Trade

By

Leonard Zwelling

Trade is the act of buying and selling goods and services.

It is my understanding that we have a trade deficit with China. I think what that means is that we buy more stuff that they sell than they buy of what we sell.

Does anyone do this “trading” for free?

Of course not.

We pay China for the excess they send to us vs. what we send to them with something, too. Money, American cash which only has value if someone that China is dealing with wants to trade for it. Right now that cash has great value in the world. China is getting a good deal, but so are we. Check out all that stuff you buy at Target. A lot is made in China far more cheaply than it could be made here. Thus, we pay less. That’s a good thing.

What’s wrong with any of that?

Mr. Trump feels that China has put up unfair trade barriers to U.S. goods and services and that he is willing to wage a counter action by jacking up the price of Chinese goods artificially. He will use tariffs to do this.

And guess what? The Chinese will do the same. So the U.S. will tack tariffs onto imported Chinese goods and the Chinese will do the same raising the price of soy beans in China making the U.S. a less attractive source for the Chinese soy bean market. This will hurt the American soy bean farmer. This is not a good thing.

Now this seems like a lot of bluster on Mr. Trump’s part because while he may raise the price American steel makers can get for their steel, it will raise the price of American autos here at home because American car companies use Chinese and other imported steel to build those cars and the Chinese and others will jack up the price of their steel. This is not a good thing.

Trade has been going on for thousands of years. It used to be really about trade. Spices for tobacco or something like that. Now we have a useful intermediary. It’s called money. Money allows us to be in a trade imbalance with countries who have stuff we need or who make it more cheaply than we can. It is part of international economic interactions and should not be interfered with by any country. If the Chinese are really using unfair practices, stealing our intellectual property or cheating on agreements, there are international courts and the World Trade Organization to be used to resolve this. Bilateral talks between the U.S. and China would also be a useful endeavor. A trade war is not.

This thing could escalate and really hurt Americans, especially Republicans who hoped that the financial benefit of their tax cut bill would be realized as money in the pocket of many voters. Wall Street is already feeling the pain. A trade war could negate the benefits of the tax cut bill and cost the GOP the House.

But first, someone needs to explain to Mr. Trump that there is a better way to deal with people with whom you disagree than tariffs that might hurt everyday Americans, small business owners, and farmers. He’s got a bunch of smart people around him (or they used to be smart). They can explain to him that what he is proposing is detrimental to the country. OK, if that won’t work, tell him it is detrimental to him. At least that, he cares about.

Leonard Zwelling