Trump on Tariffs: Clueless

[Tiny]

I've said this several times here and nobody believes me. If you think it's a good idea to reduce the trade deficit, the way to do it is with lower government spending and higher private savings, not tariffs.

The link below is to an article in Forbes written by Steve Hanke. Hanke is no clueless nimrod. He was an economic adviser to President Reagan. He's a professor at Johns Hopkins, director at the Cato Institute, and, most importantly, the "go to guy" for many countries that had currency crises:

https://www.forbes.com/sites/steveha.../#7a0d87265e64

Basically, he repeats an identity, that the trade deficit must equal (private savings - private investment) + (government revenues - government expenditures). And he shows recent government data to back up the identity. He's simplifying things a bit, by not considering trade in services and dividend and interest income. However, if he included that, it should make his case all the more compelling.

He concludes,

As it turns out, the Trump administration’s fiscal policies, which promise an ever-widening fiscal deficit, will throw a spanner in Trump’s trade policy works. If his fiscal deficits are not offset by an increase in private savings relative to private investment, increases in the Federal deficit will translate into larger trade deficits. So, the U.S. trade deficit will not only be made in the good, old U.S.A, it will be made by President Trump himself, an arch-enemy of trade deficits.

[the_real_Barleycorn]

Most knowledgeable people seem to think that the tariffs (which Trump has been against) are a temporary bargaining tactic and not a permanent solution. They seem to be working at getting the attention of our trading partners.
Looking up Banks, he doesn't like Trump. He calls Trump a bully even over China. He likes the EU and hates Brexit. What you have here is a degrees, never-Trumped. Great source.

[Tiny]

Originally Posted by the_real_Barleycorn

Most knowledgeable people seem to think that the tariffs (which Trump has been against) are a temporary bargaining tactic and not a permanent solution. They seem to be working at getting the attention of our trading partners.
Looking up Banks, he doesn't like Trump. He calls Trump a bully even over China. He likes the EU and hates Brexit. What you have here is a degrees, never-Trumped. Great source.

You may have confused Steve Hanke with someone else. Yes, he's accused Trump of bullying China over tariffs. On the other hand, see this tweet, where he says "EU is a sinking ship. Brexit was a smart move - jump off before everyone drowns!"

https://twitter.com/steve_hanke/stat...09566881890304

Doing a quick Google search, the only thing I clearly see him criticizing Trump for is trade policy. He appears to agree with Trump on Obamacare and interest rates. He's not a never Trumper.

If the tariffs are indeed a temporary bargaining tactic you've got a good point. Maybe that's exactly what's happening with China. But what about other countries? Are our tariffs on steel and aluminum, and the tariffs other countries placed on our exports in retaliation, temporary?

[the_real_Barleycorn]

He is also against sanctions against Iran. His views on the EU have "evolved" since he supported it for a couple of decades.

[Tiny]

Originally Posted by the_real_Barleycorn

He is also against sanctions against Iran. His views on the EU have "evolved" since he supported it for a couple of decades.

He apparently doesn't think much of sanctions period. This is from a call he had with the Jewish Policy Center,

By the way, I am totally opposed to sanctions anywhere in the world because they do not work. They sound good maybe, depending on which side, obviously, of the battle that you’re on. But they don’t work. The history of sanctions is that they are utter failures.

Among other things, sanctions typically motivate support for the regime at which they’re aimed. They tend to solidify, not destroy a regime politically, whether it’s in Iran or Venezuela or Zimbabwe. Zimbabwe had sanctions forever and they also had Mugabe forever.

As Peter Beinart wrote in his recent edifying article in the Atlantic, “The academic literature is clear: Far from promoting liberal democracy, sanctions tend to make the countries subject to them more authoritarian and repressive.” That is my position after studying the scholarly literature on the use of sanctions, blockades, and so forth during wars and non-wars.

https://www.jewishpolicycenter.org/2...irans-economy/

He's probably got a point. Sanctions haven't done us much good with Cuba and North Korea.

Here's a link to the article by Peter Beinart that Hanke referred to,

https://www.theatlantic.com/internat...uclear/562043/

[I B Hankering]

Sanctions Were Crucial to the Defeat of Apartheid

(NYT)

.

[the_real_Barleycorn]

Giving the ayatollahs $150 billion is a better idea?

