The Trade War

Calhoun Times - - OPINION &VOICES - Ken Her­ron

It has been my po­si­tion for a num­ber of years that the “FREE TRADE” as we have been ex­pe­ri­enc­ing it is not the “FAIR TRADE” that we need. Pres­i­dent Trump sees the prob­lems just as I see them and he plans to cor­rect them.

If we are do­ing busi­ness with a coun­try and we do not put an im­port tax on the prod­ucts that they ship into our coun­try, they should not put an im­port tax on the prod­ucts that we ship into their coun­try. Im­port taxes have been used to bal­ance the dif­fer­ence in the cost of pro­duc­ing a prod­uct in one coun­try and sell­ing it into an­other coun­try. When a coun­try is ship­ping a prod­uct into an­other coun­try and the re­ceiv­ing coun­try also pro­duces the same prod­uct the cost dif­fer­ence would be eval­u­ated and an im­port tax would be added to the im­ported prod­uct to cause the sell­ing price to be com­pet­i­tive with prod­uct pro­duced in the re­ceiv­ing coun­try. This would as­sure that the la­bor in the re­ceiv­ing coun­try would not lose their jobs be­cause of the im­ports. This is the way that the United States op­er­ated un­til World War I and World War II.

In or­der to help the coun­tries de­stroyed in the wars to re­cover, the United States re­duced or elim­i­nated the im­port taxes to al­low the for­eign coun­tries to sell their prod­ucts in the United States. This re­duced prices on prod­ucts in the USA but the ef­fect of this ac­tion caused in­dus­tries in the United States to be­come un­prof­itable and go out of busi­ness. The equip­ment of the failed busi­nesses was pur­chased by coun­tries who moved them to their own coun­tries and used them to make the same prod­ucts at lower costs be­cause of their lower la­bor costs. Our tex­tile and cloth­ing in­dus­tries dis­ap­peared. Small fac­to­ries in all of the south­ern towns closed. Our steel in­dus­try dis­ap­peared. Birm­ing­ham and Pitts­burgh closed their steel mills. Our pro­cessed food in­dus­try dis­ap­peared and we be­gan to ship raw food to China to be pro­cessed. Her­shey’s choco­lates moved out of Her­shey, Penn­syl­va­nia into Mex­ico to pro­duce their can­dies.

Pres­i­dent Trump is go­ing to bring back many of th­ese in­dus­tries to the United States. His first step was to put a 25 per­cent im­port tax on steel com­ing into our coun­try and a 10 per­cent tar­iff on alu­minum. There were ini­tially no coun­tries ex­empted from the tar­iffs. The United King­dom ( Eng­land) was the first coun­try to re­spond. The Prime Min­is­ter came to Wash­ing­ton and met with Pres­i­dent Trump. In 2017, the USA shipped $54 Bil­lion to the UK and the UK shipped $ 56 Bil­lion in prod­ucts to the USA. A no- tar­iff agree­ment is in works be­tween our two coun­tries.

Pres­i­dent Trump is ne­go­ti­at­ing from a po­si­tion of strength. We are the largest mar­ket in the world and no­body wants to be frozen out of our mar­ket. In 2017, the USA ex­ported $ 1.547 tril­lion in prod­ucts. From all of the coun­tries of the world, the USA im­ported $ 2.409 tril­lion in prod­ucts. This means that our money sup­ply was re­duced by $ 862 Bil­lion. This im­bal­ance has been hap­pen­ing for many, many years. The USA money sup­ply of cash, coins, bonds, etc., is ap­prox­i­mately $ 3.620 Tril­lion. Our Gross Na­tional Prod­uct, which shows the ac­tiv­ity of our money, in 2017 was $ 18.357 Tril­lion. This means that our money turned ap­prox­i­mately five times per year. Our trade deficit re­duces our money sup­ply by about 23.8 per­cent in 2017. How does the gov­ern­ment com­pen­sate for this? The Trea­sury De­part­ment prints and puts into cir­cu­la­tion about $ 472 Bil­lion per year with­out any in­crease in as­sets or gold to back it up. A small part of this is re­place­ment for old bills. The value of the dol­lar is re­duc­ing ev­ery year with this di­lu­tion.

The big­gest trade part­ner that is tak­ing ad­van­tage of the USA is China. In 2017 the USA im­ported $ 526 Bil­lion in prod­ucts from China. In the same year the USA ex­ported $ 130.4 Bil­lion in prod­ucts to China. This was a deficit of $ 395.6 bil­lion. This is 46 per­cent of the USA to­tal trade deficit. China pays very lit­tle in im­port taxes on their ship­ments to the USA. The min­i­mum im­port tax on USA prod­ucts into China is 15 per­cent and can be as high as 60 per­cent. There are prod­ucts that China does not want shipped into their coun­try and they will make the im­port tax high enough to pre­vent prod­ucts they do not wish to re­ceive from com­ing into the coun­try. In re­sponse to im­port taxes an­nounced by Pres­i­dent Trump, China is an­nounc­ing ad­di­tional im­port taxes on our prod­ucts to them. The eco­nomic sit­u­a­tion in China re­quires high ex­ports. They have built new cities, new fac­to­ries and many other ad­vances based on a high cash flow that comes from money from their ex­ports. If the ex­ports slow down they will be quick to ask for a con­fer­ence to dis­cuss the sit­u­a­tion.

The USA should have never al­lowed this sit­u­a­tion to de­velop, but now that it is here we must cor­rect it or it will lead to the com­plete fail­ure of our na­tion. Pres­i­dent Trump is of­fer­ing agree­ments which pro­vide no im­port taxes in ei­ther di­rec­tion to other na­tions of the world. The North Amer­i­can Free Trade Agree­ment ( NAFDA) be­tween Canada, Mex­ico and the USA was sup­posed to pro­vide this. The agree­ment as it was signed still al­lowed Mex­ico and Canada to charge im­port taxes on prod­ucts com­ing from the USA but the USA did not charge im­port taxes on prod­ucts from Mex­ico and Canada. The USA trade with Mex­ico in 2017 had a $ 74 Bil­lion deficit to the USA. The USA trade with Canada had a $24.7 Bil­lion deficit to the USA. This took $ 98.7 Bil­lion in cash out of cir­cu­la­tion in the USA.

Trust Pres­i­dent Trump when it comes to buy­ing and sell­ing. His life ex­pe­ri­ence has been in mak­ing deals. He wrote the book, “The Art Of The Deal,” which is the hand­book on trad­ing. None of the lead­ers of the other na­tions are as ex­pe­ri­enced in this as he is. A deal must be good and fair for both sides of the agree­ment for it to work, and Pres­i­dent Trump will work to­ward this re­sult.

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