Making News: More Press Cites and a D.C. Trade Debate Tonight!

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China, defense, defense trade, Donald J. Boudreaux, Gordon G. Chang, IndustryToday.com, Making News, tariffs, The American Conservative, The Fund for American Studies, Trade

I’m pleased to announce that my views on U.S.-China trade relations have been cited once again in one of Gordon G. Chang’s pieces on the subject. Click on to this link to read the American Conservative article – which anticipates that my recommendation that the United States start to disengage economically from the People’s Republic will steadily become more mainstream.

In addition, IndustryToday.com reprinted yesterday’s post on the detailed May U.S. trade figures.  Click here to have a look.

And last, but certainly not least, tonight I will be participating in a debate on using tariffs to protect U.S. defense and defense-related industries.  It will take place tonight on the George Washington University campus in Washington, D.C. and is sponsored by The Fund for American Studies.  My interlocutor will be Prof. Donald J. Boudreaux, an economist at the Mercatus Center at George Mason University and a strong advocate of conventional trade policies.

The event isn’t open to the general public, but it will be recorded, and I’ll post a link to the streaming video as soon as it’s available.

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

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(What’s Left of) Our Economy: A U.S. Trade Figures Update with a Special Focus on China & Trump “Foe” EU

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Canada, China, EU, European Union, exports, goods trade, high tech goods trade, imports, manufacturing, merchandise trade, services trade, tariffs, Trade, Trade Deficits, trade surpluses, Trump, {What's Left of) Our Economy

The May U.S. trade figures are no longer exactly new, having been released July 6. But with a big round of U.S. tariffs just imposed on China, and many more possibly on the way (along with automotive trade curbs that would affect most major U.S. economic competitors), they’re still incredibly newsy. So here’s a quick rundown of some highlights closely related to recent headlines, starting with the China figures.

>The enormous American goods trade deficit with China shot up by 18.68 percent sequentially, from $27.96 billion to $33.19 billion. The May shortfall was the biggest since January ($35.95 billion) and the increase was the greatest since May, 2016 (19.49 percent).

>The widening of the trade gap was largely driven by a 14.56 percent monthly jump in U.S. merchandise imports from China, to $43.80 billion.

>That level was also the highest since January ($45.79 billion) and the increase was the biggest since March, 2015 (30.33 percent).

>U.S. goods exports to China rose on month by only 1.69 percent, to $10.61 billion.

>Year-to-date, the merchandise deficit is running 9.92 percent higher than last year’s rate – which resulted in a record $375.58 billion bilateral shortfall.

>Also, year-to-date, U.S. goods exports to China have increased by 7.79 percent, while the far larger amount of imports is up by 9.36 percent.

>The trade figures for another competitor in President Trump’s cross-hairs, the European Union (EU) tell a different story. In May, the goods trade deficit with this grouping – labeled a trade “foe” by Mr. Trump – declined by 8.57 percent, from $14.64 billion to $13.39 billion.

>U.S. merchandise exports to the EU advanced by 4.34 percent sequentially in May, to $27.97 billion, and American sales to the group have been improving steadily since November. Indeed, on a year-to-date basis, they’ve improved by a healthy 14.02 percent.

>The merchandise deficit, however, has risen by 14.77 percent year-to-date as of May, with the larger amount of imports up nearly as fast: 14.27 percent.

>The U.S. goods deficit with Canada, another country that has drawn Mr. Trump’s ire, nearly doubled on month in May, from $806 million to $1.50 billion. But because this shortfall has fallen to such low levels in recent years, largely because of reduced American energy imports, these figures now tend to be volatile.

>U.S. merchandise exports to Canada – still America’s largest single country trade partner – increased 4.42 percent on month in May, to $26.81 billion, while goods imports rose by 8.53 percent, to $28.31 billion

>But although that import figure was the highest such monthly total since December, 2014’s $28.83 billion, the year-to-date American bilateral merchandise deficit has plummeted by 40.78 percent, from $9.78 billion to $6.08 billion.

>U.S. goods exports to Canada year-to-date are up by 4.98 percent, as of May, and goods imports have risen by 6.02 percent.

>U.S. global trade flows set a series of multi-month bests and all-time records in May.

