Trump, China and Tariffs

There is a tariff war going on and a lot of people have it all wrong. If China stops buying soybeans from the U.S., that does not put the American farmer out of work. Grains are an international crop. If there is a shortage from one country you buy from another. The price is determined by whether there is a shortage or overabundance worldwide. China can buy soybeans from a country that doesn’t even grow soybeans. All that country has to do is go on the international market and purchase soybean contracts for delivery and then turn around and sell it to China. The soy beans delivered to China do not have a “made in Country” label. You cannot change the prices on the commodity exchange by buying or not buying from a selected country; soybeans don’t have a country.

Most American farmers select what crops to plant in the spring. Usually it reflects what had high prices last year. So, this year is not a soybean year, but you never know, especially if everyone decides to plant wheat. China could face a real soybean shortage next year because of their cute little tantrum.

China right now is selling us 500 billion more than they purchase from us. This has to stop. It is like a tax we have to pay to China. If they cannot buy as much as they sell to us, we are being ripped off. It has to be one for one on trade. Plus, they copy everything we have them produce for us and then they flood our market with knock offs of the original product.

The major thing about a tariff, is the fact that it raises the price of the item being imported. Common sense suggests that the consumer will not buy the higher priced item. Democrat politicians suggest that this is a tax on the consumer. The tariff makes the Chinese goods more expensive than those offered from other sources. The consumer doesn’t really pay the tariff, the foreign producer suffers from the lack of consumer consumption. You don’t order more of a product that just sits on the shelf.

Our country, in its first 100 years, depended on tariffs to foot the bills. There was no income tax. In modern times, after World War II ended, most of the world’s productions capacity had been destroyed. We became the main supplier of product and prospered.

Most of our production has moved out of country in the last 20 years. If production moves back to this country, it will be a second boom similar to the WWII scenario. The return of production here will stimulate our economy. The one thing we need to understand is why it moved out of country? And that has to do with the bottom line. The Entrepreneur asks one question, where can I maximize profits? We need to make it a better deal, to make it in the USA, rather than in China.

Off shore production has benefits. The entrepreneur who makes his product in a foreign country takes advantage of very cheap labor. It might have cost him $1.00 to produce, and he can show a fictitious cost of $12.00 and pay very little income tax in the country of import. There are no social security wages to pay or unemployment or retirement or health care. You kind of have to wonder, passing all of these laws to protect workers, only forces producers to move their production out of country.

A legislative body can pass a law setting the minimum wage at $15 dollars an hour, it sounds great. The jobs that paid $7 to 14.99 are now gone. Intelligence is not a prerequisite to run for public office. New business are so plagued with bureaucratic red tape that the only ones that are successful are those that start out of a garage.

We need to realizes that the real problem is our legislative laws and government restrictions. The people elected mean well, but they do not have the business experience necessary to solve the issues. Plus, a lot of the yes or no votes have lobbyist money behind them.

I think that President Trump can solve the China and Europe import/export problem. We are not going to like if for a while, but the jobs will come back. A “Made in USA” tag has always been a quality product. Sadly, everything in my house says “Made in China.” And that is the real problem we need to address.