Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Tariffs against China will hurt the USA more than China

Economics / Analysis & Strategy Feb 12, 2007 - 12:15 AM GMT

By: Peter_Schiff

Economics During recent testimony before the hostile Senate Banking Committee, Treasury Secretary Henry Paulson sought to justify the Bush administration's China policy. Predictably, the unmoved senators responded with threats of tariffs should China continue to restrain the yuan, and warned of the negative consequences of restricted access to American consumers. Needless to say, China need not lose any sleep over this bombastic posturing.


For much of the 19th and early 20th centuries, U.S. tariffs on imported goods were common, and in fact were the Federal government's primary source of revenue prior to the imposition of the income tax in 1913. Tariffs were the central political issue of the time, pitting the upper and lower classes against one another. At the time, because tariffs had the effect of making consumer goods more expensive, working and middle classes largely opposed them. Industrialists argued that tariffs were needed to protect nascent American industries from more mature foreign competitors. (Ironically, today's battle lines have shifted completely, with business opposing tariffs and workers supporting them.) 

However, protective tariffs against Chinese goods today would have little benefit as there are so few industries left to protect. If tariffs caused the price of Chinese goods to rise substantially, there are few American made substitutes available to fill the low cost void. The real winners would be other foreign manufacturers that would gain competitive advantages over China. Therefore, politicians will derive scant benefit from the support of tariffs. 

The only loud cries for tariffs are coming from organized labor, in theory to gain protection from lower paid Chinese workers. However, significantly higher prices at Wal-Mart will be experienced viscerally by lower and middle income Americans (ironically including most rank and file union members), who will then be inclined to vote with their pocket books. Therefore, the political risks in supporting tariffs guarantee that that they will not be imposed.

In reality, rather than protecting American jobs, tariffs on Chinese goods would help destroy them even faster. Significant increases in the price of Chinese goods would increase the cost of consumption, causing Americans to either consume less or go even deeper into debt to avoid doing so. While in the long run less consumption would be a positive development, tariffs are not the best way to bring it about. In the short run however, the result would be higher consumer prices, increased unemployment and recession. 

The domestic risks to the imposition of tariffs pale in comparison to the risks of Chinese retaliation. To inflict maximum damage, the Chinese need not consider similar tariffs on our goods, but could instead refrain from currency intervention sending the dollar into a tailspin and interest rates and consumer prices soaring. Tariffs may be the final straw in helping the Chinese to discard their current policy of vendor-financing American consumption. They might actually see the senselessness in exporting goods on credit to over-leveraged, non-productive customers. If they do, they will drop it like a bad habit.

The bottom line is that America threatening China with tariffs is the equivalent of a bank robber turning his pistol on himself and threatening to pull the trigger. Since there is little likelihood of America committing economic suicide, there is no reason to waste any time worrying about what might happen if we did. 

By Peter Schiff
Euro Pacific Capital

http://www.europac.net/

Don't wait for reality to set in. Protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , d ownload my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in