Monday, October 03, 2011

Congress Considers Raising Taxes on American Consumers and Firms Buying Chinese Imports

Here we go again.....

WASHINGTON (AP) -- "After years of unsuccessfully trying to force American consumers and businesses to pay higher prices for Chinese imports, Congress is taking another stab at retaliating against what many see as Chinese manipulation of its currency to make its exports to the United States cheaper for Americans and U.S. goods more expensive in China.

The Senate is expected to take up legislation Monday that would impose higher U.S. duties taxes on Americans buying Chinese products to offset the perceived advantage that critics say China gets by undervaluing its currency in favor of millions of American consumers and thousands of U.S. companies.

It's a political shortsightedness because given here that China's economic policy has damaged American manufacturers and taken away American jobs has saved American businesses buying low-cost imported Chinese inputs millions, if not billions of dollars, and helped U.S. firms be more competitive and in the process support  and create U.S. jobs.  Further, the cost savings from American consumers buying Chinese imports has freed up billions of consumer dollars that have been spent elsewhere in the economy and have supported and created thousands of jobs throughout the U.S. economy.

Beijing denies that its exchange rate is responsible for the huge trade deficit that the United States has with China, and it's not clear that U.S. lawmakers have the political will to follow through with imposing new taxes on the fragile American economy.

Sens. Chuck Schumer, D-N.Y., and Lindsey Graham, R-S.C., along with others, have tried for at least six years to pass legislation making it easier to impose higher tariffs taxes on American consumers and businesses buying Chinese goods. That would help compensate punish millions of Americans for what they say is Beijing's effort to keep its currency, the yuan, undervalued against the dollar and provide everyday low prices for millions of struggling poor and middle-class Americans.

Among Republicans, presidential hopeful Mitt Romney has said he agrees that we should would penalize American consumers and businesses with higher prices through higher taxes when they buy imports from China China for keeping its currency artificially low.

MP: To the extent that China is manipulating its currency to provide low prices for American consumers and businesses, we should be thankful for the "foreign aid" being provided, and be grateful for the ongoing transfer of wealth from the relatively poor Chinese citizens to the relatively wealth Americans.  

16 Comments:

At 10/03/2011 8:56 AM, Blogger morganovich said...

talk about biting the hand that feeds you.

not only is this a terrible idea as it will increase prices and reduce selection for US consumers, but it's a fiscal catastrophe for the federal government.

are these congressmen so financially illiterate that they do not understand how the chinese "manipulate" their currency?

they do it by buying US treasury bonds. you know, the ones the federal government has to keep issuing in record amounts because they are incapable of balancing a budget?

china buys a HUGE portion of these. they are subsidizing our deficits in a really big way.

what do these congressmen propose to do if they stop and rates spike?

make the banks lever up more from already worrying levels? get the fed to buy another trillion?

where do they find these clowns?

 
At 10/03/2011 10:08 AM, Blogger Ten Mile Island said...

Simple: build ships and stuff.

Then, load stuff on ships. When they get out thirty miles, sink them.

Start over.
.

 
At 10/03/2011 10:15 AM, Blogger Buddy R Pacifico said...

China is a member of the International Monetary Fund. The Articles of Agreement of the IMF in Article IV (Obligations Regarding Exchange Agreements); Section Section 1 (General Obligations of members); subheading iii; state:

"avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members;"

Morgan, you trade currencies, such as CHF (Swiss Franc), so, can you trade CNY (PRC yuan)?

If China un-pegged its currency from USD then I predict CNY value to...

fall, after its initial IPO type rise!

 
At 10/03/2011 10:32 AM, Blogger morganovich said...

buddy-

the yuan is not convertible.

they are looking at 2015 for that, and given that china is currently running up the worst debt crisis in recorded history, it's not a currency i'd speculate on.

sure, you could get a pop from pulling out the dollar peg, but you could also get wiped out in a massive monetary expansion/inflation when the bad debts on loans extended by/guaranteed by government agencies to make absurd hobbsian investments in industries already possessed of overcapacity are exposed as the patronage giveaways they are.

it will make the US subprime crisis look like a walk in the park.

i would not touch the yuan with a 10 foot pole.

that IMF rule is a joke. no one honors it. countries (including the US) intervene in their currency markets all the time.

what do you think the swiss just did? or the japanese do all the time?

what would you call tanking the dollar by printing a couple trillion and shunting them onto the fed's balance sheet?

how is china buying US treasuries and more of a currency manipulation than our fed doing the same (though far more aggressively)?

couldn't you argue that chins was just trying to respond to our manipulation and keep their currency flat in the face of our extreme attempts to devalue and our chronic monetary expansions in excess of unit growth?

i'd be very careful painting china as the bad guy and the manipulator.

