“Who is Paying for the Trade War with China?”

That’s the title of a new report published by a consortium of European academic institutes, and written by Benedikt Zoller-Rydzek and Gabriel Felbermayr. I don’t have a problem with the analysis, which is mostly straightforward. It’s just a problem with the title.

The paper is really a quantitative analysis of the incidence of the Trump tariffs. Here it echoes my post on the fact that US prices as well as Chinese prices will adjust.

However, the costs of the Trump tariffs are narrowly defined — there is no discussion of the retaliation costs (e.g., soybeans). There is no discussion of how China will retaliate by making life difficult for US multinationals with operations in China. Nothing is wrong per se with this analysis — partial equilibrium analysis makes problems more tractable. (And who knows what the Chinese will do with the CNY?)

A better title: “Who is Paying for the Trump’s Tariffs on Chinese Imports into the US?” Answer: So far, both American consumers (particularly lower income households that consume a higher proportion of Chinese produced goods) and Chinese exporters. Ceteris paribus re: exchange rates.

58 thoughts on ““Who is Paying for the Trade War with China?”

  1. pgl

    Team Trump might like this:

    “the greatest share of the tariff burden falls not on American consumers or firms, but on Chinese exporters. We calibrate a simple economic model and find that a 25 percentage point increase in tariffs raises US consumer prices on all affected Chinese products by only 4.5% on average, while the producer price of Chinese firms declines by 20.5%. The US government has strategically levied import duties on goods with high import elasticities, which transfers a great share of the tariff burden on to Chinese exporters. Chinese firms pay approximately 75% of the tariff burden and the tariffs decrease Chinese exports of affected goods to the United States by around 37%. This implies that the bilateral trade deficit between the US and China drops by 17%. The additional tariffs generate revenues of around USD 22.5 billion, which could subsequently be redistributed in the US.”

    Now as Menzie notes, this analysis omits a lot including how China has levied tariffs on our products such as soybeans. Chinese consumers may pay a bit more for soybeans but American farmers will bear most of the incidence of the tariffs imposed by the Chinese. I presume China can use its tariff revenues to offset the pain of higher soybean prices on consumers and of course the reduction in US exports to China will raise our bilateral trade deficit.

    And of course a complete analysis would factor in changes in the exchange rate.

    1. spencer

      Generally, the import price is the marginal price that sets a ceiling for the price domestic producers can charge.
      So an import tariff raises the ceiling that domestic producers can charge and this possibility of greater profits is what draws new production into the market.

      However, virtually all of the analysis of the inflationary impact of Trump’s tariffs seems to ignore this source of higher prices and implies that the inflationary impact will be much larger than generally assumed. If the domestic producer can not get higher prices they will not expand output and the tariff will not lead to higher output.

      1. pgl

        A little market structure analysis would help here. You make it sound like the domestic sector is some sort of monopoly that laments foreign competition. Maybe but a little bit of modeling is implicit in your claims.

        1. Moses Herzog

          I don’t know where you get that higher prices due to less foreign competition= higher profit margin= higher domestic output implies a “monopoly” in this specific case. And I don’t think you need to write a long-winded research paper (not that I’m against it) to understand the point Spencer is making. It’s actually a relatively neutral comment.

          1. pgl

            Cough, cough. I thought his comment was interesting. I was just encouraging a little theoretical development of it. Yes – a research paper might be a good idea. And Spencer is a lot more qualified to do this than say CoRev.

  2. Bruce Hall

    The hidden part of the “trade war” … and why it might be necessary. https://www.latimes.com/politics/la-na-pol-china-economic-espionage-20181116-story.html

    Some economists will argue that everyone benefits if ideas/knowledge are shared freely. That’s a noble sentiment, but ignores the real economic damage to those who spend years and enormous sums of money to develop those ideas and practical knowledge to implement them only to have that work stolen from them and then undermined by someone else who does not have to recoup the research and development costs.

    Economically, China is a predatory nation; politically it is a pariah nation (that supports other pariah nations). So, do I mind paying a little more to punish and discourage this type of behavior? Definitely yes. A short term pain for a longer term gain. I say, “turn up the heat”.

    1. pgl

      Bruce Hall as attorney for Micron Technology. My God Bruce – did you have a clue as to all the twists and tricks this company has pulled to limit foreign competition. IP theft – give me a break. The Korean competitors of Micron has been kicking their butts with new developments to which Micron whines and complains about the lack of tariffs on Korean products. Now that the Chinese have decided to compete in this sector – leave it to Bruce Hall to be their mouth piece!

      1. Bruce Hall

        pgl, as a mouth-piece for the Chinese, you find that their brand of thievery is just fine because… well, it’s the Chinese brand of thievery. After all, “the Chinese have decided to compete in this sector” so that makes any complaint about the way they compete without merit.

