Or is it just goods, and in that case why focus on goods?
It’s much easier to measure physical goods crossing customs. It’s very difficult to measure whether that guy in your restaurant was a tourist or not. And that’s the simple case believe it or not…
This is one of the reasons service oriented economies seem to run huge deficits…
Everything is Microsoft and Co. in Europe and elsewhere, both the OS and things like AWS or Office 365 subscriptions.
If the USA wants tourists, they better ensure not to annoy tourists by their visa policy, or even by detaining tourists:
> Germany Issues Travel Warning for US
> https://www.newsweek.com/germany-issues-travel-warning-us-20...
However, the article you linked to states its not an offical travel warning, more like an advisory.
> But they also stressed that this change does not count as an official travel warning
For example, how to deal with Steam? most of the games I buy there (Baldurs Gate 3 for e.g.) are not made in the USA.
Do you see the word "physical" in my original comment? And me saying that I don't buy such things?
I will admit to buying Intel CPUs, but aren't they manufactured in the Far East?
P.S. Upon inspecting my memory, I think the other one was an HP cesium clock, but that was many years ago.
And rotating rusty hard drives, I suppose. But still all gone.
And don't get me started on American urinals!
A lot of international trade is other goods. Think of how much the UK has paid for things like American aircraft, ships, machinery, or materials used in manufacturing. Our armed forces use a lot of American stuff, and often even British made things have American parts (and a lot of it is covered by ITAR, to an even greater extent than the rest of Europe).
People also tend to hugely underestimate the amount of British manufacturing for the same reason, and because of lot of it is Foreign branded (e.g. Nissan cars).
So I fail to see why I need America at all...
Ah, yeah, one big exception: my computer. Argh!
You can probabl work out where the CPU was made: https://en.wikipedia.org/wiki/List_of_Intel_manufacturing_si...
So you would be happy for the Russians, the Chinese etc. to be able to overfly the UK and send ships into UK waters at will?
You want all the factories using American made machinery, or American inputs to close?
Not American ones I don't.
Is Trump suggesting tariffs on incredibly over-priced and under-performing military and civil aircraft, when we can buy from Europe, or make our own?
To me it seems that the only things the USA sells us are horrible foods, and crap cars for fat people.
Most of the software I use is open source, and again even if I pay for it, is there a tariff?
I just looked up the latest trade and investments factsheet[1] and there are some interesting deets. If you're wondering about direct investment in the US as well as imports:
- Total UK imports from United States amounted to £111.5 billion in the four quarters to the end of Q3 2024 (a decrease of 5.1% or £5.9 billion in current prices, compared to the four quarters to the end of Q3 2023).
- In 2023, the outward stock of foreign direct investment (FDI) from the UK in United States was £494.1 billion accounting for 26.7% of the total UK outward FDI stock.
In addition to direct investment I would also count portfolio investment since we're sort of involved at an individual level through our workplace pensions (and/or personal), savings, stocks and shares ISAs, and so on. A preliminary report[2] foreign holdings of US securities as of June 2024 puts the UK as the top holder at over 3 trillion USD.
1. https://assets.publishing.service.gov.uk/media/67b6f8efbd116...
Also "Total UK exports to United States amounted to £182.6 billion in the four quarters to the end of Q3 2024 (a decrease of 0.5% or £889 million in current prices, compared to the four quarters to the end of Q3 2023);"
Which is why the current government is being particularly cautious at the moment.
I suppose I could include Apple products on the basis that the majority of the profits go to the US rather than the country of manufacture. Apple sells £1.5b of goods and services in the UK although that won't appear in the UK-US trade figures.
Britain had a massive trade deficit with India. It imported far more from India than it exported to India.
But what Britain did was import massive amounts from India and made high value goods at home and provided high value services that couldn't be provided elsewhere.
Should it have flipped the other way? In 1800, should Britain have suddenly shifted gears and started massively exporting to India in order to balance the trade?