>The combined May goods and services deficit fell by 6.57 percent sequentially to $43.05 billion – the lowest such total since October, 2016’s $42.64 billion.

>The goods deficit declined by 3.77 percent on month to $65.79 billion – the lowest since last August’s $65.49 billion.

>On the services side, the May surplus of $22.74 billion bested the April result by 2.04 percent, and fell just short of the record $22.77 billion recorded in February, 2015.

>Total exports, which rose sequentially by 1.94 percent, to $215.33 billion, hit their fourth straight monthly record.

>U.S. goods exports, which increased on month by 2.62 percent, to $144.89 billion, set their third straight such record.

>U.S. services exports, which advanced by 0.56 percent, to $70.44 billion, set their 13^th straight monthly record.

>U.S. non-oil goods exports (pre-inflation) in May climbed by 2.75 percent on month, to $129.98 billion, and set their third straight monthly record.

>U.S. current dollar oil exports inched up by 0.77 percent sequentially in May, to $14.18 billion – the second best performance on record after December, 2013’s $14.27 billion.

>The immense American manufacturing trade deficit in May continued its march toward the $1 trillion-dollar annual mark, and a new yearly record.

>The May manufacturing trade deficit totaled $85.05 billion – its fourth all-time highest, and an increase of 8.95 percent sequentially.

>Manufactures exports improved on month by 4.89 percent, from $96.72 billion to $101.45 billion. But the much greater amount of manufactures imports increased even more – by 6.71 percent, from $174.79 billion to $186.50 billion.

>Year-to-date, the manufacturing trade shortfall reached $397.48 billion in May – 11.89 percent higher than the comparable level in 2017, when the gap finished the year at $929.14 billion.

>Year-to-date manufacturing exports have increased by 7.38 percent, but imports are 9.27 percent higher.

>America’s trade deficit in advanced technology products also keeps heading to a new annual record.

>On month, the chronic shortfall in this category rose by 8.44 percent, to $10.32 billion.

>That increase brought the year-to-date deficit to $45.37 billion –32.62 percent higher than the comparable total last year, when this full-year trade gap reached $110.93 billion.

Following Up: Why Auto Tariff Alarmism Just Got (Even) Sillier

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automotive, autos, CNBC, consumers, Following Up, prices, Rick Santelli, tariffs, Trade, Trump

The claims just keep coming that President Trump’s threatened auto tariffs will cause vehicle makers to boost the prices paid by American consumers per vehicle by thousands of dollars. So does the evidence that such claims are “horse hockey” – to quote a memorable euphemism for “baloney” recently used by CNBC’s Rick Santelli (in a similar context).

As I noted in a post last Wednesday, this alarmism flies in the face of recent U.S. auto sales trends – which recently have been weak enough to force the companies to offer deep discounts to prop up their numbers and try to keep market share. As I’ve also noted, those trafficking in price hike fears either know nothing about business, or are trying to fool their audiences. For although producers’ costs of course influence consumer prices, the latter’s main determinant is what the former believe the market will bear. To believe otherwise is to believe that companies aren’t striving to maximize revenues and profits wherever and whenever possible. And by extension, it’s logically to believe that, although auto makers don’t believe their customers will pay those higher prices today, they’ll change their tunes as soon as vehicles become much more expensive.

Which brings us to the newest evidence – yesterday’s data on U.S. auto sales for June and for the first half of the year. Overall, they were up, and up nicely (especially for last month, when they rose year-on-year). But as always, you need to look under the hood. (Couldn’t resist!) And that’s when you encounter vital contrarian details provided by analysts at Cox Automotive.

According to the Associated Press’ coverage of their conclusions, the increases were driven by “low-profit sales to fleet buyers such as rental car companies, and retail sales to individual buyers were propped up by rising incentives such as rebates and subsidized leases.”

Indeed, said observed one Cox consultant, “Retail sales have been flat, and even those sales have been supported by incentives being up 6 percent.”

Does this sound like a market where big, sudden price increases have much chance of sticking? If you agree, I’d be happy to show you a bridge in Brooklyn that’s available for a song. And if you’re parroting this line, chances are you’d be a great used car salesman.