        If the Korean competitors are “kicking their (Micron’s) butts” they are not doing it with theft… at least that anyone has shown. Competing in the marketplace with your own ideas, research, and development is what makes capitalism so great and socialism/communism (as practiced by China) so reprehensible.

        Yes, we can see where your bread is buttered. As to the rest of your somewhat contradictory arguments (getting their butts kicked… 50% profit margin) that’s irrelevant to the central point of Chinese theft. Your dynamic random talking points don’t make your case about China not being predatory economic nation.

        Your points, boiled down, are that Micron isn’t that competitive with their products and making 50% (gross?) profit margin is so criminal that we should overlook what the Chinese are doing. You’d make a great Chinese leader.

        1. pgl

          Bruce – please READ what I posted. I am not defending China. I’m mocking the specific example of the poor company known as Micron Technology. You know NOTHING about this company, you know nothing about the DRAM sector, and yet like a village idiot you put them forward as the poster child for your argument. The dumber post EVER. Take a bow!

          BTW – how do I know you know NOTHING. Try this from you:

          “making 50% (gross?) profit margin”

          Mother of God – you cannot be bothered to read their financials. The 50% is their OPERATING margin after deducting for all operating expenses including R&D.

          Look Bruce – if you are this incredibly stupid and so lazy not to read freely available financials, WTF are you commenting on an economist blog?!

          1. Bruce Hall

            pgl, I have to admit that your words “revenues jumped to $30 billion and their profit margin is a whopping 50%” may have been misconstrued as “profit” (either gross or net). No, I didn’t bother to read the Micron financials as it was irrelevant to the issue of Chinese theft of Micron IP. Micron’s response or the way they operate is also irrelevant to Chinese theft of Micron IP.

            Your attempt to deflect China’s actions into something that is Micron’s fault is fairly transparent.

          2. pgl

            “I didn’t bother to read the Micron financials as it was irrelevant to the issue of Chinese theft of Micron IP.”

            This would be dumb even if it came from PeakTrader. Way to go Bruce – you have won the gold for the dumbest comment EVER!

    2. pgl

      “Among Micron’s most successful products are dynamic random-access memory microchips. So-called DRAM semiconductor chips help power most of the world’s electronic gadgets, including smartphones, computers, cars and TVs. Micron controls about 20% of the world’s DRAM market, and the chips account for about 70% of the company’s annual $30 billion in revenue.”

      I wonder if Bruce Hall even knows what DRAMs are. I’m sure he has zero clue about the history of this sector. Micron has a 20% market share but guess who dominates this market. Companies like Hynix and Samsung Semiconductor. Yes – the Koreans rock and Micron whines and whines about the competition.

      C’mon Bruce – can you please find us a dumber article? DAMN!

      1. Moses Herzog

        @ pgl
        We’re now insulting the LA Times?? Specifically attacking an article with many quotes from leading economic espionage investigators of the FBI and leading economic espionage leaders in private companies that I can identify ZERO factual errors in.

        Gee, people with a strong political bias (and I’m starting to wonder, other biases as well??) taking cheap shots at great journalism. Taking shots at the messenger. Does that remind you of anyone??? You taking rhetorical lessons from the MAGA crowd now pgl ??? You realize the current owner of LA Times is ethnic Chinese, right??

        Guess which country they say is behind the vast majority of this?? HINT: It’s not South Korea. pgl, Would you like to take potshots at McAfee while you’re at it as well?? Attacking Mueller or Julian Assange could give you a trifecta. How about Chelsea Manning?? How dare she let us know what is happening in our own “democratically elected” government. Or even how dare she let us know about the murders of journalists and bystanders committed by the U.S. government. You have any cheap shots for her for passing on factual info to the “unwashed masses”??—the dresses and lipstick Chelsea wears are disgusting lately, yeah??

        1. pgl

          McAfee? OK! Now I did not say the Chinese are not trying to extract IP. What I did say was Bruce and this doof at the LA Times picked an incredibly stupid alleged victim. I know the DRAM sector quite well and Micron steals more IP than it creates. Plus it has set up shop in Asia as well as parking its obscenely high profits in tax havens.

          Of course Bruce is too stooopid to read what even Micron puts in its 10K.

          1. Moses Herzog

            I’ll be frank and say it’s a little hard to believe Micron is any worse than China on IP theft. But I’m gonna have to take your word on that as my knowledge in that area is quite thin. I generally trust you so….

    3. pgl

      I’m checking out the last 10-K filing for Micron Technology. Yep – revenues jumped to $30 billion and their profit margin is a whopping 50%. That expensive R&D Bruce whined about was a mere $2 billion in the latest year.

      Bruce Hall needs to do a little research before embarrassing himself like he just did.

      BTW – research is easy if one learns how to use http://www.sec.gov.

      Check the facts next time.

