Will Trump''s tariffs come from the U.S. or China?

Is Trump collecting tariffs from the U.S. or from China?

As soon as Trump takes office, he will raise tariffs. Exactly who pays this tax has become a big question, and people are arguing about it. Some believe that this income actually comes from the wallets of U.S. residents. For example, if the unit price of a product exported to the United States is $70, the retail price in the United States would have been $80, and the retail price would have risen after a high tariff of $20$100, the extra $20 spent by American residents on this product, isn't that the source of the $20 tariff? Isn't the imposition of customs duties the same as the taxation of residents of the country? At first glance it makes perfect sense. Another view is that it is not true, Chinese businessmen sell goods to the United States and get 70 dollars, and then take out 20 dollars from 70 dollars to pay customs duties, which 20The US dollar tariff is clearly paid by Chinese businessmen! This is strange, even though the US government only received $20, but the wallets of American residents and Chinese businessmen were missing $40, and it is not clear who got the $20 from. At this time, a friend stood up and said: In terms of state-to-country transactions, after China sells this commodity to the United States with tariffs, the currency flowing from the United States to China is only 50 US dollars, or in other words, the price at which China sells this commodity to the United States is 50 US dollars instead of 70 US dollars. The Chinese merchant did not sell for 70 dollars at all, but for 50 dollars, so that 20U.S. dollar tariffs are a transfer of income within the U.S. and have nothing to do with China, and they are taken from the wallets of U.S. residents. It also seems to make sense. However, my view is completely different, I believe that the CCP regime and businessmen collude to use the method of lowering their own labor costs to occupy the international market and obtain more foreign exchange earnings and profits, which will lead other countries to increase tariffs in order to protect their own economies, and as a result, China's income will decrease, which will inevitably further reduce labor costs, so that the $20 tariff is actually paid by Chinese residents. This view requires a rigorous series of reasoning to illustrate. Below I divide 1, 2, 3, 4... Point by point, point by point, if one of them is wrong, my point of view will not be self-justifying, and I will admit my mistake. But I believe that as soon as my reasoning comes out, the above controversy can be over.

The first point is fair international trade, which is a trade with a basic balance between imports and exports.

In a petty commodity economy, a family produces and sells its products in the market, and the income from it can of course buy back goods of equal value from the market in return for the efforts of family members. Under the premise that prices are regulated by the market, this is a fair commodity trade in which all households in the small commodity economy can benefit. The head of the family could have received a fair share of the income and shared the rest among others. But he wants to take more of his income and save it, and save more and more without buying the goods in the market, reducing the income of the rest of the family, while at the same time keeping the price below the fair market price of buying and selling, and competing with other producers of goods. As a result, the total value of the goods sold by the family far exceeds the total value of the goods purchased, and this unfair trade in goods originates from the unfair distribution of income within the family, which not only harms the interests of other members of the family, but also causes economic harm to other families, and the only beneficiary is the head of the family. The same is true of fair international trade, China exports a large number of goods to the world, which is a huge contribution made by the Chinese people to the international community, they should also get the same return from the international community, they and investors together with the fair distribution of income (here does not refer to the equal distribution of income, I have another article to discuss fair distribution), should have enough ability to pay to buy goods of the same value to the world, this is for the Chinese and the Americans... All are fair and profitable trade.

Second, the root cause of China's persistently large trade surplus is the extremely unfair distribution of domestic income.

The injustice of China's income distribution is obvious to all, and there is no need to talk about it. Under the premise of fair income distribution, Chinese per capita productivity is lower and labor costs are relatively low, which is reasonable, but this does not affect the trade balance. Germany has high labour costs, but it is also a large trade surplus because its high labour costs are still too low relative to its high productivity per capita, and income distribution remains unfair. The trade balance can only be achieved by further raising the cost of labor in Germany, increasing the purchasing power of the population and raising the prices of export products. Countries with large differences in productivity and labor costs can achieve trade balance as long as income is fairly distributed, which is beneficial to the economic development of those who come before and after. China's economic opening up and political dictatorship system after reform and opening up have enabled the government and businessmen to collude with interest groups to use their powerful economic and political power to squeeze ordinary laborers more severely than any other system, and to occupy a larger international market with seriously unfair low labor costs and low prices, with the aim of obtaining ultra-high profits, and politically they are even more vainly trying to defeat democracies and dominate the world. Suppose a car produced in China can be sold for $100,000 in the international market, but it has to be reduced to $70,000, and it is willing not to pay for the $30,000 and deduct the employee's due 3Thousands of dollars of hard-earned money, but interest groups can make greater profits from larger sales. A trade balance does not mean that income distribution has been equitable, but an unfair income distribution will inevitably manifest itself as a trade imbalance. If a country's labor costs are unfairly too low, it is not only detrimental to the interests of its own workers and the balanced development of its economy, but also harms the interests of other countries' workers and economic stability through the pressure of abnormal market competition. Therefore, labor organizations in various countries must not only care about the rights and interests of their own workers, but also organize themselves to care about the interests of workers in all countries and exert pressure on the governments of countries like China.

