(What’s Left of) Our Economy: New Fed Manufacturing Figures Nudge Tariffmageddon a Bit Further Away

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aluminum, China, Federal Reserve, industrial production, inflation-adjusted growth, manufacturing, metals, metals tariffs, metals-using industries, real growth, steel, tariffs, Trade, trade war, {What's Left of) Our Economy

Today’s industrial production figures from the Federal Reserve showed not only that U.S. domestic manufacturing regained some strength in May following a string of poor monthly results. They also provided more evidence that President Trump’s tariffs have had little, if any, effect on the performance of either the metals-using industries impacted by levies on steel and aluminum imports, or of sectors supposedly affected by China-related duties.

Two more points come through pretty loud and clear from the new figures on domestic industry’s inflation-adjusted growth. First, the weakness displayed in April by manufacturing as a whole and by metals-using sectors could well have been confined to that month. Second, the safety problems revealed in the Boeing Company’s aircraft have begun to influence the picture and may distort the readings for several more months.

The overall readings for manufacturing were mildly encouraging, with the 0.22 percent sequential rise in real output representing domestic industry’s best reading since December’s 0.64 percent improvement. Revisions were ever so slightly positive.

Most of the leading metals-using industries – where the role played by tariffs is relatively easy to identify – fared better in May than in April, too, as the following table shows. The columns show the changes in after-inflation output for these sectors starting with April, 2018 (the first full month the metals levies went into effect) and each of the last three data months of this year. And as usual, the numbers for manufacturing overall are used as a control group.

                                             April thru March   April thru April   April thru May

overall manufacturing:          +0.45 percent        -0.07 percent      +0.89 percent

durables manufacturing:       +1.34 percent       +0.68 percent      +0.98 percent

fabricated metals products:   +2.76 percent      +1.88 percent       +1.73 percent

machinery:                            +2.31 percent       -0.12 percent       +0.11 percent

automotive:                            -3.10 percent       -3.86 percent        -1.55 percent

major appliances:                   -5.27 percent       -8.24 percent        -3.27 percent

aircraft and parts:                  +5.75 percent      +3.34 percent       +1.15 percent

durable mfg ex-automotive: +2.10 percent       +1.48 percent       +1.41 percent

In general, it’s clear that the metals-using industries are still losing growth momentum versus the rest of manufacturing. But do the duties deserve all or even much of the blame? If so, then why did so many of these sectors turn in better growth numbers in May than in April – especially automotive and major appliances? The latter’s relative comeback is especially striking, given that it’s been experiencing not only metals tariffs, but separate levies on large household laundry equipment and a weakness in U.S. housing. Ditto for automotive, where output has been highly volatile for many months.

The Boeing effect is apparent, too, from the falling output numbers since March, when safety problems started generating grounding decisions and airspace national airspace bans for its widely used 737 Max models. Further, both automotive and aerospace are major users of machinery and fabricated metals products.

The impact of the tariffs on products from China remains much more of a puzzle, and for the same reasons that have been apparent since their onset, in August, 2018. They have covered thousands of products, most of which so far have been intermediate goods, and their role as these kinds of inputs for manufacturing industries varies dramatically from final product to final product. In addition, Washington uses different manufacturing classification systems for designating the tariff-ed products and for measuring manufacturing production. The levies have been in place for a shorter period of time than the metals duties. And their scope has widened since the first batch went into effect in August, along with many rates having changed.

Nonetheless, here are some figures for the handful of industries for which I’m sure the numbers create a reasonably accurate picture, with each column measuring real output changes since last August.

                                        August thru March   August thru April   August thru May

overall manufacturing:       -0.45 percent           -0.96 percent         -0.75 percent

ball bearings:                     +0.22 percent          +0.11 percent        +0.01 percent

industrial heating equip:     -0.83 percent          -5.41 percent          -4.70 percent

farm machinery & equip: -11.65 percent         -10.27 percent         -7.51 percent

oil/gas drilling platform    +4.08 percent          +2.58 percent         +4.59 percent

   parts

Unfortunately, no consistent trend emerges. Two of the sectors’ improved between March and May (farm machinery and equipment, and oil and gas drilling platform parts), and two worsened (ball bearings and industrial heating equipment).