      1. Bruce Hall

        pgl, thanks for pointing out that Micron spends about 6-7% of revenues on R&D. That places them right at about industry average for the computer and electronics industry: https://www.industryweek.com/research-amp-development/rd-spending-numbers

        In other words, if Micron (simply the example in the LA Times article) is not “earning” its revenues because it is not spending more than 6-7% of revenues on R&D, then all of the other companies are in the same boat. Now, getting back to China, by stealing R&D, it’s cost in that area is far less than 6-7% of revenues, so they are the worst of the “rent seekers”. They want something for absolutely nothing.

        1. pgl

          Hey Bruce – do some real research. How much is Hynix spending on R&D? Do you need help finding their Annual Report? I can give them a call if need be and they can mail it to you. After all – they achieved a world class bilateral APA between the KNTS and the IRS on their transfer pricing issues. Can who masterminded that?

    4. 2slugbaits

      Bruce Hall No, economists do not argue that literally everyone benefits in the sense that there are no losers if ideas and knowledge are shared freely. Believe it or not, economists do recognize that there are individual winners and losers. I don’t know of any economist who doesn’t agree that temporary monopoly rights need to be secured in order to reward innovation. But it’s also the case that the free sharing of ideas and knowledge generate non-rivalrous benefits. So when economists talk about the benefits of freely exchanging ideas and techniques, they are talking about the unique quality of ideas that makes them non-rivalrous, which allows for the possibility of increasing returns. So there is a clear benefit to unlimited and free access to ideas and techniques; but there is also a clear cost in terms of reducing the incentive to explore new ideas and techniques. That’s why we have patent and copyright laws that extend limited and temporary monopoly rights. But if those laws are too restrictive, then everyone forgoes the economic benefits that go with increasing returns. The trick is to find the right balance. We want the patent and copyright laws to be restrictive enough to encourage innovation, but no more restrictive.

      If you’re genuinely interested in the foundational paper for a lot of this stuff, then try this:
      It was good enough to win the 2018 Nobel Prize.

      You also need to ask yourself if Trump’s policy of imposing tariffs on Chinese imports is the best way to discipline the Chinese from technical piracy. I would argue that not only is it ineffective, but likely to further encourage technical piracy. Trump is just substituting motion for action. There are better ways of handling the problem. So if you support Trump’s approach, I’m afraid that all you’ll end up with is short term pain and long term pain. There is no long term gain in Trump’s approach. It’s the kind of idiotic approach that I would expect from someone who spent his entire career in a monopoly rent world of Manhattan real estate. It’s quite possibly the worst kind of training a person could have for understanding international trade and the economics of technological growth.

      1. pgl

        Paul Romer’s piece is a good discussion but note that Bruce Hall is championing a particular manufacturer of DRAMs. Of course Bruce Hall clearly did not read Micron’s 10-K or anything on the history of the DRAM sector even though there is a ton of excellent material. I provided a bit of reality in my comments here. It turns out that Micron is #3 among the Big 3 with the Koreans dominating. It turns out that Micron has a 50% operating margin but pays almost no US corporate profits taxes. Some victim.

        It also turns out that Micron Technology has a lot of Asian manufacturing as well as R&D personal. I bet Bruce Hall had no clue about any of this. No clue at all.

      2. Bruce Hall

        2slug, apologies for the hyperbole if some is hyperbole (although I suspect there are not a few very left-leaning economists who might agree with the premise I stated).

        Your statement that “there are better ways of handling the problem” is a good sentiment. However, what has changed in the past decade or so since this was written with regard to that: http://www.spiegel.de/international/spiegel/product-piracy-goes-high-tech-nabbing-know-how-in-china-a-402464.html ?

        I suggest that banning a few companies from China would do little in that regard. They would only take their theft-based products elsewhere and the Chinese government wouldn’t even blink because that theft serves the purpose of the government. Now a half-trillion dollars out of pocket might make them blink.

      3. Bruce Hall

        2slug, I apologize if the word some was taken as hyperbole. I think there are more than a few economists who lean far left that would argue that IP protection is more harmful than good, which I find concerning because of the potentially dampening effect such practices have on future innovation. To argue that there are benefits to be had from using IP in a way that doesn’t undermine the developer of the IP is a bit disingenuous when the argument includes the notion that it should be given (or taken) freely. Forced altruism is confiscation.

        You indicated that “There are better ways of handling the problem.” Perhaps, but I’ve seen little practical evidence of that over the past few decades. The Chinese have decided that the gains from IP theft are worth any bad press they may receive. Unless they are really hit in the pocketbook and restricted in the global markets, they have no incentive to “behave”. What practices have you seen that have actually worked?

        1. 2slugbaits

          Bruce Hall I think there are more than a few economists who lean far left that would argue that IP protection is more harmful than good

          I think you’re confusing issues. No economist, far left or far right, would argue that there shouldn’t be any IP protection, just as no economist, far left or far right, would argue that there should be permanent IP protection. IP protection allows a company to earn temporary monopoly profits, but those monopoly profits should only persist long enough to recover R&D costs plus a normal profit. If a company like Micron is only spending 6%-7% of its gross sales on R&D, and if their operating margin is on the order of 50%, then it’s a little hard to argue that they need a long lived patent to recover their R&D costs.

