Saturday, August 31, 2019

Tariffs, the Impact on the USA

Listen to the radio and TV, the average family will spend $1,400 on tariffs from China this year. Kind of hard to figure their math, if you buy “Made in USA.” These are real news sources spouting this crap. The announcer seems to be satisfied with continuing to buy from China; Trump is the problem. The whole purpose of a tariff is overlooked, to make you buy from some other source.

The real problem is that we buy everything from China and are dependent upon them for what we need. This needs to stop. We don’t need to pay China 500 billion a year to produce what we should be producing here. “Buy products made in the USA” is what President Trump is saying with the tariffs on China.

These news announcers that claim tariffs will be paid by us, don’t consider that fact that people price shop. Do the math, the Chinese put tariffs on our cars. They do it, to keep their consumers from buying them. We don’t sell many cars in China. Rewrite the headline on their side and it would read “Chinese paying $3000 extra on Chinese tariffs of American Goods.” Point of fact, they are not buying them, they are more expensive than cars made in China. The real question, why do we have a 500 billion dollar deficit with them? What did they buy from us? The answer could be “nothing.”

The whole world has been sucking us dry by producing what ever we wanted. Congress made the legislation and tax laws that forced business overseas. If we can bring them back, we might just have a second chance to turn our economy around. In the past, when we taxed the hell out of manufacturers, they voted with their feet and moved to other countries.

The real problem is the mentality of the legislators in Congress. They think if they double the tax rate, they double taxes coming in. This concept failed miserably during the Great Depression; taxes collected, dropped off of a cliff.

The people in Congress have good intensions, but they have so little business acumen that the real solution are not the most obvious ones. A $15 dollar an hour minimum wage when the rest of the world gets $15 dollars a week, shows how brain-dead Congress has gotten. By god, a family can’t live on a 15 dollar an hour job in the US. Raising the minimum wage moves our jobs to people in other countries. Where you could have had an $8 dollar an hour job, now you have nothing.

So far, the tariffs have been attacked politically as a tax on the American consumer. And raising the minimum wage forces our jobs overseas. Business pass the cost of labor onto the price of the product for sale. It is the consumer that determines whose product they buy. The Tariffs level the playing field; it gives American businesses a better chance to compete with foreign imports.

What we need to realize, is that China, a communist country, does not support any investment in research, there is no incentive for doing so. As a people, they can profit by stealing what we create, and selling it back to us. A lot of the prescription pills in our system like Viagra are counterfeited in their county for sale in our country. The going joke is that they use drywall to make the pills.

We can avoid the tariff issue if we buy “Made in USA.” And that is probably too simple for the democrats running for reelection. Go figure.

China is laughing at us; Trump may set them straight. They are like a bad car mechanic that needs to make a fast dollar, and the US is the patsy. The reality, the next medical cures will not come from China, they have no money for that sort of thing.

Saturday, August 24, 2019

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.