If he can set 25% tariff on everything imported from China, what's stopping him from setting 2500% tariff on everything? Wouldn't that effectively and immediately stop all trade with China?
No because China will continue to devalue the Yuan like they have been, negating much of the tariff effect.
The only solution, and a much "simpler" one (because it does not involve myriad scrutiny of which products to apply tariffs to and how much, etc.) is devaluation of the dollar. We've been here before, where US domestic manufacturing faced pressures as dollar was too strong. The Plaza Accord [0] involved Germany and Japan taking measures to increase their currencies against the dollar (in some ways successfully in some ways not). But it did result in a few years of dollar devaluation.
A better way currently, given that there isn't the same coordination or appetite for China or others to allow their currencies to rise too much against the dollar (because they don't want to sacrifice their domestic industry) is for the federal reserve to bid for gold, at a much higher price. This will diminish the dollar and treasuries role as reserve and increase (which is already happening) gold's place as premier nuetral reserve asset (see global central banks declining purchasing of treasuries, increasing gold purchases, and decreasing $ fx reserves over the last few years).
The US can either run the global reserve currency or close its trade deficit. They cannot do both [1]. Weakening the dollar and bidding up gold will solve a lot of the trade imbalances affecting the world [2] as well as devalue the massive amounts of debt overhanging the US and world economies.
No. American companies would still be allowed to sell to China. The constitution offers pretty much absolute protection when it comes to export tariffs.
That isn't the heart of the issue. The issue is US products being produced in China and sold in the US. We import > 500 billion from China and export under 130 billion to China.
>We import > 500 billion from China and export under 130 billion to China.
It's not so simple as, "Hey, lets pocket 500B - 130B = $370B and put it in the bank or spend in what we want".
First of all, prices will increase, and production will move to other countries.
If you ban imports from other countries, many things will become unaffordable to many people, which creates knock on effects. PCs and Smartphones getting more expensive means fewer people will use them, which means a smaller market for software. People will have less money to spend on, say, restaurants. People living off the $130B of exports will be out of jobs and some will go on unemployment and social welfare. Others will be hired with lesser pay, so will buy less. There will be so many knock on effects beyond this. Tesla is down 4% just today based on new tariffs announced by China for the future.
We are already paying new subsidies to farmers, from taxpayer money that can used to, say, build super fast trains in the US like China has.
> Tesla is down 4% just today based on new tariffs announced by China for the future.
The tariff is scheduled to take effect Dec 15th. Tesla will be producing cars locally in China by then, or within 30 days of then. I believe Tesla China sales have already slowed in anticipation of the lower cost locally produced version.
If anything, Tesla stands to gain from increased import tariffs from US->China.
There are also a lot of U.S. citizens who make a living working in roles that are part of that china->U.S. supply chain. Lots of potential unforeseen consequences that I'm not qualified to assess. But if you had an ideological desire to, for example, roll back a half century of increasing globalization in an attempt to bring back the halcyon days of stable, high paying U.S. manufacturing jobs then you might in your private views be willing to accept a couple of decades of suffering to get there. Of course you'd also have to believe that restoring U.S. manufacturing would bring back those production jobs, and not just sell a lot of robots.
$500B exported on behalf of American companies from China
$130B exported to China
-----
$370B where does this go?
Most of it goes to American controlled companies. A small amount goes to Chinese labor.
> If he can set 25% tariff on everything imported from China, what's stopping him from setting 2500% tariff on everything?
(1) the absence of any statute granting him the authority to impose export tariffs, and
(2) the fact that any statute which did exist purporting to grant him such authority would be invalid under the Export Clause, which explicitly prohibits export taxes and duties.
OTOH, he could prohibit pretty much any trade he chose with China under the International Emergency Economic Powers Act (the main law under which Executive-declared sanctions are instituted.) He just can't tax exports.
The only solution, and a much "simpler" one (because it does not involve myriad scrutiny of which products to apply tariffs to and how much, etc.) is devaluation of the dollar. We've been here before, where US domestic manufacturing faced pressures as dollar was too strong. The Plaza Accord [0] involved Germany and Japan taking measures to increase their currencies against the dollar (in some ways successfully in some ways not). But it did result in a few years of dollar devaluation.
A better way currently, given that there isn't the same coordination or appetite for China or others to allow their currencies to rise too much against the dollar (because they don't want to sacrifice their domestic industry) is for the federal reserve to bid for gold, at a much higher price. This will diminish the dollar and treasuries role as reserve and increase (which is already happening) gold's place as premier nuetral reserve asset (see global central banks declining purchasing of treasuries, increasing gold purchases, and decreasing $ fx reserves over the last few years).
The US can either run the global reserve currency or close its trade deficit. They cannot do both [1]. Weakening the dollar and bidding up gold will solve a lot of the trade imbalances affecting the world [2] as well as devalue the massive amounts of debt overhanging the US and world economies.
[0] https://en.wikipedia.org/wiki/Plaza_Accord
[1] https://qz.com/1266044/why-does-the-us-run-a-trade-deficit-t...
[2] https://www.nytimes.com/2019/06/16/opinion/elizabeth-warren-...