          One of the reasons that the Chinese are willing to suffer the costs associated with piracy is because the gains are great. And the reason the gains are great is because we allow companies to continue earning monopoly profits long after their R&D costs have been recovered. So our patent and copyright laws actually incentivize piracy. The IP piracy problem has gotten worse after Congress extended copyright and patent periods.

          Imposing tariffs on unrelated Chinese imports does nothing to address Chinese IP theft. It might make Trump voters feel better, but it is completely ineffective and ultimately self-defeating. If you don’t understand why it’s self-defeating, then think through the effect on the exchange rate and how those exchange rates affect companies like Micron. Trump’s tariffs only make the relative cost of pirated IP even more favorable for Chinese competitors. How stupid is that?

          What practices have you seen that have actually worked?

          Well, TPP would have been a good start. Taking complaints to the WTO would have been appropriate. Reducing the incentive to pirate IP by shortening the period in which companies can earn monopoly rents would help…and it would also help US consumers. Reminding companies that internal cybersecurity costs should be internalized by the company rather than offloaded to the US Dept of Justice. Granted, those cybersecurity costs will no doubt reduce operating margins, but I don’t see why the US consumer and US taxpayer should have to subsidize companies that are already earning ridiculous monopoly rents. So a little more corporate responsibility would be welcome and effective. What we don’t need are crocodile tears from companies that don’t want to pay for their own cybersecurity and want the US government to guarantee indefinitely long patent and copyright laws. I’m sympathetic with companies who are victims of Chinese IP theft, but only up to a point. I have no sympathy for companies who shed crocodile tears just because they want to continue earning monopoly rents long after R&D costs have been recovered.

          1. Bruce Hall

            2slug, I have no sympathy for companies who shed crocodile tears just because they want to continue earning monopoly rents long after R&D costs have been recovered.

            And there we have the crux of it. Those who believe that IP protection is not much more than a scheme to collect so-called “monopoly rents” and those who see theft of IP as the ultimate of “squatting”. If you side with the latter, then let’s take that to the extreme and have everyone steal ideas from everyone else who will not be creating new ideas and products because they are waiting to steal from everyone else. The beauty of IP protection is that it encourages formation of new ideas 1) because it allows costs to be recovered and grants a competitive advantage over others and 2) because it encourages others to come up with alternatives that are better. That’s why monopolies don’t last. Remember what happened to all of those railroad monopolies?

            This is not just a computer hardware/software issue. This covers all new product development. After all, if IP protection is so onerous and evil, why bother with protecting designs and production techniques of military hardware? Why, in the perfect world, everyone would enjoy the same level of protection from everyone else.

            No, I’d say “rents” are a wonderful thing. If you don’t want to pay the rent, build your own house.

          2. baffling

            “2slug, I don’t recall redefining IP protection as permanent.”
            bruce, i would gather you actually agree with 2slugs, but simply cannot come out and say you agree with a liberal. 2slugs simply argued that there needs to be a time limit on how long you can control your IP. and bruce, you are agreeing with that. the discussion is how long? and in this regard, 2slugs has a more valid argument than you do bruce. i want pressure on an innovator to produce a new innovation, not to rest on their laurels with their last innovation. i will certainly give them time to recoup cost and make some profit, but the american way is to get back in the game and continue working. if you are worried about people stealings others efforts, you should be more worried about folks like peaktrader, who made a career out of taking other peoples hard earned money and risking it all by creating the financial crisis. you should focus your ire on such weasels, who don’t produce but simply take from others.

    5. macroduck

      Any analysis which argues that “everyone” or “all” or any other all-inclusive category benefits from some action is a straw man.

      There is no need to aggrandize the outlay of effort or cash by any particular party, if the goal is welfare gains, rather than profit. Only to the extent that we should expect a reduction in effort in the next round enough to more than offset the welfare gain should we worry much about lost money and effort.

      Turns out “going Galt” isn’t really a thing. That’s just something made up by those in the pay of the rich.

  3. pgl

    Bruce Hall treated us to a lot of ill informed whining from Micron Technology who is #3 in the DRAM market. Of course Bruce Hall does not know a damn thing about the DRAM market. So let me share with you a neat chart of who dominates the DRAM market:


    Koreans rule and Micron wants to make sure China does not get in the game. Yes – let’s have policies to benefit an incredibly profitable US company that abhors Asian competition!

    1. Bruce Hall

      pgl, I don’t know what your background or profession is, but if I stole your research or work and used it to undermine you, I suspect you might not perceive your objections to be “whining”.

      1. pgl

        I’m an economist but that’s not the point. The point is that you do not know how to read beyond some really ill informed LA Times piece. I posted a lot of relevant material for you but as usual – you cannot be bothered to read it. I guess you make PeakTrader look smart by comparison!

