ECONOMIC POLICIES, ANALYSIS, AND RESOURCES
The Economic and Trade Policy Domain tracks and reports on policies that deal with budget, taxation, and finance issues. The domain tracks policies emanating from the White House, Congress, the Department of Commerce and the Department of Treasury. Our Principal Analyst is Ivy Perez who can be reached at firstname.lastname@example.org.
Latest Economic and Trade Policy Posts
Tax cuts were one of the primary elements that Donald Trump used to garner voter support during his 2016 presidential campaign. He spoke of tax cuts that would improve the lives of citizens nation-wide, never alluding to the potentially negative effects that could also stem from such a maneuver. He pitched these tax cuts as if they were a solution that could easily fix the economic problems the U.S.read more
As the chaos and confusion of the trade war continue to prove problematic on both domestic and global levels, President Trump has attempted to offset the damage done to a critical part of the U.S. economy.read more
Brief #46---Economic Policy Policy Summary Since the implementation of US tariff policies that have led to the outbreak of the current trade war, the global trading systems have experienced difficulties on many fronts. So far, President Donald Trump has presented a...read more
These international tariffs are not designed to only target agricultural companies, though. Some U.S. companies are feeling the impact of the steel and aluminum tariffs more than once. Florida-based boat manufacturer Correct Craft has been affected by both domestic and global tariffs. The Trump administration’s aluminum tariffs have also led to increases in prices of the American-manufactured steel used by many boat makers, as have the retaliatory tariffs imposed by international competitors, leading to a decrease in revenue and with it, a loss of opportunity to expand operations and hire more workers.read more
Recent reports indicate that China has temporally ceased its work on the structural reforms on national economic systems and is shifting its focus to policies that are more geared to supporting general economic growth.read more
The administration decided to implement 25% tariffs on 50 billion USD of Chinese goods, despite Treasury Secretary Mnuchin indicating last week that the “trade war” would be put on hold. The tariffs are meant to address “China’s discriminatory and burdensome trade practices.“ The targeted goods contain “industry significant technology” and are related to the “Made in China 2025 program” – a strategy approved by the Chinese State Council designed to transform China into a “high tech powerhouse” in industries like robotics, Artificial Intelligence, information technology, sensors and energy.read more
On the weekend May 18-21, a team of Chinese delegates lead by the CCP’s Vice Premier and economist Liu He met with representatives from the Trump administration to discuss trade policies and advert a potential trade war.read more
Brief # 14 This past week, the United States Department of Labor reported the unemployment rate fell to 3.9% - a 17-year low. This makes the 3.8% target by the end of 2018 well within reach for the Trump administration and the Federal Reserve. Furthermore, nonfarm...read more
Since the beginning of 2018, the Trump administration has been enacting a series of tariffs, on a variety of foreign products, intellectual property rights, and technology services.read more
Brief #20—Economic Policy
Tax cuts were one of the primary elements that Donald Trump used to garner voter support during his 2016 presidential campaign. He spoke of tax cuts that would improve the lives of citizens nation-wide, never alluding to the potentially negative effects that could also stem from such a maneuver. He pitched these tax cuts as if they were a solution that could easily fix the economic problems the U.S. was facing, particularly for America’s workers
Over a year into Trump’s presidency, the effects of the tax cuts are quickly becoming apparent, particularly their negative aspects that most of the nation is feeling. Already alarmingly high, the federal budget deficit is nearing $1 trillion.
The first six months of 2018 saw corporate taxes gathered by the federal government sink to some of the lowest levels history has seen. This is hardly surprising, as the tax cuts introduced by the Trump administration lowered the standard corporate tax rate from 35 percent to 21 percent. This is helped by the further component of the legislation that allows companies to deduct most new investments immediately.
As corporate tax funds have fallen, the federal budget deficit has continued to rise. While U.S. economists knew that the deficit would increase, most did not suspect that it would happen so quickly. At the time of the tax cuts, the Trump administration claimed that an initial decrease in tax revenue would not prove a problem for the deficit, as the increased revenue and spurred economic growth generated by the tax cut would cover any initial losses. This has clearly proven to be false, but even the White House has noted that they did not expect the deficit to rise as quickly as it has.
The 1940’s saw the United States Department of Commerce begin to compile extensive data on the subject of corporate tax collection and revenue following a significant drop in revenue from corporate taxes. Current data tells us that it did not sink that low until 2009 when the Great Recession was running its turbulent course on the U.S. economy and the revenue generated by corporate tax collections dropped by roughly a third. In the near decade since, they have not fallen so low until this fiscal year when tax payments from corporations again dropped by a third. Federal data indicates that as a share of the national economy, tax revenue had not fallen so far in 75 years.
It is true that most corporations have benefited from these tax cuts but as a share of the economy, their profits are still below the peak that they reached during President Barack Obama’s time in office.
The rate at which the federal budget deficit is approaching $1 trillion is not something that we can afford to ignore. There are multiple reasons that the clear effects of the Trump administration’s tax cuts on the budget deficit are concerning and could easily prove problematic.
The current trade war caused by the administration’s tariffs has created the need for further government spending, at least from the perspective of the Trump administration. The recently proposed $12 billion in aid for America’s farmers will require even more federal aid and farmers are not the only group that has felt the negative effects of the trade war. Fisherman and various types of manufacturers could also require emergency relief aid which would require even more federal funds generated by taxpayer dollars.
As has been the case with the emergency relief aid promised to America’s farmers, this budget deficit increase is a distinct example of a policy change enacted by the Trump administration that many deemed unnecessary. Economists have clearly stated that had the U.S. tax system not been changed by the tax cuts, the country would not be experiencing this budget deficit rise.
Another parallel between the tax cut and the trade tariffs is that both were presented by the Trump administration as policies that would prove beneficial to the American workers. Before the tax bill was passed, the administration argued that it would allow corporations to take the funds they were saving from the tax cuts and reinvest them in expanding production, thereby creating jobs and helping their current workers when increased revenue tricked down into wage increases. It would be beneficial for everyone, they argued, because although the portion of tax revenue collected from each corporation would be smaller, it would ultimately from a bigger pie.
Nonpartisan Washington D.C think tank the Center for American Progress recently published a report that clearly indicated that real average hourly earnings of the typical American worker have not changed in the past fiscal year. Over the same period, 80% of workers in production areas saw their wages dip by 0.2% while real median weekly earnings have dropped slightly as well. One economist from the institute stated that workers were “Not getting ahead in the Trump economy” and that certainly seems to be true.
