Trump's tariff plan a bad deal
- By Mitchell Blatt
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E-mail China.org.cn, January 20, 2016
Trump's campaign is also the extremely nationalistic. Trump poses with bald eagles and flags, patriotic symbols, and says America is the best, so it would be heresy for him to suggest foreign countries can outcompete the U.S. It must be an "unfair" playing field if they do.
In as much as Trump will admit any structural problems with the U.S. economy, he – and most other Republicans – blames liberal Democratic policies. He says burdensome taxes and regulations raise the cost of business in America too high, and he proposes to cut taxes. But that's a simplistic view of the global economy.
First, the cost of labor in China is much lower than that of the U.S. simply because America's economy is more developed and has a GDP per capita four times higher. Americans couldn't get by on an average annual salary of US$9,000, the number reported by China's National Bureau of Statistics for urban employees in 2014. No matter how low American taxes are, the U.S. can't compete on wages.
Second, the U.S. is still producing large numbers of vehicles. In fact, America's annual production of 11.4 million autos is 7.5 million more than the number built in Mexico. More cars are produced in America than any country but China.
Foreign trade benefits domestic consumers. As fellow columnist Sumantra Maitra wrote in a paper, "Low prices and greater competition keep the domestic goods price low, and benefits the consumer."
Finally, Trump is also wrong to say that China imposes tariffs on American goods while America doesn't impose tariffs on Chinese goods. In fact, both countries have tariffs. What is true, however, is that China's tariffs are somewhat higher than American tariffs on average. According to the World Trade Organization, China applies an MFN average tariff of 9.0 percent on non-agricultural goods, while the U.S. applies an average tariff of 3.6 percent on Chinese imports.
What that does in China is raising prices, but even China is liberalizing its trade policies at the very moment Trump calls for America to do the opposite. Last year, for example, China cut the tax on cosmetic imports from 5 percent to 2 percent in an effort to boost spending. Now Xi Jinping is talking about "supply-side reforms." In a different era, he wouldn't look out of place on a Republican debate stage; Republican hero President Ronald Reagan was a big proponent of supply-side economics.
Now with fear and loathing injected into the body politic, the Republicans aren't quite as open to immigration and trade as they have been. One hopes the feeling will pass when Trump's candidacy ends.
The author is a columnist with China.org.cn. For more information please visit: http://www.china.org.cn/opinion/MitchellBlatt.htm
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