Sure, India was a colony and not a mere trading partner, so no need to argue about that. But the US is also an empire that has bases around the world and has many countries in an economic chokehold. The situation is similar in a modern context since official colonization is kind of gone. The US takes in lower value products from around the world and sells them back to the original country at a higher price due to some sort of added value.
Should America do the opposite? Should we drop all of our high value scientific and medical research, drop our engineering, and go all in on making t-shirts to balance the trade deficit? Because we very well could do this. We could steal away the fine industry of Cambodia and Bangladesh and have them buy all our t-shirts and balance the deficit pretty quickly. But is that a long term benefit?
Cambodia and Bangladesh are countries that can't really afford to buy massive amounts of American high tech exports or foods. But they're essentially colonies that export goods to other countries, and through accumulating wealth through that development, more people can afford to buy American high tech products. But we're demanding that these countries buy lots of American products now with money that they don't have. The only way to balance that is to make things they can afford. Which means low value items.
Consider instead:
- Semiconductor low-end fabrication (Taiwan, Korea)
- Basic electronics: circuit boards, USB devices, .. (China)
- Auto parts (Mexico, China, Germany)
- Generic drugs (India, China)
The reality is that the US is not the ultimate global hegemon anymore and therefore offshoring industries cannot simply be viewed through an economic lens.
That’s why the logical thing to do is invest heavily in education.
Oh, wait.
Buffet's article and Trump's tariffs reflected antipathy to net trade deficits. Not specific strategic concerns.
They're "excluded" because they're coming later. It was announced they'd be specific 1s in that area.
The hegemon concept is also out of date. World trade is not dominated by countries but by multinationals. For instance, there are no real "US" car companies. There are a handful of huge conglomerates who can choose to operate wherever best suits their needs. These respond to edicts from individual countries but operate at a level above nation states.
This is why international cooperation on things like taxation or environmental protection is so important. And it is why petty bickering by individual nations will be so damaging.
I guess the only exception is semi-conductors, but we all know they are desperately trying to remedy that.
But then finally we proved Trump and all those evil Americans a point! *evil laughter...
We in EU could do that, if we dared investing in tech.
And if a more balanced trade relation arises, your current leadership is willing to destabilize the whole world, and threaten war.
And yet tariffs were put on countries where clothes are generally manufactured and imported into the US from, which is why companies like Nike got walloped on the stock market.
> The reality is that the US is not the ultimate global hegemon anymore and therefore offshoring industries cannot simply be viewed through an economic lens.
Trump et al put a 37% import tariff on Botswana. What national security interest is served by that?
Israel got a 17% tariff place on it, but Iran is part of the general 10% tariff list. If these are about national security, why does Israel have a higher number than Iran?
There are valid reasons for tariffs:
* https://www.noahpinion.blog/p/when-are-tariffs-good
The universal tariffs that have been acted don't seem to have been done for those reasons.
Eh, they were swiftly outcompeted in almost all fields, but protected that system of mercantilism, by disallowing their colonies to unload anything that was not flagged british. Monopolies work that way, they ruin things and are memorized in the empire center as "good times"..
https://www.investopedia.com/ask/answers/041615/how-did-merc...
PS: This is one of the reasons why the spinwheel is on indias flag- as a sign of clothing production autonomy.
How about the US pays them well for their work so they can afford all these "high value" items?
Oh no, we economically enslaved all these people to our clothing in sweatshops for pennies an hour, but now they're not buying our...1000$ tablets that don't even have a calculator app...or whatever else the US considers "high value"... Oh how terrible!
I think the US should pay them more. But the fact of the matter is people really want socks and shirts for a few dollars. People can choose to pay more and avoid sweatshops right now. But the fact is, most don't want to do that, and when given a choice, they won't.
What the US has traditionally done is make these countries then take Dollar loans from the IMF and World Bank to buy American defense and high tech products. When they naturally then default (right now there are more than 50 countries that cant pay back these dollar loans cause where the fuck are they going to get dollars from) their only option is to sell off their natural resources to Wall St/build a US mil base/hand over port etc.
