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China Hits U.S. With Higher Tariffs on Soybeans, Cars, Oil (bloomberg.com)
71 points by asaegyn 60 days ago | hide | past | web | favorite | 97 comments



The strangest thing about this event is how nobody can agree on what has already happened. US consumers are being hurt, US consumers are doing fine, the US economy is teetering on the brink of recession and China is steady, China is teetering on the brink of total collapse and the US doesn't feel a thing... all of these contradictory claims have been made to me by internet commenters and media outlets. Shouldn't the effects of the trade war be objective and easy to measure with typical macroeconomic indicators? It beats me as to why there are so many contradictory claims.


From what I understand it's the following:

* Certain sectors of US industries are being disproportionately harmed by the trade war: steel, agriculture, and similar.

* Other sectors of US industries, such as service and retail, are less affected, and are posting strong numbers. This, along with a tight job market, point to a generally strong economy even if specific industries are suffering.

* China is difficult to understand due to the government being known for opacity in their finances. Therefore, we can generally only speculate on second or third order effects of trends, eg. what does the currency floating mean? It means China is shifting financial strategies for X or Y. But we have no idea the X or Y reasoning, only speculations of possible reasons.

* There are several indicators of a recession coming on, including significant day-to-day dips and yield curve inversions and slowdowns in other regions like Europe. However, recessions can't be known until the numbers come out and womp womp we're in one.


So it might actually be worse, since news of the indicators might already mean that cutbacks in payroll are taking place. We would see that with the August jobs number (due out in the first week of next month). Smart companies want to be ahead of the recession curve.

The good news is that the labor force is at record highs. IOW were as close to full employment as we have ever been.

https://www.cnbc.com/2019/08/02/us-jobs-report-july-2019.htm...

The bad news is there's no where to go but down.


I'll be perfectly honest and haven't felt the tariffs one bit. I couldn't tell you one aspect of my life that has been affected. I see gas prices fluctuate drastically but nothing else seems to have been affected as far as I can tell.


There is little oil in China, so the tariffs may not even be related to that.


To be clear, I didn't mean that gas prices were affected by the tariffs. Just that I noticed gas prices more than I notice any other changes in price since the tariffs have gone in place.


As I mentioned in my earlier comment. I feel the difficulty lies in understanding the extent of global supply chains and its impact.

With successive globalization more and more nations got interconnected with multiple layers of mutual import/export of raw material, parts or finished goods and services. If its made in USA or China does not mean it's completely made in USA or China, the components or raw material for it might come from multiple nations. This trade tariffs and war is taking us to old century where we had closed borders and middle man charge a premium to get products and services in and out.

Eventually it will be a loss for everyone not just for any specific nation.


I find it personally helpful in forming my own opinion to consider that the people saying "everything is fine" have a vested interest in everyone believing that and do not in my opinion have a reputation for honesty.


Agreed. It's why I think we (and I'm slowly working towards some ideas there personally) need to prioritize (micro) information sharing, sourcing, referencing, and etc.

I feel like there is too much misinformation out there for any person to be informed these days. Any effort to wade through that should be a currency worth more than gold in my mind, and easily sharable, reference-able, tamper-proof (immutable/signed/etc), and easily remembered.

Information is tough these days. We need to find ways to adapt, because misinformation seems to be winning by leagues.


I also agree, that's very true. China looses more money to FUD, than to genuine industrial decline at the moment.

Industrialist cashing out their factories and running for good life in America not because they can't make sale now, but because they have an expectation of "hard times to come" (even if such are nowhere to be genuinely seen.)


Some of the effects are mitigated by taxpayer subsidies, so things are okay in the short term because of that. And apparently much of that money is going to Big Agriculture.

https://www.latimes.com/business/hiltzik/la-fi-hiltzik-trump...


> Shouldn't the effects of the trade war be objective and easy to measure with typical macroeconomic indicators?

No.

Typical macroeconomic indicators often don't result in undisputed broad characteristizations of conditions (good, bad, teetering on the edge of recession), and, even moreso, don't tell you how they would be different if you changed a particular factor (e.g., the trade war.)


Is the recession "because" of the trade fight?

