Guest Contribution: “How Tariffs Affect China’s Exports”

Today, we’re fortunate to have Willem Thorbecke, Senior Fellow at Japan’s Research Institute of Economy, Trade and Industry (RIETI) as a guest contributor. The views expressed represent those of the author himself, and do not necessarily represent those of RIETI, or any other institutions the author is affiliated with.

Donald Trump launched a trade war with China.  On 6 July 2018 he placed 25% tariffs on $34 billion of imports from China and on 23 August 2018 he placed 25% tariffs on an additional $16 billion of imports. On 24 September 2019 he added 10% tariffs on $200 billion of imports and in 2019 and 2020 added tariffs on an additional $300 billion of imports.  Chad Bown and Melina Kolb provided a detailed timeline of the trade war (https://www.piie.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide ).  President Biden has left the tariffs in place.

How do tariffs affect China’s exports?  Figure 1 shows China’s exports to the U.S.  The figure only extends to 2019 to avoid the impact of the Covid-19 pandemic on exports.  The figure shows that China’s exports to the U.S. fell by almost $90 billion in 2019, after trending upwards before that.  This suggests that tariffs reduced imports from China.

 

 

Figure 1. China’s Total Exports to the U.S. over the 2011–2017 Period. Source: U.S. Census Bureau.

Benassy-Queré et al. (2021) investigated quantitatively how tariffs affect bilateral trade flows between 110 countries at the Harmonized System (HS) six-digit level (http://www.cepii.fr/PDF_PUB/wp/2018/wp2018-08.pdf ).    They reported that a 10 percentage point tariff increase reduces exports by 14 percent and that a 10 percent exchange rate appreciation reduces exports by 5 percent.  In a recent paper (Thorbecke, Chen, and Salike, 2021), we used Benassy-Queré et al.’s methodology to investigate how tariffs affect China’s exports (https://www.rieti.go.jp/jp/publications/dp/20e011.pdf ).  We found that a 10 percentage point tariff increase reduces China’s exports by 25 percent and a 10 percent renminbi appreciation reduces exports by 9.4 percent.1 The evidence thus indicates that tariff increases are 2.7 times more powerful than exchange rate appreciations in deterring exports.2

Bilateral tariff elasticity estimates may be larger than multilateral tariff elasticity estimates because countries can substitute to imports from other countries.  For instance, a tariff on machinery exported from China to the U.S. may cause importers to switch to German machinery.  However, by switching the U.S. importer also incurs higher costs.  The fact that 3,500 U.S. companies have filed lawsuits challenging the China tariffs, including Disney, Ford, and Coca-Cola, suggests that higher costs burden U.S. firms (see Williams, 2021).

The results in our paper also indicate that several sectors, including televisions, computers, and iron and steel have tariff elasticities greater than 3.  This implies that a 10 percentage point increase in tariffs on these items reduces exports by more than 30 percent.  Around the beginning of the 21st century, television manufacturers transitioned from analogue to digital technology.  As Chang (2008) noted, under analogue production the technological advantage of a frontier producer such as Sony can be unsurmountable.  On the other hand, under digital production any producer can purchase modules and assemble them to construct a television.  Televisions have thus become commoditized and tariffs that increase the cost of supplying them trigger large export losses.  The same is true of computers, with the Bureau of Labor Statistics import price index for computers (Harmonized System code 8471) falling logarithmically by more than 100 percent between 2000 and 2020 (https://www.bls.gov/web/ximpim/harmimp.htm ).  Computer makers thus have little pricing power and are forced to cut exports when tariffs raise costs.

The high elasticities for steel arise because steel is manufactured in almost 100 countries.3  Domestically supplied steel can thus replace imported steel when tariffs rise.  Excess capacity also makes it difficult to maintain price differentials on steel produced in different areas.  Supply flows can shift rapidly in response to relative price changes arising from tariffs and other factors.  Thus steel exports are especially sensitive to tariffs.

Steel exports from China to the world are also subject to many trade remedy duties arising from antidumping, countervailing duty, and safeguard actions.  This indicates that the U.S. and other countries want to limit Chinese steel imports.  Interestingly, Chinese President Xi also wants to limit Chinese steel production because of the severe pollution that the industry causes in the Beijing-Tianjin-Hebei region.  Rather than using a confrontational approach such as imposing tariffs, the U.S. and other nations could negotiate with China to reduce its steel production.

