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Thread: U.S. to collect 25% tariffs on Chinese woodworking equipment starting July 6

  1. #76
    Quote Originally Posted by Wade Lippman View Post
    Normally inflation is caused by an overheated economy and interest rates go up to quiet it down.
    In this case inflation will be caused by destruction of international trade and economic chaos. The economy will be badly damaged and interest rates should go down. At least that is how I see it.
    If China decides to stop buying US Treasuries (government bonds) then the Treasury interest rate will go up to attract other investors. This has a cascading effects on other things. Who is going to put money into a marginally-earning account when (at least short-term) government bonds are a better deal. This affects you and you and you. Econ 101.

    The whole thing of "interest rates going down" was relevant when the economy needed to be stimulated. Not in this case, where somebody is
    Last edited by Lee Schierer; 06-21-2018 at 8:37 AM.

  2. #77
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    You have to think globally. On the natural resources side. There were apparently 5 huge ships full of soybeans headed to China when China responded with tariffs on soybeans. Rather than pay a 25% tariff, the soybeans headed to Saudi Arabia. Now apparently Saudi doesn't really use soybeans. Why would they buy a ship full? To resell them to China. Longer term what will happen is China will switch to other countries to buy, and those other countries will buy from the US. Long term global prices may rise slightly and overall demand could drop a little but it should basically level out. Harder for China as they are generally selling finished products. Take TVs, the US market is huge. China is very strong in the sub $500 category but not a sole source. China made TVs will be more expensive than before so when a consumer goes to the store the Korean TV will now be cheaper than the Chinese one. Korean demand will go up and Chinese down. Could be that global demand shifts here to. I was just in a Q&A session with the head of economic data in Washington DC. The estimates for the value of technology the Chinese government steals from the US ranges from $200B a year to $600B a year. This is what the US side of the battle is over.

  3. #78
    Quote Originally Posted by Doug Dawson View Post
    If China decides to stop buying US Treasuries (government bonds) then the Treasury interest rate will go up to attract other investors. This has a cascading effects on other things. Who is going to put money into a marginally-earning account when (at least short-term) government bonds are a better deal. This affects you and you and you. Econ 101.
    Unless the Fed steps in and fills the buying void left by China.
    The Fed has done it before, and even now, they are the largest holder of Treasuries by a large margin. China is the largest foreign holder, with Japan #2.

    A significant drop in T30 yields (with the corresponding increase in coupon) would have a catastrophic effect on the Federal budget due to the cost of borrowing. Unless of course we returned to a budget surplus situation and no longer needed to deficit finance. Imagine that.

    As an aside, the manner in which the Fed buys debt issued by the Treasury is difficult to understand. Could you imagine meeting your own financial obligations by borrowing money from yourself when you're already in a deficit? It's really an oxymoron, at least to a simpleton like me. But yet it happens, and on an enormous scale.
    After the Great Recession, a lot of smart people thought this practice would lead to massive inflation and devaluation of the US dollar but it didn't. I've given up trying to understand it and have now decided that modern macroeconomics is basically sorcery.
    Edwin

  4. #79
    Yeah ,China is touchy about Tiawan. I guess they consider its success embarrassing. So they claim they own it.

  5. #80
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    Quote Originally Posted by Simon MacGowen View Post
    Aren't the tariffs meant to shift us back to the manufacturing economy (steel plants, auto plants, etc.)?!
    I think that there are some that are personally convinced that might be the end result, but suspect that most folks would agree that "that ship has sailed" for raw materials in particular. While manufacturing for industries such as automobiles has been doing ok in North America including the US (with "foreign" brands like BMW and others producing here, too), the kinds of capital expense necessary to reboot industries like steel wouldn't be very attractive at this point. We all live in the most global economy that's ever existed and tariffs don't just hurt the parties on either side of the argument, but hurt everyone at some level because there no longer are borders when it comes to makers and consumers for the most part. Tying this back into the original question, the proposed tariffs are going to have a major negative impact on the folks who product our tools, such as Shiraz, as well as the folks who buy them...the community we all belong to here. And it goes beyond that...this is going to hurt independent retailers, the trades and all the folks who buy goods and services produced by the tools that are going to cost more. IE...everybody. It's a vicious thing...
    --

    The most expensive tool is the one you buy "cheaply" and often...

  6. #81
    Quote Originally Posted by Victor Robinson View Post
    Maybe it's the cynic in me, but I imagine they'll see this as an opportunity to raise prices whether or not the tariffs affect them. Need to stay x% above the Asian machinery to maintain their brand value.
    Your not being a cynic, it's going to happen. In an open market, the domestic producer is already producing the total amount of product that he can at the price he can fetch. The foreign competitor is also presumed to be producing at equilibrium. When the foreign products are taxed it raises their price, thus lowering the units they sell. Potentially, the demand for domestic products will be somewhat higher, but the producer can't supply more units, thus the price adjusts to a new, higher equilibrium point for both domestic and foreign producers, with a decrease in overall units sold but with a higher percentage going to domestic producers. Incidentally, the domestic producer makes more profit.

  7. #82
    I wonder if this will cause the Chinese to "dump" excess machines on the Canadian market at low prices just to move them out of their plants. Fingers crossed.

  8. #83
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    Quote Originally Posted by Joe Jensen View Post
    The estimates for the value of technology the Chinese government steals from the US ranges from $200B a year to $600B a year. This is what the US side of the battle is over.
    If that is true, then it should be dealt with.
    It is hard to see how a duty on aluminum from Canada or table saws is going help.

  9. #84
    Quote Originally Posted by Wade Lippman View Post
    If that is true, then it should be dealt with.
    It is hard to see how a duty on aluminum from Canada or table saws is going help.
    It is called collateral damage.

