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WSJ reports DJT action on tariffs and Fed's new forecast of slight uptick in 2025 inflation to 2.7% from 2.5%, on growth slowing to 1.7% in 2025. Fed's head Powell says- “That’s really due to the tariffs coming in,” Slowing inflation  “is probably delayed for the time being.” The tariff action is based on reciprocal tariffs, "we charge them what they charge us," and is based on the principle of fairness in world trade that was carelessly sacrificed by previous US administrations under Clinton, Bush and Obama. DJT and Trade Representative Lighthizer highlighted the issue of unfair trade and created a consensus around this issue for creating a level playing field with American action on tariffs that was accepted by the Biden led Democratic adminstration to rebuild American Manufacturing. What happened under previous presidents was ignominous for America and these administrations as they allowed the loss of whole industries first in lower technologies and then in advanced technologies as foreign countries used hidden subsidies. America's textbook economists at Ivy League universities and previous administrations used economic theory that had little connection with reality to allow shipping manufacturing overseas, destroying communities and towns with loss of jobs and public services across the US. ...

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Even China has not campaigned the way Canada, Mexico and British, American media have against DJT Tariffs because China knows it is basically about getting an even playing field when it is the only country with $1 trillion in trade in its favor in 2024, 12 times the Japanese high of $82 billion trade surplus in 2007. But why should China campaign when the American and British, German media are going to do the job for China? A simple quiz to K-12 would ask school children when is the last time a country has a $1 trillion trade surplus? Answer: Never. Greg Ip has written a few years back that the devastation of China outshoring of American factories and jobs was unlike the 1980's Japan trade invasion because of first China's size, second by the speed with which it happened at 10-14% Chinese GDP growth. There is a third Japan was an ally needing US for security and backed down, China's case is different it is challenging the US for control of the world economy and will fight this one over the long haul. Greg Ip of WSJ on the 53 countries asking to negotiate US Liberation Day April 2, 2025 Tariffs. These countries include Allies of the US in full support asking to negotiate Israel, Japan, Taiwan, South Korea, India Allies of the US in partial support asking to negotiate Britain Allies of the US not in full support asking to negotiate Germany, France Allies of the US in the past campaigning against the US, asking to negotiate Canada, Mexico Not Allies of the US, not in full support, not campaigning against the US China A look at his list tells one only one thing, mostly all trading partners except for the $146 billion exports of the US which represents exports to China are the exports that are at risk if things don't work out on tariffs. This is what the media today WSJ added this last week to the NYT, Wash. Post and the BBC, Guardian of UK, German media will not tell the reader.  The DJT Tariffs and Tariff negotiations are Lighthizer Tariff negotiations which won the fight with Japan in the 1980's over unfair trade and gaining a level playing field. Lighthizer as Deputy US Trade Representative conducted the tough negotiations with Japan. He was USTR in 2016-2020 and his Deputy Jamieson is now USTR in 2025       ...

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No less than the Editorial Board of the NYT says  Democrats have their heads in the sand when it comes to reflecting honestly about transgender -with the Cass Commission of Britain's NHS advising serious caution- and social issues. Lack of acceptance about the need for strong action on issues of trade that have hurt ordinary Americans with the destruction of manufacturing and the middle class. Some of this was done with Biden taking a stand on trade by keeping the DJT tariffs on China, and supporting US manufacturing. But this was not enough- stronger action was needed especially with strong tariffs action as the last resort needed to get Canada, Mexico and China to stop fentanyl flows to the US in 2025 and protect the middle and working class in the US in their neighborhoods.  Yet on immigration the NYT does not come flat out and say that opening up the border was the single biggest error of the Biden administration. And a failure to talk openly to the American people in a fireside chat reminiscent of FDR about Venezuela and Mexico. Part of the reason was a misconception about American power when it could be used to good purposes and has been in history. The Monroe doctrine of the 1820's asserted American right to prevent colonial powers returning to the American continent north and south. This was a good idea and helped this continent develop freely and independently. The US has a right to prevent migrant trafficking and fentanyl flows in its backyard in the American continent, including taking economic action, when it causes serious disruption leading to 7 million refugees and millions of migrants crossing borders. It also has a right to create an even playing field for trade, that not DJT alone but advisers with great experience, Robert Lighthizer, Deputy Trade Representative under Reagan- who negotiated with 1980's Japan on the same grounds as we do with China today- strongly advise the president to do.   ...