Making News: A USAToday Op-Ed on Trump & Trade, & a New National Radio Podcast on the China Tech Threat

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CFIUS, China, FDI, Made in China 2025, Making News, national security, tariffs, technology, The John Batchelor Show, Trade, Trump, USAToday

I’m pleased to announce that USAToday has just published my latest op-ed article — a piece arguing that President Trump is exactly right to believe that the United States has ample clout to prevail in trade conflicts with foreign economies. Read it at this link.

Incidentally, this article ran as a solicited rejoinder to a USAToday editorial criticizing Mr. Trump’s trade policies. As I’ve written before, the newspaper deserves great credit for its regular practice of letting readers know that there are (at least) two sides to every story.

Also the podcast is now on-line of my interview last night on John Batchelor’s nationally syndicated radio show. Click here for an information-packed discussion about the latest developments in the U.S.-China competition to control industries and technologies vital for national security and prosperity.

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

Glad I Didn’t Say That! About that Auto Tariff Alarmism

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Alliance of Automobile Manufacturers, auto tariffs, automotive, autos, Glad I Didn't Say That!, tariffs, Trump

“The Alliance of Automobile Manufacturers, a trade group representing domestic and foreign automakers with plants in the U.S., predicts the average price of a new vehicle will increase $5,800 if the president imposes a 25 percent tariff on imported models.”

–CNBC.com, June 27, 2018

“U.S. auto sales in June likely rose 2.5 percent from the same month in 2017…although discounts on new vehicles remain high, industry consultants…said on Tuesday.”

–Reuters, June 26, 2018

 

(Sources:  “Automakers to Trump:  Tariffs will drive up auto prices and cost thousands of jobs,” by Phil LeBeau, CNBC.com, https://www.cnbc.com/2018/06/27/automakers-to-trump-tariffs-will-drive-up-auto-prices-and-cost-jobs.html & “U.S. June auto sales seen up 2.5 percent, J.D. Power and LMC,” by Nick Carey, Reuters, June 26, 2018, https://www.reuters.com/article/us-usa-autos-sales/u-s-june-auto-sales-seen-up-2-5-percent-j-d-power-and-lmc-idUSKBN1JM1L4)

 

(What’s Left of) Our Economy: With Allies Like These….

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allies, Asia, auto tariffs, China, Europe, Germany, intellectual property theft, Japan, Robert J. Samuelson, South Korea, steel tariffs, tariffs, The Washington Post, Trade, Trump, value-added taxes, {What's Left of) Our Economy

Nationally syndicated Washington Post columnist Robert J. Samuelson intended this week’s essay to show how foolish, and possibly disastrous, President Trump’s emerging new trade policy will be – including for the national security goals the administration has set. That’s why it’s so ironic that his column instead unwittingly revealed how thin a reed the nation’s long-time security strategy has been, and nowhere more so than in the importance it’s assigned to its long-time security alliances in Europe and Asia.

Samuelson’s piece conveys a warning that the administration’s trade policy moves so far are on course to undermine national security in two related ways: by ignoring the alleged imperative of enlisting its major allies in a multilateral campaign to discipline predatory Chinese intellectual property and related trade and industrial policies that need curbing; and by actually antagonizing these countries and thereby jeopardizing the very existence of those alliances.

This argument conveniently overlooks several big trade and security fundamentals. First, globalist pre-Trump American leaders themselves have insisted that they’ve long tried to create multilateral pressure on China’s rogue economic behavior for years before Mr. Trump became president – though it’s unclear how serious these efforts were. For example, the Trans-Pacific Partnership (TPP) trade deal largely touted by the Obama administration for its potential to curb China’s influence contained a back door for numerous imports with major levels of Chinese content.

Second, it’s anything but obvious that U.S. alliances strengthen American security on net. As I’ve pointed out frequently (including this past week), they continue to expose the American homeland to the risk of nuclear attack even though the Soviet-style kinds of global threats their nuclear guarantees were intended to counter have been (literally) gone for nearly three decades. Moreover, as has been widely reported, the militaries of many of these allies have deteriorated so markedly that their potential as force multipliers for the United States is open to serious doubt.