This ‘Trump economy’ has fostered some economic growth but policy change results like those that have stemmed from the tax cuts are clear indicators that this growth may not be sustainable. A rising federal budget deficit does not have the markings of being a harbinger of long-term economic prosperity. The trend of the unnaturally strong economy is often alarming for economists who have seen these superficial booms prove to be dangerous and this time is no exception.
- The Center for American Progress is a nonpartisan research organization dedicated to improving the lives of American through progressive ideals and leadership.
- Stand Up America is a grassroots organization dedicated to resisting the Trump administration’s agenda and helping others learn about it’s policies.
- The Committee for a Reasonable Federal Budget is a nonpartisan research organization that is committed to addressing federal budget and fiscal matters.
This Brief was submitted by USRESIST NEWS Analyst S.O. Brient; Contact Sam@usresistnews.org
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Brief #19—Economic Policy
As the chaos and confusion of the trade war continue to prove problematic on both domestic and global levels, President Trump has attempted to offset the damage done to a critical part of the U.S. economy.
Last week, it was announced that the Trump administration would award $12 billion in federal aid for the American farmers who had been affected by the tariffs. The effects felt throughout the midwestern farming communities have been severe. Farmers across the rural midwest had been completely shut of the international markets that annually provide buyers for their crops, helping the U.S. economy to continue its healthy rates of productivity.
Trump ruled that such a maneuver was necessary without congressional vote. There is little question that these farmers are facing financial problems that are only going to get worse if the trade war continues. The response from the American people since the plan was announced, though has been primarily been less than enthusiastic.
It hasn’t only been the American taxpayers who aren’t happy about it. Speakers from many farming and agriculture driven communities across the midwest and southern parts of the U.S have also expressed fear and distain at the prospect of the bailout.
Even after it was announced that the European Union would begin purchasing more soybeans grown in the U.S, responses still remained primarily negative.
When we consider why American farmers have responded so negatively at the prospect of receiving government aid, there are several key factors that must be taken into account.
Firstly, it must be noted that the aid would not be needed if President Trump had not implemented tariffs that caused significant problems within the global agriculture markets in the first place. Products such as soybeans and grain as well as beef, pork, and chicken are often sold by American farmers through overseas markets. The retaliatory tariffs imposed by Canada and Mexico as well as Europe have resulted in them being shut out of these markets and the cost for the farmers doing the selling will likely be in the billions, as financial analysts have indicated.
The problems that Trump’s tariffs have caused within the agricultural commodities market cannot be overstated. For many of the farmers who operate small to mid size enterprises, the prospect of losing the market share of their crops and products is extremely frightening. Soybeans were among the first U.S. agricultural exports to be negatively effected by the trade war. According to the U.S. Chamber of Commerce, July 9th saw the price of soybeans fall to roughly $7.79 a bushel, the commodity’s lowest dip in almost a decade. Meanwhile in Brazil, soybean futures soared above those in the U.S. by $2.21 per bushel.
Commodity producers know just how difficult it is to recover a market share that has been lost. Soybean farmers saw something similar happen when President Richard Nixon imposed an embargo on American grown soybeans in 1978. Years later, in 1980, President Jimmy Carter imposed another on all U.S. goods being exported to the Soviet Union. Both policies proved problematic, negatively effecting the U.S. reputation as a reliable supplier within global trade markets, causing international buyers to quickly lose confidence in both American goods and producers.
Another problematic element of Trump’s plan to bailout America’s farmers is that it may cause problems within non-farming states. In the American north, many citizens, both liberal and conservative have expressed great concern for their rail transportation system. The proposed Gateway rail project would keep the Amtrak line, the New Jersey Transit and most of the Boston-Washington rail corridor from suffering further damages. People throughout the Northeast have raised their eyebrows at the fact that the farming states that would receive the federal aid package are predominantly red, while their states are primarily blue. While the necessary aid is being provided for people in communities that voted for Trump, the pressing need in their part of the country is receiving neither aid not attention from their government. This is not helped by Trump’s previous tax bill which largely effected blue states such as New York and New Jersey, nor by the fact that the aid for the farmers was generated by their own tax dollars.
Farmers across American have posed similar responses to Trump’s proposed aid for them, though, and the verdict seems to be that they do not want it. They want their market share restored and to have the same free market access and free trade options that they enjoyed before Trump’s tariffs were implemented. Those systems proved beneficial to small farming communities across the country and therefore to the entire U.S. economy. Trump’s tariffs have had exactly the opposite effect.
American farmers understand what is best for their businesses and they know that it is not Trump’s federal aid bailout. Their cries have been and remain for “trade, not aid.”
- Adopt-a-State is an organization dedicated to helping political activists and volunteers in blue states connect with each other.
- Policy Link is a research institute dedicated to helping advance economic and social policy.
- Organic Trade Association is a leading agricultural trade publication that provides resources for those within their community.
This brief was written by USRESIST NEWS Economic Policy Analyst S. O’Brient: Contact email@example.com
Brief #46—Economic Policy
Since the implementation of US tariff policies that have led to the outbreak of the current trade war, the global trading systems have experienced difficulties on many fronts. So far, President Donald Trump has presented a face that seems prepared to dismantle the entire global system.
As his administration’s policies continue to disrupt and prove problematic for the United States economy, the nations that for so long were allies of America in trade matters have taken steps to prevent further turbulence in global trade markets and strengthen the systems jeopardized by Trump’s tariffs. Both China and the European Union are working toward the common goal of protecting the trade systems that have benefitted both their economies for decades.
Following World War II, the United States devised a rule-based order, a system that they remained a champion of until Donald Trump’s trade tariffs were implemented. Recently, both China and the E.U recognized the need for action on the trade policy front as it became apparent that the U.S. was no longer abiding by this order. At a recent summit in Helsinki, Trump shook the hand of Russian leader Vladimir Putin and praised his leadership. In an interview preceding the meeting, he had described Europe as an economic “foe” due to how their trading effected the U.S. At the same time, leaders from China and the E.U. met in Beijing to discuss some similar matters.
