It’s time for President Trump to send President Xi a love letter
Is it any wonder the recent trade negotiations between the U.S. and China ended in a stalemate? The answer is quite simple, you know.
China’s President Xi (pronounced shee) is feeling like a jilted lover. After all, President Trump has a self-proclaimed love affair with North Korea’s leader Kim Jong-un, and Mr. Trump has, on occasion, put more faith in the word of Russia’s President Putin than in our own national intelligence agencies. Who could blame President Xi for being in a jealous snit?
As President Trump tweeted on May 10, “Talks with China continue in a very congenial manner — there is absolutely no need to rush — as Tariffs are now being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S.” Is that not worthy of a love letter to President Xi? OK … OK … maybe a love letter would be a bit too strong, but, Xi-pers creepers, a simple thank-you card would most certainly be appropriate. To smooth things over, White House Press Secretary Sarah Sanders could craft an insincere and intentionally misleading thank-you card; she has lots of qualifying experience in that department. (Just see the Mueller report.) How easy that would be?! President Trump could simply sign the thank-you card without missing one second of Fox News. As President Trump tweeted on March 2, 2018, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”
Xi loves me, Xi loves me not
What’s not to love about President Xi’s China making massive payments directly into the U.S. Treasury? Nothing, obviously. If only it were true. Just when we thought Xi loved us, a bunch of spoilsport academics published reports that ruined all the fun.
According to the report, “The Impact of the 2018 Trade War on U.S. Prices and Welfare” by Mary Amiti of the Federal Reserve Bank of New York, Stephen J. Redding of Princeton University and David Weinstein of Columbia University, which was published in March, “the U.S. tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters. We also find that U.S. producers responded to reduced import competition by raising their prices.”
The reality is, U.S. consumers and U.S. businesses are footing most, if not all, of the bill for U.S. tariffs/import taxes. Remember: A tariff is simply a tax on goods imported into the U.S. Who are those importers? U.S. businesses, that’s who. Their report also notes that “by the end of 2018, import tariffs were costing U.S. consumers and the firms that import foreign goods $3 billion per month in added tax costs and another $1.4 billion dollars per month” in lost real (inflation-adjusted) income. Three billion dollars here, four billion dollars there. Easy-peasy. Trade wars are good, and easy to win. Yeah, right.
Similarly, the April report “The Production Relocation and Price Effects of U.S. Trade Policy: The Case of Washing Machines” by Ali Hortacsu and Felix Tintelnot, both of the University of Chicago, along with Aaron Flaaen of the Federal Reserve Board shows how consumers are taking the tariffs/import taxes on the chin. Their report notes that “despite the increase in domestic production (of washing machines) and employment (gains of about 1,800 jobs), the costs of these 2018 tariffs are substantial: we estimate increased annual consumer costs of around $1.5 billion, or roughly $820,000 per job created.”
As noted in my column, “Consumers taken to the cleaners, “after the Trump administration imposed tariffs on washing machines in early 2018, Whirlpool’s CEO Jeff M. Fettig said, “This is a victory for American workers and consumers alike. By enforcing our existing trade laws, President Trump has ensured American workers will compete on a level playing field with their foreign counterparts, enabled new manufacturing jobs here in America and will usher in a new era of innovation for consumers everywhere.” As we now know, with its increased consumer costs of $820,000 per job created, the tariff/import tax on washing machines was far from a victory for American consumers. The same is more than likely true for several subsequent rounds of tariff increases, which have been much more widespread than those imposed in early 2018. The next time you pay $1,000 for an $800 washing machine, dear consumer, that just shows you how trade wars are good, and easy to win. Whatever.