We Don’t Need No Stinkin’ Trade War With China
Donald Trump’s war on global commerce is just plain nuts, and not just the pure economic part of it either. With each passing day we hear from more wanna be MAGA big thinkers arguing that the Donald’s Trade Rampage is also about geopolitics and four dimensional Trumpian chess designed to restore America’s global leadership and technological dominance for years to come.
Well, no, true economic prosperity and technological advance comes from entrepreneurs, investors, inventors and risk-takers operating on the free market. They don’t need any help at all from loud-mouthed Washington politicians who generally have no idea what they are talking about and, more importantly, no skin in the game. That’s why the latter are both ineffectual and dangerous: To wit, the Washington pols are always happy to burden, block, batter and impair the honest enterprise of companies large and small if they get it in their minds that “national security” or “national greatness” require the heavy hand of bureaucrats, tax collector, regulators and pork dispensers.
That’s the essence of Trump-O-Nomics. It amounts to nothing more than a rightwing/populist appropriation of the normally leftist-led approach to mobilizing the state’s heavy-hand for the purpose of fixing problems that are either non-existent or badly misdiagnosed. In the case of the yawning US trade deficits and the hollowing out of America’s once vibrant industrial economy, the massive Trumpian Tariff maneuvers are about as far afield from the real issues as anything every dreamed up by FDR, LBJ or Barrack Obama; and these Trumpian misfires are already fostering immense collateral damage that’s breaking to the surface everywhere.
For instance, when we saw this missive from Goldman Sachs earlier today we initially presumed that its trading book was heavy with Boeing stock and that, as they are want to do, Goldman was putting out a sheep-shearing call to lighten its book at the expense of its customers. After all, how in the world could a 145% tariff on China not result in some retaliatory damage to the world’s leading commercial jet supplier by the folks in Beijing who control upwards of 25% of the total global commercial jet market?
We think the impact to Boeing is very small because China had already stopped taking Boeing deliveries and stopped ordering Boeing aircraft during the last Trump administration, such that there is no real reduction to implement,” Goldman wrote in a note to clients in the late afternoon hours of the cash session.
Needless to say, it was the bolded part of the sentence after the “because” point that changed our mind. It turns out that single-handedly the Donald has already wiped out the largest market of one of America’s premier exporters and aerospace powerhouses that consistently puts huge “winning” trade surplus scores on the board. Well, at least according to Trump’s way of splainin’ things.
Thus, if you look back at 2014—a time before the Donald volunteered to come to Washington and help—Boeing shipped nearly $1o billion of civilian aircraft to China in a single year. Alas, after Trump launched his first trade war on China in 2018-2019, Boeing sold a total of only $6.5 billion of planes to China during the entirety of the five years over 2019-2024!
Stated differently, during the period 2010-2018, Boeing shipped $79.8 billion of planes to China, which accounted for 62% of the combined duopoly market with Airbus. During the last five years, however, Airbus shipped 630 planes to China versus a mere 89 by Boeing, causing Airbus’ $42 billion of sales to tower over Boeing’s $6.5 billion, That is to say, thanks to the Donald’s misguided trade meddling a company owned by a socialist consortium of European states has had handed to them on a platter a stunning 87% share of the global aircraft market!
You can’t get more destructive than this. And for what?
Well, apparently, to get even with China for scooping up US labor-intensive manufacturing jobs that the Fed had inflated right out of the global market.
Boeing Versus Airbus Sales To China in Units And Dollar Value, 2010 to 2024
To repeat from Part 3, US unit labor costs by 2024 stood 470% higher than they had been in 1965 when the US was still running balanced accounts with the world, and when the Fed understood “sound money” to require o.o% inflation.
Stated differently, under a regime of sound money the urgently required deflationary purge demanded by the rise of the low-cost exporting economies would have caused the red bars in the chart to fall after 1992, not continue to climb skyward as it actually did. Accordingly, the solution to America’s unsustainable trade deficits lies in root and branch reform at the Eccles Building a few blocks from the White House rather than a madcap eruption of global trade wars over tariffs and NTBs, which have virtually nothing to do with the trade deficit problem.
Nonfarm Unit Labor Cost Index, 1965 to 2024
Again, just consider the US/China trade balance in 2023 for the top 50 US imports from China which was hideously lop-sided. Yet it is not remotely possible that this 18:1 ratio between imports and exports was caused by trade barriers to US exports or other kinds of cheating by China’s trade bureaucrats. To the contrary, it was due to a vast gap between labor and other production costs in the two economies
Article from LewRockwell
LewRockwell.com is a libertarian website that publishes articles, essays, and blog posts advocating for minimal government, free markets, and individual liberty. The site was founded by Lew Rockwell, an American libertarian political commentator, activist, and former congressional staffer. The website often features content that is critical of mainstream politics, state intervention, and foreign policy, among other topics. It is a platform frequently used to disseminate Austrian economics, a school of economic thought that is popular among some libertarians.