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This report in The South China Morning Post in Hong Kong, gives insights into the Chinese position in trade war with the U.S.  China has its own internal groups which support China being able to take a leadership role in world affairs. Xi Jinping made giving China a prominent role in the world a feature of his presidency. China  has this internal audience and its own sense that China's resurgence was won with hard work and cooperation, plus dedication of the Chinese people. In the past Japan and South Korea also used state subsidized industries, and subsidies to gain leadership in key business sectors involving high technology. China would see this state subsidies model as its own model of development. From this standpoint the U.S. demands on subsidies as unfair competition could be seen as changing a key part of its economic model.  Asking China to put everything in writing and show tangible proof of enforcement as the U.S. insisted in talks, was too much for the Chinese side. China said trust us to do this, and lift the tariffs based on our verbal assurances. The U.S. having seen decades of no progress on this point, wanted tangible proof before tariffs were lifted. Added to the demands on subsidies were the demands for no more of what the U.S. calls stealing of U.S. technology through forced transfer of technology by U.S. firms as a condition to operate in Chinese markets. With the U.S. lagging in 5G technology and Huawei ahead the issue resonates on the U.S. side. Add to this Mr. Trump's key voter base includes the former Democratic party supporting workers who have shifted to him because of trade agreements and policies of Clinton and Obama that hurt American workers through seemingly endless closure of manufacturing plants from Chinese competition.   ...

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President Trump pushes forward with a deal with Mexico so that it can be signed before the new Mexican administration of Lopez Obrador takes over. This means leaving Canada out and having a separate deal with Canada later on. Mr. Trump sees negative connotations in the term NAFTA and would like to call it the "United States - Mexico Trade Agreement." Terms for Canada to join the agreement would be tougher and the pressure on Canada to strike a separate deal was increased with Mr. Trump saying there could be tariffs on imported Canadian made cars. Mexico has accepted revisions to NAFTA that make it harder for Mexico to challenge U.S. trade penalties. Mr. Trump's negotiating position is based on his conviction that the eagerness of other nations to sell in the U.S. market gives the U.S. a lot of clout. Mr. Trump also faces pressure from within the Republican Party to show results not just by imposing tariffs and playing hardball on trade but to come up with new trade deals. Steps taken by Mr. Trump were to impose tariffs of 25% on imports of aluminium and steel, and 25% tariffs on a list of imports from China including solar panels. President Trump hopes to get support from Democrats by including provisions that support trade unions in Mexico and higher wages in Mexico. The provisions also require higher wage labor in the U.S. to build the required U.S. content and are designed to support American jobs and wages in the auto industry.   ...

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President Trump escalates the trade battle with China by increasing tariffs on $200 billion Chinese goods from 10% to 25%. The U.S. says China went back on its commitments in a 150 page agreement at the 11th hour or last minute, by deleting these commitments in all 7 chapters of this agreement. These are firm commitments sought by the U.S. in a number of areas of deep concern to the U.S. and the U.S. Trade Representative Mr. Lighthizer had already conveyed the determination of the U.S. to not relent on this. In the past China was seen to go back on its commitments and the U.S. side now wanted to ensure promises were kept. The U.S. concerns cover- theft of intellectual property and trade secrets, forced technology transfers, competition policy, access to financial services and currency manipulation.  The situation has been building up fro a decade with the Trump campaign honing in on this issue of China stealing U.S. jobs, and factory closures in the U.S., because of unfair trading practices. It also led to Mr. Trump's winning election campaign in the American midwestern states. With China seen as gaining an unfair technological advantage over the U.S., most recently over 5G telecom networks, the U.S. is not likely to back down. The U.S. is less dependent on trade with China. China is more dependent on the U.S. and a lot of manufacturing jobs in China are affected by the U.S. tariffs. This is why president Trump has decided to take a strong stand, including putting on tariffs on and additional $300 billion of Chinese goods.   ...