But Samuelson’s analysis makes no sense even if these considerations are put aside. The key is in his own portrayal of leading U.S. allies – which he describes as livid about recent American steel tariffs, and sure to become even angrier is levies are imposed on their motor vehicle exports to the United States. Indeed, he worries, major auto-exporting countries like Germany, Japan, and South Korea could well become so upset with the United States that they not only retaliate in kind, but unhesitatingly move to supply China with whatever high tech goods and services Washington embargoes or restricts.

In other words, these allies would redouble their efforts to feed the Chinese beast even though all of them face China trade, technology, and/or national security threats of their own, and even though the United States continues to provide them with crucial military protection – including, in the case of Japan and South Korea, from Chinese designs. But these same allies were supposed to be amenable to cooperating with Washington to deal with China? Even more revealing, the allies would choose to intensify confrontation with the United States instead of (finally) proposing concrete steps to deal with the China problem over which they profess concern.

And they would display no interest whatever in meaningfully removing the formidable obstacles they have created to block American automotive exports. (The recently reported German auto-makers’ proposal to eliminate all tariffs in the sector on both sides of the Atlantic would leave in place towering European value-added taxes – e.g., 19 percent in Germany – on motor vehicles and most other imports. No such U.S. equivalent exists either for autos or for light trucks and sport utility vehicles.)

No one can fault these European and East Asian countries from acting in their own perceived interests – or even for trying to have their cake and eat it, too. Indeed, for decades, globalist American foreign policies have encouraged and actively enabled precisely this kind of free-riding. What these countries should be faulted for is posing as allies (let alone allies with justifiably hurt feelings), and worse, as paragons of sobriety and free market values nobly resisting a wrecking ball of an American President. As for any Americans and U.S. leaders who keep fooled by this act for so long and, more important, failing to take the policy hints – shame on them.

Making News: Back on CNBC This Afternoon – & More!

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China, CNBC, Germany, Making News, Power Lunch, tariffs, The John Batchelor Show, Trade, Trump

I’m pleased to announce that I’m scheduled to return to CNBC this afternoon at 1 PM EST to help provide an update on President Trump’s trade policies toward China and other major trade competitors.  You can watch the segment on-line – on the network’s “Power Lunch” program – at this link.  As always, if you can’t tune in, I’ll post a link to the streaming video of the segment as soon as one’s available.

The podcast of my interview last Wednesday on John Batchelor’s nationally syndicated radio show is now on-line as well.  Click here to listen to an informative discussion focusing on U.S.-Germany trade tensions — and apologies for posting the link so late!

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

Im-Politic: A Left-Wing Attack on Trump Tariffs that the Offshoring Lobby Could Love

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"resistance", China, Democrats, globalism, globalization, Im-Politic, liberals, multinational companies, NAFTA, Nomi Prins, North American Free Trade Agreement, offshoring lobby, progressives, strange bedfellows, tariffs, The Nation, Trade, Trump, Trump Derangement Syndrome, Trump tariffs

Although I view it as being small-minded, short-sighted, and often over-the-top, I can’t completely fault many left-of-center American trade policy critics for failing to support (and even attacking) most of President Trump’s trade policy initiatives. Not so with Nomi Prins’ new indictment in The Nation. She’s taken this dimension of Never Trump-ism and “Resistance” to a wholly new and troublingly counterproductive level,

Mr. Trump has assaulted many of the trade deals that liberals, progressives, and many Democrats themselves long resisted (like NAFTA – the North American Free Trade Agreement – and the the Trans-Pacific Partnership – TPP). And he’s dealing decisively (so far!) with many other foreign trade policy transgressions and global trade institutions they’ve long assailed (like China’s dumping of steel and aluminum and wide array of other predatory trade practices, and the World Trade Organization, or WTO).

But many on the Left (and indeed, all over American politics) are understandably disgusted with some of the President’s rhetoric and record in immigration and gender issues and race relations, and with his family’s continuing domestic and foreign business ties (including with China), which look like conflicts of interest and at the least can look hypocritical (e.g., using immigrant workers both legal and illegal). Moreover, you don’t have to be a Never-Trumper to be upset with the ties between many Trump administration appointees and industries they’re supposed to be regulating.