This game has been going on so long (google super imperialism) the US with 5% of the worlds population has accumulated more than 50% of the worlds market cap value.
So the US starts overdosing on leisure/luxury and pace of innovation starts slowing cause they dont even need to be innovative. Try to build a ship in the US and its not possible anymore cause the experience is all gone. There is no great magic solution. When you talk about British history look at the 60s and 70s. There was major turmoil economically and socially post the Ww2 rebuild cause the entire system dependent on colonies had to restructure itself.
Separately, your first paragraph also seems problematic. Let’s take Vietnam and Cambodia as examples: neither has a US military base, port, nor sells natural resources to “Wall St”.
Finally, I’m not sure I follow how that would cause the US to accumulate 50% of the world’s market cap—especially because the vast majority of the companies in the S&P 500 have nothing to do with defense, shipping or natural resources. I haven’t done the math, but I would venture to guess that >50% of the S&P 500 market cap is tech or tech-adjacent.
I decry this misplaced pessimism.
This bit I see differently, though only with ~ 30% confidence.
> vast majority of the companies in the S&P 500 have nothing to do with defense, shipping or natural resources.
If you were evaluating the impact that a road has, and you looked at all the vehicles that passed over it every day, most of the vehicles you see would be in other industries — retail, industrial, commercial, domestic — very few of them are professional bitumen pourers who make roads. So clearly bitumen pouring only affects a low percentage of the city.
Not sure which one the parent means but this is what I found:
https://www.amazon.com/Super-Imperialism-Origin-Fundamentals...
That seems to resolve the question you put. Britain and India weren't independent, so talking about a trade balance between the two doesn't really mean anything. If it favoured India, that was good for the British Empire. If it favoured Britain, that was also good for the British Empire. It didn't matter who was favoured or by how much because the British capitalists and Imperial officers were in control of both sides of the trade.
I personally think the US trade deficit is a huge problem ... for the US's trading partners who just gave it real stuff for paper. But your argument for why Britain-India experience was relevant doesn't hold together.
Google tells this isn’t true.
The UK actually had a massive trade surplus because it received cheap resources from India, then sold back high value items.
All of this was controlled by strict trade rules.
I think the UK ran a deficit with India, but a surplus with (richer) countries that bought those high value items.
USA on the other hand has a completely different problem (perhaps opposite of what you describe - being the world’s gracious and benevolent trade partner).
And now it's apparent that even being a great ally will result in economic attacks.
So the world gives the US tangible goods. In exchange they get shittalked and more demanded of them.
Your examples of Cambodia and Bangladesh don't really fit in as American colonies. Both countries are already more dependent on China than on the US for imports. Only a fraction of their populations actually use American goods, what maybe an iPhone or some American brands tops.
They do however manufacture final goods for the American market (and the overall worldwide market), so I don't see any losers here except for American consumers. Your average American clothing company isn't going to move away from these countries because they have the full supply chain in place, and your average overseas production facility isn't going to continue producing for an American company at a cheap price if tariffs are in place.
You're on the money with the last point though. The only way to balance it out is to make low value goods, but that was the whole point of outsourcing it to Bangladesh or Cambodia in the first place. Because that was low value production.
For most of living history, the US went out of it's way to ensure that crude oil is sold in USD, including oil that's extracted in oilfields halfway around the world. There's only one way to get USD is to trade with the US.
Only if you're buying direct from the gulf countries or you're buying on the spot markets are you forced to pay with the USD. For example, the EU had a long standing agreement to pay for Russian oil and gas with Euros, India has recently begun paying for Russian gas with Indian rupee, as does China with yuan. While Saudi Arabia and the rest of the oil dependent GCC are forced to curtail production to force prices up, Russia floods the oil market to account for the shortfall.
Tell that to any country having trouble repaying USD denominated debts. The US loves lending money to other countries, especially via military goods, and then the US uses the debt as a hammer.
Let's talk about the all the software exports that got "converted" into a "service" i.e. SaaS / PaaS / IaaS 1st. Not to mention previously we'd have CD / DVD / etc that are now also "services".