And although as long as the China tariffs continue , the future will provide results over a more statistically significant time frame, because the footprint of Chinese inputs in most of U.S. Manufacturing sectors will continue to be so broad and deep, their costs are likely to remain just as hard to discern.

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(What’s Left of) Our Economy: Tariffs-Led Wholesale Price Inflation Going, Going….

Tags

aluminum, China, inflation, metals, metals-using industries, Producer Price Index, steel, tariffs, Trade, trade war, Trump, wholesale prices, {What's Left of) Our Economy

Amid all the recent trade policy-related news, I’ve struggled (unsuccessfully) to keep up with the U.S. inflation data, but kept my nose to the grindstone this week and have now managed to scrutinize the new producer price figures (for May) in detail. These Bureau of Labor Statistics (BLS) figures contain unmistakable signs that whatever tariff-led inflation had begun to be generated in the American wholesale sector has been dramatically dissipating lately – which no doubt has much to do with continuingly weakening core inflation on the consumer side.

As usual, let’s start with the impact of President Trumps metals tariffs, which have lasted the longest (their first full month was April, 2018), and it’s easiest to identify the industries affected, since steel and aluminum-heavy sectors are pretty obvious (along with the metals themselves), and since we’re not dealing with the dependency on metals from any one trade competitor.

And a special bonus: It’s with steel and aluminum prices per se that the loss of any inflationary momentum comes through most clearly. Specifically, after rising 12.37 percent between April and their most recent (September) peak, prices for steel mill shapes fell 6.44 percent through May. As a result, they’re now 5.14 percent higher than during their first tariffs month. In their control group (the processed goods minus foods and feeds – or “core” – super-category) prices rose by 3.41 percent from April through their peak (in October), and have since declined by 2.62 percent. Consequently, they’re now 0.70 percent higher than during the first metals tariffs month.

So although in absolute terms, steel prices remain higher than those in their super-category, they peaked earlier and have come down faster.

Aluminum prices have been much weaker for much longer. After rising by 6.66 percent between April and their (latest) June peak, aluminum mill shapes prices are down by 6.53 percent. As a result, they’re now actually 0.30 percent lower than during their first full tariffs month.

Significantly, signs of markedly decelerating inflation are just as evident in numerous metals-using manufacturing sectors. In past posts on producer price trends, I looked first at industries where price increases since the metals tariffs onset had initially been faster than that for their super-category – final demand goods minus food and energy products.

The table below makes plain that a sizable, widespread slowdown has taken place. The columns show the percentage price changes between April and whichever month saw such prices hit their latest peak; and such changes for such goods since January. In every instance, the percentage changes for the latter have been much smaller than for the former. And in the cases of mining machinery and equipment and construction machinery and equipment, the slowdowns were more dramatic even than that for the super-category (which was awfully dramatic).

                                                               April to peak (month)          Since Jan.

Final demand less food and energy:       +1.73 (May, 2019)              +0.17

pumps/compressors:                               +3.82 (May, 2019)              +0.57

mining mach & equipment:                    +7.52 (April, 2019)            +0.03

construction machinery & equipment:   +5.75 (April, 2019)            +0.04

metal-forming machine tools:                +3.77 (Feb.,2019)              +0.77

But it would be reasonable to counter that four manufacturing sectors are too few to show anything conclusively. So here are results for nine more whose early inflation numbers were stronger than that of the core final demand super-category. Every single one has experienced an inflation slowdown since January, and except for railroad equipment and possibly oil and gas field machinery, all involved several orders of magnitude.

