The Trade War
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.