It's not clear to me that is the case as much as the recession was a long time in coming anyway.

Economic predictions have been all over the map. The stimulus after the events of 2008 was supposed to bring in a lot of inflation, some folks seemed very sure of that ... didn't happen.


I hope this trade war finishes quicker. Everyone playing this game will lose. Global supply chains are much more complex and complete impact is difficult to understand. Hope sense prevail at the end.


Considering the huge understanding gap between regular Americans and Chinese, I unfortunately suspect the trade war will not be over soon.


This is strategically released just before the G7, to make sure that this will be discussed, or maybe to put some pressure on the US before negotiating with its allies.


China is grasping at straws with this. They are really out on a limb.


Per The Washington Post [0]:

> A 25 percent tariff on automobiles and a 5 percent levy on auto parts take hold Dec. 15.

That means your car's transmission replacement goes from ~$3k to ~$3200 (due to the additional markup on parts for time, labor, insurance, etc). Not too too bad for the end user, but actually bad for the parts companies, mechanics, tool and die makers, and others in the supply chain. This will be hurting your local repair shop very directly.

[0] https://www.washingtonpost.com/business/2019/08/23/china-hit...


Assuming the Chinese economy can hold up, Xi Jinping doesn't have an election coming up in 2020.


To everybody raising this question I answer this: "A dictator faces election every time he shows his back to anybody."

And being a head of a giant country, the man just can't avoid doing that from time to time, unlike the head of some tiny banana republic.


Why not apply a value added tariff instead of purely import tariffs? China actually buys more from the US from a value added perspective than the other way around: https://www.bloomberg.com/news/articles/2018-06-12/the-1-4-t...


Pretty sure both sides have a b-plan to avoid massive damage, but someone definitely going to lose.


Most likely, they're both going to lose.


As an Australian I'd say yay but our economy is going down with China.


If it reduces the export of Australian coal to China, not a bad thing.


True, though its clean coal were told.


Really? Hanlons Razor would indicate that the US president doesn't have an A-Plan to start with.


Well, that escalated at an intermediate pace.


They're scared of whats coming next I guess.


Just Devil's Advocate, but if they're scared, why didn't they back down?

I sincerely hope someone is in the room on our side who has seriously considered the possibility here that we may have miscalculated. There needs to be some contingency in place so that we don't get stuck in round and round of barrier escalation.


They need to appear "tough" for their internal audience, even though they are miscalculating at every twist and turn.


China should just start a carbon tax and apply tariffs on imports from countries that don't have an equivalent system in place.


For more details on this excellent idea by Nobel Prize winning William Nordhaus: https://issues.org/climate-clubs-to-overcome-free-riding/

This idea is one that has me slightly less pessimistic about the chances of the world actually doing something about climate change. We don't have to have 195 countries agreeing to a plan and have huge advantages accrue to cheaters who don't follow the plan. We can start with a small but significant number and it's the cheaters that lose out.


China is the world’s largest greenhouse gas emitter. So its a cute idea, but countervailing tariffs would be swift and deserved.


per-capita China emits about half of what the US does.

https://en.wikipedia.org/wiki/List_of_countries_by_carbon_di...


If you believe numbers coming out of China I don't know what to tell you. https://www.reuters.com/article/us-china-power-emissions/fal...


Given that US emissions are more than double China's per capita, I only have to believe that China's numbers have less than a 100% error.

Satellite monitoring of CO2 emissions has a pretty wide error bar, but it's not that wide.


Additionally it just simply makes sense since anecdotally we are aware that many chinese live in extremely rural situations with no heating/cooling, or live in dense buildings with shared resources.

These things cost money, and the median Chinese consumer does not have the budget for these items.


Is that also how the environment calculates the impact? As if per-capita has any bearing on the final outcome.


"China is worse" is a particularly horrible excuse for America doing nothing given those per-capita numbers.

"America is worse per capita" is a bad excuse for China to do nothing.


The environment knows nothing about "China" or "USA" either, these are just arbitrary groupings of people. You can compare the whole of the USA with arbitrary subsets of China, and find that the USA is the biggest polluter in absolute terms. Of course it's as pointless as comparing the whole of China with the whole of US, what counts is the per capita emissions. Qed.