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Tariffs policy is part of a renegotiation the US is conducting with China similar to that started with Japan by Lighthizer in the Reagan era as Deputy Trade Representative. It does not in any way have anything to do with the tariffs of Herbert Hoover in 1930 that gave tariffs a bad meaning. This is because tariffs were reduced since Harry Truman's efforts in 1945 by 2017 to 1.47% on average on total imported goods into the US and world trade makes up 63% of world GDP, so large is world trade today. What are Lighthizer- DJT tariffs trying to accomplish? As with Japan in the 1960-1970's it is intended to reverse the trends for China in 2000-2017 that allowed it to game the world trading system to gain an unfair advantage by dumping specific products into the US destroying American manufacturing and communities dependent on it. The US tariffs on Chinese goods proposed in 2024 by former USTR Robert Lighthizer come at a time when US tariffs are in 2023 only about 2.2% of all imported goods, $33 billion on 2333 billion of imported goods. In 2023 the total import duties or tariffs as a percentage of US total imported goods is about 2%, with total imported goods into the US from European Union 3%. and with total imported goods into the US from China about 19% matching China's about 19% on American imports into China. By the time the first tariffs were taken up by the DJT administration in 2017 the total tariffs the US had imposed on imported goods were down to an all time low of 1.47% of imported goods value, $33 billion out of $2333 billion in total imported goods. Compared to the 29-40% under Hoover Act of 1930 raised to 60%.  Today world trade makes up 62% of world GDP, in 1930 it made up 9% of World GDP.  In 2023 the total import duties or tariffs as a percentage of US total imported goods is about 2%, with total imported goods into the US from European Union 3%. and with total imported goods into the US from China about 19% matching China's about 19% on American imports into China.   ...

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The U.S. trade agreement with Mexico is for 16 years, to provide business with a stable rules environment to operate in. It includes a clause for review after 6 years. The content made in the U.S. is increased to 70% from 62.5%. This has to be made by workers earning at least $16  an hour. Aluminium and steel going into the cars has to come from the U.S. helping push U.S. steel plant capacity utilization to 80%. Labor collective bargaining is strengthened in Mexico through new provisions, a provision supported by new Mexican socialist president Obrador. Free trade in agricultural products is maintained. $4.7 billion was added in help to U.S. farmers as aid for the effects of China's tariff retaliation. New rules are set for textiles, chemicals, and steel intensive products that set requirements to qualify for tariff free import into the U.S. This is intended to help bring more jobs and investment in these industries in the U.S.     ...

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This editorial in the WSJ argues against Trade Representative Lighthizer's move to increase the percentage of North American content in a vehicle so that it creates more jobs. Currently Nafta rules require 62.5% of a duty free vehicle be made in North America. Lighthizer wants to lower the content coming from Asia or Europe. This is not favored by Canada and Mexico and it makes Mexico less competitive than it is now.

