Playing Chess With World Trade

America has been on the wrong end of bad trade deals for a long time. We watched our manufacturing jobs leave America after NAFTA. We watched the steel industry disappear after being undercut by Chinese steel held up by subsidies by the Chinese government. President Trump is a businessman. As a businessman, he is trying to level the trade playing field. In some areas he is getting cooperation at home and abroad; in some areas he is not. China has been a difficult country to deal with regarding trade. The uneven playing field they have enjoyed for years has been very profitable for them. Because their economy is based on an uneven playing field, they are reluctant to make changes. Their economy is currently struggling, and if President Trump stands his ground, the Chinese economy could face serious challenges. That’s where we are. There is, however, some positive news about where we might be headed.

Ed Morrissey at Hot Air posted an article today about a possible breakthrough in the talks with China.

The article reports:

Did China finally blink in Donald Trump’s trade war? Trump himself seems to think so. At the G-7 summit, Trump told reporters that a statement earlier in the day from a top official in Beijing showed that China had finally expressed a real interest in redefining the trade relationship between the world’s top two economies. It’s “the first time” that Trump sees China acting in good faith, he said

The article continues:

After rapid-fire escalations in tariffs by both sides, China’s vice premiere called for “calm.” Liu He also declared Beijing’s willingness to conclude a trade agreement and called for talks to begin immediately:

“We are willing to resolve the issue through consultations and cooperation in a calm attitude and resolutely oppose the escalation of the trade war,” Liu, who is President Xi Jinping’s top economic adviser, said, according to a government transcript.

“We believe that the escalation of the trade war is not beneficial for China, the United States, nor to the interests of the people of the world,” he added.

U.S. companies are especially welcome in China, and will be treated well, Liu said.

“We welcome enterprises from all over the world, including the United States, to invest and operate in China,” he added.

“We will continue to create a good investment environment, protect intellectual property rights, promote the development of smart intelligent industries with our market open, resolutely oppose technological blockades and protectionism, and strive to protect the completeness of the supply chain.”

The last time we thought we had a deal, the person who made the deal was executed when he returned home. Hopefully this time will turn out better for everyone.

Trying To Level The Playing Field Has Its Challenges

Fox Business posted an article today about the devaluing of the Chinese yuan. The devaluing of the Chinese currency (currency manipulation) has been used by China for decades to grow their economy at the expense of America. It has been used to lure manufacturing away from America, impact our trade balance, and generally work against the American economy. We have needed to combat this practice for decades, but no President had the courage.

The article reports:

The onshore Chinese yuan weakened to worse than seven per U.S. dollar, hitting its lowest level since 2008, as Beijing looks to cushion the blow from Trump’s tariffs. A weaker yuan makes Chinese goods cheaper for overseas buyers, which may be necessary as China just lost its spot as the US’s biggest trading partner.

Trade data released Friday by the Department of Commerce showed U.S. imports from China fell by 12% in the first six months of the year, allowing Mexico to supplant it as the U.S.’s biggest trade partner.

“China dropped the price of their currency to an almost a historic low,” Trump tweeted Opens a New Window. on Monday. “It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

Last week, Trump said beginning Sept. 1 the U.S. would place a 10% tariff on the remaining $300 billion of Chinese goods. He went ahead with the announcement despite objections from his advisers.

The president warned he could “always do much more” with respect to tariffs, adding the 10 percent tax could go “well beyond 25 percent” if necessary. Earlier this year, the administration placed a 25% tariff on $250 billion worth of Chinese goods.

Weakening the yuan isn’t the only form of retaliation Beijing took on Monday. It also ordered state-owned enterprises to stop purchases of U.S. agricultural products, according to a Bloomberg report, citing people familiar with the situation.

That is a reversal from just last week, when Beijing said it had purchased several tons of U.S. soybeans Opens a New Window. as a gesture of a goodwill amid trade negotitations. Before the trade war began, China was the largest buyer of U.S. soybeans, accounting for 70% of all purchases, but their imports have fallen by 97% since the trade war began.

The article notes:

Over the weekened, The Trump administration pushed back against the idea the trade war was hitting the wallets of U.S. consumers.

“China has strategically gamed the tariffs by slashing their prices and by devaluing their currency,” White House trade advisor Peter Navarro told “Fox News Sunday.”

This trade dust-up with China may get ugly, but it is something that has to be done.

The Coming Election Impacts Foreign Policy

Yesterday The Washington Free Beacon posted an article about China’s plans to influence the 2020 presidential election.

