy from those in the middle to upper middle and above towards low end workers. The mentality I did it, why can't they? Despite there being a quite un-level playing field and many of them would have different results attempting what they did in today's market.
We are seeing the impact of a maturing of our economic system, poor domestic population growth and inflation for essential items is starting to have a dramatic impact on our ability so sustain economic growth.
Fix wage growth for the bottom half of our population and you fix our economy. Instead we are looking at providing huge cuts to people that don't need it. Over the last 30 years we have definitive proof this does NOT trickle down. Why we continue to push this crap is beyond my understanding but people some how are for it.
The bottom 50% of the population drive consumer demand. They spend a significantly higher portion of their money on goods and services as they get it. Considering that has been the segment that has been screwed the most by stagnant wages with high inflation on key items they are the people that have gone without. Improving their lot, by raising wages would greatly impact the economy. Far more than the last 30+ years of trickle down economics could ever hope to.
IF we want to fix the problem we must increase wages for the bottom half of the country. If corporations can't do it then the government must step in and correct the error. We also need to be considering punishing further automation as we will continue to erode jobs and ultimately our entire economic system.
Now is the time to play with compensation at the low end as we are at full employment, profits and productivity are high and an infusion of dollars on the lower end of the spectrum is exactly what this country needs to keep growth going.
That and reducing cost of child raising, adding incentives to have more children so that our domestic population growth doesn't continue to hover around 0.People often over look that issue. Compare that to 5% or 3% in previous decades that is another huge driver of our current woes. WE are importing poorer people to attempt and partially offset this and now we are going to stop that to a trickle as well with immigration policies because Browns.
Well, something has to give. You can't keep strangling the middle class and below, giving huge breaks to billionaires and corporations while stopping our only source of population growth and expect it to turn out well. Oh yeah and going all John Wayne on Tariffs screaming 'merica! is only going to get us inflation, unemployment, higher interest rates and recessions / depression.
Last edited by toosie; 01-25-2017 at 07:46 PM..
Reason: TOS - profanity - edited out multiple instances
This is about fairness. After agreeing to NAFTA Mexico raised tariffs on US goods twice to something like 29% which was contrary to the agreement. It's absolute BS and politicians don't want to do anything about it. So Trump says FU, you are violating the agreement, so we are pulling it.
How is requesting a country to honor an agreement the same as starting a trade war?
Mexico absolutely depends on US trade.
I've read that of all the NAFTA violations, 35 are suits against Canada. 22 are against Mexico, and 20 are against the US.
Mexico has placed tariffs on US goods, but this was in retaliation to the US backing out of the cross-country trucking agreements.
Tariffs and barriers only shift the winners and losers in the economy(protected industries see reduction of foreign competition, consumers see increased prices, job losses in industries that export, etc) but the net effect in the account balance is zero because the exchange rates change accordingly to balance it out. The trade deficit is controlled by how much a country invests and how much it saves.
The real question is not whether US companies will prevail, but whether US consumers have the stomach for a trade war because they are the ones who will pay for it. If Trump raises import duties, cost of goods will increase for all Americans. We are basically subsidizing Trump's goal to recapture jobs lost to overseas.
So to answer your question - Are you willing to pay a lot more for cars, appliances, cell phones, clothes, food and all the other stuff we import?
I believe that globalization is too far along to reverse it. Trump will weaken America's very strong position in global trade and there are many other countries that will step in to fill the void. He might get a short term boost in jobs but ultimately this is going to make America a second rate power in global commerce.
For the past forty years, American consumers have been subsidized by the government's policies of sending companies and jobs overseas. If we had a trade war, or if protective measures were put into place, American consumers would be paying the fair price, as we should have been doing all along. Paying the fair price will be very hard to do after years of government policies have given US consumers a windfall.
So the question is not are you willing to pay a lot more, the question is: Are you willing to pay fair price?
American's very strong position in global trade has come at a very stiff price for the US, a trade deficit of billions of dollars each month, something this country cannot continue to sustain.
Corporations and their rise to power have killed wages.
I think we've always had an oligarchy. Prior to globalization, fiat money, and easy credit though, the rich couldn't extract too much from the economy without causing it all to collapse. Consumer capitalism is inherently symbiotic. Consumers need to get richer in step with the capitalists, else it fails. We actually had a long running imbalance that led to the Great Depression, and subsequently 40 years of rebalance. Rebalance in the form of unions, good wages, social benefits, etc.
It's important to understand that our "new" economy (40 years old now), greatly reduces the oligarch's dependence on us, and that is precisely why income disparity has grown enormously. It's easy to fix it (in theory), but those who are in charge certainly don't see it as a problem. Rather it is working as intended.
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We are seeing the impact of a maturing of our economic system, poor domestic population growth and inflation for essential items is starting to have a dramatic impact on our ability so sustain economic growth.
You are confusing GDP with GDP/capita. The later is the only one we should care about.
So the question is not are you willing to pay a lot more, the question is: Are you willing to pay fair price?
If median wages had keep pace with GDP/capita growth as they had in prior history, we'd be nearly 2x as wealthy in real terms. I think most people would be glad to pay "fair price" for imports, with double the real income!
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Originally Posted by james777
So the question is not are you willing to pay a lot more, the question is: Are you willing to pay fair price?
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Originally Posted by rruff
If median wages had keep pace with GDP/capita growth as they had in prior history, we'd be nearly 2x as wealthy in real terms. I think most people would be glad to pay "fair price" for imports, with double the real income!
Median wages would have kept pace if we had not sent all those jobs overseas, and taxed imports as they should have been taxed all along.
Those in power sold the American people on false dreams when they made all those "free trade" agreements, which are anything but free trade. Then the slick politicians did a great job of convincing the American people that they had all these "programs" to lessen the impact of that free trade farce. They did have a lot of programs, food stamps, section 8 housing, Move To Opportunity (move at the taxpayer's expense, to a place with less opportunity), WIC program, government "make work" jobs, etc. which kept the jobless from being hungry and living on the streets, but did not give those displaced a lifestyle anywhere near what those good paying factory jobs provided.
Increasing their wages will not fix your economy, but it will ensure that you lose jobs, because it will make America less competitive globally.
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Originally Posted by rruff
If median wages had keep pace with GDP/capita growth as they had in prior history, we'd be nearly 2x as wealthy in real terms.
There is no Law of Economics that says median wages must keep pace with GDP per capita growth, nor is there a relationship between GDP and wages.
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Originally Posted by james777
For the past forty years, American consumers have been subsidized by the government's policies of sending companies and jobs overseas.
Capital flows to where growth is taking place. There are more profits to be made from the 4 Billion people in the developing world than there are from the measly 320 Million Americans.
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Originally Posted by rruff
One thing that seems to be missed is that globalization and the persistent high trade deficit are largely responsible for the great disparity in income and wealth. Median real wages have been basically flat since the late 70s. In the prior 40 years they rose nearly 200%, keeping pace with productivity.
Median real wages are rising in developing- and emerging-States, the very same States the US oppressed for decades and decades.
Economics always has a way of self-correcting.
Where you're headed economically, is where you always should have been in the first place.
Nothing can change that. You can fight it all you want, but at the end of the day, the Laws of Economics rule and you lose.
Theoretically the US wins since it currently runs a trade deficit. It might bring back some low-wage manufacturing, but lose some skilled service exports. Of course agriculture would suffer as that is a pocket of trade surplus. Would smuggling increase? You bet.
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