China and the E.U. have experienced considerable conflict in matters involving trade, particularly with regard to human rights. These differences, though, did not stand in the way of the two nations producing a mutual declaration to both do their part to help strengthen global trading system due to their strong common interest in the matter. Following this, European Union officials made their way to Japan for the signing of the largest free trade agreement in history. On Europe’s part, the following day a $5.1 billion fine against Google was announced by the E.U.’s top regulatory agency. France and Germany meanwhile, have created study groups designed to study U.S. policies under President Trump and determine the best ways to prepare for their effects, particularly in trade related matters. Speculating that President Trump may soon seek to impose “national security” tariffs on the automotive industry, the E.U. is currently planning tariffs of their own to counter such a measure.
As the contingency plans are slowly set in motion, both Chinese and European leaders have made statements pushing back against the policies imposed by the Trump administration. These attitudes did not all begin with the recent policies, though. In January 2017, Chinese President Xi Jinping expressed sentiments that he felt both Europe and Asia should stand together owing to the need to defend both multilateralism and a free trade system based on rules. During the recent meeting with the E.U, he reiterated these comments. European Council president Donald Tusk made similar statements, emphasizing the common responsibility not just of their nations, but of American and Russian to improve the free trade order rather than dismantle it.
Even with these mutual agreements, it should be noted that China and the E.U. are not natural allies on trade related matters. European leaders have continuously expressed concern regarding alleged human rights violations on the part of the Chinese, an area that the Trump administration has ignored. In matters regarding Chinese investment, Europeans have recently become more critical of China’s dealings, particularly of its attempts to overtake the Western nations in the area of advanced technologies. Past years have seen European businesses tire of operating in China, often due to Communist party ideologies in various workplaces. Baring all that, though, it can be argued that both China and the E.U. have staunchly benefitted from the global free trade system that Trump’s tariff policies have challenged.
Despite singlehandedly giving rise to a global trade war, Donald Trump has accidentally succeeded in bringing his country’s former trade allies together as Europe and Asia have been forced to work together to help prevent further damage from his policies.
Unpredictability on the part of Trump’s administration has proven a recurring theme since the early stages of the trade war. If is hardly surprising that the E.U. would harbor some fears regarding a tariff on the automotive industry. Should President Trump impose such a policy, it would likely prove highly problematic for countries such as Germany whose economy is partially fueled by auto manufacturers such as BMW, Mercedes-Benz, and Volkswagen. Planning significant counter tariffs on their part is a wise precaution.
The heavy fine levied against Google by the E.U. drew instant criticism from President Trump, but it serves as a clear indicator that Brussels, where this instance took place, is seeking to keep a close watch on the rules-based order system of trade. This stance against American technology firms prompted Trump to claim American companies were at an unfair disadvantage throughout Europe but the E.U. has appeared unmoved in their determination to maintain the order system.
It seems clear, though, that Europe still harbors hope that President Trump’s successor will seek to return to the traditional global trade system. It is also possible that they also harbor some uncertainties on working closely with China, a nation that so far has discussed open trade policy at length but has done little to demonstrate their commitment beyond speaking. It should be noted, though, that China is still looking to support the World Trade Organization in order to shield itself from the effects of the trade war, a maneuver that would be bolstered by the E.U.’s help. Fending off future trade war chaos would prove quite beneficial to both Europe and Asia. It seems apparent that the pressure that China is feeling due to the trade war has caused it to strongly consider the common interest that it shares with Europe.
For now, the E.U. can regard the positive results of its summit with China as a clear indication that the nation is committed in its expressed desire to work together to reform the World Trade Organization and to stand together to strengthen the systems attacked by the Trump Administration.
- ourrevolution.com is an organization dedicated to transforming American by revitalizing democracy and empowering progressive thinkers.
- Indivisible is a network of grassroots organizations focused on resisting the Trump administration.
- The World Trade Report is a publication produced by the World Trade Organization that helps consumers understand trends in trade and trade policy matters.
This Brief was prepared by USRESIST NEWS Analyst S O’Brient: contact Sam@usresistnews.org
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Brief #18—Economic Policy
As the trade war continues throughout the U.S. and through many nations beyond, citizens everywhere continue to feel its effects. While some have argued that there are no winners in a trade war, recent gains in the U.S. stock market might serve the case against such an argument. S&P 500, Nasdaq and the Dow Jones Industrial Average have seen two straight weeks of gains according to recent reports.
For those in lower economic brackets, though, the effects of the recent tariffs have not been so positive. The 22 percent tariff on imported newsprint paper has caused significant problems for many in the independent publication sector. In Owosso, Michigan, the owner of the Owosso Argus-Press, a local, family operated newspaper, is anticipating a hit of up to $30,000 following the spike in costs of paper. This trend is not unique to small papers, though. Florida’s The Tampa Bay Times has seen its operating costs rise by as much as $3 million following the tariffs.
That said, the effects of these tariffs seem almost small when compared to those felt by companies in industries dependent on aluminum and steel. When the Trump administration announced the imposition of these tariffs in June, the outcry was global. Mexico, Canada, and the European Union responded with force. Mexico was quick to announce that it would be implementing new tariffs of their own on certain products including various types of flat steel and tubes as well as meats, fruits, and cheeses. One of the top steel exporters to the U.S, Mexico made it clear that it did not feel the tariffs imposed by the Trump administration were justified. China, meanwhile, announced that it would levy significant tariffs designed to effect the U.S. with a focus on agricultural goods such as soybeans, fish, and pork.
These international tariffs are not designed to only target agricultural companies, though. Some U.S. companies are feeling the impact of the steel and aluminum tariffs more than once. Florida-based boat manufacturer Correct Craft has been affected by both domestic and global tariffs. The Trump administration’s aluminum tariffs have also led to increases in prices of the American-manufactured steel used by many boat makers, as have the retaliatory tariffs imposed by international competitors, leading to a decrease in revenue and with it, a loss of opportunity to expand operations and hire more workers.
The steel and aluminum tariffs are continuing to negatively effect more larger companies as well. Poplar Bluff in rural Southeastern Missouri is a town whose economy is driven by the nail manufacturing giant Mid Continent Nail Corp. The recent tariffs have caused a 25 percent spike in prices of the steel that the company continously imports from Mexico. This has prompted an increase in product prices, leading to the loss of considerable customers followed by 60 layoffs with many more expected to follow. A media spokesperson has described the company as being on the “brink of extinction” and reports indicate that it could be forced to close its doors by labour day or sooner if policies are not changed quickly.