Third, the market-adjusted exchange rate is a mechanism for restoring the trade balance and a mechanism for correcting the unfair distribution of income among trading countries.

When a country, such as China, implements a very unfair income distribution, on the one hand, the purchasing power of residents is limited by too low labor costs, and the consumption power is too low; On the other hand, it has made export products cheap and competitive to occupy the international market. With the combined efforts of these two aspects, the country will continue to have a trade surplus and hoard a large amount of international currency, and the exchange rate of the country's currency will rise under the effect of international market regulation. The rise in the renminbi exchange rate means raising the income of Chinese residents and China to a fair international level, giving them greater purchasing power over imported products, raising the wages of China's wage earners in international currency, and at the same time raising the labor cost of export products and weakening the momentum of cheap export of Chinese products. Obviously, the effect of exchange rate adjustment is to adjust the trade imbalance on the one hand, and to counter the unfair income distribution of countries with persistent trade surpluses, such as China, on the other.

Fourth, the international community's demands for the protection of labor rights, exchange rate liberalization, and basic trade balance conflict with the interests of the CCP regime and the interests of the government-business collusion interest groups.

Some articles have pointed out that the ultimate purpose of the WTO is to benefit the broad masses of workers, not trade liberalization. For the benefit of workers in all trading countries, it is necessary that all countries have a fair distribution of income in order to have a chance to achieve trade balance and protect the interests of the people of all countries. However, this is in conflict with the interests of Chinese officials and businessmen, and practice has proved that this will not work in China. Although the international community and the Chinese people have repeatedly called for improving China's income distribution, raising labor costs, and improving people's income and welfare, they have ultimately failed, and the gap between the rich and the poor between the government and the people, between capital and labor, is still widening, and it is one of the most unequally distributed countries in the world. In the face of the counter-effect of the currency exchange rate on the unfair distribution of income, China has done the opposite, manipulating the exchange rate and not allowing the renminbi to appreciate even if the trade surplus continues to be large, preventing the appreciation of the income and purchasing power of Chinese workers in international currencies, and causing damage to the globalized economy.

Fifth, tariffs are the last line of defense to prevent China from harming the interests of other countries through unfair and low-cost competition.

More and more democracies have come to realize that it is impossible for China to improve the injustice of domestic income distribution without the game between labor and capital in elected parliaments, the protection of labor rights and interests through legislation, especially when the government and business are linked together, and with such huge political and economic power and interests. The second line of defense to increase the international purchasing power of Chinese residents holding the renminbi has also failed, because raising their real incomes makes cheap labor no longer cheap in the international market, directly conflicting with the interests of Chinese politics and business. In 2018, Trump launched a trade war by signing an agreement with China to force China to change its deeply distorted income distribution relationship by raising tariffs and coercing China to buy American goods. China's consistent practice of saying yes but not doing anything, and even going the other way to increase the injustice of income distribution, has continued to deteriorate unbalanced trade relations, and accordingly, tariffs on exports to the United States have been rising. In the face of rising tariffs, China's political and business interests have a very simple response: to keep their international market share and profit margins unchanged, then to further reduce labor costs. To use the example at the beginning of the article, suppose that the U.S. raises the tariff on that item from $20 to $30, and the actual price of selling to the U.S. drops from $50 to $40, assuming that the capital would have made a profitIf $10 remains the same, then the wages earned by the labor will fall from $40 to $30, which is 10% of the U.S. tariffsThe loss of dollars was thus transferred to the laborers. In reality, we see that the wages of Chinese workers are constantly decreasing. On the other hand, it is the manipulation of the exchange rate, which does not hesitate to reduce the RMB exchange rate to reduce the purchasing power of workers for international products, reduce the labor cost of international pricing, and participate in international market competition at lower prices. Trump is about to take office, and China is stepping up its response. Since the start of the trade war, China's trade surplus has continued unabated. The complacent Chinese interest groups and the little pink who don't know the truth see this surplus increase in the suppression of labor costs as an advantage of the system.

Sixth, the United States and other countries will inevitably further increase tariffs to reap the profits of Chinese companies, and the result will be decoupling from China's economy.