The implication of the results reported here is that tariffs are powerful instruments.  They impact not only Chinese exporters but also U.S. retailers, automakers, and other companies relying on Chinese imports.   Tariffs disrupt supply chains. In addition they raise costs to U.S. firms at a time when businesses are warning the Federal Reserve of intense cost increases that they will pass on to consumers (https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20210602.pdf ).  It is important that grownups in both countries handle the U.S.–China trade war rather than politicians seeking to foment conflict.

Footnotes

1. The exchange rate elasticity is similar to those reported by Cheung et al. (2012) (“Are Chinese trade flows different?”).↩

2. The disruption to trade caused by tariffs is multiplied by the uncertainty that accompanies trade wars and protectionism. Bloom (2009) reported that uncertainty hinders investment. Investing in physical capital and in research and development is crucial for the electronics industry, given its short product cycles and volatile consumer demand.↩

3. I am indebted to Anthony de Carvalho for the ideas in this paragraph. He is not responsible, however, for any errors.↩

References

Bénassy-Quéré A, M. Bussière, and P. Wibaux, 2021, “Trade and currency weapons,” Review of International Economics, forthcoming. DOI: 10.1111/roie.12517 .

Chang, S., 2008. Sony vs Samsung: The Inside Story of the Electronics Giants’ Battle for Global Supremacy, John Wiley & Sons, Hoboken, NJ.

Cheung, Y. W., M. Chinn and X. Qian, 2012, “Are Chinese trade flows Different?” Journal of International Money and Finance, Vol. 31, No. 8, 2127–46.

Thorbecke, W., C. Chen and N. Salike, 2021, “China’s Exports in a Protectionist World” RIETI      Discussion Paper No. 20-E-011, Research Institute of Economy, Trade, and Industry, Tokyo. Available at: https://www.rieti.go.jp/jp/publications/dp/20e011.pdf

 

This post written by Willem Thorbecke.

35 thoughts on “Guest Contribution: “How Tariffs Affect China’s Exports””

  1. Moses Herzog

    Succinct but informative. I had forgot how much this might increase U.S. inflation. I think Biden will make the proper moves. Maybe just waiting on the first summit, or maybe waiting to hear from unofficial channels in Beijing. I’m pro free trade, but I think if I was Biden I would offer a behind the scenes willingness to take down the tariffs, but be stubborn on having China make the first open/public move. Most Americans right now seem tolerant of some inflation. It could also be a way to reward allies such as India, Canada, Vietnam etc and start up some manufacturing jobs in USA until China comes to the table. Chinese only understand the language of power and leverage, you don’t get leverage from Beijing by making the first move—you let them come knocking on your door with a bottle of Maotai and then have them pay for that night’s dinner. Any other tact/stratagem with Beijing and you’re asking to be hit in the back of the head on the recess playground.

    1. Ivan

      Lifting the tariffs would be politically difficult. It has to be coupled with a deal that reduce trade deficits. Lifting the tariffs and then having an increase in trade deficits would be a disaster for the midterms.

      1. Moses Herzog

        @ Ivan
        100% agree with you on this. America was the initiator of the tariffs and breaking of promises. America was both morally and ethically wrong. It still has to be handled in an intelligent way. Maybe America could throw in some small sweeteners that lag time wise, or “kick in” at latter dates to make up for the fact we were in the wrong in the bilateral thing. That being said you have the 5G and Huawei thing, international waters problems, Taiwan, Hong Kong….Tibet……Xinjiang…….. which were legit transgressions on the China side, so……. there’s an argument we owe China nothing. Still….maybe we can throw some candy in if they make the first friendly move post-Biden White House.

      2. Barkley Rosser

        Ivan the Terrible Scientist,

        You think that voters have their eyes focused on trade balance data? Are you aware that when an economy expands due to internal causes and jobs increase imports tend to rise more than exports with the trade deficit thus increasing? So, do you think that a policy that increases employment more in the US than employment is rising in other nations, this “would be a disaster for the midterms”?

        Offhand for a tariff reduction to hurt Dems in the midterm one would have to see job losses happening clearly as a result of those tariff reductions. But if there are not such obvious job losses and in fact we job gains, how is this going to damage the Dems so badly. Do keep in mind that it looks like Trump’s trade war probably cost more jobs in the US (see workers in industries using more expensive steel and aluminum thanks to the tariffs of in export industries hurt by retaliatory Chinese tariffs that might get lifted if we cut tariffs)..

