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The Truth About Tariffs And ‘Trade Wars’ [An Extract]

“What happens if Trump lays tariffs that erase the benefit of employing slavery in other lands? Let’s say for example that Trump was to figure out the difference in labor cost in a Blazer between one built here and one built in Mexico. It’s not hard — $4/hour there, $20/hour here times however many hours of labor are in the truck and all parts not made in America, plus the avoided environmental expense. That’s the tariff.

“Now take Apple’s iPhone. How much would the screws and assembly cost here .vs. over there for all parts not made in America, plus the avoided expense in the non-US components made where environmental damage is not prevented? That’s the tariff.

“Go down the list one at a time of everything we import and look at what costs are evaded by firms soliciting labor through other lands where the legal environment does not protect the right of free movement, the environment and similar. That, by the way, is essentially everything this nation imports. Set the tariff as equal to that evaded cost.

“Now lay the same via taxes on any firm that employs H1b — or the so-called “Seasonal worker” visas (H2a and H2b) . Take the full imputed cost including salary and benefits of said person and, if lower than a US individual of the same skill set employed in the same job that’s the tax due.

“What happens if you do this?

Those manufacturers no longer have an economic reason to put labor there. They will bring it here instead, by and large. Further, watch how fast all those H2 jobs who people claim “can’t be filled by Americans” suddenly can find all the employees they need!

“The result is that all those people on the left side of the curve will have jobs that are sufficient to support themselves and their families.

“But what if the manufacturers don’t bring the labor back? Then Treasury has hundreds of billions of dollars in surplus funds to cover the welfare costs of everyone on the left side of the curve.

“Either way the outcome is the same — we have a stable, thriving society.

“No, your iPhone will not cost an extra $200 nor will your GM truck. If either company could charge another $200 or $6,000 for their products and still sell them here in the United States they would do it right now. What prevents them from doing it is that they’ve determined that demand is insufficient to support that price. That does not change if there is a tariff imposed.

“So what will happen is that Apple’s margin on said iPhone will go from 40% to 25% and their stock price will reflect that. Likewise GM’s margin on that truck (remember, they make more on trucks than any other vehicle) will come in and so will their stock price.

“Neither company will admit this because if they do there is a very real risk that those 150 million on the left side of the curve will decide to eat the executives of said firms and the politicians that screwed them out of a job on purpose so the top 2% of the nation can make money through a rapidly advancing stock price! See above for the survival odds of that ~6 million should the other 150 million take that decision.

That is why they lie repeatedly on this subject and in fact will never admit the truth.”

RTWT: The Truth About Tariffs And ‘Trade Wars’ in [Market-Ticker]

Comments on this entry are closed.

  • rabbit tobacco July 27, 2018, 8:42 AM

    They don’t care about the Truth.

  • OneGuy July 27, 2018, 9:35 AM

    Make no mistake, someone benefits from these unfair and uneven trade agreements. I would bet good money that every American negotiator who created the NAFTA agreement got cushy jobs and retired with millions as payment for their part in NAFTA. There is simply no other logical reason why they would have negotiated it so favorable to Canada and Mexico. Ditto for all our trade agreements with other countries. Our politicians aren’t so stupid or ignorant that they cannot make a good deal they are so dishonest that they made a deal with payola in it for them. Those who speak loudly against Trump’s efforts to level the trade playing field are going to lose their advantage and that is why they are unhappy.

    We literally cannot lose a trade war with China. If they choose the nuclear option and put 1000% tariffs on our goods and we responded equally than we would be forced to make all those products here instead of buying them there. We would gain jobs, protect our trade secrets stop funding their war machine and more. They would lose their single biggest market, lose trillions that they need to build their nuclear and conventional arsenal and lose jobs. They cannot afford to go toe to toe in a trade war and we, at this point, cannot afford not to.

  • ghostsniper July 27, 2018, 10:23 AM

    “They cannot afford to go toe to toe in a trade war and we, at this point, cannot afford not to.”

    This is a myopic view.

  • OneGuy July 27, 2018, 3:59 PM


    Or do you mean you don’t understand that we have been in a trade war with China for decades and they are winning. No what it means if we go toe to toe with China is a win/win. We cannot lose. The very worst that could happen is we reduce our trade imbalance to zero and get back 10 – 20 million jobs. THAT my friend would be long sighted!