                                                                  April to peak (month)       Since Jan.

agricultural machinery & equipment:        +4.18 (April, 2019)          +0.04

tools, dies, jigs, fixtures, molds:                +2.82 (Feb., 2019)           +0.51

industrial material handling equipment:    +3.83 (May, 2019)          +0.22

oil and gas field machinery:                      +1.99 (March, 2019)       +1.01

household appliances:                               +4.53 (Feb., 2019)          +1.39

lawn & garden equipment:                        +2.19 (May, 2019)          +0.13

truck trailers:                                             +6.96 (May, 2019)          +0.81

aircraft:                                                      +2.20 (May, 2019)         +0.52

railroad equipment                                    +2.76 (March, 2019)      +2.67

For good measure, a slowdown is also occurring for metals-using industries where price increases have been relatively weak since the metals tariffs were imposed, as apparent from the table below: 

                                                                 April to peak (month)    Since Jan.

metal-cutting machine tools:                     +1.75 (May, 2019)        +0.69 

passenger cars:                                          +1.20 (Oct., 2018)         -0.30

heavy trucks:                                             +1.22 (Jan., 2019)           0.00

light trucks:                                                +2.43 (Nov., 2018)       -1.72

motor vehicle parts:                                   +0.71 (April, 2019)      +0.31

travel trailers & campers:                          +2.24 (March, 2018)    +0.42

Switch over to “intermediate demand” goods and you find a broad-based, often dramatic inflation deceleration as well – even though price increases in this super-category have accelerated!

                                                                 April to peak (month)    Since Jan.

core intermediate demand:                       +1.11 (May, 2019)         +1.26

metal containers:                                      +5.01 (May, 2019)         +2.95

fab wire products:                                  +11.49 (March, 2019)     +0.23

non-fluid power valves:                          + 4.01 (May, 2019)        +0.98

bolts, nuts, screws, rivets, washers:        +7.98 (April, 2019)        -0.43

fabricated structural metals products:     +5.10 (May, 2019)        +2.18

hardware:                                                 +5.10 (May, 2019)       +0.49

heating equipment:                                  +6.99 (May, 2019)       +1.85

fluid power equipment:                           +4.54 (May, 2019)       +1.33

mechanical power transmission equip:   +3.73 (May, 2019)      +0.40

A/C & refrigeration equip:                     +4.16 (April, 2019)     +1.37

ball and roller bearings:                          +5.85 (March, 2019)   +2.96

The first Trump China tariffs weren’t imposed until early July, so the sample size is smaller. And as previously noted, it’s relatively difficult identifying their precise effects because the list of tariff-ed sectors uses an industry classification system different from that used by BLS to monitor price changes, and the China content of these products can vary significantly. In addition, the group of tariff-ed goods have grown since then, the level of levies differs widely, and the original duties for many have been increased (not to mention the suspension of this major increase for several months earlier this year.  For the exact phases of the U.S.-China trade war until the latest – May 10 – Trump tariff increase, see here.).

But on this policy front, too, the exact same recent wholesale inflation slowdown is apparent as documented above for metals and metals-using industries. And for goods in the core intermediate demand super-category, the China tariff-affected goods have also seen produce price inflation slow as price inflation for the super-category has sped up. The only exceptions are the transformer category (where the inflation levels have been very low in absolute terms and the speed-up marginal) and possibly the oil and gas field machinery sector (where the monthly inflation rates for the two periods seem to be about the same_. Here, again, are the results for the entire August, 2018-May, 2019 period (covering the full duration of the China tariffs in toto), and for the post-January period.

                                                                              Aug.-May            Since Jan.

core intermediate demand goods:                     -1.85 percent       +1.26 percent

aircraft engines and engine parts:                    +1.32 percent       +0.35 percent

ball bearings:                                                   +4.23 percent       +2.96 percent

electric generators:                                          +2.41 percent       +0.18 percent

medical, surgical & personal aid devices:      +0.94 percent         -0.05 percent

core commodity final demand:                      +1.12 percent          0.00 percent

industrial heating equipment:                        +3.50 percent        +1.85 percent

oil and gas drilling platform parts:                +1.84 percent        +1.01 percent

farm machinery and equipment:                   +2.29 percent           0.00 percent

paper-making machinery:                             +2.92 percent         +0.88 percent

electricity transformers:                                +0.61 percent         +0.70 percent

X-ray and electro-medical equipment:         +0.35 percent          +0.12 percent

It might be an exaggeration to say “If you blinked, you missed tariffs-led inflation in the wholesale economy.” But as the above figures make clear, for now, it’s not much of an exaggeration.