  2. Moses Herzog

    Off-topic
    This is pretty unrelated, but loosely connected based on geography. The first thing you have to have if a nation wants a healthy and well-functioning bond market is TRUST, reliability, and really a kind of honesty. So what’s going to happen when mainland Chinese are asked to make some Chinese suffer more in order to “make whole” foreign bondholders?? You only get one guess where I lean on that question:
    https://www.youtube.com/watch?v=PWZk-3_-1vQ

    Menzie, I tried to look for a print version of this story and wasn’t having much luck, Maybe there’s something on ZH?? I apologize but the Bloomberg hosted video is clean.

  3. Moses Herzog

    I can’t figure out why people think she’s shallow, can you?? She says she’s “been working on this issue for a very long time”, but she’s NEVER visited the border.
    https://twitter.com/TODAYshow/status/1402224936136187907

    Admirable. Very very admirable. If this is who Democrats are running up the flagpole in 2023–2024, they might as well send a personal request to donald trump to run the country again, because this woman is so shallow, when people look at her they lose depth perception.

    What is she going to do when her name gets tossed around to replace Biden in 2023–2024 and the immigration problem has gotten way worse, and she was the one appointed to “solve” it?? It’ll make Hillary’s server mess look like Nixon’s Checkers speech.

    1. pgl

      Lester Holt’s question here was why I call him Lester the Dolt. And of course MSNBC embarrasses itself by playing this pointless silliness over and over again. And of course you would make a BIG deal of it. More like BFD. Then again – you think Trae taking a shot when he has a clean look and everyone else is covered tightly is being a ball hog. Yea – you suck at basketball analysis too.

      1. Moses Herzog

        @ pgl
        Trae Young was 1-for-7 from 3 point land. I haven’t seen a scoring percentage this bad, since the New York Governor you called “America’s leader on Covid-19 policy response” got up to 8 failed sexual aggressions on his office staff.
        https://www.nytimes.com/2021/03/19/nyregion/alyssa-mcgrath-cuomo-harassment.html

        Do you consider that a BFD also??—because you’ve gotten awfully quiet on that topic. No worries, it appears New Yorkers are totally on board #MeGrabbyFeelyToo
        https://spectrumlocalnews.com/nys/central-ny/ny-state-of-politics/2021/05/24/siena-poll–49–of-voters-do-not-support-cuomo-resignation

        New York “Democrats”, like yourself pgl, are special people. Some New York “Democrats” even claim to be “feminists”. I’m not sure if it passes the whiff test, but hey, I’de never accuse you of that.

        No New York Democrat should expect a woman who ran for President of the USA to have visited the border where Mexican immigrants were being abused, starved, raped, murdered. That’s not Copmala’s problem. She had to ride a public school bus you know……… “She was that little girl……. on the public school bus”. Copmala doesn’t visit immigration borders and she doesn’t clean windows. That’s for “other people”. You and Barkley are just magnetized by these types, aren’t you??

        1. pgl

          How drunk are you? What a mash up of unconnected rants? Relax dude – only one NBA game tonight. And you do not know who is playing. BTW if you see a black point guard do not assume he is Russell Westbrook.

        2. baffling

          from a credibility perspective, moses, you are now on the wrong side. kamala harris won the national election as vice president. this went against every argument you had against her. you may not like her, but she won and you were wrong about her. time to accept her. otherwise you are basically in the same camp as trump, in denial about the outcome of the election.
          i watched the lester holt video. personally i found his approach poor to say the least. what he was implying, but too cowardly to state, was that unless she had personally been to the border she could not have legitimately worked on the problem. but going to the border is simply a pr stunt. it has absolutely no bearing on whether the administration was working on the problem or not, as lester was implying. i thought it was pretty poor journalism on his part.

          1. Moses Herzog

            @ baffling
            Politicians have a responsibility to view firsthand things they are looking for a solution to. You can’t solve things until you define both the specificity and the breadth of the problem. And not all of the problem lies in Guatemala. But she can have nicer “surroundings” there handing out financial bribery to the Guatemalan government that most likely will get America NOWHERE.

            The reason NBC/MSNBC kept playing the video was because she was caught flat-footed and basically lied that she had visited the border. When she said “We visited the border” she knew how most people would regard that, that she herself had visited the border when she had not. It was the style of lie a child would tell.