The article reports:

In his conversation with Levin, Gertz (Washington Free Beacon senior writer Bill Gertz) reflected on his interview with Guo, who told Gertz earlier this week that the Chinese government has been deploying a prolonged campaign to defeat President Donald Trump in 2020. Gertz asserted the Chinese government may try to wait out Trump’s time in office so it can negotiate trade deals with a new Democratic president if Trump loses in 2020.

Trump announced Thursday he would impose an additional 10-percent tariff on certain Chinese exports as a trade agreement between the United States and China has yet to materialize.

“The China threat to me is the most serious threat facing the country,” Gertz told Levin.

He pointed to the economic integration between the U.S and China and how those relationships make it difficult for lawmakers and military officials to address Chinese aggression head-on, which he referred to as “an existential threat.”

The article concludes:

“There’s a major push right now to try and build up of American courses in Asia so we won’t have to go to war with China,” Gertz said of the government’s efforts to deter a war hypothetical war with China.

Looking towards the presidential race, Gertz warned the Chinese government would prefer to have a Democrat in the White House.

“It’s going to be a huge problem if the Democrats retake the administration,” Gertz said, pointing to former Vice President Joe Biden’s recent downplaying of threat China poses to the United States.

Gertz pointed out that during the Obama presidency the Chinese government expanded their presence in Asian waterways, in addition to ramping up their theft of intellectual property from American companies and entrepreneurs.

This may be the reason the negotiations with China have become so difficult–China is waiting for a President who will cave into their demands. It is obvious that President Trump is not that person.

By undermining President Trump since he was elected, the Democrat party has made international trade negotiations much more difficult. Creating an even playing field in trade with China would result in continued growth of the United States economy. It is time to repair the damage bad trade deals have done in the past.

Yes, The President’s Border Policies Have Changed Things

One America News posted an article today with the following title, “Border apprehensions nosedive after President Trump’s Mexico deal.”

The article reports:

Apprehensions on the southern border have plummeted, following President Trump’s historic deal with Mexico. According to leaked Department of Homeland Security data, apprehensions at the southern border dropped by 25-percent between May and June.

This drop was corroborated by acting Department of Homeland Security Secretary Kevin McAleenan on Friday, who attributed the change to President Trump’s deal with Mexico in June. The deal called on Mexican officials to do more to stop the flow of illegal migration to the U.S. southern border.

“It’s become clear that over the past three weeks, since the administration reached a new agreement with Mexico, that we’ve seen a substantial increase in the number of interdictions on the Mexican southern border and a sincere effort to address the transportation networks coming through Mexico,” stated McAleenan.

While the month of June typically sees a decline in border apprehensions, a 25-percent decrease is unprecedented compared to previous years.

The article concludes:

“While it’s been many weeks coming, I think we should pause to note the significance of the strong bipartisan votes to respond the administrations request and provide the over $4.5 billion in total to support these humanitarian missions,” said the DHS secretary. “Although we did not get everything we asked for, including — importantly — additional ICE beds for single adults, the bill substantially addresses our request.”

Despite the decline, McAleenan admited there’s still a lot of work that needs to be done to stop the flow of migrants from central America. He also said he believes we should wait to see if the drop in apprehensions continues in the coming months to assess just how much more work needs to be done to combat the migrant crisis.

One of the advantages of having a businessman as President, is that President Trump understands that money (tariffs) can be used as leverage. The change in the situation at our southern border is an example of that. Hopefully, the decrease in illegal immigrants attempting to enter America illegally will continue.

Wrong Again

Remember when the talking heads on television told us that because of the tariffs President Trump had placed on China, the cost of imports would go up. Well, they misread the tea leaves again.

The Gateway Pundit posted the following from the Bureau of Labor Statistics:

Prices for U.S. imports declined 0.3 percent in May, the U.S. Bureau of Labor Statistics reported today, following an increase of 0.1 percent the previous month. Lower fuel and nonfuel prices contributed to the May decline in import prices. U.S. export prices fell 0.2 percent in May, after advancing 0.1 percent in April, 0.8 percent in March, and 0.6 percent in February.

Imports

U.S. Import prices fell 0.3 percent in May, the first monthly decline since a 1.4-percent drop in December. Import prices advanced 1.8 percent from December to April before the downturn in May. The price index for overall imports decreased 1.5 percent over the past 12 months, matching the drop in January. These were the largest over-the-year declines since the index fell 2.2 percent in August 2016.