(What’s Left of) Our Economy: U.S. Jobs Report Again Shows Evidence of Tariffs Damage

Tags

China, Jobs, Labor Department, manufacturing, manufacturing jobs, metals tariffs, metals-using industries, tariffs, Trade, Trump, {What's Left of) Our Economy

A speaking engagement yesterday prevented me from posting promptly on that morning’s monthly U.S. jobs report (for May), but after crunching the numbers, two conclusions come through loud and clear. First, the overall results added up to a total stinker. And second, like last month’s release, they contained more evidence that President Trump’s tariff-centric trade policies are taking a toll on hiring in manufacturing.

As with economy-wide (“non-farm”) hiring in May, manufacturing employment creation in general grew weakly – and for the fourth straight month. Industry’s payrolls rose by a measly 3,000 on month in May. The revisions, meanwhile, left the discouraging situation basically intact, as April’s previously reported 4,000 net sequential job gain was upgraded to 5,000, but March’s former flatline is now judged to have been a 3,000 net monthly job decrease.

As usual, however, when it comes to the trade policy implications, the results that count are those in manufacturing sectors actually significantly affected by trade policy moves like Mr. Trump’s tariffs. First let’s examine industry’s major metals-using sectors – both the necessary data for these industries goes back to April, 2018 (the first full month when these levies were in effect) and because the industries themselves are much easier to identify.

Here are the figures for these sectors’ employment changes between that month and this past April (both the originally reported numbers and today’s revisions), and between April, 2018 and May, 2019. (All these results, incidentally, are still preliminary.) Serving as control groups are the results for the entire private sector in the United States, for all of manufacturing, and for the durable goods super-sector (where all the main metals-using industries have been found).

                                                    Old thru April   New thru April   April Thru May

entire private sector:                  +1.79 percent     +1.93 percent      +2.00 percent

overall manufacturing:              +1.58 percent     +1.60 percent      +1.62 percent

durable goods:                           +1.92 percent     +1.94 percent      +1.99 percent

fabricated metals products:       +1.82 percent     +1.71 percent      +1.65 percent

non-electrical machinery:         +2.68 percent     +2.52 percent      +2.64 percent

automotive vehicles & parts:    +0.42 percent     +0.20 percent     + 0.48 percent

household appliances:               not available       -4.57 percent       not available

aerospace products & parts:      not available      +7.02 percent       not available

The pattern is clear. Even in metals-using sectors that had been outperforming the overall private sector and overall manufacturing in absolute terms, hiring momentum has waned. Moreover, it’s recently been slackening at a faster rate than evident in those larger sectors. That’s clear from the narrowing of the gap that can generally be seen between the employment increases in the metals-using sectors and the broader parts of the economy.

The impact of the China tariffs remains a puzzle, though, because they’ve been in place for a briefer period of time, and because the industry classification system used by the Trump administration in developing its tariff lists is different from the system used by the Labor Department to track employment changes. In addition, the level of China content of domestic manufactured goods can vary considerably, meaning that the impact of the tariffs can vary just as considerably.

Nevertheless, some exact and reasonably close matches can be identified, and, at least through April (the latest month for which data are available for the specific sectors below, which are narrower than those in the table for metals-using industries), the same relative hiring weakness can be seen. That is, job creation in the China tariffs-affected sectors has been growing more slowly than job creation in the private sector in toto, or in manufacturing overall. This trend is visible even in sectors that have greatly bested the private sector and manufacturing control groups in absolute levels of job creation.

                                   July-March    Old July-April   New July-April    July-May

private sector:         +1.23 percent   +1.44 percent    +1.39 percent    +1.46 percent

overall                   +0.98 percent  +1.03 percent     +1.02 percent     +1.04 percent  

   manufacturing:

aircraft engines       +1.39 percent    not available    +1.51 percent    not available

   and engine parts:

industrial heating   +2.46 percent     not available    +1.45 percent    not available

    equipment:

oil & gas drilling   +5.83 percent      not available   +5.02 percent    not available

    platform parts:

farm machinery     +1.67 percent      not available   +0.17 percent     not available

    & equipment:

ball bearings:        +1.82 percent       not available   +1.54 percent     not available

These results don’t mean that the Trump tariffs, as some keep predicting, are going to throw the American economy into recession, much less that if they do start biting significantly, that they won’t be a price worth paying for overhauling decades of boneheaded, offshoring-friendly, national security threatening (especially in the case of China) trade policies. In fact, they don’t even add up to evidence that the levies are biting significantly now.