            Now, you, Barkley Junior, and pgl obviously love politicians who get up on a national stage and tell lies~~hence your adoration of Hillary Clinton. The three of you fake Democrats may enjoy watching a politician tell children’s style lies to all of middle America “We did visit the border” and then lose national elections because you have zero credibility and are a lightweight~~~if you want to lose 2024 to trump or whoever the Republican candidate ends up being, my advice is to keep on worshipping the “school bus riding” LIAR. Did you enjoy 2016–2020?? Keep going at it with shallow candidates like Copmala, just keep at it. You can spend another 4 years calling Republicans racists because you keep fielding/nominating pathological liars. Just go right on and continue. No one on this blog will stop you if you enjoy losing elections with lightweights.

          2. Moses Herzog

            Here’s an interesting take from “Business Insider”. I guess our three resident political geniuses here in the comments section are going to tell us there’s a “conspiracy” against Copmala coming from inside the White House?? Because many White House insiders apparently think defending yourself by equating personally observing America’s southern border with a trip to Europe may have shown a lack of mental acuity on Copmala’s part:

            “Some administration officials are quietly perplexed about the vice president’s answers to some of those questions, in particular that initial question that she got from Lester Holt about the border where she equated it with Europe.”

            “There was a hope inside the White House that this trip would be a success, and by the end of it there was concern that it was perhaps overshadowed by her answers to some of those questions,” Diamond said.

            The White House and a spokesperson for Harris did not immediately respond to Insider’s request for comment.

            Harris was also criticized this week for telling Guatemalans not to come to the US.

            Rep. Alexandria Ocasio-Cortez of New York on Tuesday slammed Harris’ comments, saying they were “disappointing to see.”

            One unnamed Democratic strategist told The Hill on Tuesday that Harris would be “haunted by this trip and this issue for as long as she is in politics.”
            https://www.yahoo.com/news/white-house-officials-quietly-perplexed-110623304.html

            What is Copmala going to do when she figures out bribing Guatemalan officials is going to produce ZERO results on the numbers of immigrants “making the trek” north?? I guess our 3 resident political experts in the comments section will figure it out around the same day Copmala does. Grab some popcorn and fruit punch Gatorade and start the countdown on empty excuses for Copmala.

          3. Moses Herzog

            From “The HIll”:
            Even Democrats conceded the trip hadn’t gone as well as it was intended.
            “She is going to be haunted by this trip and this issue for as long as she is in politics,” said one Democratic strategist, in no uncertain terms. “The border is a thorny issue and she can’t win inside her party and she’ll be targeted for these comments for a long time from Republicans.”

            “The HIll” article goes on:
            “Issues like immigration are not the ones that anyone would sign up for given the obvious political risk,” Democratic strategist Joel Payne added.
            https://thehill.com/latino/557433-harris-hears-criticism-from-all-sides-amid-difficult-first-trip

            Even one of the biggest political dunces of the last 120 years, Hillary Clinton was wise enough to have Richard Holbrooke to do all of her dirty work in the MidEast, always there to be her scapegoat if things went down the crapper, but shove behind the curtain after negotiating with unsavory folks~~~which most likely lead to Richard Holbrooke’s expedited death, while Hillary took the encore bows on stage.
            https://www.nbcnews.com/id/wbna40649624

            So what will Copmala do now?? Copmala has no Richard Holbrooke to blame, in all of Copmala’s political savvy she has set off the bear trap on her own ankles, with no painless exit point, and no one else who ‘wants the job”.

          4. baffling

            moses, looking at the past election, the candidate i supported won. you cannot say the same thing. so it seems a bit outlandish to take to heart your prediction for a hypothetical 2024 election that supposes you will be right and i am wrong.
            moses, you are simply playing right into the hands of the conservative media, who will do anything to create a controversy to repeat over and over again in the echo chamber.
            i suppose if biden were to say “we are going to mars”, you would be upset if he never arrived personally? if kamala harris is the flawed individual you say she is, there will be bigger controversies to worry about. this one is artificial, and no big deal in my opinion. rush is rolling over in his grave laughing at the suckers who bought into this controversy.

  4. Jacques

    Is it really fomenting conflict rather than defending interests? Is the only alternative to tariffs the U.S. laying down and capitulating? If tariffs don’t work, why not provide an alternative rather than just dismiss the problem? I for one don’t want to live in a world controlled by a totalitarian state.