Moreover, the President is attacking American trade and related globalization policies from an economic nationalist/America First standpoint. Having worked with left-of-center trade critics for nearly 30 years, I can tell you that this has never been their perspective. Though this is an overly broad generalization, they have been loathe to acknowledge that what’s best for America and what’s best for the rest of the world may not be identical – especially in the short and even medium-terms. As a result, their criticisms of many long-standing U.S. trade policies have often demonstrated at least as much concern for their impact on workers in developing countries as on their counterparts in the United States.

In fact, they tend to reject the idea that the main fault-line in the global economy has been the United States (and even the U.S.’ productive economy) versus “the rest”. In the view of these left-of-center critics, the main fault line instead is between the capital holders of the world versus the workers of the world.

The point of this post is not to insist that the nationalists have been right and the progressives et al have been wrong. It is to note that Prins’ new Nation piece disturbingly edges into Trump Derangement Syndrome territory. The main reasons: Her stated problems with the administration’s trade policies aren’t based on any of the above counter-arguments. Instead, her main anti-Trump points are almost indistinguishable from those made by the establishment supporters of the trade and globalist status quo – including not only the foreign policy “Blob” that has always backed seeking geopolitical and diplomatic gains even when they come at the expense of U.S. workers and the domestic economy, but those multinational business groups comprising the “global capitalist” interests that the trade policy progressives have always targeted!

Thus we hear from Prins both that the actual and prospective Trump tariffs have angered America’s “closest allies” in the Group of 7 industrial countries of Europe and the Far East, along with “our regional partners” in NAFTA. She’s repeated the canard that the President’s trade moves scarily resemble the Hawley Smoot tariff that “sparked the global Great Depression, opening the way for the utter devastation of World War II.” She consistently portrays the world’s other major economies as genuine paragons of free trade. (Not even China is chided.)

Even more striking, the main evidence she cites for the claim that the President “is sparking a set of trade wars that could, in the end, cost millions of American jobs” comes from Offshoring Lobby pillars like the U.S. Chamber of Commerce, the Business Roundtable, and the Brookings Institution (which, not so incidentally, takes lots of money from most of the leading foreign economies that will be hit by Trump tariffs).

It’s been noted often since the NAFTA’s negotiation in the early 1990s ushered in the offshoring-happy phase of U.S. trade policy that the resulting domestic political divisions have created some “strange bedfellows” alliances – i.e., coalitions that have had little in common other than common views on this front. Will the Prins article help usher in the strangest trade bedfellow coalition yet – between the left-wing anti-Trump resistance and the Fortune 500? Such groups are singing much the same tune on issues like immigration policy, so this prospect isn’t as far-fetched as it might seem. Further, don’t forget that voters who consider themselves Democrats and those leaning in this direction are viewing trade in general much more favorably these days than during any other recent period – at least according to polls. (Republicans and GOP leaners have shifted in the opposite direction.) And the appearance of an article containing these arguments, and evidence drawn from corporate and corporate-funded sources, has appeared in The Nation – long one of the American Left’s flagship publications – is another ominous sign.

One reason for optimism (if you agree that U.S. trade policy needs a big-time overhaul): Many left-of-center trade policy critics have (albeit grudgingly) supported the main thrust of the President’s trade policies. Even though most still retain their “globalist loyalties,” their complaints about the administration’s approach have centered on its instances of backtracking on Mr. Trump’s campaign promises, and (like me) on apparent inconsistencies. So it will be especially interesting to see if they push back strongly, or at all, versus Prins’ views. The answer could help determine the future of the politics of American trade policy – and of the policy itself.

Making News: A Major New Article on “America First” Foreign Policy, a Return to National Radio – & More!

Tags

America First, China, foreign policy, globalization, Making News, national security, Newsmax Now, Newsmax TV, tariffs, The John Batchelor Show, The National Interest, Trade, trade wars, Trump

I’m pleased to announce that a major new article of mine on the future of U.S. foreign policy has just been published in The National Interest.  Titled “America First at Home and Abroad,” it looks at the heated debate over President Trump’s approach to international relations from a wholly new standpoint.

Rather than attacking or defending the President’s stances, the piece argues that Mr. Trump’s departure from the nation’s decades-long globalist strategy is much more bark than bite so far, describes what a genuine ‘America First” policy capable of attracting public and political support would look like, and makes the case that such a strategy is likeliest to serve U.S. security and economic interests going forward.