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Economist Paul Krugman points out the risks of a trade war in the tariffs announced for steel and aluminium by president Trump. Yet he accepts that he advocated stronger action on China's currency in 2009-2010 when the U.S. economy was weaker. In the past on the TPP agreement proposed by president Obama, Krugman said that it would have an insignificant impact as most of the gains on trade were already made. Here Krugman is critical of the language used by president Trump about trade wars being "easy."  This is taken out of context though as president Trump is saying that it is easy in the context of a country enjoying a $100 billion surplus with the U.S., because that country is going to have incentives to maintain a good trading relationship with the U.S. Essentially this means that the steel industry in the U.S. benefits. China also benefits as it closes many of the older steel plants that led to overproduction. This would reduce overcapacity in China's steel industry, a problem China's economic planners see as a priority. China already is making the shift to higher technology products and this process will be accelerated, as it puts less emphasis on steel and metals as it did in its earlier stage of development. As a result contrary to textbook economics this has the potential to be a win-win solution for the U.S. and China in the long run. So little was done under the Bush and Obama administrations to manage trading relationships with other countries so that the interests of small communities across the U.S. were protected from unfair trade- that Reagan administration trade expert Robert Lighthizer took up the cause of the U.S.,workers in these communities. Surveys showed U.S. public opinion also had shifted among educated, professionals and middle class on this issue by 2015, against unfair trade that hurt U.S. interests. Robert Lighthizer is now the Trade Representative for the U.S. in the Trump administration. Reports in the WSJ about the discussion within the Trump economic council, show Gary Cohn favored not imposing the tariffs on steel and aluminum. Lighthizer advocated the tariffs and was able to convince the president.  For Trump this presents a win-win situation, as a mild response by China -and other trading nations that have enjoyed a favorable situation in the past -with its huge surplus and favorable trading relationship with the U.S. would present a win for the president. Economist Krugman accepts this when he says tariffs in the current context of the trading field- that is more favorable to other countries- are not such a big deal, only the use of such policy that is likely to endanger world trade.  As in much of the debate that takes place this adds to the headlines today yet provides delayed and limited relief to communities across the U.S. devastated by world trade as documented by experts who studied trade patterns and their effect on regions across the U.S.  As the WSJ points out in one report the trade deficit itself may continue to grow under president Trump because of other factors. The U.S. dollar surged 8% during the last 2 years of the Obama administration with the economic recovery underway. With Trump's election win the dollar surged another 3%. This may play a bigger role in the direction of the trade deficit than the new steel tariffs announced by president Trump. Workers and unions matter. As TPP pushed by Democratic party president Obama was opposed by the unions, and by the auto industry (workers and auto companies) in the midwestern states which suffered a hollowing out in the last decade. A WSJ survey after the election showed Clinton received 56% support from union workers in 2018 compared to 65% for president Obama in the 2012 election. Some of that erosion in support may come from Obama's TPP stand fervently opposed by the unions and workers in the auto industry. A similar situation took place in Ontario with hollowing out of the auto industry in this large industrial state in Canada and led to the rejection of the Conservative government and election of the Liberal Party under Justin Trudeau. This lesson is so far lost in the Democratic Party's debate.     ...

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In his second part of the series on Capitalism and Globalization Schieritz says Trump's arguments have backing, and goes back to the studies done by David Autor of MIT on the adverse impact of free trade on communities across the U.S.. Lyrarc has covered this issue since 2006, and the reality is that this issue was brought up long before the Autor study gained prominence. On Nov. 12, 2010 Robert Lighthizer, Deputy Trade Representative under U.S. president Reagan wrote an op-ed in the NYT titled "Throwing Free Trade Overboard," that made a strident and strong case for what Trump says 5 years later, and from no less than a top trade official under Repubican Reagan.Trump comes late to this in 2015 when it was already amply clear what was happening. It is not so much Trump having discerned this, than others who should have paid attention, including Lew and leaders in both parties, and the business community,  who for too long ignored it. Or as Hilsenrath in a recent WSJ report says, simply said we have seen this before with Japan's entry into the American market, not realizing the speed and widespread impact of the changes in trade with China, that are unprecedented in history- evident just from the great speed of urbanization and manufacturing work force growth in China, policy rapidly impacting vulnerable communities across the U.S. The corrective course has to be credible which is why it has to come from a a reawakening among leaders such as May, Merkel and Clinton, who are keen students of change, and capable of designing and executing a corrective course of action, and winning the popular support and patience needed to stay the course which could run for most of the next decade. It would also provide leadership and show the way for societies in Brazil, China, India and other countries facing similar problems.     ...

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This analysis in the South China Morning Post shows that some of the nuclear options China has in a trade war with the U.S. are not as effective as they appear. Selling off China's huge Treasury holdings would lead to a situation where there are no buyers on the other side. It says private sector bond buyers would run a mile, and the lack of buyers, actions by the U.S. government freezing these assets could render them effectively worthless. The bond yields would jump but only for a short period as the Federal Reserve would step in to buy bonds, and yields would stabilize with the actions of central banks of U.S., Europe and Japan. A dent in the dollar would only make Chinese goods more costly in the U.S. exactly what U.S. tariffs are trying to achieve. A 10% devaluation of the yuan would have the effect of creating expectation of further devaluation, and lead to capital outflows from China on a large scale. A small devaluation in 2015 led to a large outflow. This would lead to a significant loss in foreign exchange reserves for China.  In this way China's deterrent would be less effective than it appears. ...