Where's the trade deficit again?
Does this story really describe a trade deficit? Trade is measured in units of currency, not in kilograms.
If I import a quantity of sugar from the West Indies for $1, turn it into rum, and export that rum for $10, then I have, net, produced $9 of exports.
No data points, but I like to entertain this.
well, it is not surprising then that war seems to be a realistic possibility at the moment.
(doesn't matter with whom, we have always been at war with Eastasia).
A (very) partial solution is to build the factories at places where the cost of living for the workers is low. This way, the workers can maintain a higher standard of living at a constant salary.
Is it better standard of living to be in a small apartment in the city working an office job or is it better standard of living being in a more rural area working manual jobs. (I honestly don't know, personally, I prefer to do thinking work)
For rural employment to increase you would need to throw away all the technological progress from the last century. The country and economy would be unrecognisable from what it is now.
The question is how post-industrialism wealth redistribution looks like, when work does not seem to be a good key.
No it can't, not yet anyway.
But hey, changes take time!
Americans may no longer have an unnecessarily large or luxurious automobile, or a screen in every room, but I would argue excess becoming the standard is the problem and a major cause of the imbalance.
The solution doesn't feel very democratic or free though, values that have been critical to the identity of the USA.
Because they all wanted to maximize their profit, so they ship their production overseas and now we have no choice but to buy “foreign goods“ from corporations that say they’re from the United States.
Corporations don’t care about countries, they care about profit. Countries are prisonsfor the workers.
Okay, let europe just sell all their stocks and ETF. But also, let them build alternatives to all american products. Let them keep the money they are spending for their Windows and Office licenses, their Netflix and Disney plans. Let them no longer create ad revenues on youtube. Let them buy korean Samsung phones instead of american iPhones.
Would that be a good deal for the american people?
The US creates a 'trade deficit' by swapping things that have imaginary value for things that do not. Under these circumstances they'd be foolish on not running a trade deficit.
But if Trump gets his way, that world will be soon over, and people will trade in whatever they have so will no longer be compelled to hold USD.
So far I can only see 2 reasons why Trump wants this:
1. He believes the US can force others to pay even more, via tariffs, and they will just accept it. No retaliatory tariffs. Kind of like how he says Greenland will be handed to the US no problem. Dishonest? Delusional? Bullyish?
2. The theory of him being a Russian asset is true, and this is the way for Russia to undermine the US while looking like Trump is rooting for the US. The real plan is for the world to drop the dollar. I don't like conspiracy theories but it just makes no sense otherwise
Aside from the obvious consumer technology and software I am hard pushed to think of any USA produce I would buy that would meet the standards we have in the EU.
The simple reality is that the USA consumes more than it produces.
Exactly. Esp when you have the leader(s) of the US complaining that Europe doesn't buy US cars. Well in the UK smaller cars dominate the market where in the US larger cars do. On avg US cars are longer, wider, taller, and heavier.
A lot of our roads (Cities and urban areas) were not designed for larger cars, even a Tesla smallest car, the Model 3 feels big on the road, well it feels big on the road to me.
Indeed, and the US can afford this because it has concentrated a lot of the world's wealth within its borders. So it is not really clear what they want to fix.
Yet, actually the proper analogy, would be a wealthy family using their disposable income to buy products that make their life easier, and sometimes, even make them more productive so that they can have even more income.
Seems unthinkable I know but we are in weird times.
If Trump doesn’t back down we may see a very interesting time in the US economy. I should point out that many oligarchs in Russia established themselves by making bold moves in the turbulent post Soviet times. This may be similar time period for the US where a new generation of winners emerge.
Something to consider. Money can't buy you love.
[1]: https://www.bea.gov/data/intl-trade-investment/international...
He uses the analogy of a farm owner selling bits of their farm to fund their trade deficit.
But in the real world, it's not zero sum like this. The pie isn't fixed to the size of the farm. New companies serving new needs can be created.
