1) Those who've followed for me a bit or are readers of my blog are probably aware I'm fully in favor of free trade.
I'm also in favor of President Trump's use of tariffs as a negotiating tool.
I'm also in favor of President Trump's use of tariffs as a negotiating tool.
2) Imports, of themselves, are not "bad" and can be highly additive to economic growth.
At it's most basic level an import is no more than a transaction. It happens to occur between a buyer and seller who reside in differing countries.
At it's most basic level an import is no more than a transaction. It happens to occur between a buyer and seller who reside in differing countries.
3) The transaction occurs for a reason.
Consumers - companies, individuals & governments (theoretically) - look about for the best value for their money.
This doesn't necessarily mean the cheapest price. Quality can be a huge factor as well.
Consumers - companies, individuals & governments (theoretically) - look about for the best value for their money.
This doesn't necessarily mean the cheapest price. Quality can be a huge factor as well.
4) I got a few critical comments on an recent tweet.
Being criticized was this:
"Keeping all else static - lower imports directly raises GDP."
Being ignored was this:
Goldberg is making current assumption that domestic production will fall.
Being criticized was this:
"Keeping all else static - lower imports directly raises GDP."
Being ignored was this:
Goldberg is making current assumption that domestic production will fall.
5) Of course things won't stay static in a real-world complex economy.
When trade deficits fall foreign investment also falls.
Capital flows shift. Currency rates adjust.
Central Banks can - and do - distort markets.
The number of variables are simply staggering.
When trade deficits fall foreign investment also falls.
Capital flows shift. Currency rates adjust.
Central Banks can - and do - distort markets.
The number of variables are simply staggering.
6) But all of this ignores the broader issue at play.
Goldberg is attempting to use textbook economic theory as a means to discredit what President Trump is doing.
Goldberg is focusing on short-term pain at the expense of long-term gain.
This is immensely misguided.
Goldberg is attempting to use textbook economic theory as a means to discredit what President Trump is doing.
Goldberg is focusing on short-term pain at the expense of long-term gain.
This is immensely misguided.
7) Goldberg's right about one thing.
Tariffs for the sake of tariffs ARE bad economic policy.
But so are misguided and unfair trade practices.
Tariffs for the sake of tariffs ARE bad economic policy.
But so are misguided and unfair trade practices.
8) I’m NOT in favor of tariffs as an ECONOMIC policy.
Sustained tariffs reduce economic activity for all. They are a hindrance to free trade.
But in the appropriate circumstances - in the right hands - they can be an effective economic club.
Sustained tariffs reduce economic activity for all. They are a hindrance to free trade.
But in the appropriate circumstances - in the right hands - they can be an effective economic club.
9) Having sustained tariffs has never been President Trump's goal. As he noted back in March:
"Ultimately, what’s going to happen is they’ll end up not charging a tax and we won’t have a tax. And that becomes free trade."
whitehouse.gov/briefings-stat…
"Ultimately, what’s going to happen is they’ll end up not charging a tax and we won’t have a tax. And that becomes free trade."
whitehouse.gov/briefings-stat…
10) This is about negotiation.
Using tariffs as a negotiating tool in the short-term.
Imports & trade balances of themselves are NOT the problem.
Heavy regulations, tax imbalances & Multi-lateral Trade Agreements ARE the problem.
@realDonaldTrump knows this.
Using tariffs as a negotiating tool in the short-term.
Imports & trade balances of themselves are NOT the problem.
Heavy regulations, tax imbalances & Multi-lateral Trade Agreements ARE the problem.
@realDonaldTrump knows this.
11) President Trump started with regulation.