But empirical evidence of some damage is finally emerging, at least on the jobs front, and it should be seen as a warning to tariff supporters – including the President – to stop insisting that the current trade wars will entail no costs or need for sacrifice whatever.

(What’s Left of) Our Economy: Through the Policy Noise, More Evidence of Trade Progress Under Trump

Tags

China, exports, imports, Made in Washington trade deficit, manufacturing, real non-oil goods trade deficit, tariffs, Trade, trade deficit, Trump, {What's Left of) Our Economy

Today’s new monthly U.S. trade figures (for April) from the U.S. Census Bureau come at an awkward time statistically speaking. As must be obvious, they predate President Trump’s latest escalation trade war escalations. They’ve been shaped significantly by the safety-related problems at the Boeing Co., long a major American export standout, which may or may not be solved relatively quickly. To make matters more complicated, they incorporate revisions – some of which go back to 2014.

All the same, the trade report contained some data worth noting.

Regarding the macro numbers, the combined U.S. goods and services trade deficit shrank by 2.15 percent on month in April, from an upwardly revised $51.91 billion to $50.79 billion. That’s the second lowest monthly total of this still-young year and, more important, the second lowest total (after February’s $50.03 billion) since June, 2018’s $47.43 billion.

And, in an unusual (literal) footnote, March’s figure was revised up by a substantial 3.81 percent.

Total U.S. exports fell by 2.16 percent on month in April, to $206.85 billion. That’s the biggest percentage sequential decrease since January, 2015’s 2.66 percent. And the April total was the lowest since last December’s $205.66 billion.

Total American imports, though, fell at the same 2.16 percent rate – but the decline was only the fastest since January’s 2.40 percent. The $257.64 billion total import figure was the nation’s lowest since April, 2018’s $257.10 billion.

Year-to-date, the overall trade deficit is 2.02 percent higher than in 2018, although overall economic growth is a little slower.

As known by RealityChek regulars, more insights on how Mr. Trump’s trade policies can be gleaned from examining the “Made in Washington trade deficit” – comprised of U.S. trade flows strongly influenced by trade policy decisions. Such figures strip out oil trade, which is rarely dealt with by trade policy makers, and trade services, where liberalization has still made only modest progress worldwide.

In inflation-adjusted terms (the figures that are used to help calculate overall American economic growth or contraction), this non-oil goods deficit dipped by 0.14 percent month-to-month in April. More revealing, so far in 2019 it’s up 6.13 percent. That sounds like an indictment of the Trump trade record.

But 2018’s comparable figure was 12.71 percent. So even though the economy’s growth changed little, the growth rate of the Made in Washington trade deficit plunged by more than 50 percent – unmistakably good news for anyone wanting the economy to rely less for growth on borrowing and consuming, and more on saving and producing.

The U.S. goods trade shortfall with China shot up 29.66 percent on month in April – which looks like a setback for the President’s trade policy. The more so since the jump was the biggest since the 37.01 percent surge of March, 2015.

All the same, this increase followed the biggest two-month plunge in this trade deficit (39.80 percent) since October-December, 2001 (39.87 percent). In addition, despite the tariff policy gyrations on both sides, the impact of seasonal factors on U.S.-China goods trade can still be detected, as bilateral commerce tends to wane temporarily after big Christmas holiday-related buildups.

Moreover, the China goods deficit through the first four months of 2019 is down 9.88% from the comparable 2018 period – even though the overall goods deficit year-to-date is up 0.33%.

The April widening of the China goods gap was led by a 24.27 percent monthly nosedive in American goods sales to the People’s Republic. This biggest such drop since January, 2018’s 27.35 percent surely represents one sign of the Boeing effect. Although country-specific data aren’t yet available, overall civilian aircraft overseas sales plummeted by 46.89 percent sequentially in April (or just under $2.30 billion in absolute terms).

Goods imports from China rose on month for the first time in six months – by 11.62 percent, to $34.80 billion. This increase was the biggest since May, 2018’s 14.78 percent, by which time tariffs front-running was clearly underway.