While some companies are forced to face the reality of shutting down, others are trying to save face by shifting production overseas. The most prominent example is Harley Davidson. For decades a symbol of American manufacturing, the motorcycle maker announced in late June that it would shifting part of its production to Europe. When the E.U. announced it would be raising its tariff on American manufactured motorcycles from 6 percent to 31 percent, Harley Davidson opted to move some operations overseas rather than increase the prices of their products to cover the $90 to $100 million burden that would be imposed on an annual basis by the new tariff.
There can be no doubt that the effects of the trade war brought on by the Trump administration are significant and it seems as though they are not likely to slow down in the near future. President’s well documented interest in pulling the United States from the World Trade Organization further supports the theory that the effects of the trade war are likely to continue, for small and large businesses alike.
It is not only businesses who are feeling these effects, though. Citizens are beginning to notice increased prices in consumer goods across many industries that can no longer be ignored. This is hardly surprising as these tariffs have driven up operating costs for companies that manufacture and produce almost every type of consumer good. The inevitable effect of this is increased operating costs, higher product prices and as a result, worker layoffs. When a company’s bottom line is negatively effected, every other aspect is never far behind. While demand may be remaining robust, supply is not, as the problems for supply chains and employment resources remain continuous.
A further negative effect of the trade war for many businesses has been the lack of predictability that has accompanied the recent tariffs. It has led to significant instability, problematic declines in investor confidence and slumps on investments necessary for growth within many industries. Investors throughout the U.S. are opting to delay investment decisions, causing further negative ripples throughout the national economy. Without the necessary investment capital, many companies are unable to add to their capacity for production, often leading to layoffs.
So far, the focus of the Trump administration regarding the tariffs seems to be aluminum and steel. This has led to the theory that they may not understand the broadness of the impact that their policies have had and continue to have. The harm that has been done to the U.S. economy cannot be ignored and so far, there is nothing to indicate that they are concerned with the significant layoffs throughout factory driven communities nor the drag on capital investments caused by the instability and declines in investor confidence.
This trade war has turned our former trade partners and allies into rivals whose tariffs are having further negative effects on the U.S. economy. From the looks of it, it is likely that the impact of these tariffs will be felt across the country and beyond for the foreseeable future.
- World Trade Organization is an international organization created to regulate world trade.
- #KnockEveryDoor is an organization created to recruit and train volunteers to get involved with discussions on policy related matters to enact positive change.
- Global Trade Magazine is a leading publication and voice on all things related to global trade matters.
This Brief was developed by USRESIST NEWS Analyst S O’Brient: Contact firstname.lastname@example.org
Photo by: Kyle Ryan
Brief #17—Economic Policy
Recent reports indicate that China has temporally ceased its work on the structural reforms on national economic systems and is shifting its focus to policies that are more geared to supporting general economic growth.
The People’s Bank of China is the nation’s central bank. Recently, it has prompted prominent lending institutions to trade over $1 trillion yuan’s worth of corporate debt in return for equity. In U.S. dollars, that amount is equal to roughly $152.9 billion. July 5th marked an important event for the Chinese economy, as the People’s Bank of China slashed the reserve ratio that many banks are required to have on hand by 0.5%, thereby liquidating roughly 700 billion yuan. These newly liquidated funds are available to be lent out or used for further purposes intended to spur growth.
In addition, the central bank is putting pressure on smaller banks, typically those in the small to midsize range, to increase their loans distributed to small businesses and enterprises. To further encourage this, capital for these banks will be raised by up to 200 billion yuan. At the larger banks, meanwhile, the reserve requirements will decrease to 15.5%. The funds that will be liquidated from his endeavor are intended to be used to finance the debt-for-equity trades mentioned earlier while the bank’s outstanding liabilities are exchanged for stock options.
The original guidance for these debt-equity swaps was originally issued by the State Council of the Chinese Government in 2016. Currently, there is over 1 trillion yuan in anticipated swaps intended for enterprises owned by the state. Many such enterprises are steel and coal manufacturers who have been negatively affected by overcrowding within their industries.
So far, we have seen only roughly a tenth of the proposed swaps carried out. As of now, there seems to be no prospect of the shares of these indebted companies being resold.
It is clear that these actions on behalf of the Chinese regulators and central bank are to help shield the nation’s economy from the effects of the trade war with the swiftly approaching trade war with the United States.
The recent actions on behalf of the People’s Bank of China indicated that they may be trying to move away from downsizing state-owned enterprises that have been deemed inefficient.
Banks all across the nation have been asked to do more to help the enterprises that continue to struggle, further indicating the prioritization of quick economic growth and general stability. This is further indicated by the recent policies pushed by the central bank that are intended to free up and stabilize liquidity in order to make such an endeavor more doable.
Historically, the practice of banks being pushed to create loans for those in the lower income brackets has not always worked in nations such as the U.S. but China remains hopeful as it moves forward with the policies centered around this endeavor.
The impending trade war with the U.S. has been marked by the tariffs on imported goods such as steel and aluminum proposed by President Donald Trump in March 2018. The manufacturer of half the world’s steel, China has been responsible for flooding the marketplace and lowering steel’s global prices. As previously mentioned, China has seen a strong overcapacity throughout its primary manufacturing industries. A trade war will affect the entire globe and as the world’s second-largest economy, it would certainly serve China to be ready.
- National Retail Federation – The world’s largest retail trade association, responsible for organizing a collation of diverse industry groups that are banding together to stand against the Trump administration’s proposed tariffs.
- Information Technology Industry Council – A Washington D.C. based trade association, credited with helping the NFA compose a letter to the White House Ways and Means Committee warning of the impending negative impacts of the proposed tariffs.
- United States Chamber of Commerce – An American lobbyist group centered-around business that recently launched a campaign against the Trump administration’s trade tariff policies.
This Brief was prepared by USRESIST NEWS Analyst S O’ Brient, email@example.com
Brief #16—Civil Rights
In a stunning, but not surprising reversal of policy, the Trump administration last week decided to impose proposed tariffs it had previously put on hold on China, the EU, Canada, and Mexico.