        1. Bruce Hall

          pgl, so you’re saying that if a company is profitable and a country like China steals their proprietary information, that’s not really a problem because the profitable company deserves to have their information stolen.

          Yeah, reading financial reports will clearly make such theft a reasonable course of action. Irrelevant!!!

    1. Bruce Hall

      pgl, really???? In Chinese state investigator’s sights? That’s laughable. If a company won’t give away their IP and fight when the Chinese try to steal it, then they will be “investigated”.

      I guess that’s how the communist systems works for you, eh?

      1. Anonymous

        Everyone in this sector steals IP from everyone else. And everyone in this sector whines about competition. Micron Technology is legendary for this stuff. Leave it to a naive twit like you to fall for their spin! Learn to read – as in those passage from Micron’s own 10-K. Lord – the stupidity here is getting out of control.

    2. Bruce Hall

      pgl, do a little research beyond some financial statements. Try a Google search on “Micron accused of stealing intellectual property” and see what comes up.

      This is not just an issue about trade; this is an issue about China being a predatory nation in business and economics and a pariah nation in politics and human rights. Sometimes one cuts off a gangrene limb to save the body. Until China actually reforms (which is unlikely), the U.S. would do well to seek economic alliances elsewhere and minimize business dealings with that country in whatever way possible. This may not “make sense” to you as an economist?, but there are other issues involved beyond lowest acquisition price and short-term ROI.

      Nixon made the strategic blunder of the 20th century when he believed that opening economic ties with China would lead to a China that was more democratic, less belligerent, and less of a long-term threat to security and peace. The only thing that has changed is that China is wealthier and more capable of being belligerent, aggressive, and a threat to both regional and world peace. Economics fail!

      1. pgl

        Google quality research? That is what Peaky does. He finds some of the dumbest intellectual garbage ever. You have learned well from Peaky!

      2. 2slugbaits

        Bruce Hall Until China actually reforms (which is unlikely), the U.S. would do well to seek economic alliances elsewhere

        You mean the US would do well to seek economic alliances like TPP? You remember TTP, don’t you? It’s that thing our stable genius President Trump killed.

        TPP increases the likelihood that Japan will undertake economic reforms to revive its economy, which coupled with potential South-Korean accession to the TPP, might have an economic impact on China. By making the Chinese economy less competitive and Chinese leadership less likely to write the rules of trade in East and Southeast Asia, the Chinese regime will be under great internal and external pressure to liberalize its economy. Japan’s prime minister, Shinzo Abe, believes that future Chinese accession to TPP would have a major pacifying impact on the Asia-Pacific region. U.S. Trade Representative Michael Froman has said that a failure to ratify TPP would give China the opportunity to boost its exports and set labor and environmental standards in the fast-growing Asia Pacific region through the Regional Comprehensive Economic Partnership (RCEP).

  4. joseph

    Oh, my. It seems that after spending two years and as recently as last week Trump leading his fans in chants of “Lock her up” that his own daughter Ivanka violated federal law in her use of personal email for government business.

    It’s important to note that while Clinton’s use of personal email violated no law, Ivanka’s use did. There is no law now or ever has been prohibiting use of personal email for government business. However there are laws requiring that those personal emails involving personal business must be copied to government archives.

    When Clinton left office in 2013 there was no deadline for providing those copies. It was the custom at the time to forward government records to the archives after leaving office and that is what Clinton did.

    However in 2014, the Federal Records Act was amended to say that personal email must be forwarded for archival within 20 days. This new law was passed unanimously in both the House and Senate, so they must have considered it important.

    It is the Federal Records Act that Ivanka violated. According to reports, she used her personal email for government business for at least a year without making official copies as required by law. She only did this recently when it was uncovered accidentally by other FOIA requests that she was violating the law.

    Rather ironic that Clinton was the one complying with the law and Ivanka was the one violating the law with her email.

  5. macroduck

    Any analysis which argues that “everyone” or “all” or any other all-inclusive category benefits from some action is a straw man.

    There is no need to aggrandize the outlay of effort or cash by any particular party, if the goal is welfare gains, rather than profit. Only to the extent that we should expect a reduction in effort in the next round enough to more than offset the welfare gain should we worry much about lost money and effort.

    Turns out “going Galt” isn’t really a thing. That’s just something made up by those in the pay of the rich.

  6. pgl

    I’ve been reading Micron Technologies. Some tidbits Bruce Hall did not tell us:
    They not only do R&D and production here but also in China, Taiwan, Japan, Malaysia, and Japan.
    A couple of passages note Micron may be stealing IP from China:
    ‘We have been served with complaints in Chinese courts alleging patent infringement.
    We have been served with complaints in Chinese courts alleging that we infringe certain Chinese patents by manufacturing and selling certain products in China. The complaints seek orders requiring us to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages plus court fees.’
    And then there is this:

    ‘Increases in tariffs or other trade restrictions or taxes on our products or equipment and supplies could have an adverse impact on our operations.