Fuel Imports: Import fuel prices declined 1.0 percent in May, after rising 25.4 percent over the previous 4 months. Lower prices for both petroleum and natural gas contributed to the May decline. Petroleum prices fell 0.9 percent in May, after a 4.7-percent advance in April. The May decrease was the first monthly decline since a 15.3-percent drop in December. Natural gas prices fell 6.8 percent in May following a 51.1-percent decline the previous month. Overall fuel prices decreased 1.1 percent over the past year. The decline was driven by a 1.9-percent drop in petroleum prices which more than offset a 2.5-percent rise in natural gas prices.

The Gateway Pundit article concludes:

The lower costs on fuel allowed the overall import costs to go down for the month.  This is in the face of tariffs the Trump Administration put on China as a result of inaction from the Chinese in coming together on a trade agreement with the US.

Despite what all the liberal naysayers said about increasing tariffs costing Americans millions, the costs of imports are actually down.

Overall the US economy is in very solid shape –

The experts seem to be having a very difficult time getting things right under the Trump administration.

An Obvious Conflict Of Interest

Senator Mitch McConnell does not like tariffs. He does not like them on China where they are levied in an attempt to level the playing field on trade, and he does not like them on Mexico where they are being levied in an attempt to stop the flow of illegals and drugs over our southern border.

Unfortunately, the meme below is not a joke:

An article posted at Breitbart today explains the problem. Senator McConnell is married to Transportation Secretary Elaine Chao.

In the article, Peter Schweizer explains why that is important:

Schweizer highlighted Transportation Secretary Elaine Chao, who is married to McConnell, as illustrative of what he described as widespread political conflicts of interest between sitting American officials and foreign governments.

“The Chao family are deeply embedded commercially and financially with the Chinese government,” explained McConnell. “The Chinese government essentially set them up in the shipping business. Their ships — these are large cargo ships that transport a large amount of goods around the Pacific.”

Schweizer added, “The Chinese government is financing the building of these ships for the Chao family business. They provide crews for these chips, and they provide contracts to ship steel and other products around the Pacific.”

The Foremost Group is a shipping business founded by James Chao, Elaine Chao’s father. The Chao family business primarily revolves around China, necessitating “deep ties to the economic and political elite in China,” according to a Sunday-published New York Times report.

“[The Chao family’s shipping business] started out in the early 1990s with just a couple of vessels, a couple of large cargo ships,” said Schweizer. “They now have, by some estimates, 35 or 36, many of those built by the Chinese government. The estimates are that hundreds of millions of dollars in financing is done by the Chinese to build these ships, and that they give them preferential treatment.”

Schweizer explained, “Business in China is done with a political purpose. The China State Shipbuilding Corporation is controlled by the government, by the Communist Party, and they do business deals with people in the West with the expectation that they will get things in return.”

That is called a conflict of interest. So what is Senator McConnell’s problem with the Mexican tariffs? Many Republicans have aligned themselves with the U.S. Chamber of Commerce which supports our porous southern border as a source of cheap labor. There has never been a border wall because Republican business men who contribute to political campaigns want cheap labor and Democrats want future voters.

Tariffs And Trade Negotiations

John Hinderaker posted an article at Power Line today about the ongoing trade negotiations with China. It is an open secret that China has been stealing American intellectual property for years. They have also engaged in other unfair trade practices such as manipulating their currency. What is happening now is that President Trump is trying to make the playing field more level. There will be opposition. There also may be some short-term losses for Americans, but the President is doing what needs to be done.

The article includes the following cartoon:

That about sums it up.

President Trump Has Reached A Trade Deal With Canada And Mexico

America has not done well in trade deals in the recent past. Our manufacturing sector has suffered for a variety of reasons–high taxes, bad trade agreements, energy costs, etc. The Trump administration has begun to address these issues, sometimes more successfully than others.

This past weekend, Fox Business announced that the United States and Canada confirmed that they had reached a deal on a “new, modernized trade agreement,” which is designed to replace the 1994 NAFTA pact.

The article reports:

In a joint statement the two nations said the new deal would be called the United States-Mexico-Canada Agreement (USMCA).

Canadian Prime Minister Justin Trudeau said following a cabinet meeting, “It’s a good day for Canada.”

…The agreements reportedly boost U.S. access to Canada’s dairy market and protect Canada from possible U.S. autos tariffs.

Trump’s administration has said Canada must sign on to the text of the updated NAFTA by a midnight Sunday deadline or face exclusion from the pact. Washington has already reached a bilateral deal with Mexico, the third NAFTA member.

If Canada did not sign a new deal, Trump had threatened to impose steep tariffs on all automotive imports.