 
At 10/03/2011 10:46 AM, Blogger Methinks said...

I guess poverty is the new prosperity.

 
At 10/03/2011 10:46 AM, Blogger Buddy R Pacifico said...

"buddy-

the yuan is not convertible."

Yes, I know. The world's second largest economy does not have a convertible currecy.

"couldn't you argue that chins was just trying to respond to our manipulation and keep their currency flat in the face of our extreme attempts to devalue and our chronic monetary expansions in excess of unit growth?"

I'm not sure of that but pegging to the USD allows China to:

Keep a strong Balance of Payments, and have massive USD to buy commodities around the world with the bucks.

 
At 10/03/2011 10:46 AM, Blogger morganovich said...

"Simple: build ships and stuff.

Then, load stuff on ships. When they get out thirty miles, sink them.

Start over."

is that you paul krugman?

 
At 10/03/2011 10:50 AM, Blogger Buddy R Pacifico said...

"Simple: build ships and stuff.

Then, load stuff on ships. When they get out thirty miles, sink them.

Start over."

Did you ever get that sinking feeling stimulus isn't working?

 
At 10/03/2011 10:52 AM, Blogger IT STANDS TO REASON said...

I once shared your line of reasoning but recently have come to the conclusion that China's policies are not good for the USA or Europe. They are distorting global free markets and China is simply too large of an economy to engage in mercantile practices. Yes we get low cost goods but yes also we get these goods on credit rather than with earned income. A free market should be free of all artificial constraints including currency manipulation.

 
At 10/03/2011 1:20 PM, Blogger Marko said...

As long as our trading partners are manipulating their currency in a way that advantages the U.S. consumer, I don't think we should try to stop them.

We should thank China for sending us low cost goods, and then for lending the money we spent back to us at very low rates. Reallly.

How many people you know get mad at Amazon.com for selling things, books for example, for cheaper? Is that destroying your incentive for making books yourself? You bet it is, and you are better off for it. Same with China - if they can make the shoes or toys for cheaper, than better that they make them.

That being said, it is time we lift the U.S. government's boot off the throat of U.S. manufacturing. Without overpowered unions, overblown employment, environmental, safety, etc. etc. regulations, maybe we could make the shoes cheaper. That would be even better than the Chinese making them cheaper, I suppose. I just want cheaper stuff.

 
At 10/03/2011 1:30 PM, Blogger Rufus II said...

What is the benefit of cheap goods if you don't have a job?

 
At 10/03/2011 4:17 PM, Blogger juandos said...

"What is the benefit of cheap goods if you don't have a job?"...

Well its a misdemeanor instead of a felony if you steal it?

 
At 10/03/2011 5:13 PM, Blogger Rufus II said...

:)

 
At 10/03/2011 7:37 PM, Blogger arbitrage789 said...

Apparently, the CME will start trading Chinese yuan currency futures on 10/17/11

http://bit.ly/nu26tO

 
At 10/03/2011 7:39 PM, Blogger arbitrage789 said...

"What is the benefit of cheap goods if you don't have a job?"

^^^^^^^^^^^^

All government policies generate winners and losers.

Question of total costs versus total benefits

 
At 10/03/2011 9:25 PM, Blogger David L Gilmer said...

Let;s not get too drawn into the argument created by the present-day "definers" of our thoughts. For much of US history, all (or a majority) of federal government revenues came from tariffs. The conventional wisdom today is that this was appropriate to allow the development of domestic industry, and that that's not too different from what the Chinese are doing today.

Break out of this box built by others! If we were to implement a tariff uniformly, no matter the industry or country of origin, without special breaks for those who own one or more Congressrats, what would happen?

Bad things, unless we more-or-less simultaneously rid ourselves of "Progressive" politicians! If we can do both, America will again be exceptional; innovation will rule. If others don't want to pay our price for it, they can kiss our grits.

In the meantime, we need to keep GE's Jeff Immelt and his Obamite kindred from giving what we do know to China in return for a mess of potage.

 

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