China: What is it Good For

From Steven W. Mosher writing in American Greatness:

The latest numbers on U.S. economic growth are astonishingly good. The land of the free enjoyed 3.2 percent annual real GDP growth for the first quarter of 2019. It would have been even higher—3.5 percent—without the government shutdown.

The numbers vindicate President Trump’s position on trade. The dealmaker-in-chief has been saying for decades that a trade deficit is a drag on growth. And we now learn that almost 1 percent of our GDP growth was a result of a reduction in imports.

Imports are down because Trump’s tariffs are driving down the trade deficit with China. Now that he’s increased tariffs on $200 billion more of Chinese goods, expect the U.S. economy to grow even faster.

Amazing, isn’t it? When the largest economy in the world fights its own corner, it tends to win.

The thing is, since the end of World War II, we have been a bit guilty about our success, and for reasons that may have been reasonable, even cogent, in 1945, we have set our foreign exchange system to favor everybody else and disfavor ourselves. It’s part of that American magnanimity in victory that has rebuilt Germany and Japan (and would have our ally Great Britain as well, if they hadn’t wasted it experimenting with socialism).

To continue:

The Trump Administration has taken a decidedly different tack, pursuing an economic nationalist agenda that insists:

  • We must defend ourselves against China’s relentless cyberattacks on American businesses, and its theft of hundreds of billions of dollars in intellectual property each year.
  • We must stop China’s state-owned, state-subsidized and state-controlled enterprises from the wholesale dumping of products. Flooding foreign markets with steel and aluminum, not to mention autos and robotics, is only the first step. The end game is the destruction of free-market capitalism altogether.
  • We must stop China from forcing America companies to hand over their cutting-edge technology as a condition of doing business there. Forced technology transfer is theft, pure and simply.
  • We must stop China from manipulating its currency to gain an unfair advantage in trade.
  • Finally, we must defend Americans from the flood of fentanyl and other dangerous opioids that are killing them by the tens of thousands. The first two Opium Wars were waged by Great Britain against China. The Third is being waged by China against the United States and its people, and it must stop.

Understandably, China is not enthused at America fighting its corner, and so are resisting. So what? The President didn’t campaign on ‘Make China Greater Still”. His remit is to “Make America Great Again”. And so far, so good.

The tariffs are bad for China but very good for America. American companies that in the past would have offshored production to China will stay put. Some companies that have already left will be coming back. Whatever the opposite of “offshoring” is—inshoring? reshoring?—we are about to see it happen.

We should expect that China—the Bully of Asia—will try to retaliate. In fact, they have already begun to threaten to do just that. It’s unlikely that President Trump will back down, however. He understands that we buy $5 worth of goods from China for every $1 the Chinese buy from us. That gives us much more leverage.

As far as the soybeans and other grains that China will no longer buy from us, Trump has already announced a plan to make sure that America’s farmers are not hurt. Some of the tariff money will be used to buy and ship grain to parts of the world suffering from chronic food shortages.

Think about that for a while – we invent various products (not excluding iPhones) and then we outsource the production of some of the most advanced products in the world, to a country who has no desire to allow free people to live anywhere in the world. If that wasn’t enough, they always steal the ideas and the products, and often half of the companies set up to produce them.

And by the way, other than those products that our shortsighted companies allow to be stolen from them for a mess of pottage called cheap labor, what do we sell? Soybeans.

One of the underlying cause of our Revolution was the fact that Great Britain’s considered policy in the First Empire was to use the colonies to provide raw material and increase the market for its manufactured products. It’s called mercantilism, and it’s designed to keep colonies dependant on the other country.

Sound familiar?

About NEO
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18 Responses to China: What is it Good For

  1. audremyers says:

    You must be a voracious reader. You find insightful, articulate, rounded articles to share and your ‘editorial comments’ are top notch.

    Liked by 1 person

  2. the unit says:

    Duh, what? Government shut down reduced GNP it says. How does not spending money confiscated from taxpayers who earned it in real GNP earning times, where government doesn’t make any GNP in the first place increase GNP?
    Er, not really expecting an answer. Plenty of places to consider what experts say. 🙂
    http://theconversation.com/whats-the-economic-impact-of-a-government-shutdown-109182
    And etc.

    Liked by 1 person

  3. Nicholas says:

    Technological changes mean that we should actually be able to set up “smart factories” in the West and make decent profit on manufacturing again (few staff needed, so few wages; good control over output to respond to market demand). These can be expensive to set up, but in the long run they truly are profitable and can go a long way to balancing our economies and reducing haulage and shipping (though we would still need to import any raw goods we cannot produce ourselves). If we had IPOs on these and restricted investment to citizens, we could also ensure that dividends benefitted our own people, at least initially until the shares were traded.

    Like

    • NEO says:

      You are spot on. The problem for us both has been (and largely still is) that our large businesses are dominated by finance and lawyers. The finance people are only concerned with the quarterly bottom line and the stock market, and lawyers are inherently deal breakers and risk averse. For you, over regulation is also a problem, here too but we are getting it under control. You guys can’t even start until you Brexit.

      Liked by 1 person

      • Nicholas says:

        Exactly, I couldn’t agree more. Short sightedness is stopping a lot of firms from making the big initial outlays that will put them ahead and into sustainable positions. The technology is here: I see it advertised in the FT and elsewhere. Short-termism is also responsible for the overleveraged state of a lot of “zombie companies” in Europe and the UK (not sure about the USA). Low interest rates, forced on us by central banks and government, is making loans way too attractive. As a person influenced by the Austrian School, I believe in growth built on savings, not debt. Companies out to be careful about throwing out dividends: retained profits and investment leads to capital growth. It’s a shame we have taxes on capital gains and income from dividends – it’s bad for investment.

        Liked by 1 person

        • NEO says:

          It is, indeed bad for investment. That’s what we are seeing from our tariff dispute with China, jobs are coming back as we make it more profitable (although maybe not this quarter) to manufacture here. I’m basically a free trader, but when a country abuses every part of a trade relationship, other measures must be taken.

          Liked by 1 person

        • Nicholas says:

          I agree. I favour capitalism over socialism, but I like to see people making fair deals. What the market does is just the product of how people are, but Christianity calls people to rise above the sin nature. A capitalist world of true Christians would not have the abuses we experience in this present age. Of course, resurrected Christians probably don’t need trade: I imagine they have no need to eat and cannot be harmed by the elements.

          Liked by 1 person

        • NEO says:

          Capitalism is best defined as trade for mutual benefit. If it is not mutual in is something other, mercantilism, corporatism, some other ism. It is, perhaps, moral trade, which is easier to see in our personal life. If I don’t perceive value for money (or time, or whatever) in something I purchased, I will not again so purchase, and so the vendor is cutting off (an admittedly small portion of) his nose to spite his face. It’s the reason natural monopolies don’t exists, if they get too greedy, another solution to the problems will be found. Only monopolies enforced by force (and this may apply to social media today) can exist.

          Liked by 1 person

        • Nicholas says:

          Indeed, Christian morality must sit above all our actions, including trade. The fact that both parties gain something out of a transaction does not necessarily mean that they have both behaved honourably or honestly.

          Liked by 1 person

        • NEO says:

          No, but it makes it likely.

          Liked by 1 person

  4. Nicholas says:

    This may be of interest regarding China’s currency ambitions:

    Liked by 1 person

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