Well, it certainly doesn't calculate it by political territory or tribal affilliation.


If you pee in the river once a month, but the municipality of the town upstream decides to release its entire sewage into it, does the river calculate the impact per-capita?


If you kill somebody once a month but a government near you decides to start a war, does it make your murder ethically acceptable?


Terrible analogy. Someone making a campfire, like humans did for thousands of years, isn't doing something remotely as bad as committing murder.

The analogy only works if what a single person is doing is inconsequential if they are the only ones doing it. Murder certainly does not belong there.

https://en.wikipedia.org/wiki/Tragedy_of_the_commons

Murder isn't a good example of it.


I hardly think that the GHG emissions of countries other than China are inconsequential.


I really hate people think that China is so green, while they are building coal mines in other countries.

They just import it without pollution in China, but it's happening elsewhere.

So a carbon tax like you suggest would do more harm.


Are you approaching this from an environmental POV?

I think China is targeting specific products, not thinking of this the same way I think you're thinking of this.


Environmental protections would have been a much more justifiable motivation for attempting to modify the behavior of Chinese exporters and even the playing field for US competitors who must comply with environmental regs that Chinese firms can ignore.

But Trump's goal with the tariffs was simply to destroy economic cooperation between the US and China, so that peaceful business entanglements would be less able to prevent escalation toward war.


This is a genius tactical move. It gives them a claim to the moral high ground and splits off Europe as an ally.

This move is also available to Trump, but there's no way he'd ever take it.

It'd also be a genius tactic to adopt by the Democratic presidential candidate's. Trump's trade war is quite popular with the American public; the presidential candidates could be hurt quite badly by opposing it directly.


The trade war is one of the most hated policies of the President. It polls worse than the immigration camps (sadly).

https://poll.qu.edu/national/release-detail?ReleaseID=2622


You are citing a 3 month old poll.

Actually, 2/3 of Americans support the President's trade war.

https://www.nbcnews.com/politics/meet-the-press/support-free...


What? It looks like your source claims the exact opposite of what you do. What am I missing?


From my citation:

> “While Trump plays a game of chicken on tariffs, a record number of Americans believe that free trade is good,” says Democratic pollster Jeff Horwitt at Hart Research Associates.

Horwitt is spinning his poll to make it seem like free trade is not what the trade war will result in. A majority of Americans support Trump. Don't make the 2016 mistake of trusting polls again...


>Horwitt is spinning his poll to make it seem like free trade is not what the trade war will result in.

And you're spinning it as 2/3rds supporting Trump's tariffs. Which is not the poll's question.

>A majority of Americans support Trump

What has this got to do with anything, even if true? Which it is not, see below.

>Don't make the 2016 mistake of trusting polls again...

What 2016 mistake? 2 million more voted against Trump than votd for him. He won because the electoral college is effective gerrymandered because of demographic changes. So you have zero basis to state that a majority of Americans support Trump for now.

I mean, you're the one quoting a poll, and saying it shows that 2/3rds support Trump's tariffs.

Which is wrong on two levels, first, that's not even what the poll shows, second, even if it did, if you're right about polls being wrong, then the poll is useless to measure public sentiment.

Also, you cannot just make up things without telling us how you arrived at those assertions.


The trade war specifically is not addressed in the poll; “free trade” is, and it has broad support. Free trade is directly the opposite of a tariff policy, so superficially that's directly contrary to your characterization. While you could argue that the policy is designed to produce an outcome which would feature free trade as a future state, there's nothing in the poll that suggests that the public supports that position. So, no, while there is a potential argument that your source doesn't directly contradict the point you cite it for, it absolutely does not support that point even a little bit.



That also doesn't show that the American public broadly supports the trade war, it shows that a particular demographic that broadly supported Trump before the trade war broadly also supports the trade war, just a little less than it still supports Trump (78% vs. 79%.)

If that holds for other groups (trade war support just below Trump support) it would indicate America broadly opposes the trade war, as Trump's at <45% support in current polling.


[flagged]


I don't think you understand how China or the CCP works, my friend.

There is no need to be condescending.