    1. Moses Herzog

      NO Jacques, haven’t you noticed how much Beijing’s behavior has changed since WTO and NAFTA?? When Xi Jinping found out that Han government bureaucrats were committing cultural genocide on Tibetan and Xinjiang people he cried for 3 days straight. Now Great Leader Xi has transported all of them free of charge to Hainan where they bathe in the sun and drink Tsingtao beer all day long. The positive humanitarian aspects of WTO and NAFTA have been powerful. Can’t you read demand and supply curves Jacques?? The American corporations that take profits on low labor costs and siphon those profits off into more stock options executive pay can verify all of the above for you if you don’t believe me Jacques. They ALWAYS pass on those production cost savings to you and me. Honest they do. Do you think American corporate executives just take it for themselves!?!?!?!?! Next Jacques you’ll be telling me that Apple, Google, Amazon, and Facebook don’t pay much in federal taxes.

      Here’s a picture of Tim Cook at a public event explaining how he’s trying to make the world a better place, and how he and Xi Jinping have put an an to Uighurs’ suffering:
      https://images.app.goo.gl/zGGnxj9qxJFdmJRf7

  6. ltr

    https://news.cgtn.com/news/2021-05-19/China-seeks-to-ensure-commodity-supply-stable-prices-10oJFFdetPO/index.html

    May 19 2021

    China takes measures to boost domestic steel supply

    China will strengthen the implementation of its earlier decision to adjust tariffs on steel products, which is designed to boost domestic supply and keep prices stable amid extended price rallies of global commodities, according to the State Council’s Executive Meeting on Wednesday.

    A host of steps were implemented starting on May 1, including raising export tariffs on certain iron and steel products, temporarily exempting tariffs on pig iron and scrap steel, and canceling export tax rebates for some steel products, according to the Tariff Commission of the State Council.

    Since the beginning of this year, due to multiple factors, especially the transmission of the global price rise in commodities, some products have seen extended price rallies, with some hitting new records.

    Prices for 42 out of 50 major commodities rose over the April-May period, according to the Chinese National Statistics Bureau. Prices of steel and coal products surged by over 10 percent on average, on top of a 9-percent inflation in steel in the first three months of this year, data from China’s Iron and Steel Association showed.

    Boosted by the price surge of raw materials, China’s producer price index, which measures costs for goods at the factory gate, saw a better than expected year-on-year increase of 6.8 percent in April.

    https://news.cgtn.com/news/2021-05-19/China-seeks-to-ensure-commodity-supply-stable-prices-10oJFFdetPO/img/c4a58672181b431197dfabfdde9cd078/c4a58672181b431197dfabfdde9cd078.jpeg

    Although the consumer price index, the main gauge of inflation, rose by only 0.9 percent in April, the increase in non-food prices was 1.3 percent.

    “Affected by the increase in raw material prices, the prices of our industrial products such as refrigerators, washing machines, televisions, laptop computers and bicycles have all increased,” said Ren Zeping, chief economist at Soochow Securities.

    The government will take very seriously the adverse impact caused by the price hike, and take measures to ensure the supply of commodities, curb unreasonable price increases and prevent transmission to consumer price, according to the meeting….

  7. ltr

    http://www.xinhuanet.com/english/2021-05/20/c_139958754.htm

    May 20, 2021

    China’s steel industry embraces green shift for carbon-cutting commitment

    BEIJING — Forging ahead toward a greener future, China is ever more committed to transforming the steel industry into a low carbon-emitting one amid its long-term green pledges.

    As China has promised to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060, the steel industry remains the largest emitter among all manufacturing sectors in China, accounting for about 15 percent of the annual domestic carbon footprint.

    This industry, therefore, plays a crucial role in helping the country live up to its carbon-cutting pledges.

    But its green shift is far from effortless. The latest data showed that China’s crude steel output rose by 15.6 percent, year on year, to 271 million tonnes in the first quarter of this year, putting a burden on this carbon-cutting undertaking.

    Under the circumstance, the country has vowed further efforts to reduce crude steel output to ensure it falls yearly in 2021. Measures have also been tailored to encourage endeavors nationwide in this regard.

    One of the latest moves came on May 1, when China applied a provisional zero import tax rate on pig iron, crude steel, recycled steel raw materials, and ferrochrome.

    According to a circular issued by the Customs Tariff Commission of the State Council, the adjustment is expected to reduce import costs, expand steel imports, support domestic producers to cut crude steel output, and guide the industry to cut energy consumption.

    Also, export tariffs on ferrosilicon, ferrochrome, and high-purity pig iron would be raised to 25 percent, 20 percent, and 15 percent, respectively.