    In 2018, 88% of our sales were to customers located outside the United States. We also purchase a significant portion of equipment and supplies from suppliers outside the United States. Additionally, a significant portion of our facilities are located outside the United States, including Taiwan, Singapore, Japan, and China. The United States and other countries have levied tariffs and taxes on certain goods. General trade tensions between the U.S. and China have been escalating in 2018, with three rounds of U.S. tariffs on Chinese goods taking effect in July, August, and September 2018, each followed by a round of retaliatory Chinese tariffs on U.S. goods. Some of our products are included in these announced tariffs. Higher duties on existing tariffs and further rounds of tariffs have been announced or threatened by U.S. and Chinese leaders. If the U.S. were to impose additional tariffs on components that we or our suppliers source from China, our cost for such components would increase. We may also incur increases in manufacturing costs due to our efforts to mitigate the impact of tariffs on our customers and our operations. Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial conditions.’

    So maybe the Trump trade wars will be bad news for them! I learned all of this stuff than Bruce Hall forgot to tell us when I was trying to figure out how Micron Technology had such a low effective tax rate. Note its operating profits were nearly $15 billion but guess how much was sourced as taxable income in the US? A mere $141 million. So Micron massively evades US taxes!

    This is Bruce Hall’s poster child for Trump’s trade agenda? Just WOW!

    1. Moses Herzog

      Well if the Chinese courts say Micron stole their “secret technology” and/or “proprietary technology”, that settles that question. I’d make some sarcastic comments here related to the 4 inventions mainland Chinese brag about like very 4 minutes while you’re over there, but I’ll spare Menzie. Other than vague outlines on accusations the “highly regarded” Chinese courts have made about Micron—did you want to share the links to all theses statements you’re making—or should we attach this to the PeakIgnorance/BarkleyRosser “I don’t do links” “I don’t do supportive references” folder?? I don’t razz those two everyday about that habit—because I know their modus operandi. Fool that I am, I expect better from you pgl

      1. pgl

        Are you saying Micron Technology lied to its shareholders? Or do you not get what a 10-K filing is? Try reading what I provided. We know Bruce Hall will not.

        1. Moses Herzog

          @ pgl
          Speaking to what you read in a 10-K, I don’t think you do “know” how to read a 10-Q or 10-K—-There’s a difference between pointing out something as a potential liability or future cost, and saying the claims are true. Now, I will bow down to you on the knowledge of IP theft in the DRAM chip market—-I am NOT going to bow down to you on how to read a 10-Q or 10-K dear.

          I was reading the individual comment without reading all the umpteenth retorts towards the beginning of this thread, that’s my mistake, I apologize. It might even be COURTEOUS to leave a DIRECT link to the annual report or 10-q . I don’t quote a LA Times story, WaPo, or FT story, then leave a link to homepage of the paper and say “now go find it”. And I should state, I was using sec.gov back in college and have used it many times since, so, that has nothing to do with it. It’s just courtesy when presenting an argument.

          However some of the argument you’re making is still very weak. If Micron mentions court fees and court costs from trumped up (no pun intended) accusations of theft of intellectual property (which even YOU must realize are a farce), it has nothing to do with the VALIDITY of the accusations. Micron must mention those if the possibility of the liabilities or legal costs and penalties are MATERIAL to the company’s results and shareholders equity holdings. It doesn’t mean that in the joke of a legal system existing in China 2018 that those charges have any basis in fact. So it’s a little ridiculous to quote Chinese courts as a basis for Micron stealing IP. Again, I can’t believe that EVEN YOU could make that argument with a straight face.

          What you might do (and I would compare this to Rosser’s farce of a “skewed” distribution curve related to whites with native American genetic makeup that never emanated or emerged into existence) is post articles from respected sources breaking down the details of Micron’s supposed IP theft, rather than SEC filings of potential liabilities/costs related to the Chinese government’s joke of a law system.

          1. Moses Herzog

            @ pgl
            Not a very good argument, and similar to Barkley Rosser Jr’s “skewed” distribution curve of whites with Native American genetic makeup, ZERO journalism links provided to support your contention of Micron IP theft. I give you an A+ in the unsubstantive smart-ass department though.

            Here is the direct link to the Micron 10Q you seem to have a intellectual challenge providing. It’s not that hard if you have visited sec.gov at a minimum of like 3 times. 3rd quarter 10Q came out in June:
            If people want to know the details about the Chinese courts’ accusations against Micron, it starts around page 13 and is basically listed under “Contingencies”. You can also find a broader/vague breakdown on pages 40-41 under the heading “Risk Factors”

            Here is a direct link to the more up to date 10K (which came out mid-October).
            And here they have the related IP litigation risk factors (yet to be litigated it appears, on page 17, again under the larger heading “Risk Factors”.
            And again the more DETAILED breakdown is under “Contingencies” towards the bottom of page 60 and 61.

