Political Debate: Tariffs- Democratic view
We’ve seen in the news over the course of the last two years that China-US Trade has come to an all-time low in terms of international relations. However, many economists are divided on what outcome will occur within the American economy—let alone the world economy—as a result of the trade war. A top diplomat for China at the United Nations suggested that the heightened tariffs on China-U.S. trade will backfire and lead to a recession.
But, the evidence does suggest that China has taken advantage of our intellectual property. I’ve heard a few people tell me, “the economy is doing great,” “my 401k is looking great right now,” and other things. However, you have to pay attention to what these people are saying, right now—what about in the next year or two? Is your perspective so short-sighted that you will eventually have to change your investment because you neglected to look into future projections?
Everything can be fine and dandy right now, but just be aware of what your 401k will look like in five to ten years. If you aren’t worried about that, you should consider being worried now. I’ve talked to people, specifically two people who are day traders, who are also projecting a recession in the next year. The traditional stock they have been investing in, such as Pepsico (PEP) and Coca Cola (KO), are doing so well that it’s too risky to take them seriously. These traders also said that they are paying close attention to their stocks because President Trump constantly tweets about topics that affect the stock market and these are hindering its progress.
The problem is that now the current administration is relaxing regulations and lowering taxes because of the tariffs. However, does anyone appreciate history? Didn’t we just rebound from a recession? Was anybody alive between 2006 and 2010? In a free-market economy, you have to have regulations; if you let the market run wild, with no oversight, what happens is what happened with the banks in 2006 through 2008. Banks claimed, “we are going to self-regulate,” when, in reality, they needed more regulations because they didn’t self-regulate at all. History is important and if you aren’t paying attention to these historical patterns and trends, you’re doomed to repeat the same cycle over and over again.
The thing I’ve found is that Ireland can have a low corporate tax rate because their economy is not near the size of the U.S. The U.S. has a broad economy, the now 2nd largest in the world. Ireland’s economy isn’t even in the top twenty, so it would make sense why Dublin is looking like Silicon Valley, because it works for them demographically and statistically. But, in the U.S., if we had a corporate tax rate of 12.5%, like that of Ireland, we would be repeating history. This has nothing to do with CEO’s making too much money, it has to do with not comparing “apples to oranges.”
We can see that some countries are benefiting from the trade war. Vietnam and India are benefiting, among other nations. But, what’s concerning the people on Wall Street, who make these projections, is that by getting no trade deal and leaving this uncertainty, it could backfire on the future projections. PBS reported that the United States and China were at 90% agreement in recent trade talks, but China is backing out and “nagging” the U.S. about different concessions which President Trump is not going to make. China’s new strategy I suspect is to wait to see the outcome of the 2020 election—as in, if Trump wins, a deal will have to be made.
What Trump voters should also consider when reflecting on him is how the economy is doing in reality, not just what partisan news is professing to them. Look into the facts, look at the data, project the data, and do the quantitative math. If you can’t do that and are so serious about the economy doing well right now, your ignorance for not looking into the facts and long-term projections is hindering the success of the American economy and, in fact, the world economy.