Monthly Archives: August 2019

Why Is The Iphone Tariff 6%, Not 15%?

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Mother Jones provides an explanation: “It is hard to keep track of all the China tariff action these days. Here’s a short primer. Imports from China have been broken into lists, which are just what they sound like: lists of various kinds of products.
Lists 1 and 2 account for about $50 billion worth of Chinese imports annually and were subjected to 25 percent tariffs last year. These were mostly industrial products, not consumer products.

List 3 included food and other consumer items in addition to industrial goods, clocking in at about $200 billion worth of Chinese imports. Trump imposed a 10 percent tariff on List 3 last year and upped it to 25 percent earlier this year.

List 4 is everything else and amounts to about $300 billion worth of imports. Trump imposed a 10 percent tariff on List 4 products earlier this month. On Friday, he announced that this would increase to 15 percent and the tariffs on the other lists would increase to 30 percent. However, because Trump doesn’t want to interfere with Christmas, List 4 was split into List 4a and List 4b. The tariffs on List 4b, which includes lots of popular consumer items, won’t go into effect until mid-December.

Keep in mind that tariffs are imposed on the “customs value” of products. An iPhone that retails for $1,000, for example, has a customs value of around $400. A 15 percent tariff comes to $60, or roughly 6 percent of the retail value.

All told, we import about $550 billion in goods from China annually, and when List 4 takes full effect at the end of the year all of it will be subject to Trump tariffs. Products on Lists 1-3 will be subject to tariffs of 30 percent and products on List 4 will be subject to tariffs of 15 percent. Unless Trump changes his mind between now and December”…

“I Am The Chosen One:” When All Else Fails, Appeal to Religion

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On August 25, 2019, Politico reports that “Trump continued to shrug off responsibility for any economic fallout from his trade war with China on Wednesday, arguing that a face-off with Beijing was necessary due to the failures of past administrations. Trump painted himself as a reluctant warrior, shifting from his usual narrative that the trade fight is not hurting the American economy or his political prospects to asserting that it was something he had to do. The president also adopted a religious theme in describing his role in picking a trade fight with China, saying: “I am the chosen one.” “Somebody said it is Trump’s trade war,” he said. “This isn’t my trade war. This is a trade war that should have taken place a long time ago by a lot of other presidents.”

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Novel Enemies: WSJ & Republican White House

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The WSJ is the most conservative mainstream paper, and it decided to pick a bone with White House Trade Policy, after which The White House Trade Advisor “then compared the WSJ, which has long been a leading capitalist voice in the US, to the main media outlet of the Chinese Communist Party.”!

“The Wall Street Journal editorial board warns against a tariff-fueled ‘Navarro recession’ for the second time in one week

Gina Heeb, Aug. 15, 2019, 01:27 PM
  • The Wall Street Journal editorial board lambasted the economic policies of White House trade adviser Peter Navarro for the second time in one week on Thursday.
  • That came a day after a key recession warning led to the stock market’s worst session of the year. 
  • Investors have become increasingly unnerved by slower global growth and escalating tariff disputes.

The Wall Street Journal editorial board has lambasted the economic policies of White House trade adviser Peter Navarro for the second time in one week, a day after a key recession warning sent stocks to their worst session of the year.

The Journal first took aim at the China hawk in an op-ed last week, saying the trade war could lead to a “Navarro Recession.” Navarro then compared the Journal, which has long been a leading capitalist voice in the US, to the main media outlet of the Chinese Communist Party.

“That was novel as criticisms of these columns go, but perhaps Mr. Navarro would care to comment again after Wednesday’s recession warning from the bond and equity markets? Are they Commies too?” the Journal’s editorial board wrote Wednesday in an article titled “The Navarro Recession, II.”

 “Wednesday’s market moves are an omen of the future, not destiny,” they wrote. “The key to avoiding the worst is to restore a sense of policy calm and confidence. Stop the trade threats by tweet. Call a tariff truce with China, Europe and the rest of the world while negotiations resume.”

“We’ve been warning for two years that trade wars have economic consequences, but the wizards of protectionism told Mr. Trump not to worry,” the Journal article said. “The economy was fine and the trade worrywarts were wrong.”

 

The Trump administration has argued that its trade policies would ultimately protect Americans from what it has found to be unfair business practices abroad, such as intellectual property theft in China.

“Someone should tell Mr. Trump that incumbent Presidents who preside over recessions within two years of an election rarely get a second term,” the editorial board wrote.

China’s New Retaliation

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Since the US imports more from China than China from the US, Trump has been excited to level more and more tariffs on Chinese goods claiming that eventually, China would not be able to retaliate. It turns out that global trade has many dimensions. China can retaliate not only via tariffs on trade but restrictions on FDI or simply by depreciating its exchange rate: TB($) = X [$, Chinese tariffs] – M[E, US tariffs]. As tariffs increase China does not have to increase its tariffs on US goods, it can simply depreciate its currency, as it did today.