In addition, I’m scheduled to return to John Batchelor’s nationally syndicated radio show tonight at 9 PM EST to help John and co-host Gordon G. Chang provide updated coverage of President Trump’s China trade policies.  Click here to listen live on-line to what’s sure to be a timely and provocative discussion.

And last night, the Newsmax TV program “Newsmax Now” ran a backgrounder segment on U.S.-China trade relations based largely on my analysis of the subject.  Here’s the link; the backgrounder begins at about the 33:40 mark.

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

(What’s Left of) Our Economy: More Evidence that Trade Wars are Absolutely Winnable for America

Tags

Apple, China, Financial Times, global supply chains, globalization, manufacturing, Paul Krugman, Rana Foroohar, tariffs, Trade, trade wars, {What's Left of) Our Economy

Throwaway lines are among my favorite aspects of opinion writing, largely because in a simple, usually brief, and almost by definition understated sentence or two they can thoroughly debunk or at least gravely weaken shibboleths that have reigned virtually unchallenged for decades. And Financial Times columnist Rana Foroohar had a doozy yesterday.

As is well known by anyone who’s been closely following the development of President Trump’s trade policies and the uproar they’ve triggered, some of the biggest fears surrounding the prospect of the “trade wars” they’re deemed all too likely to ignite concern the impact on global supply chains. As explained this morning by Nobel Prize-winning economist and New York Times columnist Paul Krugman;

“[C]orporations have invested trillions based on the assumption that an open world trading system, permitting value-added chains that sprawl across national borders, was going to be a permanent fixture of the environment. A trade war would disrupt all these investments, stranding a lot of capital.”

And since lots of capital would be stranded, lots of employment patterns worldwide would be disrupted, too – including in the numerous American manufacturing industries that have been thoroughly globalized and whose ability to assemble, further process, or produce goods in their U.S. facilities therefore depends on the smooth operations of these corporate networks.

Further, tariffs on imports from China allegedly would be especially damaging, since Chinese factories play such key roles in so many manufacturing supply chains, and since China’s prominence in globalized manufacturing in large part stems from so many special manufacturing strengths that the Chinese have developed – often by hook or by crook – in recent decades. If you need a compelling example, check out this early 2012 article on why Apple, among many others, has concentrated its industrial operations in the PRC.

At the same time, since Mr. Trump won the White House, not a few companies have either started relocated some production in the United States in response to actual or threatened tariffs, or made public remarks indicating that supplying the U.S. market from abroad would make no sense if trade barriers impeded their access. Other corporate leaders were saying even before Mr. Trump’s election that mounting protectionism and populism worldwide were bound to result in more localized manufacturing.   

So it’s become clear in recent years that however much they’ll complain about moving supply chains, business leaders scarcely view the challenge as impossible. Still skeptical? Recall how easy it’s been for them to send even the largest supply chains from inside the United States to outside American borders, or capitalize on the existence of overseas networks. And recall how quickly many of these transfers happened.

Just how fast they took place, and can still take place, is where Foroohar’s column comes in. In yesterday’s column, she echoed my point about supply chain movements that are either already underway or being contemplated:
“Over the long term, China and the US are headed towards regional supply chains for high-growth technologies of the future.” She continued – consistent with the conventional wisdom, “But in the short term, the interdependencies will be difficult to untangle.”

Then, however, came the kicker – which received no special emphasis from the author at all:

“Several executives who supply Fortune 500 companies have told me it would take months if not years for the biggest US companies to break completely free of Chinese components.”

To repeat: Months – and at the outside years – for many companies to marginalize China’s role in particular in global supply chains. And then remember the reward: Greatly diminishing China’s still-burgeoning influence over the American economy and over the broader global economy, and in the process blunting the growing threat it poses to U.S. security interests both in the Asia-Pacific region and around the world.

That sounds like an appealing – indeed, no-brainer trade-off – to me. For an American leader hoping to disrupt U.S. trade and globalization policy for long-term gain, and facing numerous raucous short-term complaints, it should be an especially effective pitch to make, and an urgent policy target to prioritize explicitly and pursue systematically. Anyone seen any politicians like that lately?