The Boeing effect can also be seen in the April manufacturing trade figures. The monthly deficit – which due to trade war factors has been volatile lately – increased sequentially by 12.76 percent, from $76.96 billion to $86.78 billion.

Exports slumped by 9.81 percent month-to-month – or $10.07 billion – with nearly a quarter of the decline due to aircraft.

The much larger amount of manufactures imports was down, too, sequentially in April, but by only 0.14 percent.

Year-to-date, the manufacturing trade deficit stands at $324.17 billion – 4.11 percent higher than the comparable 2018 figure. January-through-April exports are 1.18 percent lower than in the first four months of last year, while imports are 1.21 percent higher.

Making News: Back on National Radio on the China Trade Wars…& More!

Tags

Border Crisis, border security, China, Gordon G. Chang, i24News, Immigration, Making News, Mexico, migrants, tariffs, Thaddeus McCotter, The John Batchelor Show, Trade, trade war, Trump

I’m pleased to announce that I’ll be returning to John Batchelor’s nationally syndicated radio show tonight.  I’m not yet sure about the segment’s timing, though, and the best way to find out is to follow me on Twitter (@AlanTonelson) if you don’t so do already.  I’ll be sending out that info via that platform.  The subject, not surprisingly, will be an update of the U.S.-China trade wars.

You can listen live on-line here.  And as usual, I’ll post a link to the podcast as soon as one’s available.

Speaking of podcasts, one’s on-line of my latest appearance on the program – a very short notice interview on Monday night.  Click here for the usual robust discussion involving John, co-host Gordon G. Chang, former Michigan Republican Congressman Thaddeus McCotter, and me.

Also, the video is now available of my Monday night interview on the American-Israeli TV network i24News.  To view this segment, which covered President Trump’s proposed border security-related tariffs on Mexico, click here and then press the download button.  The file will take a few moments to transfer and, at least in this case, you might have to sit through a few more moments of ads before you can open it up.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

(What’s Left of) Our Economy: Time to Investigate China’s Enablers in the Trade War

Tags

China, customs fraud, Malaysia, Mexico, Nikkei Asian Review, Taiwan, tariffs, Trade, transshipment, Trump, v, Vietnam, {What's Left of) Our Economy

For decades (decades!), when describing how U.S. trade policy should be overhauled, I’ve emphasized that Washington’s approach needs to be not onl “tougher” or “stronger” — as per the favored terms of politicians and reporters.  It needs to be smarter and more nimble as well.

So here’s to the Japanese publication Nikkei Asian Review. It’s just shown exactly why – and why such smarts and agility are especially important for an administration more than willing to use tariffs on China and other economies to achieve its policy goals. (And thanks also to my Twitter follower “DeSaram-MAGA” for calling my attention to the piece.)

For a team of Nikkei journalists has investigated a key subject that no one in the Trump administration, the Congress, or the American media (at least to my knowledge) has bothered to look at: How much of the falling U.S. imports from China are being replaced by supplies genuinely produced in other countries (like Mexico and Vietnam), and how much are being replaced by goods from China being shipped through other countries either simply by putting them in different boxes and containers, or by slapping a coat of paint on them or making some other superficial change before sending them on to the United States?

The answers matter because if it’s mainly or significantly the former, then it becomes clear that the Trump tariffs really are hurting China by denying it sale opportunities that are being snapped up by other competitors. True, the final result per se won’t achieve the major Trump-ian goal of reducing the overall U.S. trade deficit. But China will be weakened – clearly another one of the President’s objectives – and the beneficiaries at least won’t be a huge, wealthy, powerful dictatorship acting like it wants to expand its influence in East Asia and perhaps the world over at America’s expense.

If the answer is the mainly or significantly the latter, then it becomes clear that numerous other economies – including U.S. allies – helping China evade the American levies, and that unless they halt these practices pronto, the case for worldwide tariffs on lots of products becomes a lot stronger.

The Nikkei journalists present evidence for both propositions. But given the uproar that erupted over the global Trump metals tariffs (imposed precisely to prevent assistance given to the Chinese metals producers who had glutted global markets), signs of customs fraud, transshipment, and related practices are especially important.