The administration decided to implement 25% tariffs on 50 billion USD of Chinese goods, despite Treasury Secretary Mnuchin indicating last week that the “trade war” would be put on hold. The tariffs are meant to address “China’s discriminatory and burdensome trade practices.“ The targeted goods contain “industry significant technology” and are related to the “Made in China 2025 program” – a strategy approved by the Chinese State Council designed to transform China into a “high tech powerhouse” in industries like robotics, Artificial Intelligence, information technology, sensors and energy.
The US government maintains this program is designed not to help China join the ranks of many advanced economies but rather to outright dominate them. Allegations against “Made in China 2025” claim Beijing is seeking to replace foreign technology, gain self sufficiency, and become a manufacturing powerhouse that dominates global high-tech industries. Foreign companies that do business in China chains could be affected. For example, foreign high tech companies are at risk of getting pushed of mainland China’s markets as the Chinese government will provide preferential consideration to its own companies. The US also maintains such policies violate WTO anti-technology substitution rules and gives Chinese companies an unfair advantage as they are subsidized by the the Chinese government. By June 15, the US is stated to list goods targeted by the tariffs and by June 30, the US will announce investment restrictions and capital controls so China can’t buy up technology significant industries. China, on the other hand, has announced retaliatory trade measures, ultimately bringing both countries to an impasse in the midst of ongoing negotiations. Chinese response to the sanctions have been mixed. Initially, China threatened to retaliate by tariffs on 50 billion USD of imports on soybeans, small aircraft, electric vehicles and orange juice. Soon after, in an effort to curb potential government, China offered to purchased 70 billion USD of US products. The Trump administration still remains steadfast on tariffs.
In a slightly more puzzling announcement, the Trump administration said that the US will also follow through on proposed tariffs on the EU, Canada and Mexico – 25% tariff on steel and the 10% on aluminum. The US cited “national security concerns” as the impetuous for implementation. The announcement was met with harsh criticisms from G7 countries saying that the tariffs “undermine open trade and confidence in the global economy.” Prime minister Justin Trudeau of Canada strongly rebuked the announcement describing tariffs as “totally unacceptable” and as an “affront to the long standing security partnership and to the Canadians who have fought alongside with their American brother in arms.” Naturally, the EU, Canada and Mexico announced retaliatory measures including: “dollar for dollar” tariffs on US goods and a joint complaint to the WTO. The EU Commission president Jean-Claude Juncker described the unilateral tariffs as “unacceptable” and the that “whatever the US does the EU could do the same.”
Although the Trump administration has a confusing, possibly incoherent policy when it comes to trade, many experts would agree that Trump has correctly identified unfair trade policies of the Chinese. China has violated many rules and regulations of the WTO, artificially devalued the Renminbi to make their exports cheaper in the past, has little respect for intellectual property rights (consider the numerous Chinese knockoffs), care even less of labor laws and conditions, conducts robust business-related cyber espionage activities, and finally it is very concerning to many countries that the communist party has actively encouraged Chinese companies with strong ties to the government to buy foreign companies in sensitive industries. It’s only natural other countries would worry about “Made in China 2025” due to China’s poor track record of engagement.
However, starting an uninhibited trade war is not the answer. Trade wars would most likely hurt millions of Americans (many of whom voted for Donald Trump) just as much as it would hurt the Chinese, if not more so. Trade wars have an inflationary reaction and increase prices across many different industries. Historically, every time the US has engaged in a trade war, it has hurt job growth rather than help it. In 2002 President George Bush imposed steel tariffs which he immediately reversed after the WTO declared the tariffs in violation of its rules and in 1980s President Ronald Regan imposed tariffs on Japanese products which initially hurt American consumers. However, perhaps the most notable example occurred during the Great Depression in the 1930s. Shortly after the depression began, Congress bowed to the nationalist rhetoric and passed the Smoot-Hawley Tariff Act which placed a tax on American imports in hopes of saving American factories. The logical response by European countries was to place counter tariffs, quid pro quo, on American products. Global trade decreased by over 25% due to the tariffs. Ultimately, this only further exacerbated the Great Depression.
After World War II, the WTO was created to ensure the 1930s protectionist era, tit-for-tat tariffs would not occur again. Unfortunately, just as President Herbert Hoover’s administration ignored the advice of economists about the harmful effects of tariffs in the 1930s, the Trump administration appears to be following a similar path. The very people Trump is seeking to protect are the very people who will be hurt the most by a trade war.
The Trump administration’s logic as it pertains to China is at least somewhat understandable. However, their logic pertaining to Mexico, EU and Canada is completely illogical. Mexico, EU and Canada are America’s allies. These countries do not commit the trade abuses China does. It makes little sense to punish your friends who play by the rules. The trade deficit between the EU, Canada, and Mexico with the US is largely a product of market forces and America’s propensity for consumerism rather than unfair trade policies as it is more so in regards to China.
Instead of building walls, the US should be building bridges. It would be better policy if the Trump administration strengthens ties with allies like EU, Canada and Mexico and build trading coalitions with these and other countries. Instead of starting a trade war with China, the US should build coalitions with the international community (especially the EU, Canada and Mexico) to put maximum pressure on China to follow WTO rules, respect intellectual property laws and to force China to reign in its economic-cyber espionage and predatory trade activities. There is power in numbers. If the Trump administration consulted on trade policy with allies, it would go a lot further than just indiscriminately evoking tariffs on rivals and allies alike. This may leave China with an opportunity to drive a wedge between US and its allies against Trump’s tariffs. The Trump administration also should be focusing on supporting the development of new industries and infrastructure investment legislation to provide new job opportunities for economic disenfranchised citizens in economically depressed states.
- The Global Policy Journal is an innovative and interdisciplinary journal that brings together academics and practitioners to help analyze global trade issues.
- The International Trade Centre is a development agency that is dedicated to the internationalization of small and medium size businesses (SMEs)
- A brief History of the World’s Trade Wars by CNBC
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Brief #15 Economic Policy
On the weekend May 18-21, a team of Chinese delegates lead by the CCP’s Vice Premier and economist Liu He met with representatives from the Trump administration to discuss trade policies and advert a potential trade war. This comes at the backdrop of tough rhetoric and escalating tensions between the two superpowers. Last month, President Trump threatened to slap tariffs on 150 billion USD worth of Chinese product and in response, China threatened to implement tariffs upwards to 25% on a wide range of US products equaling to 50 billion USD.