    The export policy adjustment is necessary because there is no reason to continue exporting numerous ordinary products given China’s highly limited resources, said He Wenbo, stressing domestic supply. He is the executive director of the China Iron and Steel Industry Association (CISA).

    Apart from tightened control over steel production, the country is stepping up efforts to carry out structural adjustments, shut down outdated production facilities, and improve energy utilization rates, the CISA said.

    China’s steelmakers have taken actions….

  9. ltr

    http://www.xinhuanet.com/english/2021-06/09/c_139998507.htm

    June 9, 2021

    Over 800 mln COVID-19 vaccine doses administered across China

    More than 800 mln doses of COVID-19 vaccines have been administered in China as of Tuesday as the country steps up its inoculation drive.

    A total of 808.96 million doses of COVID-19 vaccines have been administered, according to the National Health Commission (NHC) on Wednesday.

    At least 70 percent of the target population in China is expected to be vaccinated against COVID-19 by the end of this year, said Zeng Yixin, deputy head of the NHC, during a recent interview with Xinhua.

    [ Domestically, about 20 million doses of 5 Chinese vaccines are now being administered daily. Internationally, more than 350 million doses of Chinese vaccines have been distributed. ]

  10. ltr

    Donald Trump launched a trade war with China.

    — Willem Thorbecke

    [ The critical point of the trade war launched by President Trump was to undermine the technological development of China. The response from China has been to emphasize technological independence and development. As for international trade expansion, China has entered a range of agreements and is, of course, building the Belt and Road. As with stopping Chinese participation in International Space Station programs from April 2011 on, the Chinese now have an orbiting space station which astronauts are preparing to occupy this month and which will be international. ]

  11. pgl

    “The high elasticities for steel arise because steel is manufactured in almost 100 countries.”

    Census also provides US imports of steel products by country. 30% of our steel imports in 2018 were from China. Now they may have dropped by 25% but the decline in steel imports from all nations was less dramatic. I guess the Germans and South Koreans were loving this stupid trade war.

  13. David O'Rear

    Let’s remember, folks, that 55-60% of China’s exports are by foreign-invested firms, and pretty close to who cares is produced by the party or state.

    So, while seeking to screw “China,” we generally manage to make life tough for Japan, Korea, Taiwan, and the other big investors.
    Oh, and US consumers and customers.

    1. pgl

      “we generally manage to make life tough for Japan, Korea, Taiwan”

      Where you taking about that $1100 iphone of yours?

      Let’s see – Apple paid Foxconn only $250 for it. And Foxconn paid $225 for components made in Korea, Japan, and Taiwan.

      1. David O'Rear

        pgl,
        Your comments are generally worth reading, but the point of this one escapes me.

    1. Dr. Dysmalist

      Maybe Greg Ip should spend a few days working alongside some of these workers ‘on the floor,’ whether that be a factory floor or a sales floor. And I do mean work, not simply observe. What he may find is that, especially in retail, there are fewer workers than before the pandemic while the flow of freight is at least as high, despite the production of some products being limited by one constraint or another.

      I have witnessed that, while some workers are willing to do no more than a certain amount of work each day, and are therefore equally productive as in the Before Times, there are others who are working harder, voluntarily staying longer, coming in on days off, etc., simply out of a sense of pride in serving their customers as well as possible.

      I’m sure Ip interviewed corporate managers for his story, and yes, they have invested in new/improved technology. But the execs are too impressed with themselves and cannot recognize that more work is being done by fewer people due to sweat, hustle, and sheer dogged determination by hourly grunts, most of whom have received miniscule pay raises, if any, over the last 15 months. That is the primary impetus behind the higher productivity Ip is seeing.

  17. Paul Mathis

    Demand Trumps Trump’s Tariffs

    “The widening in the trade balance with China over the last few months has erased the tightening that occurred over 2019 as a result of tariffs,” said Veronica Clark, an economist at Citigroup in New York. Imports from Mexico hit a record high in March, as did those from South Korea. https://www.reuters.com/business/us-trade-deficit-rises-record-high-march-2021-05-04/

    Vietnam, Taiwan and other east Asian countries are also benefitting from the Trump/Biden tariffs on China. Our overall trade deficit is far above its level 2 years ago. https://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf

    1. pgl

      At this point Jacob Viner is reminding us to read his writing on trade creation and trade diversion. Of course Lawrence Kudlow and Peter Navarro have no clue what I just said.

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