The Nikkei team provides some anecdotal evidence on this score. But the data-based case described is much more compelling. For example, the journalists found that although exports of five categories of goods from China to the United States – machinery and parts; electrical equipment and parts; furniture; toys; and automotive equipment and parts – declined between January and March of this year declined by 16 percent, “exports from China to developing countries and from developing countries to the U.S. [of these goods] have generally climbed. Exports via Vietnam, Taiwan and Mexico have increased particularly steeply.”

The rising Chinese exports to these countries strongly suggest that Vietnam, Taiwan, Mexico and others aren’t simply filling the China gap in the U.S. market with goods originating in their own economies. To a great degree, they’re helping Chinese origin goods fill that gap on the sly.

Even more suspicious, according to the article:

“Since the U.S. first slapped punitive tariffs on a broad range of imports from China, the six major Southeast Asian nations and Taiwan have started shipping nearly 1,600 new categories of products to the U.S. that they had never exported to America before.

“Of these new U.S.-bound exports, about 1,000 items, or over 60% of the total, are on Washington’s blacklist.”

That is, unless you believe that in a matter of months, major production capacity for this huge number of products somehow suddenly appeared where little, if any, existed before, then circumvention has to be rife.

The Nikkei findings don’t mean that the Trump administration should build all-encompassing tariff walls immediately. But they do mean that Washington needs to demand prompt answers from the economies in question. U.S. leverage, moreover, in many cases isn’t only economic. It’s grounded in national security, too. Countries like Vietnam, Taiwan, and Malaysia aren’t official U.S. treaty allies, but are all quite pleased that the American military counters China geopolitically by basing lots of assets in their neighborhood.

President Trump plainly understands that the United States needs these countries much less than vice versa both economically and security-wise. But the trade policy overhaul he’s rightly pursuing still needs to do better at guarding against foreign efforts to game the system. In this case, that requites demonstrating one of the most reliable signs of intelligence – curiosity.

(What’s Left of) Our Economy: Why the Multinationals Still Should be Ignored on China

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Bloomberg.com, China, multinational companies, multinationals, offshoring, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

Is China mainly valued by American multinational businesses as a super-cheap production site for serving U.S. customers, or as a huge and potentially huge-er consumer market? The question has mattered decisively since the beginning of the nation’s controversial and dramatic trade expansion with China because of the impact on domestic U.S. jobs and production.

So it’s important to report that a new poll of the multinationals that operate in the People’s Republic strongly supports the views of trade policy critics (like me) who have charged that the nation’s pre-Trump approach to China’s economic rise has produced America Last results for the United States, and have urged a fundamentally new strategy.

If the multinationals were using China mainly to supply the U.S. market, as the critics have long insisted, then the trade and investment patterns that have emerged with China would inevitably be undercutting America’s economy. For their investment in the People’s Republic would be mainly replacing factories and similar facilities in the United States, and even exports to China would mainly be replacing shipments between plants within the United States.

If, however, these global giants (and the economists they employ to make their case to politicians, the press, and the public) were right in claiming that their activities were mainly focused on satisfying demand in China, and especially final demand, then the U.S. domestic economy would benefit. For their new Chinese customers would be supplementing their existing American customers, and overall markets for products Made in the USA would grow. (See here and here for arguments from multinationals-funded think tanks studies purporting to document that this win-win scenario has been the case for years.)

But a survey conducted by no less than the American Chamber of Commerce in China and by its Shanghai branch makes clear the great extent to which U.S.-owned businesses operating in China are oriented towards customers back home. One of the biggest hints? More (40 percent) of the 239 firms contacted said that (in the words of a Bloomberg.com summary) “the hike of U.S. tariffs announced on May 10 would have a strong negative impact on their business” than said that they would be hurt by a retaliatory Chinese increase in its duties (33 percent). Clearly, the American levies’ increase would damage those companies because of all that they produce in China for export to the United States. And this despite the robust growth of a Chinese consuming class that is said to be the main reason for concentrating on Chinese customer.