            None of the above was that hard to find, or provide a direct link to. And none of the above supports pgl’s claim of Micron IP theft. It is a list of potential litigation costs that any and every publicly listed company must outline, if it could have a material affect on financial results or Shareholders’ equity holdings. It’s not rocket science if you have used the sec.gov site before, it’s actually very user friendly. Therefor if someone was trying to present a cogent argument, and just out of courtesy, you could provide those two direct links as I just have.

            BTW, I’m still waiting on any respected journalistic link, outside of the “highly respected” “morally honorable” “laudable” “ethical”, and uh “irreproachable” Chinese courts’ claims against Micron. And as it comes to the normally sensible pgl’s providing reference support for the Chinese courts’ (i.e. Chinese Politburo’s) claims against Micron, it appears we may be waiting a LONG time for pgl to provide journalistically respected sources supporting said claims. Kind of reminds me of a specific “skewed” normal distribution curve I never saw.

          2. pgl

            “Here is the direct link to the Micron 10Q ”

            Moses – I never said Micron accused itself of stealing IP. So the point of your long winded rant from their latest 10-Q was noise. I did quote their 10-K for OTHER reasons. I also quoted other stories. And to date neither you nor Bruce Hall has addressed a single thing I said. So confuse this even more with more noise. I really could care less.

            Micron’s operating margin is over 49%. But Bruce thinks that is their gross margin? And you think you are defending this fool? Seriously?

          3. Moses Herzog

            @ pgl
            Your last posted response speaks for itself, along with no link providing support for your statement that Micron “steals IP”. Similar to Barkley Jr. and his nonexistent “skewed” distribution curve, you couldn’t provide a single supporting link or article. NOT EVEN ONE link to show Micron “steals intellectual property”. Maybe you are the one who taught Barkley Rosser Jr. how to make citations and references?? What, nothing from Barkley Jr.’s favorite website “Quora” even?? We already know you don’t like factual sites like the LA Times.

            People who read this entire thread (left or right politically) will see you how you presented yourself on this one pgl—-not well.

    2. Bruce Hall


      If a U.S. company uses it’s R&D to manufacture some of its products overseas and pays taxes there, why must it double down and pay taxes here. If BMW manufactures its vehicles in the U.S., it pays U.S. taxes on those revenues and profits, not German taxes. What does your distraction have to do with theft of R&D by the Chinese? (I’m going to keep pointing out that your attempt at deflection is not working) U.S. companies are not in business to pay U.S. taxes. They are in business to bring wealth to their owners/shareholders. Taxes are simply a cost of doing business. Where they are paid is pretty much irrelevant except to those who want to redistribute that wealth. If they produce the wealth through overseas operations, they are not obligated to pay taxes twice.

      If a company chooses to do business in China despite China’s well-deserved reputation as a thief, then it is accepting the risk that action against China for their thievery may well impact them. But at least they have that choice. The companies who have had their IP stolen certainly had no choice in that matter.

      You’ve blown so much smoke, you can’t even see where you’re going.

      1. pgl

        “If a U.S. company uses it’s R&D to manufacture some of its products overseas and pays taxes there, why must it double down and pay taxes here.”

        You do not get transfer pricing obviously. #1 – your contention is that they are doing R&D and production here. That is partly true. But they pay zero income taxes here. HELLO?

        Now yes – they are also creating value in Asia. Something you never realized until now. FYI – a lot of Asian nations (China, Korea, Japan) have significant corporate profit tax rates too. So how does Micron Technology pay so little in foreign income taxes. It is called parking income in tax havens. HELLO?

        BTW – if you ever learn to use http://www.sec.gov, their 10-K tells us where their subsidiaries are. And many are well known tax havens.

        But Bruce Hall would not know this. Hey Bruce – try learning something before you take me on.

  7. Moses Herzog

    You know, I’m sitting here at roughly 11pm local time, drinking a “bang” energy drink I got for $1.48. Anyone beat me on that price local, or Amazon with shipping costs?? I think that’s about as good as you’ll get for that kind of energy drink. It’s highway robbery for soda but it’s about as low as I’ve found for that type premium drink. It’s even hard to get Starbucks supermarket drinks that low (I know I looked). Would rather be drinking bourbon with club soda, a squeeze of lime juice and playing air guitar to “Mastodon” but we can’t win them all kids. Anyways….. The “bang” drink helps juice my mind and get me passed my laziness and reading this paper. Menzie would probably be surprised the amount Of time I gnaw on his posts in my mind. Probably more a commentary on my slow brain processing things.

