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China, Oil, and Iran
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georgia_tech_swagger Offline
Res publica non dominetur

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Post: #1
China, Oil, and Iran
Quote:The economic conflict between the United States and China continues to ramp up. Earlier this week the Trump administration announced plans for tariffs on another $200 billion in Chinese exports to the United States. Barring (substantial) Chinese concessions the new tariffs will likely come into effect around the end of August. This is now the third volley in what has become a tit-for-tat trade war. I’m starting to think up snazzy names. “Pacific Pong” doesn’t have quite the right je ne sais quoi, but I’m working on it. Suggestions welcome.

The Americans’ imports from China are triple China’s imports from the United States (quadruple if you factor out services). The simple fact is the Chinese are already running out of American imports to penalize. Any effort to shift the dispute to something beyond goods trade will similarly end in colossal failure. The Americans control global trade routes, global energy, global security, and global finance — everything that makes the Chinese system possible. The Chinese simply can’t bring the fight to other fields without suffering immeasurably. (Which isn’t the same thing as me saying I’d like to be an American company operating in China right now.) Chinese holdings of American government debt don’t even give Beijing leverage as such “investments” in reality are capital flight from the Chinese system.

While Chinese state media continues to put on a brave face, the days of tone-deaf chest-beating are gone. Government censorship guidelines now regularly bar terms like “Trump tantrum” and “trade war” and in general discourage the discussing of any angle of the issue whatsoever. One of the problems with stoking nationalism is that it can be hard to turn off. With the Politburo realizing they have little ammo for this sort of fight, political consolidation at home is far more important than scoring points in a media firestorm.

But that’s not what I want to talk about today. I want to talk about one of the funniest things I’ve seen in months. On July 11 the Chinese floated the possibility of a 25% tariff on U.S. oil exports. Several media commentators immediately pounced on the trial balloon as evidence of something that would get Trump’s attention because of his stated interest in “achieving American energy dominance.” Maybe it will. The criteria for what attracts or doesn’t attract the American president’s attention continues to elude me.

But that doesn’t mean a tariff on American oil isn’t a fabulously stupid idea. It has to do with the nature of the oil market, and in particular the role of American crude within it.


Quote:That doesn’t mean Trump’s actions are wise or productive. That doesn’t mean Trump has a plan. Of course there are better ways to do this. There are aspects of the NATO alliance – in particular members of the NATO alliance – that are worth maintaining. Even cutting NATO into bait would be more productive than the path Trump has chosen. But the bottom line is the Order is gone, and so far the only person who seems willing to admit it, however frustratingly, is the man at the top.

I get why the American foreign policy class feels overwhelmed, offended. Betrayed. After a quarter-century of American leadership largely ignoring them or sending them on wild goose chases through the Middle Eastern Sandbox, they now have a leader who has torn up the script they’ve been following their entire adult lives. It isn’t that they are wrong about the risk to the international order, per se, but instead that they are late to the party. What comes next for the world is scary, particularly after decades of relative stability and prosperity. The American policy establishment (much less the public) is panicking and stampeding for the door. It hasn’t yet realized that there is no going out the way we came in. Until that sinks in (and probably well beyond), Trump will be blamed as the cause. There is plenty of criticism for the quick, ugly, instinct-driven way Trump is severing America’s ties to the world, but there are far greater forces at work than a real estate mogul from Queens.

Instead of panicking through the saddest party of the century, the Americans need to find a new way forward. That’s impossible without a national conversation on what America wants out of the world, and it is certainly impossible without a president who actually engages with his own people. Until the United States figures out that new strategic policy, we will be living in a world in which the Americans are not a force for Order, but instead the greatest wild card in history.

07-26-2018 07:25 AM
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arkstfan Away
Sorry folks

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Post: #2
RE: China, Oil, and Iran
I believe in free trade but I'm not twisted over this for two reasons.

1. A significant portion of US exports are commodities. A boat load of US soybeans basically becomes Brazilian soybeans when they get a Brazilian manifest. Commodity markets will align with supply and demand rather than tariffs on origin. Markets will simply adjust, if the tariff on US is high enough, the price adjusts to reflect transportation costs to a third party and their spread needed to make being intermediary profitable enough to pursue.

2. We operate our domestic corporate economy in a different manner from our world competitors. We impose higher corporate tax rates and lower individual rates. We expect our exporters to provide health coverage via tort insurance, worker's compensation insurance, and as employee benefits. US employees have a smaller national retirement pension and therefore expect either a significant employer retirement plan or higher wages to permit more retirement savings. I don't care which someone thinks is better or worse, the reality is we put US business in a higher overhead cost situation vs most competitors and that has to be addressed in some manner whether that be change what we do or impose tariffs to rebalance the playing field.
07-26-2018 09:58 AM
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