Since the campaign, President Trump has accused the Chinese as conducting unfair trade practices. Some of the President claims against China includes: devaluing their currency to make Chinese markets cheaper, not respecting intellectual property rights affecting the competitiveness of American firms in Chinese markets and flooding American markets with cheap Chinese products resulting in almost a 380 billion USD trade deficit in 2017.
After the negotiations concluded, little progress on either side appear to be made. Vague gestures and ambiguous language characterized the post-negotiations press conference. China pledged to purchase more US products while both countries pledge to continue to meet and have more discussions in the future. However, Trump’s negotiation camp appears to be bitterly divided over the focus of the talks, the potential outcomes and the means of achieving different goals.
Throughout the three days, there appeared to be much confusion on the US’ side. While the Chinese were able to present a united front during the talks, the same can not be said for the Americans. The disorganization was evident when Trump’s official released contradictory statements. Some in the camp wanted statements to focus on China’s bullying and forcing American firms to share technology and intellectual property while others wanted statements and tactics to focus more on reducing the trade deficit.
On Sunday, Secretary of Treasury Steve Mnuchin said the Trump administration would “put the trade war on hold” while talks continued while that same day US Trade Representative Robert Lighthizer released a statement that said that may still resort to tariff and other measures unless China makes “real structural change.” On Friday, Trump chief economic advisor Larry Kudlow prematurely said China offered to reduce its trade surplus by 200 billion USD although such an agreement was never made.
According to Derek Scissor – a Chinese scholar at the American Enterprise Institute claims that the Trump negotiations team is divided into two camps. Secretary Mnuchin and Economic advisor Larry Kudlow represents the neoliberal faction who seek further global integration and worry about the market’s reaction to a potential trade war – a testament to their banking background. This side is seeking to make a deal as quickly as possible. The other faction includes Peter Navarro leader of the White House National Trade Council and Robert Lighthizer who are demanding China change its practices and help reduce the deficit by 200 billion USD. This faction is willing to resort to extreme trade disruptions to accomplish their goals. The rivalries between both camps is evident as they jockey for influence over the president during the trade talks.
These talks also come days after President Xi Jinping of China asked Trump for a “personal favor” by providing sanction relief for Chinese telecommunications giant ZTE which has had its operations severely crippled under the Obama administration. After bipartisan backlash in Congress, in a tweet Trump claimed “that nothing happened with ZTE except as it pertains to a larger trade deal.” Both Republicans and Democrats are steadfast in maintaining sanctions on ZTE for illegally selling products to both Iran and North Korea. Both parties feel as if Trump is placing Chinese economic need over America’s national security imperative. On Tuesday, May 23 2018, the Senate Banking Committee passed an amendment that would make it illegal for Trump to reduce penalties on ZTE unless it provides proof that the company is compiling with US laws.
Next month, in June 2018, both sides are preparing for round three of the talks with hopes that a deal can be made. However, it is unclear exactly if the potential for a trade war still exist before or while negotiations talks take place. Those in the Mnuchin camp would rather make a deal and if that isn’t possible would rather wait before implementing tough tariffs until after the North Korea summit at the very least. While those in the Navarro camp would rather use any tools at their disposal to force China to acquiesce to America’s demands.
There is a great possibility that the disorganization and the in-fighting within President Trump’s negotiation team gave the Chinese the upper hand in these talks and future talks. It was very noticeable to see the divisions within the camp and China’s skilled negotiations could easily take advantage of the situation by playing both sides off one another and pandering to one side over another at advantageous times. Already, some might argue China achieved a great victory by getting the US to delay tariffs with China only vaguely agreeing to purchase “massive amounts of farm and agricultural products” according to the President’s tweet.
This chaos and confusion seems to be commonplace in the Trump administration. One might even begin to think that confusion and chaos is a part of the President’s elaborate grand strategy pertaining to trade and almost any other policy issues for that matter. If one gives off the appearance they are confused and disoriented the other side may begin to overestimate their own abilities. However, it is difficult to see an underlying strategy in the midst of all the confusion. After the trade talks, Chinese official felt a sense of bewilderment saying that they would place any “concession” made during the talks on “hold” until president Trump gave final confirmation. Still, it is very likely China did use and will use this confusion to buttress their demands in the next round of talks.
The foundation of President Trump’s thinking as it pertains to trade and China is the belief that China is more dependent on America than America is on China. China makes hundreds of billions per year off of selling its products to American consumers. The United States is China’s largest single country trading partner accounting for about 20% of all of China’s exports. China is still an economy more heavily dependent on exports than it is on domestic consumption even though the Communist Party is desperately trying to change this. It can’t be said one way or another if the president’s line of rationale is correct or incorrect. Existing literature supports both arguments. China, on the other hand, feels like it would have the upper hand in a trade war. Although, the US market does make up a significant cross section of Chinese exports, the US is also a democracy. The US is often times constrained by the capricious desire of the citizenry. A trade war will have an inflationary impact. America’s thirst for cheap Chinese products may to be so great as to weather a long term trade war. No one wants to walk into a Wal-Mart or Target and spend almost 35% more on clothes, electronics and other items- two stores many in Trump’s base are very fond of. Ironically, existing literature both supports and goes against this view as well. Although it can’t be concluded one way or another, most certainly both economies are very dependent on each other and both side stands to lose significantly in a trade war. A trade war would not only hurt both China and the US, but it would harm global supply chains across the world.
President Trump’s demand for China to reduce the trade deficit is unrealistic. The only way the deficit can be reduced is if US ships more goods and services to China, limit the number of imports or a combination of both. The US has little control over demands for its products in China just as China has little control over demands for its products in America. President Trump’s lack of understanding of basic supply and demand principles shows up in the various infeasible demands he made this weekend.
Finally, Trump’s ZTE controversy shows his willingness to often times easily abandon his own agenda. The President has consistently abandoned beliefs that he presented himself resolute on. This might be very problematic going forward with negotiations with Chinese officials. The Chinese are expert negotiators and have more than likely studied the President’s weakness. The President was elected to represent the American people and its problematic if the president forgets his own underlying platform. The people who will be hurt the most are those who support him and believe in him the most.\
- The US-China Business council is an NGO consisting of over 200 companies that do business in China and its mission is to expand the US commercial relationship to its members.