  • Fred July 27, 2018, 4:32 PM

    “Then Treasury has hundreds of billions of dollars in surplus funds to cover the welfare costs of everyone on the left side of the curve.”

    Actually this “surplus” is paid by the middle and right side of the curve who purchase the products at higher prices. China doesn’t pay tariffs, you do. China is not buying the more expensive item, you are. China pays for it in loss manufacturing as the balance shifts, not a cheap cost at all but there will be no realized US surplus except over years as items are gradually demanded at the higher price if built here.

    I’m for the tariffs anyway but for sovereignty reasons and I don’t particularly care for the NWO reincarnation of the Tower of Babel global utopia. But Sir, it’s not without cost to us. I see nothing wrong with a nation seeking real domestic employment opportunities as I was there back when I could get a job for $10 bucks an hour decades ago that is still a $10 dollar job now. However, inflation adjusted, that roof on your house come replacement time ain’t gonna be cheap.

  • Hale Adams July 27, 2018, 7:46 PM

    I think it has to be said that free trade is a good thing, generally speaking. One thing that a lot of people forget is that the federal Constitution is not just a compact between the states for a political union — it’s also a free-trade pact, as well.

    It’s worked really well for us — these united States are the wealthiest political entities on the planet. I suspect that the reason it works so well for us is that we Americans see ourselves as having a lot in common, and so we deal generously with each other. The Europeans have less in common with us, but there’s enough kindred feeling that things still work reasonably well.

    It may not work so well with other countries that are more “alien”. Ethnicity may have something to do with it, but so do attitudes regarding individual autonomy and (for lack of a better term) religion. (Perhaps a better term than “religion” might be “belief in a power higher than the merely mortal”.) The Japanese aren’t saints, but their government is at least not hostile to religion, and the culture does place some value on individual autonomy (especially since 1945). And so our trade relations are pretty good — yes, there are quarrels, but they generally play fair, and both we and they seem to think we get good “value for money” in our trading.

    The Chinese, perhaps not so much. Their culture doesn’t seem to place much value on individuals generally, and the official attitude towards religion seems to be quite hostile. There just doesn’t seem to be much belief in playing fair — if there is going to be no retribution in the next world (this is where attitudes about “celestial authority” come into play) for your misdeeds, why bother being conscientious in adhering to the terms of a bargain, even the unwritten ones that help guarantee repeat business? Just take advantage of the charitable and honorable instincts of your opposite numbers, and when they get tired of being burned, move on to the next sucker.

    I have no animus against the Chinese as a people — they’re no better or worse than any other group of humanity. My problem is that too much of Chinese economic activity exists to directly benefit the People’s Liberation Army. Yes, I like smart-phones, but I don’t like the idea of putting money directly into the pockets of the PLA. Yes, a certain Chinese outfit makes great closed-circuit television cameras (I work for a company that does, among other things, CCTV installations and maintenance), but do I really want to install cameras that have “back-doors” built into them to allow Chinese intelligence services access to the video? (Uncle Sam bought a bunch of these cameras, installed them in sensitive areas, and is now deeply regretting having done so.)

    So, yes, free trade is great — we DO need to get tariff barriers lowered. You can’t “tariff” your way to prosperity — the Founders and Framers understood that, hence the free-trade-pact aspect of the Constitution — but when dealing with people who don’t see things in the same light as you do, some caution is in order, and tariffs may be a good way to get their attention and to induce better behavior.

    My two cents’ worth, as usual.

    Hale Adams
    Pikesville, People’s still-mostly-Democratic Republic of Maryland

  • ghostsniper July 27, 2018, 8:18 PM

    “Or do you mean…”

    Don’t even ATTEMPT to put words in my mouth asshole.
    Now get your fat ass back over there in front of that CNN TV and stay there.

  • OneGuy July 28, 2018, 8:18 AM

    If you don’t like people interpreting what you say be more specific. Your comment was simply a run of the mill insult. At least have the guts to put your argument out there. As for trying to intimidate or insult me don’t waste your time. Concentrate on a coherent and convincing reply. Although I do also enjoy a witty one liner.

  • ghostsniper July 29, 2018, 6:53 AM

    “If you don’t like people interpreting what you say…”

    People conditioned by communist TV have comprehension problems.