[Hotrod511]

you and speedy must be brothers one is obsessed with polls the other is obsessed with tariffs and for being clueless he's got more money than I do and probable more than any poster in this forum

definition obsessed ( be preoccupied with or constantly worrying about something. )

[Chung Tran]

I reject economic formulas, ever since my Professors told me huge deficits would bring on hyper inflation. we have a completely unsolvable National Debt, meanwhile the 10 year Treasury Bonds are at the lowest levels EVER.


formulas are designed to force the left and right side to be equal. there is no equality anywhere!

[SpeedRacerXXX]

Originally Posted by Hotrod511

you and speedy must be brothers one is obsess polls the other is obsess with tariffs and for being clueless he's got more money than I do and probable more than any poster in this forum

Well, I might agree with you or disagree with you if I had any idea what you were saying.

[Hotrod511]

Originally Posted by Hotrod511

you and speedy must be brothers one is obsessed with polls the other is obsessed with tariffs and for being clueless he's got more money than I do and probable more than any poster in this forum

definition obsessed ( be preoccupied with or constantly worrying about something. )

Originally Posted by SpeedRacerXXX

Well, I might agree with you or disagree with you if I had any idea what you were saying.

maybe this will help

[Tiny]

Originally Posted by I B Hankering

Sanctions were crucial to the defeat of apartheid

Not necessarily. This guy wrote a couple of papers that appeared in journals but you have to pay to get them. This one was free:

http://www.econ.yale.edu/growth_pdf/cdp796.pdf

Hanke probably does go too far. Sanctions sometimes probably make sense and blockades during war time certainly do. Interesting idea though.

[Tiny]

Originally Posted by SpeedRacerXXX

Well, I might agree with you or disagree with you if I had any idea what you were saying.

Hotrod's talking about Trump.

[bambino]

Originally Posted by Tiny

You may have confused Steve Hanke with someone else. Yes, he's accused Trump of bullying China over tariffs. On the other hand, see this tweet, where he says "EU is a sinking ship. Brexit was a smart move - jump off before everyone drowns!"

https://twitter.com/steve_hanke/stat...09566881890304

Doing a quick Google search, the only thing I clearly see him criticizing Trump for is trade policy. He appears to agree with Trump on Obamacare and interest rates. He's not a never Trumper.

If the tariffs are indeed a temporary bargaining tactic you've got a good point. Maybe that's exactly what's happening with China. But what about other countries? Are our tariffs on steel and aluminum, and the tariffs other countries placed on our exports in retaliation, temporary?

Hey Tiny, if Trump is so clueless on tariffs, why do are trading partners impose them on us? And why do they come to bargaining table when Trump announces he’s slapping tariffs on them? Why did Mexico suddenly start to shore up their southern border? Seems like Trumps tactics are working just fine.

[Tiny]

Originally Posted by Chung Tran

I reject economic formulas, ever since my Professors told me huge deficits would bring on hyper inflation. we have a completely unsolvable National Debt, meanwhile the 10 year Treasury Bonds are at the lowest levels EVER.


formulas are designed to force the left and right side to be equal. there is no equality anywhere!

This is an identity, it's more accounting than economics. Or math, like 3+2 = 4+1.

If you import more than you export, foreigners end up with your dollars. The foreigners invest those dollars in U.S. government and corporate bonds, equities, real estate, bank accounts, etc.

The trade deficit has to equal GDP less consumption less investment. We as Americans, ourselves and our government, consume and invest more than we make. The difference is made up by the trade deficit, that is, by foreigners sending dollars back and investing in our economy.

If you set out to reduce the trade deficit, which many economists would consider to be stupid, this is what you can do. All else being equal, a dollar change in any one of these components will cause a dollar's change in the trade deficit.

Decrease imports (IM)
Increase exports (EX)
Increase GDP (GDP)
Decrease government spending (G)
Decrease private consumption (C), that is, increase savings
Decrease Investment

That is, EX-IM = GDP-C-G-I

Say we increase exports (EX) through an increase in GDP. Nothing else in the equation changes. We'd all agree that's good. Or maybe we decrease government expenditures so we end up spending more in the private sector, on producing exports among other things (G goes down, EX goes up). I like that idea, I suspect you might not. Another example, I think people spending less and saving more (decrease in C), would correlate with a decrease in imports (IM) and would be good.

Tariffs are not a benign or favorable way of getting the job done, if you believe the trade deficit should be smaller. First your trading partners are going to retaliate with tariffs of their own, so exports go down along with imports. You're taking away the benefits of comparative advantage, where everyone produces what they can make most efficiently. And you have crony capitalists running industries that wouldn't be competitive except they're protected by high tariffs.