- The US-China Policy Foundation is an NGO that seeks to enhance mutual understanding and positive relations between the two countries via awareness
- The US-China Strong Foundation is an NGO that seeks to develop relations by investing in a new generation of knowledgeable leaders.
This Brief was submitted by KAF, a USRESIST NEWS Analyst. For more information contact: firstname.lastname@example.org
Brief # 14
This past week, the United States Department of Labor reported the unemployment rate fell to 3.9% – a 17-year low. This makes the 3.8% target by the end of 2018 well within reach for the Trump administration and the Federal Reserve. Furthermore, nonfarm payroll jobs increased by 164,000 in April and 135,000 in March. African-American and Latino unemployment rate also hit records lows as the unemployment rate fell to 6.6% and 4.8%, respectively; this is the lowest jobless rate for these ethnic groups since the 1970s. Naturally, President Donald Trump and his economic advisor Gary Cohn attribute strong economic growth to the Trump tax cuts Congress passed in December.
On other metrics, the economy appears to be as strong. The “Broader Unemployment Rate” – a metric that includes dissatisfied workers or part-time workers in 2009 was over 17%. By April 2018, this number also feel to 7.8% showing signs of continued economic growth. The Labor department also announced that the US has a record of 6.6 million job posting.
Despite strong jobs growth, wages haven’t fared as well. Wage growth has occurred but not near the 4,000 USD annual figure the Trump administration predicted. From January to April, average hourly earnings only increased by 13% (multiplied by 12 months to average around 260 USD). Economist predicted for a 3.9% unemployment rate, wages should theoretically increase by a far greater margin than the 2.6% when compared to last year. Wages would have to hit a margin of 3% for the average consumer to feel the benefit.
President Trump was quick to declare the tax cut a victory for job creation and economic growth. In economics, it is always important to refer to raw data to determine the veracity of presidential claims- especially this President. President Trump may say one thing while data shows the full picture.
Brief # 12
April 12, 2018
Since the beginning of 2018, the Trump administration has been enacting a series of tariffs, on a variety of foreign products, intellectual property rights, and technology services. The tariffs reflect Trump’s efforts to follow through on a campaign promise to not let other countries take advantage of the US. He is seeking to appease his base of supporters, many of whom perceive that current trading agreements with other countries is the major reason for their unemployment. The tariff’s that Trump has enacted include the following:
On January 22 the President imposed tariffs on imports of solar panels and washing machines; A tariff of 30 percent will be applied to imported solar panels, most of which originate in China. Tariffs will begin at 20% on large residential washing machines.
On March 22, he imposed a 25 percent tariff on selected Chinese products that could total $60 billion dollars. The products included aeronautics, modern rail, new energy vehicles, and high tech products.
On March 25 he imposed 25 percent tariff on imported steel and 10 percent tariff on aluminum. The administration stated that tariffs on such goods from Argentina, Australia, Brazil, the European Union and South Korea were delayed until May 1. Canada and Mexico are exempt from the tariff as the US reviews its national security relationships and the North America Free Trade Agreement (NAFTA)
On April 6th, after China retaliated with its own tariffs on US products, Trump announced he was considering $100 billion dollars of additional tariffs on Chinese goods.
The Chinese government, according to a CNN Report, then responded by reiterating that it doesn’t want “to fight a trade war, but we are not afraid of fighting it.” “If the United States disregards the opposition of China and the international community, and insists on unilateralist and protectionist trade practices, the Chinese side will follow through to
By instituting these new tariff’s President Trump is threatening to overturn a decades long bi-partisan policy of free trade. This policy is predicated on the fact that national economies have become increasingly inter-dependent, and that many businesses operate by buying and selling products and services across the planet. Trump’s tariffs also threaten to unleash a trade war, as the Chinese have observed. Trade wars, usually escalate conflict between countries rather than cooperation. They result in higher prices for consumers, shrinking demand for business services and products, and increased unemployment. The last large-scale global trade war occurred in the nineteen thirties and was a factor that contributed to the Great depression and World War II.
Fortunately, the U.S. and the world learned a lesson from this experience. With the Reciprocal Trade Act of 1934 and its successors, which granted the President authority to reach tariff reduction agreements with foreign governments, U.S. trade policy came to be global and strategic.
This new approach was institutionalized at the international level with the creation of the General Agreement on Tariffs and Trade in 1948 and its successor, the World Trade Organization (WTO), in 1995.
The basic principle of these agreements is reciprocity — that each country will agree to liberalize its trade to the extent that other countries liberalize theirs. The approach uses international negotiations to overcome protectionist political pressures
President Trump claims that certain countries have weakened American industries by exporting cheap products to the United States. He believes this has been going on for decades and has caused significant job losses. He takes this position because a large part of his political base are unemployed blue-collar workers.
However, international trade is one of many factors contributing to US unemployment; the larger ones being the onset of automation, the lack of an adequate unemployment safety net, and the lack of effective job education and retraining programs.
There are better ways for addressing international trade issues that don’t publically embarrass nations and force them into an escalating trade war. These include behind the scenes country-to-country diplomatic negotiations or working through the WTO that was established to deal with trade disputes between countries.
It is true that there remain many injustices in the world trading system. Until recently most free trade agreements failed to take into account workers’ rights and labor and environmental standards. It is also true that the WTO is still a young organization that needs strengthening. However, these are problems that skilled diplomats and trade negotiators can address.
There is increasing concern that President Trump’s tariffs will likely impose a heavier burden on lower income households as these households generally spend more on traded goods as a share of expenditure/income.
VoxEU.org – CEPR’s policy portal was set up in June 2007 to promote research-based policy analysis and commentary by leading economists.
The Council on Foreign Relations (CFR)-The CFR is an independent, nonpartisan membership organization, think tank, and publisher dedicated to being a resource for its members, government officials, business executives, journalists, educators and students, civic and religious leaders, and other interested citizens to understand foreign policy
The Center for Economic and Policy Research (CEPR) – The CEPR was established to promote democratic debate on the most important economic and social issues that affect working people’s lives.
ThinkProgress is a news site dedicated to providing their readers with rigorous reporting and analysis from a progressive perspective.
The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created to include the needs of low- and middle-income workers in economic policy discussions.