If Trump had more than a five second attention span we’d have the Border Adjustment Tax right now and be done with it. Maybe make it carbon based later.


USD shortage. Chinese tariffs and past import restrictions conveniently decrease pressure on their declining USD reserves (see link to article below).

https://www.scmp.com/economy/china-economy/article/3012460/d...


Big bucks Poker game played in public.


tariffs or Tarrifs?


Bloomberg corrected the headline now. In my option commenting on typos doesn't add much value to a discussion.


Opinion*

(Sorry)


Trump's whole schtick is to come in with an incredibly aggressive posture (cancel NAFTA!), extract some concessions, then take a victory lap. When the concessions don't come he gives up quickly (see the government shutdown). He has no real plan or capacity for a protracted and painful trade war. He hasn't made the case to his people or his allies for what the goal even is, and whatever support he has will evaporate when the pain becomes serious, assuming he doesn't just fold first.


He already could have taken a victory lap and done effectively nothing with the first offer from China. He chose to double down.

I'd say there is no plan and it is just the randomness of a capricious old man.

That's a glib take I admit, but I really think that all indications are we're dealing with a very glib president.


I don't believe that you are considering that President Trump is a master negotiator. It's what he's known for in the business world.

His hard-nosed deals bring profits for his investors, and massive revenue streams.

Call him whatever you will, and demean him to the world, it still won't change facts; he's an extraordinarily profitable businessman, with extreme revenue returns.

::shrug:: The proof is in the pudding so to speak. Our President's actions will prove themselves, one way or another.


I don't see much to indicate what you're saying is accurate.

His own waffling and capriciousness have sunk even his own initiates in congress with his own party members. Leaks from the white house, members of his own party, even his own people who have publicly stated he is very impulsive (some are less generous of that).


> he's an extraordinarily profitable businessman, with extreme revenue returns.

This is a genuine question : how do you know the profitability of Donald Trump's investments or companies ?

From my understanding, he has always worked for his private company/holding/organization, and thus there is no yearly or quarterly public reports. Did I miss something ? Maybe there is some joint venture with transparent reports ?


There is either no plan, or there is a plan to utterly trash the US and it is working.


I'm not sure it is possible to distinguish one or another considering the way things have played out / information available.

But as for any intent to "trash the US", at least as far as a trade fight goes I'm not convinced that any other trade fight plays out any differently. Personally I would do things differently, but the results may be the same.


Not having the trade fight plays out differently.

edit - I thought I'd respond to this bit as well -

>I'm not sure it is possible to distinguish one or another

When the President of the US is comparing China with the head of the Federal Reserve, in order to claim that the Federal Reserve is a domestic enemy, while systematically poisoning relations with any country that hosts a US military base, Denmark/Greenland being just the latest example, then I think it is possible to distinguish the two. Someone being random tends not to travel in a specific direction unless it is the path of least resistance.


First China tariffs were in January 2018, when do you start to consider the trade war protracted? I’d say it is already painful and protracted.


Painful would be the 35 percent GDP contraction that Cuba endured, without regime change, after the USSR fell, under continuing US sanctions. Or the hyperinflation and food rationing that Venezuela has endured, without regime change, under US sanctions. Do you think Trump could lead the USA through that kind of pain?


That’s seems to be happening over NAFTA, you’ll likely just end up with a somewhat update NAFTA 2, which I’m sure will be the best trade deal in the history of trade deals, unlike the largely identical previous NAFTA.

I think the China tariffs are different. Both sides have doubled down, then doubled down again. It’s even possible both Trump and China see this as an opportunity to reduce their dependency on each other.

China also may calculate thus could take some excess heat out of their economy. If there is a down turn, which many observers have been predicting anyway, they can blame Trump and make enduring austerity a patriotic issue.

A similar dynamic is playing out with Brexit. A no deal exit may be hugely damaging to both sides. But they each calculate they can blame it on the other side, and even paint anyone complaining about the effects as unpatriotic. That won’t necessarily persuade the complainers, but as long as it plays well to the politicians own support base that may not matter enough electorally.


You are right on everything except his support. His followers will support him unconditionally.