Two other big clues: Fully 35 percent of the companies responding said that “their main strategy for dealing with the tension was to restructure so their operations were more heavily ‘in China for China.’” In other words, many of their China operations are still structured to be “in China for somewhere else.” And 53 percent of the businesses reported that they faced no non-tariff retaliatory measures from Beijing since July, 2018 – when the first Trump China tariffs were announced. Why would they if much of their focus was exporting, and thereby helping China earn valuable foreign exchange revenue?

Nonetheless, the American Chamber survey did turn up two semi-surprises. First, only one of the companies responding complained that a curb on China’s forced technology transfer practices “was the most important outcome” for President Trump to achieve in any trade agreement. For decades, reports of this practice have been too numerous to list.

Second, 42 percent of the companies stated that “a return to the status quo before the tariffs was most important for them” – even though mounting corporate complaints about harassment from and discrimination by the Chinese government and its agents in the Chinese “business” sector are mains reason for strong (stated, anyway) bipartisan American support for ramping up the pressure on China. At the same time, this result could be yet another sign of how much U.S. corporate activity in China continues using the country mainly as an export platform.

Even the most charitable interpretation of this survey would conclude that American businesses simply have no coherent idea of what they want U.S. China trade diplomacy to produce. On the one hand, many of them plainly remain unhappy with the Chinese environment in which they operate. On the other, many plainly oppose the only American measures – tariffs – with any hope of improving this environment.

All of which tells me that, although there may be many grounds for criticizing President Trump’s trade war with China, opposition from an American business community that is at best utterly clueless and at worst hopelessly conflicted on the issues isn’t one of them.

Making News: New China Trade Wars Op-Ed…& More!

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China, Making News, RealClearPolitics.com, tariffs, The John Batchelor Show, The National Interest, Trade, trade war

I’m pleased to announce (a little tardier than usual) the publication of my latest freelance article.  Posted on The National Interest website Monday night, it takes a detailed look at the U.S. goods that China says it will tariff in retaliation for President Trump’s latest levies, and explains why they reveal how weak the Chinese negotiating position is, not how strong.  Here’s the link.

It was also great to see the piece headlining this morning’s edition of the aggregator site RealClearPolitics.com, as you can see by clicking here.

Finally, on Monday night I did a short-notice interview on the U.S.-China trade wars on John Batchelor’s nationally syndicated radio show.  The podcast, strangely, isn’t on-line yet, but I’ll post it as soon as it’s available.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: Major New Trade & Antitrust Article Now On-Line…& 3 Podcasts!

Tags

American Affairs, antitrust, Breitbart News Tonight, China, competition, i24News, Making News, monopoly, tariffs, The John Batchelor Show, Trade, trade war

I’m pleased to announce the publication of a major freelance article tying together two so-far generally separate areas of American economic policy.  Featured in the Summer issue of American Affairs, it makes the case for using trade policy to reduce the levels of foreign competition faced by U.S. businesses and workers, and using more vigorous antitrust policy to replace them with higher levels of domestic competition.  Here’s the link.

In addition, the podcast of three China trade war broadcast media interviews from last Tuesday night are now on-line.  Click here for the link to the relevant segment on John Batchelor’s nationally syndicated radio show; here for the link to my interview on Breitbart News Tonight (you need to scroll pretty far down before seeing my name); and here for my appearance on Israel’s i24News television network.

For the latter, two more steps are necessary – click on “Download” to receive an mp4 file that you can then open up.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: Three China Trade War Interviews Coming Up Tonight!

Tags

Breitbart News Tonight, China, i24News, Making News, tariffs, The John Batchelor Show, Trade, trade war

I’m pleased to announce that I’ll be doing three broadcast interviews tonight – and yes, that would be a record.  All of them will deal with updating the U.S.-China trade war, no doubt with a special focus on China’s new retaliatory tariffs on American goods.

At 8:10 PM EST, I’ll be returning to i24News.  This Israeli TV network only permits paying subscribers to watch live on-line, but if you go to this link, you can sign up for a free trial subscription.

At 10 PM EST, it’s on to John Batchelor’s nationally syndicated radio show.  Listen live here.

And at 11:05 PM EST, I’ll be appearing on Breitbart News Tonight.  This looks like a sign-in page for free listening.

As usual, I’ll be posting podcasts and streaming videos of all these broadcasts as soon as they’re available.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.