This Brief was compiled by Ron Israel, USRESIST NEEWS Managing Editor and Bruce Boccardy
Brief # 13 Economic Policy
April 30, 2018
On May 1st, 2018, the US tariffs on aluminum and steel imports from the EU are set to take affect. The above-mentioned tariffs are an appeasement to the US Steel industry, which has been affected by increased globalization throughout the second half of the 20th century. For example, in 1948 after World War II, the American steel industry produced over half of the world steel output while employing 700,000 people. Now, that figured has dropped to only 11% and employs only 78,000 people. The proposed tariffs will impose a 25% tax on steel products and a 10% tax on aluminum products. Countries most affected by these tariffs are scrambling to prevent President Trump from implementation, amid fears of a global trade war. LEARN MORE
In an effort to prevent the US from imposing these tariffs, President Emmanuel Macron of France and Chancellor Angela Merkel of Germany assembled a united front to convince President Trump. President Macron, displayed his budding “bromance” and savy emotional rhetoric played the “good cop” during his two-day official visit with President Trump, while Chancellor Merkel, armed with an arsenal of facts, figures, and threats of retaliation played the “bad cop” , both pleaded the EU’s case last week for permanent exemption status. Steel and aluminum are especially important to the 28-member states of the EU as they account for 10% of global steel trade or 172.3 metric tonnes of production. In response, the EU has proposed tariffs on selected US products amounting to 7.8 billion USD (the same amount worth of steel EU exports to the US). Interestingly enough, many of these products are produced in state Trump won by double-digit points. It is unlikely if President Macron and Chancellor Merkel’s Pathos-Logos offensive had its intended affect as it appears the May 1 deadline will pass eliminating the temporary waiver tariff exemption granted to EU countries in March.
EU countries are not the only ones in the line of fire of President Trump protectionist nationalism policies. China, who always served as President Trump’s campaign punching bag, will also be affected by the tariff on steel and aluminum. Firmly sitting at the top of the steel world, China is the world’s largest producer of steel accounting for around half of all global trade or 1.68 billion metric tonnes. Steel and Aluminum are some of the few goods in China where surplus outstrip demand providing an opportunity for profit as excess is sent to the world export market. To prevent tariff implementation, on April 10th, China has filed a complaint to the World Trade Organization requesting 60 day consultation with the US arguing the tariffs are in violation of the WTO rules. In response, on March 23 China implemented retaliatory trade measures on beef, pork, apples and other perishable food items – many of these items are also produced in states President Trump carried by double-digits as well.
Argentina, Brazil, South Korea, Canada and Mexico were offered exemption status while countries like Russia, India, Brazil, Taiwan and India were not. These countries are among the world’s largest steel and aluminum producers. A majority of the US steel supply comes from groups that were exempted from the tariff.
If one were to watch the news and listen to president Trump, he/she would think Chinese steel and EU steel account for a lion share of US steel imports. As it the case with most issues, once you set aside politics from fact you will see the fissures between what is widely discussed and the reality on the ground. The reality is China and the EU make up 2% and 4% of US steel imports respectively in 2017 – a small cross-section proportion of aggregate US steel and aluminum imports. Canada, Brazil , South Korea, Mexico and Russia round off the top 5 exporters accounting for 17%, 14%, 10%, 9% and 8%, respectively. US allies would have lost the most if Trump’s initial tariff plans were implemented without second thought or revision.
Like many other policies with this administration, politics is the end and these “sweeping” aluminum and steel tariffs are just the means – less than 25% of US steel imports will actually have any kind tariffs. Fully cognizant of this fact, Chancellor Merkel and President Macron are taking a stand to President in an attempt to set boundaries on potential future tariffs in other industries Trump may want to implement. Although, the US is the world’s largest steel importer accounting for 77% of all global steel imports, the EU make up less than 4% of that total. Europe’s preeminent leaders understand the personality and ego of president Trump. Consider this, what would occur if Trump randomly wanted to institute tariffs on the EU’s three largest export categories, machinery (64. 6 billion USD), pharmaceuticals (55.2 billion USD) or vehicles (54.6 billion USD)? This would represent a significant blow to some of Europe’s largest and most important industries. Certainly, a global trade war would ensue as retaliatory measure would definitely target America’s largest exports to the EU.
The possibility also exist these tariffs were implemented as an affront to China as they received no exemption status. Conventional thinking suggests 2% is not a large amount, but many in the steel industry claim this number is higher. American steel makers claim China engages in a practice called transshipment, where other countries by Chinese steel at lower prices than ship those steel to the US for profit. However, the Department of Commerce investigated and found no evidence of this occurrence. This still has not stopped China from attempting to drive a wedge between the US and the EU by standing together against US protectionism. As of now, there is little chance the EU would unite with China against the US, but should President Trump continue destructive trade policies, a Chinese-EU partnership against the US could foment.
Steel and aluminum tariff are not new. In 2003, president Bush attempted to implement 25-30% tariffs on steel and aluminum imports – which ultimately was a failure. Steel and aluminum are heavily dispersed through the automotive and construction industries; those tariffs would have increased prices on their products. The National Association of Manufactures came out against the tariffs, eventually leading to the WTO ruling the tariffs went out US trade obligations. In less than a year, the tariffs were reversed. It has been proven these tariffs don’t work so what does President Trump have to gain? Once again, it is about politics.
President Trump has a tendency to govern toward his base specially to gain some kind of political expediency. Whether it’s when personal scandals gain traction or to keep his supporters in a perpetual state of anger, these tariffs appear to be another measure to provide his die-hard supporters lip service and quite possibly to distract from other non-economic issues.
- Volunteers for Economic Growth Alliance (VEGA) is a consortium of 24 members NGOs that promoting prosperity by bringing highly skilled workers together across the global. VEGA is also instrumental in advocating for global partnerships as it pertains to trade and economics.
- The Progressive Policy Institute (PPI) was known as Bill Clinton’s personal think tank. They offer progressive policy recommendations that are practical and pragmatic. Their policy expertise is in the field of economics, trade, foreign policy, healthcare, etc.
- The American Liberal Review attempts to “advance a project of resurgent American liberalism of bold reform and visionary politics for the 21st” It accomplishes this by offering a list of many NGOs and Think Tanks that promote liberal economic values.
- “How to Enrich a Country: Free Trade or Protectionism” , the YouTube channel, the School of Life offers an objective view on many topics ranging from philosophy, to history, to relationships, etc. This video provides people with an objective view on the history of the protectionism vs free trade debate.
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