…Trump blames NAFTA for the loss of American manufacturing jobs and wants major changes to the pact, which underpins $1.2 trillion in annual trade. Markets fear its demise would cause major economic disruption.

Negotiators from both sides spent two days talking by phone as they tried to settle a range of difficult issues such as access to Canada’s dairy market and U.S. tariffs.

As part of any agreement, Canada looks set to offer increased access to its highly protected dairy market, as it did in separate pacts with the European Union and Pacific nations.

Access to Canada’s dairy market was one of the sticking points of the negotiations. Canada places high tariffs on imported dairy products in order to protect its dairy farmers.

This agreement is another indication of the Trump administration’s desire to protect the interests of America. America is simply looking for a level playing field in trade agreements. This treaty is one more step in that direction.

An Interesting Take On Tariffs

Real Clear Politics posted an article today titled, “Why Trump’s Tariffs Won’t Cost Consumers a Nickel.” I’m not sure I totally agree with that, but the ideas behind the statement were interesting.

The article states:

Critics also contend that President Trump’s tariffs will inevitably lead to higher prices for consumers.  We’ve heard this before. They said aluminum tariffs would spike the cost of a six-pack. But soda and beer prices have remained flat.

Now Walmart has joined the chorus. But we have no more reason to believe officials there than other boys who cried wolf. To understand why, let’s review how tariffs work, and how specifically the president’s tariffs work.

…Tariffs aren’t imposed on the final retail price the way a sales tax is. They are also not imposed on the wholesale price. They are not even imposed on what the importer pays at the dock when the goods enter the U.S.  The duties are imposed on an even lower price than that – and that’s a scandal in itself.

Let’s say Black & Decker wants to sell a line of toaster ovens with a $60 retail price in the U.S.  It goes to a Hong Kong middleman who deals with Chinese manufacturers. The Hong King middleman pays his cousin at a Chinese toaster oven factory $10 for toaster ovens. Black & Decker agrees to pay the Hong Kong middleman $20 for the toaster ovens, and picks them up off the boat in Long Beach, Calif.

Let’s say there’s a 10 percent tariff on toaster ovens from China. (There isn’t.)  The tariff would only be $1 because it’s calculated on what the Hong Kong middleman (says he) paid his cousin at the toaster factory – the first sale — not what Black & Decker pays to take delivery at the port – what’s known in the jargon of the trade world as the last sale. 

As a result of this accounting flim-flam, Hong Kong middlemen and the importers who love them are getting rich while taxpayers are getting hosed for untold billions of dollars the U.S. Treasury is not collecting.

The article concludes with information that shows the wisdom of what President Trump is doing:

And here’s the beauty part, how the tariffs are designed to hurt China: The Trump tariffs target items available from sources outside China.  Buy from a supplier outside China, avoid the tariff.

President Trump’s surgical strike tariffs are sending companies a clear message: Do business anywhere but China.  

And the message is getting through. Companies no longer see China as a safe space.  China needs a continued influx of foreign investment to feed its economic growth, and the president’s trade policy encourages companies to look elsewhere.

This is the reason it is good to have a businessman in the White House instead of a politician.

Good News For Indiana

Yesterday Breitbart reported the following:

U.S. Steel has announced that they will invest $750 million at their 110-year-old steel manufacturing plant known as Gary Works in Gary, Indiana, crediting President Trump’s protective tariffs on steel imports.

…“We are pleased to be making this significant investment at Gary Works, which will improve the facility’s environmental performance, bolster our competitiveness and benefit the local community for years to come,” Burritt said in a statement.

“We are experiencing a renaissance at U.S. Steel,” Burritt said.

That manufacturing renaissance for U.S. Steel comes after decades of free trade policies which incentivized American companies to readily outsource their labor force to foreign countries.

…Already, though, Trump’s tariffs have created 11,100 American jobs in six months. There have been 20 times as many U.S. jobs created because of the tariffs than those jobs that have been lost.

This illustrates why it is good to have a political outsider who is a businessman in the White House. The political establishment and the State Department would never have had the courage to reverse bad trade agreements. America cannot afford to support the world by making bad trade deals–we have serious deficits that we still have to deal with. We need to remember that when more Americans that are working, fewer Americans are depending on the government to support them. That alone cuts government spending.

The economic growth we are experiencing under President Trump is a vivid example of the fact that economic (and trade) policies matter. The elimination of unnecessary regulations combined with a tax code that is friendly to business have resulted in a degree of economic growth that Democrats told us was impossible. We need to remember who said that this couldn’t be done and vote them out of office. We then need to vote people into office who will support economic policies that result in economic growth.