    From Euro to Canada to Japan and even South Korea, the tariffs and trade wars may make little sense to them, but when the two largest economies in the world collide, everyone will suffer. Who knows? May be this is all brinkmanship, or may be this is the beginning of a new global model in which protectionism is the norm for everybody.

    Simon

  10. #85
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    I can't see the logic but then politicians usually have a simple view on this sort of stuff. In a nutshell China produces the vast quantity of the electronics the US and the ROW buys and there is no way on God's earth that that production capacity can be moved. That being the case either the consumer cops the tarriff bill or he goes on strike and refuses to buy. What won't happen is the production being moved to the US or any other country, it is just not going to happen and my bet would be that the retail sales might dip but they will return to normal after the initial sticker shock wears off so the citizen consumer copped it in the neck.

    Australia is going through a similar thing at the moment, one of our wealthier citizens who owns a big chunk of retail sales in this country has been lobbying the govt to put a 10% tax on every single item bought from overseas and it comes onto effect this month. Amazon have said they won't play ball and told Australian consumers that we can't buy from their US website which while inconvenient is hardly going to mean much as there are ways around that embargo. What it does mean is that in a small way the US suffers because one greedy individual thinks he can increase his wealth by lobbying the govt.
    Chris

    Everything I like is either illegal, immoral or fattening

  11. #86
    Quote Originally Posted by andrew whicker View Post
    To be fair to all of us, either this is the most boring topic of all time (cheap crappy Chinese tools go up in price) or a very interesting topic that impacts all of us (new tariffs that you might encounter in making an income, whether running a business or keeping your job).

    It will probably stray into the 'more interesting' category.
    Boring is accurate. Take the real debate out, and the discussion about whole versus 2% milk sounds positively riveting.

  12. #87
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    The meeting in Washington was with Kevin Hassett, Chairman of the Council of Economic Advisors. I did not know one thing he spoke about. He said that during the cold war to fight the spread of communism and Russia's influence on developing countries the US made it's markets very open with super low tariffs. China for example set 20% tariffs for US imports and we agreed to 2%. He said most trade deals were crafted for that purpose. Now that countries like China are first world and have economies that are plenty strong, imbalanced trades deals are no longer an important tool to spread capitalism.

  13. #88
    Quote Originally Posted by Joe Jensen View Post
    You have to think globally. On the natural resources side. There were apparently 5 huge ships full of soybeans headed to China when China responded with tariffs on soybeans. Rather than pay a 25% tariff, the soybeans headed to Saudi Arabia. Now apparently Saudi doesn't really use soybeans. Why would they buy a ship full? To resell them to China. Longer term what will happen is China will switch to other countries to buy, and those other countries will buy from the US .
    This is so beautiful...on paper. It worked seamlessly as if soybeans were sold by the US govt to Saudi Arabia govt by contract and not a business transaction between two private businesses, one in US and in Saudi Arabia. In the scenario you painted, some mystery businessman would buy million metric tons of soyabeans from US farmers and then resell them to China which would take them because China had no alternatives or would like to help the US farmers during a trade war with America (one in three rows of soyabeans ends up in China currently)!

    Brazil, not the US, is the largest exporter of soyabeans in the world and China does have an option if it decided to shut out a lot, not all, of imports of beans from America.

    We can not look at tariffs or trade wars in one dimension. China is not a sitting duck, waiting to be shot just because you think your tariffs will and theirs won't.

    I understand the trade deficits with China need to be fixed, but I don't understand how applying the same attack strategy on the allies would help the cause when the focus should be soley on China.

    Simon

  14. #89
    Quote Originally Posted by Martin Wasner View Post
    Boring is accurate. Take the real debate out, and the discussion about whole versus 2% milk sounds positively riveting.
    Boring? I bet every Forum owner would wish that every thread would go boring like this...running 6 pages long on the first day it is created.

    Nothing is boring when people go back and forth on a topic with an inquring mind and in a civilized manner.

    Simon

  15. #90
    China has become a super manufacture. Their raw materials is their labour force. They show up at the auctioning block out bid everybody for scrap metal. All the containers that are shipped here with product get almost a free ride back. They take back our garbage and turn it into gold.

    The US buys raw aluminum about 40% from Canada. Canada ships quite a bit to China for their manufacturing and then it shipped to the US again as product.

    The US manufactures used Mexico for close production in the automotive and manufacturing sector’s to cut rates. To make consumers happy happy happy.

    The US manufacturers used Canada because of free trade agreement 20 some odd years ago. Canada was considered somewhat of an equal to the US with a very open border. (This changed shortly after 911.) product could still be bought from Canada at a 25% discount. Still to this day Canadian workers (with the same skill set) work for less money than the average American demands. Most Canadians pay more taxes which ends up leaving them with even less free spending money. Canadians also have a harsher climate which taxes each individual More then the average American and Mexican.

    The state of California has a higher population than all of Canada combined.

    The guy at the top is trying to find a way to tax his American people.

    He could’ve just raised sales tax to 13% which Ontarians pay on everything purchased. But, this would make him the bad guy. He’s making the manufactures pay the tax/tariff.

    I guarantee he will not put these same restrictions on national defence. Because I know otherwise. The defence department is still allowed to purchase without Tariffs.

    In the end, you’ll be taking your old Table-saw, Lathe, drill press... to the local machine shop for repair which they’re going to gouge you an extra 25%. Or you learn how to fix things yourself before putting it in the scrap pile for you to re-purchase at 400% more.
    Last edited by Keith Outten; 06-21-2018 at 7:53 AM.

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