TRADE WAR US CHINA N.1
Get the truth on this issue with Michael Hudson
From: Hugo Adan Zegarra
….
TRNN: The Real News Network. August 2, 2019,
Trump’s claim that China is paying
for the tariffs is completely false and basically serves to redirect income from his poor supporters to his wealthy
supporters. Not only that, the policy will have the consequence of
further isolating the United States, says Michael Hudson
GREG WILPERT: Welcome to The
Real News Network. I’m Greg Wilpert in Baltimore. President Trump announced on
Thursday via Twitter that trade negotiations with China have stalled and that
he will now impose a 10% tariff on $300 billion worth of goods imported from
China. At a rally later in the day on Thursday, Trump said the following.
PRESIDENT DONALD TRUMP: I
just announced another 10% tariff on $300 billion worth
of Chinese products that come into our country. The fact is China
devalues their currency, they pour money into their system, they pour it in,
and because they do that, you’re not paying for those tariffs. China’s paying for those tariffs. And until such time
as there is a deal, we will be taxing the hell out of China. That’s all there
is.
GREG WILPERT: The
announcement came as a surprise to financial markets, which plunged worldwide
immediately after Trump’s tweet with the Dow dropping by over 700 points for
example. China responded by saying that it will retaliate, but it did not
specify how. Meanwhile, the IMF estimates that the US-China trade war will reduce
global economic growth by at least 0.1%. International trade growth and
business investment has stalled because of the trade war. Trump has long said
that his main objective is twofold. On the one hand, he wants to China to make
it easier for US companies to invest in China without giving away their
intellectual property. On the other hand, he wants China to commit to
purchasing more US-made goods in order to reduce the US-China trade deficit.
The US and China had almost come to an agreement last June, but faltered over
China’s unwillingness to change its approach to intellectual property.
Joining me now to discuss the US-China trade war is Michael Hudson, he is Distinguished Research Professor
of Economics at the University of Missouri, Kansas City and Professor at Peking
University, and recently met with China’s Academy of Social Sciences. His most
recent book is J is for Junk Economics. Thanks for joining us again, Michael.
MICHAEL HUDSON: Good to be
back here.
GREG WILPERT: So let’s start
with what Trump claimed, which many have already criticized, but it bears
repeating. That is, his claim that China’s actually paying for the tariffs and
not US consumers. But if we end up paying more for Chinese products because of
the tariff, is there any basis for this claim of Trump’s that the Chinese are
paying this tax? And what purpose does this tax serve any way, other than to
pressure the Chinese?
MICHAEL HUDSON: It would only
be true that China pays if China’s firms would now
reduce the prices they charge to Americans by the equivalent of 10%. In
practice, this would be 30%. It would only be true if China would
operate all of its export industry at a loss. And of course that’s crazy. No
country would do that. China certainly wouldn’t do that.
Trump is pretending that Americans
will not pay this price. He’s pretending that our prices in this country
will not jump by one or two or three percent, and they’re going to be a lot of
shortages as many imports simply stop from China.
Basically, what he’s trying to do is
blame China and blame foreigners for the fact that a lot of Americans are
really hurting. They’re not doing better. They’re not earning enough to
break even. They’re going further into debt. But Trump is really saying that
it’s not our fault. It’s China’s fault. Don’t blame the financial
mismanagement. Don’t blame the corporations. Blame China.
He pretends that they’ll pay instead
of Americans. But when you levy a tariff, import prices are going to go
up. Americans will pay more. The demands he’s making on China are nonsensical.
No country is going to give away their autonomy and abolish their socialist
economy and say, all right, we’re going to become an American satellite. We’re
going to follow Thatcher and Reagan policies and let America buy our companies
out and push us back into the 19th century Opium Wars.
The Opium Wars are over and so it’s now Trump’s trade war.
So this is nonsense.
But there’s another reason that
Trump is doing this, and that’s because he has something in mind that
most people just don’t even think of: the American
budget deficit. The government budget is running up deeper and deeper
debt as a result of Trump’s tax giveaway to the 1%. So he says,”How am I going to shrink the budget deficit?” He says,
“I know. I’ll make my constituency pay. That is,
the people that voted for me. I’ll make labor pay.
If I can raise taxes on 300 billion of Chinese imports by another 10%,
that’ll be all together I think 20% and will yield $60 billion to help us solve
the budget deficit that I might give away to Wall Street and the wealthy
corporations I’ve created.”
