Thread by @TheLastRefuge2

🤔If China doesn't pay the tariffs, then why does China attempt to evade tariffs through transnational shipping?

2) Of course China (or EU, or anyone else) pays the tariffs. That's how the process works.

If you want to deliver $1 million in exported goods with a 25% tariff, you pay $250,000 as a U.S. duty.

YOU, the exporter, pay the duty upon arrival at port.

3) The question accurately framed then becomes: does the exporter then pass on that additional cost to the importer (the U.S. company)?

Right now, the answer is no. China is not transferring the vast majority of the tariff cost to the arrival price of the product.

4) If the arrival price did increase, then yes it is possible that importer (distributing the product) may pass along the price increase to the wholesaler or ultimately retail consumer.

But that's not happening.

5) Fox News (Goldman Sachs) graphic actually proves that point.

Notice they use an *index. Not an actual price % increase. But regardless, the graphic shows a 103% index on tariff goods. Or in simpler terms a 2% increase in price.

[*On indexes 101 is even]

6) Steel (25%) and Aluminum (10%) tariffs have been in place since 2017. 25% tariffs on $250 billion in Chinese imported goods has been in place since June 2018 (over a year).

Yet the prices on those specific tariff goods has only gone up in the USA by 2% net upon arrival.

7) Overall U.S. inflation (consumer price index) is 1.5%

The tariff goods are 2% realized, and non tariff goods are defationary (actually lower prices) by approximately 1%. [We are also importing deflation]

8) The difference between 25% tariff being paid by the exporter (china), and only 2% increase in price felt by the importer (U.S.) is the amount being offset by the exporter (China).

In this example China is paying a 25% tariff and absorbing 23% to keep prices low.

9) So you can clearly see that China is paying the tariff, AND not passing that along to the importer.

Why and How would they do this?...

10) The Chinese government absorbs the tariff in two ways.

First, by directly subsidizing the industry affected by the tariff. The CCP or Bank of China literally pays or underwrites the export cost to the corporation.

11) The second way is by devaluing their currency... which makes their stuff cheaper when pegged against the Yuan.

Dollars, with higher value, buy more stuff backed by Yuan.

It costs the importer in the U.S. less dollars to buy the same amount of stuff from China.

12) Devaluing local currency, which naturally inflates the value of the dollar, is a way for export dependent nations to offset tariffs and keep prices static.

Note: The EU is now doing the same thing; for the same reason.

13) The trade is done in dollars, therefore the same dollars buy more product. It's not difficult to see.

However, as an outcome of the devaluing, the non-tariff exported product also costs less. It takes less dollars to buy the non tariff goods also.

14) The import of non tariff goods at lower prices, due to a stronger dollar, is how we are importing deflation.

As long as there is a trade deficit with the country doing the devaluation, we will import deflation on non tariff products.

15) Because this financial trade process is outside the reach of the U.S. Federal Reserve; meaning the trade exchange is external to the U.S. domestic economy; the Fed is unable to influence imported deflation/inflation by raising or lowering lending rates (interest rates).

16) It is this dynamic that is causing the International Monetary Fund to increase its projections of the growth of the U.S. economy, and downgrade the projections of those global manufacturing nations who are dependent on the U.S. Market.

washingtonpost.com/business/2019/…

17) When anyone says U.S. Consumers pay for tariffs, it's just a flat out lie.

The exporter pays the tariff upon arrival in order to be allowed to offload product into the U.S. market.

In the current situation China is absorbing 23% of that 25% tariff and NOT raising the price.

18) China and EU have devalued their currency in an effort to block the impacts from President Trump & the ‘America First’ trade policy.

Because those currencies are pegged against the dollar, the resulting effect is a rising dollar. IMF not happy.

mobile.reuters.com/article/amp/id…

19) In essence, the globalist IMF is now blaming President Trump for having a strong economy that forces international competition to devalue their currency.

20) That’s the stupid hypocrisy of global banking outlooks. They make a decision to devalue their currency, which causes the dollar value to rise, and then turn around and blame the U.S. dollar for being overvalued.

21) In the bigger picture this is why President Trump is the most transformative economic President in the last 75 years. The post-WWII Marshall Plan was set up to allow Europe and Asia to place tariffs on exported American industrial products.

22) Those tariffs were used by the EU and Japan to rebuild their infrastructure after a devastating war. However, there was never a built in mechanism to end the tariffs…. until President Trump came along and said: “it’s over”!

23) After about 20 years (+/-), say 1970 to be fair, the EU and Japan received enough money to rebuild. But instead of ending the one-way payment system, Asia and the EU sought to keep going and build their economies even larger than the U.S.

24) Additionally, the U.S. was carrying the cost of protecting the EU (via NATO) & Japan w/ our military. The EU/Japan didn’t need to spend on defense because the U.S. essentially took over that role. That military role, just like the tariffs, never ended. Again, until Trump.

25) The U.S. economy was the host for around 50 years of parasitic wealth exfiltration, or as most would say “distribution”.

[Note I use the term *exfiltration* because it better highlights that American mfr corporations paid tariffs to access EU and Asia markets]

26) President Trump is the first and only president who said: “enough”, and prior politicians who didn’t stop the process were “stupid” etc. etc.

Obviously, he is 100% correct.

27) For the past 35 years the U.S. was a sucker to keep letting the process remain in place while we lost our manufacturing base to overseas incentives.

28) The investment process from Wall Street (removal of Glass-Stegal) only made the process much more severe and faster. Wall Street was now investing in companies whose best bet (higher profit return) was to pour money overseas.

29) This process created the “Rust Belt”, and damn near destroyed the aggregate manufacturing industry.

30) Fast forward 2017 through today, and POTUS Trump is now engaged in a massive and multidimensional effort to re-balance the global wealth dynamic.

By putting tariffs on imports he has counterbalanced the never-ending Marshal Plan trade program and demanded renegotiation(s).

31) Trump’s goal is reciprocity; however, the EU and Asia, specifically China, don’t want to give up a decades-long multi-generational advantage. This is part of the fight.

32) One could reasonably argue that China’s economic rise happened inside this period, and as a consequence they have no comprehension of an economic history without the institutional advantages.

33) China has never competed with the U.S. under any terms of equivalence or fairness; they’ve only ever known the advantages. Combine that with the Chinese communist mindset and you get the extreme severity of their position.

34) So yeah, there’s going to be pain – for them; massive economic pain; as the process of reestablishing a fair trading system is rebuilt. This dynamic is the essence of reciprocity that benefits Main Street USA.

35) Unfortunately, putting ‘America First’ is now also against the interests of the multinationals on Wall Street; so President Trump has to fight adverse economic opponents on multiple fronts…. and their purchased mercenary army we know as DC politicians. (aka "The Big Club")

36) No-one, ever, could take on all these interests.

EXCEPT @realDonaldTrump

@realDonaldTrump 37) Think about it… The EU, Asia, World Bank, International Monetary Fund, China, Russia, U.S. Chamber of Commerce, Iran, Congress, Democrats, U.S. Senate, Wall Street, the Big Club, Lobbyists, Hollywood, Corp. Media (foreign and domestic), and the ankle-biters in Never Trump…

@realDonaldTrump 38) All of these financial interests are aligned against Main Street USA and against President Trump.

Name one other individual who could take them on simultaneously and still be winning.

Pretty friggin' remarkable.

@realDonaldTrump They say he’s one man. They say they have him outnumbered. Yet somehow, as unreal as it seems, he’s the one who appears to have them surrounded.

"complicated business folks, complicated business"...

Incredible.

@realDonaldTrump 40) /END