Tags: trump | trade | china | europe | germany

Trump's Trade Wars in China, Europe

Trump's Trade Wars in China, Europe
(Olivier Le Moal/Dreamstime.com)

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Monday, 03 June 2019 05:04 PM Current | Bio | Archive

You are probably anxious to hear from me about the terrifying trade wars which involve threatening even larger tariffs from the U.S. against China and vice versa (still better than a shooting war). We all experience tariffs (custom duties) whenever we arrive at the airport with two instead of the allotted one bottle of whiskey.

Well, here is my take:

CHINA

Reading the paper you must by now be confused about the seemingly endless tariffs (custom duties) going back and forth between the U.S. and China.

Among all that posturing, what President Trump really wants from China, in order to reduce the about $200 billion trade imbalance to zero, is for the Chinese to make their money stronger, say from the current 6.9 yuan to the dollar down to 3.5 yuan. This would make Chinese goods twice as expensive. I am afraid the Chinese will never do this, since it would upset their commercial relationships with all their other trading partners. If it works, this would be a replay of what then-President Reagan did with the Japanese back in 1985, which doubled the value of the yen between 1985 and 1988 and which stopped the flood of Japanese cars into the U.S.

Besides, if this doubling of Chinese prices would happen, it may force Walmart out of business, since the majority of manufactured goods they sell are made in China. It also would have a devastating effect on electronics companies such as Apple, which relies heavily on Chinese parts. In the meantime, we just have to live with tariffs on goods we import.

Unfortunately it is the U.S. importer who pays the duty, not the Chinese exporter. Thus the extra expense is added to the cost of things we buy. This is nothing but another form of additional sales taxes which the U.S. government collects at the border and for which we pay at the store.

EUROPE

Here the beef is primarily with Germany, a country with a huge trade surplus (even though most of it is eaten away supporting sick economies such as the Italian economy).

Here is the case: Trump threatens the German Chancellor Ms. Merkel with high car tariffs, which would drastically reduce the export of Mercedes and other cars Americans prefer over Cadillacs (one wonders why). However, such punitive tariffs will not happen if Ms. Merkel stops the Russian pipeline being built and scheduled to deliver the bulk of Northern Europe’s need for natural gas. Once she does that, the U.S. will graciously deliver all needed gas in the form of frozen gas (LNG). The problem here is LNG is twice as expensive as natural gas from Russia. Besides, Germany would have to spend hundreds of billions of Euros to build access ports and gasification plants to be able to use LNG.

But wait, Ms. Merkel is expected to resign after the next German election. Does that explain why President Trump postponed the auto tariffs by six months?

The thought may be that perhaps after 6 month, Ms. Merkel’s successor will be more accommodating.

By the Way

With the U.S. economy staying on a boring, flat trajectory (see my blog of January 5, 2017) with Gross National Product increasing only at 2%, Inflation at 2% and Productivity at 2%, one wonders why the Federal Reserve is surprised that the five year Fed. Fund Rates interest rates are down to 2.02%.

Hans Baumann is a licensed engineer in four states and a member of Sigma Xi, the Scientific Research Society. He is an adviser to the dean of the University of New Hampshire Business School. Dr. Baumann has published manuals on valves and was a contributor to many works including the "Instrument Engineers' Handbook" and the "Control Valves Handbook." He has also published several books on business management and German history, including "Hitler's Escape," which suggests that Adolf Hitler did not commit suicide and survived World War II. In his latest book, "Atomic Irony" he proves that the Hirshoma Atom Bomb contained captured German Uranium. For more of his reports, Go Here Now.

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HansBaumann
Reading the paper you must by now be confused about the seemingly endless tariffs (custom duties) going back and forth between the U.S. and China.
trump, trade, china, europe, germany
676
2019-04-03
Monday, 03 June 2019 05:04 PM
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