If you're a poor country wanting to escape poverty, you want FDI to be high because you realize it's not zero sum.
Yeah, foreigners now own 20% of your stock market due to negative net investment, but it's now 1.5x as big so your slice increased in size to 0.8*1.5 > 1 and everyone is happy.
Given this, I struggle to understand if his argument still has merit.
He has a point about national debt but it's not a new one.
Fwiw, the US has a big surplus in services,so it'll be interesting to see if other countries retaliate against that.
But wouldn't literally selling the country imply the biggest possible trade surplus? It's all export and no import.
Something is not right with how we calculate these things.
China gets a modest share of the profits, because Apple pockets the rest. Reinvesting a fraction in US and stashing most of the profits in banks across the world that use this money as leverage to buy US bonds, among other things.
Should the entire price of the phone count as a Chinese export?
> Prior to 20th-century monetarist theory, the 19th-century economist and philosopher Frédéric Bastiat expressed the idea that trade deficits actually were a manifestation of profit, rather than a loss. He proposed as an example to suppose that he, a Frenchman, exported French wine and imported British coal, turning a profit.
> He supposed he was in France and sent a cask of wine which was worth 50 francs to England. The customhouse would record an export of 50 francs.
> If in England, the wine sold for 70 francs (or the pound equivalent), which he then used to buy coal, which he imported into France (the customhouse would record an import of 70 francs), and was found to be worth 90 francs in France, he would have made a profit of 40 francs.
> But the customhouse would say that the value of imports exceeded that of exports and was trade deficit of 20 against the ledger of France. This is not true for the current account[, which] would be in surplus.
( https://en.wikipedia.org/wiki/Balance_of_trade#Monetarist_th... )
A major fundamental flaw in the concept is the assumption that goods have a fixed value. In reality, their value changes according to where they are, which is the only reason it's possible to make a profit by moving them around.
Note that in the same example, if the French wine is bought by a wizard instead of a merchant, and he transmutes the wine into 50-francs-of-wine's worth of coal for export to England (the ways of wizards are mysterious), the customs house will record the value of the coal as 90 francs. It's only worth 50 francs when it's going the other way.
And if he does the same thing, transmuting the wine into coal within France, and then sells it in France, the econometric body will be happy that French GDP has increased by 90 francs, making the people of France richer.
But note also that the example doesn't make any use of comparative advantage. It's sufficient that the value of the coal is different in different places. This is about how water is more valuable when you're dying of thirst, not about how water is easy to produce if you live on an island in a freshwater lake.
But the fact that there is no flow of currency makes the problem look stupider. England is notionally benefiting because it has gained some wine "worth" 50 francs while losing some coal "worth" 70 francs. France is suffering because it's lost some wine worth 50 francs while gaining some coal worth 70 francs. With no francs traveling abroad, the matter is closed and France has ended up better off. What was the problem?
From this perspective, "trade deficit" appears to be synonymous with "gains from trade". (But note that the analogy falls apart immediately; England is also experiencing gains from trade, but it has a surplus instead of a deficit. The difference is driven by the artificial division of the trade into two legs, one of which happens first. If the import happens first, you get a surplus. If not, you get a deficit.)
With fiat, I think there is a concern floating around that if some foreign party absorbs a lot of our currency, and then we print more to replace the loss (so that we continue to have an appropriate amount domestically), the foreign party could suddenly crash the value of the currency by deciding to spend it. That's true. It can't be the origin of the fear of trade deficits, though, because nothing similar appears in Bastiat's example, where currency never moves. It's more analogous to the traditional fear of seeing your country's supply of gold drained away by trade.
Apple has internal transfer pricing which is dictated by accounting regulations and tax law.
Companies try and set transfer prices to minimize local taxes, but need to follow regulations.
A phone made in China is “purchased” by say Apple Canada for some fraction the price it sells for - regulation usually require the Value to reflect the cost of inputs.
So Apple Canada might purchase a phone from Apple China for $600 CAD then turn around and sell it for $1200 CAD in Canada.