Hundreds of regulations were killed during President Trump's first year in office.
whitehouse.gov/briefings-stat…
Hundreds of regulations were killed during President Trump's first year in office.
whitehouse.gov/briefings-stat…
13) The results were immediate. As I noted some time ago:
If you tell me we’re going to experience lower taxes and reduced regulation, I’ll tell you the economy will improve, GDP will rise, the jobless rate will fall and the stock market will move up.
themarketswork.com/2018/01/18/tax…
If you tell me we’re going to experience lower taxes and reduced regulation, I’ll tell you the economy will improve, GDP will rise, the jobless rate will fall and the stock market will move up.
themarketswork.com/2018/01/18/tax…
14) Now President Trump is focused on trade.
NAFTA is on the chopping block and furious negotiations regarding unfair trade practices are going on behind the scenes.
NAFTA is on the chopping block and furious negotiations regarding unfair trade practices are going on behind the scenes.
15) Trade deficits aren't inherently bad.
As long as they result from an even playing field.
But when they result from uneven regulation, differing tax treatment and bad multi-party trade agreements that create manufacturing imbalances - problems arise.
As long as they result from an even playing field.
But when they result from uneven regulation, differing tax treatment and bad multi-party trade agreements that create manufacturing imbalances - problems arise.
16) Multi-lateral trade agreements like NAFTA, by their very definition, are not free trade.
They are Multi-Party Trade Agreements.
A true free trade agreement should be on one page and simply contain two words: Free Trade
They are Multi-Party Trade Agreements.
A true free trade agreement should be on one page and simply contain two words: Free Trade
17) Admittedly, a pure free trade agreement is politically hard to come by.
Issues of corporate tax rates, governmental regulations, etc. intrude their way into practical application.
If we must enter into trade agreements, they should be done on a bi-lateral negotiated basis.
Issues of corporate tax rates, governmental regulations, etc. intrude their way into practical application.
If we must enter into trade agreements, they should be done on a bi-lateral negotiated basis.
18) Some misguidedly say we don't need to worry about trade agreements.
We don't need to worry about manufacturing jobs.
What's done is done.
We don't need to worry about manufacturing jobs.
What's done is done.
19) Obama on manufacturing:
"Some of those jobs of the past are just not going to come back."
"When somebody says [Trump]…that he’s going to bring all these jobs back. Well how exactly are you going to do that? What are you going to do? There’s no answer to it."
"Some of those jobs of the past are just not going to come back."
"When somebody says [Trump]…that he’s going to bring all these jobs back. Well how exactly are you going to do that? What are you going to do? There’s no answer to it."
20) There is an answer & President Trump has it:
CNBC: Over the past year through July, U.S. manufacturing added 327,000 jobs, the most of any 12-month period since April 1995.
cnbc.com/2018/08/03/job…
CNBC: Over the past year through July, U.S. manufacturing added 327,000 jobs, the most of any 12-month period since April 1995.
cnbc.com/2018/08/03/job…
21) Capital spending increased by 39% in Q1 '18 - the fastest growth in seven years.
Expect another good number for Q2 '18 after full reporting has completed.
taxfoundation.org/business-inves…
Expect another good number for Q2 '18 after full reporting has completed.
taxfoundation.org/business-inves…
22) Business only make discretionary capital outlays with the expectation of achieving a superior return on their investment.
They are literally betting on economic improvement & GDP growth.
They are literally betting on economic improvement & GDP growth.
23) Now, contrast Goldberg's doom & gloom over tariffs with actual economic numbers and performance of the financial markets.
24) "The economy is firing on all cylinders"
25) Markets are forward looking.
They price in ALL available information.
I’m all but certain the markets expect President Trump’s tariff’s will be short-lived.
They price in ALL available information.
I’m all but certain the markets expect President Trump’s tariff’s will be short-lived.
26) If we listened to Goldberg, a long-standing problem would continue to be perpetually ignored.
But then, If we'd listened to Goldberg we'd have Hillary Clinton as President.
/End.
But then, If we'd listened to Goldberg we'd have Hillary Clinton as President.
/End.
Tariffs, Trade Negotiations & Better Trade Policies.
Enhanced article article version of thread.
themarketswork.com/2018/08/05/tar…
Enhanced article article version of thread.
themarketswork.com/2018/08/05/tar…