The international community and currency exchange rates have unsuccessfully forced China to raise people's incomes to improve international trade relations, and the agreement requires you to buy American products, you default, and you have initially raised tariffs, and you have passed the cost on to the Chinese people. As long as there is room for labor to be squeezed, the U.S.-China trade relationship will continue to deteriorate. But will the United States wait for Congress to stop there? Of course not. The extent to which China can reduce labor costs is limited, and the minimum wage income for enterprises to recruit workers and maintain the basic life or life of workers must always be guaranteed. Otherwise, people will lie flat. In this way, Trump can only fight to the death and raise the tariffs to 60% or 100%. %..., until you can no longer shift tariffs to workers, siphon out corporate profits, drain them, shut down businesses, flee capital, and decouple the U.S.-China economy. You will say that Trump is poisonous enough. But you have to figure out where the source of the poison is, think about it, you know. Trump had no choice but to do so, and if China had actively or passively cooperated to maintain the basic balance of international trade, and had not used various means to damage and knock down the United States, Trump would not have come to this point.

The seventh point is that foreign capital has fled China, and the trade war is one reason, but not the root cause.

I have pointed out again and again that fair income distribution, the maximum benefit of the whole society from the economy, and economic equilibrium are a trinity, and that there is no possibility of unfair income distribution and balanced economic growth, and the difference is only in the degree of economic imbalance. Due to the serious injustice in China's income distribution, China's reform and opening up has embarked on a path of high investment and low consumption, and the economy has grown at a high speed. At the inflection point, there will be all kinds of phenomena that blur people's perception of this essence. Low labor costs and low consumption attract a large amount of foreign capital into China, becoming an important part of high investment and low consumption, the overcapacity at the inflection point, so that its investment opportunities disappear on a large scale, and it is impossible to compete with Chinese enterprises with more vicious decline in labor costs after the inflection point, which is the decisive reason for the outflow of domestic and foreign capital in China. At a time when the income distribution in the second largest economy is unfairly distributed, triggering the global economic depression, there will inevitably be an outflow of foreign capital due to the trade war, which is only a secondary causal relationship. This process will continue until all foreign capital flows out, Chinese companies go bankrupt, the market shrinks dramatically, and the international economy decouples from China. At present, China's low labor costs and large market are still remembered, and foreign capital that stays in China and wants to make another profit will eventually understand this simple truth.

The eighth point is that Trump's tariffs have led to a limited increase in domestic prices in the United States, which is a return to prices under fair trade balance conditions, which is conducive to the equilibrium of the U.S. economy.

It has been reported that China's annual output of solar panels is 1.9 times that of the global market demand (an example of overinvestment and low consumption), and in the face of such a huge overcapacity, it will inevitably dump and export excess to the world at ultra-low prices. The formation of ultra-low prices depends on the reduction of labor costs, including state subsidies, and also the siphoning of residents' hard-earned income to fill the gap in capital profits after low-level dumping. There are many, many similar industries in China, such as steel, automobiles... This kind of dumping not only seriously harms the interests of Chinese civilians, but also deals a heavy blow to the production and employment of relevant industries in the United States and other countries, and harms others as well as their own people. If China's income distribution were nearly equitable, there would be no unbalanced high-speed economic growth with high investment and low consumption, and there would be no serious overcapacity, and a basic balance in international trade would be achieved. Under this premise, the price of China's export commodities, which reflects the contribution of Chinese workers to the world, will be much higher than the vicious dumping price, and the retail price in the United States will be much higher than the retail price under the vicious dumping, which is a fair and reasonable price. I can't say that the price of goods after Trump's tariffs will return to a fair state, but the direction is reasonable, and it will protect the US economy and employment. The extra money spent by US residents for this is not a source of income for Trump's tariffs. Trump's tariffs are based on lower labor costs in China, and finally lower profits from investments in China.

Long before the start of the US-China trade war, I put forward the idea of imposing punitive trade surplus taxes on countries with persistently large trade surpluses to maintain the basic balance of international trade. However, I suggest that this tax should not be collected by countries with trade deficits, but by relevant international trade organizations, and entrusted to the customs of each country to collect it on their behalf. The advantage of this is that, in addition to reducing the contribution of countries to participate in the WTO, it is more important to make the trade surplus countries, especially the residents of that country, more clearly understand that the tax is their own income, and the benefits lost due to the unfair trade surplus are in vain. After reading the above 8 interlocking and logical points, I don't know if there are still different opinions, come out and debate it, but it is better to have an organized and in-depth discussion, rather than some simple conclusions that pat your head.