It’s the $600 that counts as a Chinese export to Canada.
> That’s not true.
You're right. It's not always the "entire" value paid by the consumer.
So if Foxconn is assembling a phone from components, they are paid for just that. The export is labor, not a fully valued finished phone.
No, I should have been more clear relative to original comment. I was pointing out even % Apple charge customs, i.e. imports from PRC, large % is still ultimately not value captured by PRC.
For full priced iphone, i.e. $1200, Apple captures or offshores another big slice of $800 in Ireland for intangibles like software related IP. But within the $400-600 BOM for physical device / import unit cost for customs, ~80% are western components, i.e. western value capture.
https://graymirror.substack.com/p/implementing-market-balanc...
Economics likes to present the facade of a hard science with equations and rules - but macro economics simply doesn't work the same way as physics, and pretending that your equations are going to be a crystal ball has so far proved mostly bullshit.
Too many things depend on decisions made by actors acting under very complex and dynamic social constraints, rather than predictable rules.
The end result is that several decades after something happens - we're ok at examining the social/political influence of the time on macro economics, but that insight doesn't do much for us now because circumstances are changing at a pace that has rendered any intuition utterly obsolete.
Trade deficit is a blunt and ineffective way to model international trade on this level, but it is easy to point at and say "look at this large bad number!" which is exactly what is going on. People are primed to interact with that through social media, etc.
The American trend currently is that any trade deficit is bad. It simply isnt. It is idiotic to state so.
The whole point of unequal import and export is that every single country should not strive for importing as much as it exports across all sectors. It is extremely inefficient for every country to specialize in everything equally. What then is the point of international trade? I produce steel, you produce tractors, your neighbor produces wheat. We have mutual dependence across our specializations in the market.
What is missing from the debate is that import/export equilibrium should be achieved on a global level, not on a national level. This is taking something that is a healthy driver for international trade and framing it as if trade partners are forcing others to sell out cheaply.
They aren't. They have found their niche. Find yours or step back.
Except when you have to produce gazillions of CO2 to move things around or when the "efficient" countries are those who don't look at the health of their workforce...
On global level it's always balanced. (How can it be otherwise?)
Common Agricultural Policy?
Tariff rate for cars of 10% (compared to US' 2.5%)
Everybody in the EU would be better off if those countries actually let their consumers spend the money that they're hoarding. All of that spending wouldn't go on foreign goods, so it would even benefit their own producers as well. Yet German politicians indoctrinated in stupid frugality (that once had a point, but is completely outdated) continue to scold countries that run trade deficits in order to buy German goods instead of suffocating their economy and making it even worse for everybody, especially Germany.
The irony of course is that Warren is a leader of the very business community that struck this Faustian bargain, and he probably accumulated a fair quantity of land and bonds through exactly this process. He's basically pleading with politicians to change the math so he can make money a way that is better for the nation.
My question: don"t these foreigners become Americans in a sense? E.g. by holding shares of US companies they have common interests with other shareholders.
Upd: I mean, if considering nation as a partnership, those new asset co-owners are new parnters. Does it imply old co-owners are deluted? Only if the total value of assets is not growing proportianally to the new shares.
In the short-term it may turn out to be fine, but over the long run, you have to pray the foreign owners' values are aligned with American success (keeping Americans employed, building value and not asset stripping the company).
Though I will admit recently I don't even feel like even American owners' values are aligned with American success.
It's all relative. Relative to what? I think its healthier than it would have been had there been no manufacturing at all.
> Are those manufacturing jobs attractive?
Not all but some are for sure. I'm sure there are enough people working for Volkswagen, BMW or Bosch that earn well and prefer working for them than doing something else.
> Are the Germans and the Japanese richer?
Again, richer than what? I think they're richer than they would have been had they not been manufacturing anything. If you're asking whether they're richer than Americans, no they're not, but that's mostly due to historical reasons (U.S dollar is the world reserve currency).
