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Trade Wars

The TV talking heads are in a frenzy about President Trump’s new tariffs on imports from countries that run a large trade surplus with the US.  So far, it’s all TV talk and no wars.  It is likely to continue that way.  It took 70 years for our US trade deficit with dozens of countries around the world to get this bad and it will take time to correct it.  Those countries have been waging trade wars on us all along and finally Trump is fighting back.

China runs about a $390 Billion annual trade surplus in manufactured goods with the US.  Our economist insist that trade surplus doesn’t matter.  They claim China can’t spend its surplus dollars anywhere except in the US and therefore it’s not really a surplus.

That is plain BS.  The US dollar is the world currency and many things like oil and gas and other commodities are bought and sold in dollars.  China uses its surplus dollars to buy oil from our enemy, Iran, despite our sanctions on buying Iran oil because of its nuclear weapon program.  Iran uses those dollars to finance ISIS in Syria and other terrorists around the world.

Likewise, Germany, uses its trade surplus dollars to buy Iran oil in violation of our sanctions.  Iran then uses those dollars to buy uranium centrifuges for its nuclear weapon program from Germany.  Germany is a NATO member and claims to be our friend.  With friends like that, who needs enemies?!

Trump first put a tariff on $50 billion of China industrial products and China retaliated with tariffs on $50 billion of US exports to China.  Now Trump is proposing tariffs on $200 Billion of China consumer product imports to the US.  China imports so little from the US, that there’s no more US goods it can tax.  Instead, China is threatening to put non-tariff barriers on US exports to China.  That would be a direct violation of World Trade Organization (WTO) rules which China promised to obey when it joined in 2000.  China has never obeyed WTO rules and obviously never intends to because it gains a trade advantage with WTO member countries by doing so.

A good example of non-tariff trade barriers is Japan’s treatment of imported cars in the 1980’s.  Japan required imported cars, like Ford and GM, be transported from the port to small towns in remote Japan to go through customs then be completely unassembled and reassembled by Japan workers.  That’s how blatantly unfair non-tariff barriers can be.  Obviously, Japan imported zero cars.

By one estimate, China’s manufactured goods exported to the US create 50 million Chinese jobs.  US exports to China create ½ million US jobs.  That’s a 100 to 1 advantage for China.  If we ever have a trade war with China, the US will win.  China will have to agree to a fair balanced trade deal.

Trump’s critics claim his 30% tariff on imported steel, 25% on imported cars and 10% on imported aluminum can’t be justified based on national security. That’s BS, also.  Our steel mills, aluminum plants and car assembly plants were key in winning WWII.  They produced the military vehicles and weapons for our military and our allies’ military.

We all need to ignore the TV trade wars and be patient.  This will work out and the US will be a lot more prosperous and secure as a result.

Author:  Ralph Coker

Bio:  Ralph Coker is a retired petroleum refinery plant manager.  He writes on business, economic, military and political topics

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