It’s all a diversion so that people
won’t look at what’s really happening, only at what Trump is saying. But
as people find that they have to pay higher prices, I
don’t think they’ll believe Trump. I think he’s lost all credibility. That’s
why the stock market’s collapsing. They’re aghast. They think that even Trump can’t get away with this big a lie when it’s so
obviously false.
GREG WILPERT: Yeah. I think
that’s a very interesting point about where these taxes might be going. I
already mentioned though, the short-term consequences of this trade war, which
is lower investment, less trade and lower economic growth. But what are the
long-term consequences for the US of this trade war?
MICHAEL HUDSON: Well, it’s a
war not only against China. It’s a war against the entire world. Trump has just
recently stepped up the war against Russia a few days ago when the Senate
agreed to penalize countries that help fund Nord Stream, like Germany. He has
gone to war with the EU. He’s going to war with Germany.
He’s also gone to war with Venezuela,
gone to war with Iran and Yemen. He is going to war with the entire world. So
the long-term consequence is for China and Europe and Russia and Iran to draw
closer together. America is going to be left isolated.
That’s what an isolationist policy
is. It isolates America. Trump is doing it, and this is going to mean
that America is going to have to fall back on its own resources. Trump’s
pretense is that now that we have tariffs against China, we can restore
manufacturing here. But there’s no way he can bring manufacturing back, because
it’s already gone. It takes years and years to rebuild factories, to put in
infrastructure. America basically is already overpriced
because of the cost of healthcare alone. Not to mention housing and debt. So
he’s locked America into an austerity program. This austerity program is
going to get deeper and deeper over the next year or two.
GREG WILPERT: Now, if the
effects of these tariffs are quite negative, as you point out. Wouldn’t that be
an argument in favor of free trade then, in favor of neoliberalism? What’s your
reaction to that notion?
MICHAEL HUDSON: What Trump
wants is not free trade. It’s controlled trade.
He’s telling other countries what they have to import from us and what they
have to export to us. Colonialism was free trade. There
is no way that America now can engage in free trade and win, because we’re a
high-cost economy and we’re not producing.
There’s no way in which a change in currency values is going
to shift production to the United States when we don’t have any factories to
produce manufactures. When you look at the structure of world trade, you
realize it has nothing to do with tariffs at this point, and nothing to do with
currency values. It’s to do with the fact that Wall
Street and the corporate employers have jumped ship, they’ve moved abroad, and
they’ve hollowed out the United States. And once it’s hollowed out, the
only way you can rebuild it is to have public infrastructure, to have public
subsidy just like China’s doing and other countries are doing, public health
just like other countries are doing, to cut the costs to employers.
But now that America and especially Trump,
but also the Democrats want to privatize everything from healthcare to
infrastructure, we’re going to be priced out of world
markets whether it’s free trade or not.
GREG WILPERT: Now, finally,
what do you expect the Chinese will do assuming that the US and China do not
come to an agreement very soon?
MICHAEL HUDSON: Nobody expects them to come to an agreement. They
think that America has made such outrageous demands that they surrender and
become an American colony, that they’ve given up on America. They do not expect
there to be a rapprochement. They are turning closer to Russia and to Europe.
Basically what China said is, “We’ve been using our factories to produce consumer goods for
Americans. It’s time we begin using them to produce consumer goods for the
Chinese.” So they’re going to raise their own living standards. They’re
going to produce more for their own population. They’re going to develop much
more trade with Europe.
Now that Europe has seen that
America is trying to interfere with its trade with Russia, its oil
trade, and is trying to get Germany and Europe to join the war against Iran,
they’re saying, “Okay, the whole postwar unity with the
United States is over. We’re now going to be
part of Eurasia.”
So Trump has sort of sped the parting guest. He’s driven
Europe, Russia, China, and Iran together. As I’ve joked before, he should get
the peace prize for that. He’s unified the whole world
outside of the United States.
GREG WILPERT: I think that’s
a really, very powerful point. On that note, I’m going to have to stop here
though for now. I’m speaking to Michael Hudson, Distinguished Research
Professor of Economics at the University of Missouri, Kansas City. Thanks
again, Michael, for having joined us today.
MICHAEL HUDSON: Thank you,
Greg. It’s good to be back.
GREG WILPERT: And thank you for joining The Real News
Network.
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