But if you wanted to create blue collar jobs and if the government was going to step in and contort the economy with heavy handed measures, anyway, then just setup a public works program and build a bunch of housing, build and maintain energy and transport infrastructure, build climate mitigation projects. That would actually address a real demand and make a whole lot of sense.
Any source for that? What's the average VW salary , I'm assuming life long VW workers are actually pretty well compensated.
> Nothing close to what Americans are able to afford.
Americans are rich in small part due to true innovation (Google, Microsoft, biotech etc) and large part running endless deficits by having the world's reserve currency. Also America is the complete opposite of the government planned economy / state socialism you're proposing the Germans should do.
Based on Münchau's Kaput, this doesn't seem to be the case. Sounds like they are pretty comparable, especially if you're not a refugee.
So those foreigners who own parts of "American companies" are really owning parts of international companies.
Say foreigners own 50% of US assets. When someone creates in the US a company ex nihilo and sells 10% of it to foreign investors, even though foreigners bought more US assets, this new wealth creation causes the % of foreign-owned US assets to diminish.
When foreign investors own US bonds, as inflation increases and the money supply increases, they end up owning less in real terms.
This doesn't account for investments that are limited in quantity such as real estate.
Also just because those are opposing forces, doesn't mean that foreign ownership wouldn't increase. As a matter of fact, when looking at the foreign ownership of US stocks, it has been steadily increasing.
When the US has a trade deficit with China, it tries to balance that out by issuing debt in the form of treasuries.
As more treasuries get issued to foreign nations, the risk to American sovereignty increases. People really forget Japan's blitz on US real estate and businesses in the 80s and the drastic actions of that era the US took to knee-cap Japan.
And private trade deficits are not balanced by sovereign debt, they are balanced by private debt and foreign direct investment, which don’t threaten sovereignty.
The 1990s U.S. reaction to Japanese business success was primarily driven by popular xenophobia, not economic analysis. It was resolved by the dotcom bubble, an explosion of American innovation that changed the conversation. Not by government policy.
Essentially what Buffett suggests in the article is a cap and trade system on imports.
To import $X worth of goods the importer must have $X worth of ICs (import certificates), which consumes those ICs. ICs are created when exporters export, with each dollar of exports creating a dollars worth of ICs.
ICs are tradable so an exporter does not have to use the ICs created by their own exports. They can sell them to importers.
Note that under this system it is perfectly fine to have a trade deficit with any given country, as long as their are trade surpluses with other countries that balance it.
Trump wants trade with each country to be balanced (or a surplus).
Consider this hypothetical.
• Country A needs to import some natural resource. They import it from country B and use it to manufacture something.
• Country B doesn't need anything that A makes, but does need something from country C.
• Country C doesn't need anything from B, but imports the thing A is manufacturing.
If Trump were running country A he would view this as A getting ripped off by B. Under Trump logic B would be getting ripped off by C, and C would be getting ripped off by A, but he wouldn't care about the former and would probably by bragging about the later but not calling it a rip off.
One of the big reasons money was developed in the first place was so goods did not need to be balanced between each pair of traders.
Before money if a farmer had chickens and wanted a goat he had to find someone who wanted chickens and would trade a goat for it. If the only guy with goats he could find didn't want chickens but wanted a pig the farmer was out of luck, unless he could find someone who had a pig and wanted chickens. It can keep going...maybe pig guy wants a cow so now the guy with chickens also needs to find someone who will trade a cow for pigs.
Money made it so trades become money for goods instead of goods for goods. Chicken guy just needed to find someone with a goat for sale for money instead of finding someone with a goat who specifically needed chickens.
Same thing applies to trade between countries, and for some inexplicable reason Trump wants it to work like the old chickens for goat days.
A H1B visa but for goods instead of people...
Also interesting to update some of the numbers from the doc. Buffett mentions the $2.5t net foreign ownership vs. $12t in total US stocks in 2003; the values are now $26t vs. $62t.
easton•6d ago
(But still good.)
yapyap•6d ago
FollowingTheDao•6d ago
ggm•6d ago
nosianu•6d ago