China is more or less out of options already though. Their economy is trashed to the point they are already devaluing their currency. HK situation certainly isn't helping either.

In the meantime every tariff they add just serves Trump's goal of keeping jobs in America ( or at least that is how he will pitch it). Were already seeing plenty of companies pack up shop in China.


In general yes but the consensus seems to be that China has been a problem and although Trump hasn't necessarily gone about it in the right way something needed to be done. My guess is the people around him are quite happy for this to continue.


Not a trade war. The Trump administration goal is nothing short of regime change in China; and it's a goal the next President (Trump, Warren, etc.) will likely continue. By 'regime' I mean an end to Chinese 'destiny' based policy, even if it requires a change in CCP leadership. That's not to say the CCP will be displaced, rather the balance of power internally may change.

HN readers are hip to the reasons why this needs to happen. Internally, China is destroying its people's savings, purchasing power, environment and health to achieve China's 'great destiny'. Externally, China has created all manner of artificial economic inefficiencies. This includes debt enslavement of African and central Asian nations, dumping of goods, and theft of IP at a monolithic scale.

It's true that the full case has yet to be made to the American people. It's also true the US cannot do this alone and the EU (China's largest trading partner) may have to join the fight. And, it is the case that a 'trade deal' may be reached between Trump and China that falls short. None of this is going to alter the larger national (global) security objective of 'helping' China compete for resources in a less zero sum manner.


If someone had made this comment 10-15 years ago and used it to caution the US about why it was foolish to invest $3.6 Trillion into destroying middle eastern infrastructure, it would have made coherent sense to consider.

But it's simply too late. The policies you describe are benefitting most Chinese people and are broadly supported domestically in China. Your characterization of China's dealings in Africa borders on absurd, and the IP theft claim (even if true) would not justify any of what you suggest is necessary.

> It's true that the full case has yet to be made to the American people.

Nor will it be. There is no definition of US national interest that is utilized in policy discussions. Leaders stick to painting foreign leaders as despots and the American people happily pay for all the warmaking.

What is different about China is that most Americans broadly support what China is doing and respect President Xi's leadership.

The US spent $3.6T on a useless war that had supremely negative ROI and now China is right behind us ready to attain first world status and beat us at 5G, etc. China didn't cheat us, our leaders did by wasting $3.6T in the middle east. The US middle eastern wars are the biggest financial fraud in the history of the world.

By simply doing infrastructure improvement and focusing on domestic issues, China has nearly overtaken the US, and the US response is supremely outdated and fails to recognize that it was US mismanagement that closed the gap, not Chinese cheating.


>Internally, China is destroying its people's savings, purchasing power, environment and health to achieve China's 'great destiny'.

More reference is needed. As a Mandarin Chinese my impression so far is otherwise.


RMB declining in open market against USD.

China issues much debt in USD and pays interest in USD. What should be 1 unit of debt is 6 or 7 units of debt because of currency differential & risk premium.

China purchases many imports in USD.

To keep RMB well under USD, China must sell USD and buy RMB in open market. This has happened for many years.

In sum, as long as China subsidizes domestic market the effect of all of this is not felt to most Chinese. However, this becomes very, very, very, very costly. Look at food prices in China as one example.

When there is a rebalance / reconciliation the RMB savings will be hurt.

China hopes to prevent this by gold purchase and Belt & Road growth.

Very difficult situation. Bad management of economy.


I'm more interested in what average Chinese experiences than the macro currency/debt figures. Yes food price has been going up. But salary has been going up in the past decades or so as well. I feel purchasing power has been flatlining now than before. Environment wise it's getting better actually. I agree with the growth of salary and food price, people's savings are destroyed. But other than that I wont use the word destroyed for other aspects. I personally think if it's not because of the economic achievement of the Chinese government, you wont see as much nationalism from there today.


China's been conducting a trade war for several years. US finally woke up and now China's trying to nip any resistance in the bud. I guess they couldn't buy off the current president like they have others.

https://en.wikipedia.org/wiki/1996_United_States_campaign_fi...


I'm still baffled why Beijing is still goes THAT easy on USA.

It is fully in its capacity to make Washington to capitulate.

