Tax Cut To Widen Trade Gap That Riles Trump

Jul 2009
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I think it's telling that many of the goods on the list of tariffs imposed by the Chinese are subsidized.
BlueNeck, I'm a proponent of the “most favored nation” concept which does not prohibit nations from favoring their own entities.
Among mutually agreeing nations, they treat each others' entities equitably, and they do not treat each others' entities with less favor than they grant to entities of any other foreign nation.
I'm also a proponent of USA adopting an Import Certificate policy which is a unilateral trade policy.

I'm opposed to sovereignties presuming to intervene within others' domestic policies. What we or any other nations prohibit from passing through our national borders are domestic issues. That's the essence of the “most favored nation” concept.
With nations that we, the USA do not have such an agreement, or there's a breach of an agreement with us, our trade relationship should be conducted on an “ad hoc” basis.

Respectfully, Supposn
 
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Blueneck

Former Staff
Jun 2007
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BlueNeck, I'm a proponent of the “most favored nation” concept which does not prohibit nations from favoring their own entities.
Among mutually agreeing nations, they treat each others' entities equitably, and they do not treat each others' entities with less favor than they grant to entities of any other foreign nation.

I'm opposed to sovereignties presuming to intervene within others' domestic policies. What we or any other nations prohibit from passing through our national borders are domestic issues. That's the essence of the “most favored nation” concept.
With nations that we, the USA do not have such an agreement, or there's a breach of an agreement with us, our trade relationship should be conducted on an “ad hoc” basis.

Respectfully, Supposn
The whole idea of subsidies was supposed to be about keeping the price of food affordable for Americans, not to give farmers an edge to sell to countries who's standard of living is lower than ours. I don't think we should export products that are subsidized by the taxpayers.

In the end the main problem ends up being currency and the value of it. I know there are plenty of arguments against a one-world currency but it would level the playing field as far as competitiveness is concerned. We simply can't compete with countries with average wages of a couple bucks an hour.
 
Jul 2009
516
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The whole idea of subsidies was supposed to be about keeping the price of food affordable for Americans, not to give farmers an edge to sell to countries who's standard of living is lower than ours. I don't think we should export products that are subsidized by the taxpayers. ...
BlueNeck, no; although U.S. Federal price supports of agricultural commodities do not substantially increase food prices to USA consumers, they certainly increase rather than decrease those prices.
(I'm not thrilled with the concept of USA's federal budget expenditures for subsidizing our agricultural exports. Were it not for those subsidies, our apparent trade balance of agricultural goods would not be so much of a surplus, and would now or in the near future be more of a deficit).

To the extent that U.S. federally subsidized food exports encourage poorer nations to produce more food for the international rather than their domestic markets, we're actually to some extent contributing to the increase of world hunger. I'm not sure if we are a net benefit or detriment to the poor of this world.

Federal donations of food for poverty programs and school lunches do somewhat help maintain farm prices and serve the public welfare, but there's the question of waste and corruption within those programs.

Respectfully, Supposn
 
Jul 2009
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BlueNeck, I'm aware of no general (as opposed to only agricultural) trade policy concept other than the Import Certificate concept, that could possibly subsidize its nation's export products.

Import Certificates net costs are eventually and entirely paid for by its nation's purchasers of imported goods. To the extent that those costs exceed their national government's direct expenses due to the policy, those additional market-determined price increases also serve as indirect but effective subsidizers of their nation's exported products.

Respectfully, Supposn
 
Jul 2009
516
71
... In the end the main problem ends up being currency and the value of it. I know there are plenty of arguments against a one-world currency but it would level the playing field as far as competitiveness is concerned. We simply can't compete with countries with average wages of a couple bucks an hour.
BlueNeck, no; the major problems are availability of jobs and their purchasing powers.
If whatever a person earns is insufficient to support them and their families, a single global currency will do little or nothing to solve such problems.

Respectfully, Supposn
 
Jan 2016
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Bumping this thread to have it handier, as the issue has come up again, with the 2018 trade deficit numbers coming out, and looking grim.
 
Jun 2014
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On Thursday, April 19 (2018), an article with that title appeared on page A2 of The Wall Street Journal, in the weekly Capital Account column by the very knowledgeable Greg Ip. His columns are highly recommended, BTW. I would link to the article, but you would run into an immediate paywall. A few brief excerpts:

Among President Trump's most deeply held convictions is that trade deficits are bad, yet his signature economic policy---a major tax cut---likely will deepen the trade deficits for years to come.

But in the long run wider trade deficits will make Americans poorer. That's not because foreigners are stealing American jobs, as Mr. Trump often contends. Rather, it's because Americans will increasingly borrow from foreigners to sustain their standard of living. Paying them back will wipe out a sizable chunk of the tax cut's benefit.

The U.S. runs a trade deficit because it consumes more than it produces while its trading partners, collectively, do the opposite. (Another way of saying this is that the U.S. invests more than it saves, while other countries save more than they invest.)

Permanently reducing the U.S. trade deficit requires some combination of the U.S. saving more and other countries saving less, a tall order because saving is heavily driven by structural factors such as aging, the social safety net and the availability of credit......Permanently higher budget deficits make trade deficits worse by diminishing national saving. Larry Kudlow, Mr. Trump's chief economic adviser, in an interview with The Wall Street Journal, disputed the link between the budget and trade deficits. But economists at Goldman Sachs recently studied the historical record and found that all else equal, every $100 boost to the budget deficit raises the trade deficit by $35.

You told us so, but some of us just wouldn't listen.
 
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