    But the point I wanted to make is, it’s interesting that no one, not anyone, especially some of Menzie’s detractors constantly tagging Menzie as “biased” have pointed out that this paper that Menzie is highlighting, doesn’t really take Menzie’s “side” in this debate, and that Menzie overall goes so far as to say he has no major issues with the paper, other than, it could/should have been more “encompassing” (my word not Menzies, but I think that’s the “gist” of what Menzie is saying). Why would Menzie highlight this paper and put it on his blog?? Is it is simple game of “gotcha”?? Menzie really doesn’t “gut punch” this paper that hard. Far from it. What many people miss is what makes great minds like Menzie (in large part) who get their Phd’s, manage to add great contributions to the academic literature, and rub elbows with the likes of Barry Eichengreen, the Fed Wonks in Jackson Hole, and take residence in one of the greatest college towns in North America (am I assuming too much he lives in Madison??)—->> is the ability to take a broad view, hear out the best of your ideological opponents’ arguments, and never have too much certainty in your own view/views.

    How many people “got that” about this post?? NO, It’s not a differential calculus equation , a large Matrix, or a Markov chain, (as I can only dream I can do those on a high level), but I think it’s a semi-deep thought, that I wager a good 85%+ of you missed about this post.

    Or maybe my ex-GF was right when she told me I was basically a complete idiot because I had forgotten how to simplify fractions after not doing it for years?? I wonder if she would have bought “Because I didn’t drink any ‘bang’ today.” ?? hmmmm, if only to go back in time and just shotgun bullshit lines.

  8. pgl

    We have seen some stock price declines in general but notice that Micron Technology’s shares are still worth $41 billion. Not exactly a company that has seen its IP “stolen” as Bruce Hall wants us to believe:


    Yahoo/finance also provides income statements as was other financial information for those who are too lazy or stupid to check the 10-K filing (yes Bruce we’re looking at you). Let’s see – Bruce read where I said Micron’s operating margin was nearly 50% and like the complete idiot he tends to be – he fires back that this is the gross margin as if I left off selling and R&D costs. Well – let’s see their latest fiscal year really says.

    Cost of revenues is only 41% of sales so the gross margin = 59% not 50% as Bruce ignorantly claimed.
    R&D relative to sales was 7%, which is considerable but not exactly what we see from pharma multinationals.

    Selling costs are just over 2.5% of sales. Low selling costs are a feature of the DRAM sector. Of course Bruce Hall would not that as he has no idea what a DRAM even is.

    OK – its operating margin was approximately 49.5%. And if Bruce Hall does not know the difference between the two – why should anyone pay any attention to his usual rants?

  9. pgl

    Moses is cherry picking something irrelevant from Micron’s latest 10-Q to defend old Bruce Hall. Credit to Moses for being able to find SEC filings but he is uttering a lot of noise which has nothing to do with what I found in Micron’s 10-K. I challenged Bruce to check out Hynix’s Annual Report (so much information so little time) but of course he has not bothered so here goes:


    Converting Korean wons to dollars, Hynix is selling as much as Micron. Neither comes close to Samsung. Micron needs to worry more about Korea than China. But let’s look at profit margins with a better understanding of gross v. operating than Bruce gets. Poor Hynix – its cost of production is nearly 50% of sales as compared to only 41% of sales for Micron. Its operating expenses (selling plus R&D) is 10% of sales – same as Micron’s. Poor Hynix has only a 40% operating margin and Micron has an operating margin over 49%.

    Yes – yes someone stole something. They have stolen from the rest of us by their anti-competitive behavior keeping their prices too high.

    Sorry dudes but if the Chinese decide to compete, the rest of us will benefit from the busting up of this oligopoly.

    1. Bruce Hall

      pgl, if the Chinese decide to compete????

      So, now you… the economist… define theft as “competing”? The Yyan are in the mail.

      1. baffling

        bruce, we have enormous amounts of IP theft domestically as well. and we also have egregious noncompete clauses, which keep american workers from taking their desired jobs in order to “protect” their previous company. even if that company abuses its workers. would love to see some of your outrage directed in those directions as well.

  10. noneconomist

    Industrial theft? That recalls the late 18th century and the beginnings of the American factory system with and how technology of the day arrived here.
    An old college intro history text (“The American Pageant”, Thomas A. Bailey, c. 1961) offered this version.
    “Long established British factories, which provided cutthroat competition, posed another problem. Their superiority was attested by the fact that a few unscrupulous Yankee manufacturers, our to make a dishonest dollar, learned to stamp their own products with faked English trademarks…
    Samuel Slater has been called the ‘Father of the Factory System…As a skilled British mechanic of twenty-one, he was attracted by bounties offered to English workmen familiar with textile machines. Having memorized the plans of the machinery, he escaped in disguise to America …..Laboriously reconstructing the machines with the aid of a blacksmith and a carpenter, he put into operation in 1791, the first efficient American machinery for the spinning of cotton thread.”
    At the time, the British did not export such machinery, nor did they share its workings. And, Slater was forced to flee because English law did not allow workers who were familiar with this technology to leave the country. Leave–illegally in that time–he did, bringing with him the seeds of American industry.
    Stolen IP, 18th century style? Were the Americans who profited from Slater’s knowledge also thieves or stalwarts of a budding capitalist system?

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