If they were to go with embargoes and not tariffs, things would be dramatically different, especially if they can nuke holiday season sales.

Just a plain clothing embargo would send all and every American retailer scrambling. There will be not enough merchandise in all India, Bangladesh, and Vietnam combined. And it will be even worse if Chinese factories in those countries would also join the embargo.

For things like regular household goods will also be no real alternatives as even export oriented economies like Vietnam import god knows how much plasticware from China just because it is often cheaper than manufacturing locally.

Just thing of how many "dollar goods" you buy every month, and what would you do if there would simply be none.

I instantly remember my childhood in early nineties Russia. We were one of richest families in the city or likely the entire Russian Far East, with father's business and mom's salary making few hundred thousand bucks a years, but from time to time we had to subsist on millet for months in a row for a simple reason that there were physically no other food in the entire region.


>If they were to go with embargoes and not tariffs,, things would be dramatically different, especially if they can nuke holiday season sales.

>Just a plain clothing embargo would send all and every American retailer scrambling. There will be not enough merchandise in all India, Bangladesh, and Vietnam combined. And it will be even worse if Chinese factories in those countries would also join the embargo.

>For things like regular household goods will also be no real alternatives as even export oriented economies like Vietnam import god knows how much plasticware from China just because it is often cheaper than manufacturing locally.

I am confused.

No countries that I know of apply tariffs and embargoes on exports of goods, except stuff that's national security sensitive like military tech. They do the opposite, i.e subsidize exports, which is at the core of this mess, i.e Trump thinking that China is subsidizing too much and devaluing their currency.

Are you advocating that China apply tariffs and embargoes on exports to the US? Isn't that what the US exactly wants?

Also embargoes mean that, in the future, after this is resolved, importers will be very vary of trust Chinese exports and will prefer other countries even if somewhat more expensive, just for stability.


Very much yes. One thing is just having to buy goods at 25% higher price, another is not being able to buy even basic houseware and "dollar goods" at all.

When even rich people start feeling powerlessness at not being able to get basic material necessities, things do happen.

At some point, people stop looking at Beijing, and start looking at Trump


Nah, it's tempting for China but they are smarter than that. Other countries would quickly ramp up, and will also think twice about relying on critical imports from China, as China would have shown their willingness to cut their nose to spite the face. It would unite Americans behind Trump as China would be viewed as a bad actor acting to hurt Americans. The response is not proportional and it would hurt local jobs while helping competition from other countries to ramp up.


Do you understand that industrial output of all "China alternatives" combined would only equal that of one well industrialised province in China despite not so insignificant investments coming for more than a decade?

So US will be stuck, and will have to live with understanding that even a plain plastic bucket costs $20.


the issue is it would also wreak serious havoc on china's economy

and while xi is president for life, he doesn't want to risk mass unrest in his own country.


The Yuan to USD exchange rate is still close to an 11-year low so China's economy is already in flux.


Trade with USA is just 2% of China's GDP.

Were it to take a short, controlled dip into recession to teach US a lesson, it would not be really noticed domestically.

And it will be a much better alternative than to let China to slowly bleed as manufacturers leave the country just to be able to sell to US in long term.


Total Chinese export is still going up. You only need 35% local content to be labeled “made in country x”. This trade war will reduce headline bilateral deficit with the US which China knows to be at an unhealthy level. There’s additional cost compared to the past but US is sharing the burden.


It's not really that baffling - China makes vast sums of money trading with the US and nuking holiday sales would hurt them just as much as it would hurt the US, if not more so. And there's no undo button on such a move, if China crossed that line once then there's zero guarantee they won't do it again in the future. So while in the short term China might get what they want, but in the long term it would drastically decrease the appeal of manufacturing in China and international businesses would look elsewhere to invest.


China has to avoid alienating the American people, who largely support China over Trump on the matter of tariffs.

So by playing it cool and letting Trump get in a few rounds of tit for tat, China is expecting not to have to take more drastic measures in order to win.

I expect that China's restraint will pay off, as the trade war has already sent the economy into the early stages of recession, and China still has a year to let Trump dig his own grave.


They know that there are elections in 2020. They might be playing for time until then.

But if Trump is re-elected...




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