How a tariff on Canadian lumber could backfire on the U.S.

[Camille]

JUDY WOODRUFF: But first: As we touched on earlier, there is a trade dispute brewing between the U.S. and its northern neighbor.

William Brangham is back with that story.

WILLIAM BRANGHAM: President Trump’s decision to slap tariffs on certain lumber imported from Canada escalated tensions between the two nations.

And the president has already said he wants to renegotiate or overhaul NAFTA this summer.

Today’s move drew a pointed response from Canadian Prime Minister Justin Trudeau, who said, “You cannot thicken this border without hurting people on both sides of it.”

At a meeting with farmers this afternoon, President Trump came back with some tough words of his own.

PRESIDENT DONALD TRUMP: People don’t realize Canada has been very rough on the United States. Everyone thinks of Canada as being wonderful. And so do I. I love Canada. But they have outsmarted our politicians for many years, and you people understand that. So, we did institute a very big tariff.

QUESTION: And do you fear a trade war with Canada?

PRESIDENT DONALD TRUMP: No, not at all.

QUESTION: Why not?

PRESIDENT DONALD TRUMP: They have a tremendous surplus with the United States. Whenever they have a surplus, I have no fear.

WILLIAM BRANGHAM: So, let’s get some further explanation about this move, and what it means for the broader trade agenda of the new president.

Greg Ip covers all this for The Wall Street Journal, and he joins me now.

Welcome back to the NewsHour.

GREG IP, The Wall Street Journal: Thank you.

WILLIAM BRANGHAM: So, who would have thought that we’d have our first trade flare-up of the Trump administration with Canada, of all places. Explain, what is this fight all about?

GREG IP: It does sound like a surprise, but it shouldn’t be surprising.

And, remember, the Canada-U.S. trade relationship is still the world’s largest. And a relationship that size always generates disputes. And this particular dispute didn’t fall out of a clear spring sky. It’s been going on for literally decades.

It’s rooted in the different way Canada and the United States charges forestry companies for the trees that they cut down and turn into lumber. In the United States, they have a market-based system. There is an auction. Companies compete against each other to buy the trees.

In Canada, the provincial government is basically assigned a fee that turns out to be lower than the market price American companies pay. The United States claims that’s an unfair subsidy. And so this has been an ongoing source of dispute between the two countries.

The dispute that is under way this week actually began under the prior administration. There had been, if you will, a truce between the two countries. That truce expired.

The Obama administration had been negotiating with the Canadians to come up with a permanent solution. And they failed. And so even though this is being portrayed as the first salvo by Trump’s tough trade regime, in fact, it’s quite possible that, if Hillary Clinton were president, we would be in the same place.

WILLIAM BRANGHAM: Let’s say Trump is successful and he puts this tariff on imported Canadian lumber. As a consumer here in the U.S., would impact would we likely see?

GREG IP: Well, remember, tariffs are in the end taxes. And somebody has to pay that tax.

And in this case, that tax will be paid by the buyers of that lumber, which is the home builders primarily and the people who buy those homes. The National Association of Home Builders estimates that there’s about $15,000 worth of lumber in a typical new home, a single-family home in the United States. This tariff will add about $1,200 to the price of that home.

Now, it’s been the case that because the market had already anticipated something like this, lumber prices have already started to move up, so you won’t necessarily see an immediate impact from this point forward.

But I think one thing people are forgetting is that trade disputes are two-sided. When the United States imposes tariffs on a partner like Canada, there is always a possibility that Canada will say that’s not fair and retaliate. And at that point, you have to ask the question, which Canadian industry will suffer because the Canadians have imposed tariffs — excuse me — which U.S. industry will suffer because the Canadians retaliated against it?

WILLIAM BRANGHAM: We’re seeing this Trump move on wood. He also had some very strong complaints about Canadian milk. Last week, we saw him making some noises about steel in China. There might be a move on aluminum coming up.

Are we starting to see now a Trump trade policy emerge?

GREG IP: I think we are.

When he was first elected, there was a lot of fear of a trade war. They listened to Trump’s rhetoric on the campaign. Oh, we’re going to put a 45 percent tariff on China, a 35 percent tariff on Mexico. We haven’t seen any of that.

It’s clear now that Trump and his administration doesn’t want the start a trade war, i.e., big tariff on a whole country that triggers retaliation. What we are seeing is a very careful and meticulous review of all the tools they have available and to use those to start bringing cases against countries under existing law that they think are unfair.

Now, that doesn’t look like a trade war, but it could look like a lot of border skirmishes that add up. We still don’t know, though, what the end result is. The reason we have things like NAFTA and the World Health Organization is so that, when there is a dispute like this, as there always will be, it’s contained, you don’t get an escalating tit-for-tat spiral.

And the real test will be, if Canada takes this to a panel with NAFTA or the WTO, and wins, will the Trump administration abide by that ruling?

WILLIAM BRANGHAM: Well, we have seen a lot of instances where the president has talked very tough standing on the sidelines, and then, when push comes to shove and he gets close with foreign leaders, or starts these negotiations, he becomes a little more conciliatory.

Let’s say a trade war or a trade fight really does break out. Do you think he will escalate or de-escalate?

GREG IP: At this point, it’s impossible to say, and I think it would be unwise for us to speculate too far, because I don’t think they really know.

But I think we know this much about Trump so far: He believes he’s a deal-maker. He likes to bargain. Part of bargaining is that you talk really tough. You ask for the moon, you settle for the topsoil. He says — he beats up on the Mexicans, he beats up on the Canadians, but the point is not to abrogate the treaty and have the two of us basically putting up walls and blocking trucks at the border.

It’s to come up with a deal that both sides feel they can live with. And I think that that’s probably where we’re going to end up. I think that Trump has people working for him who are ultimately deal-makers. And the Canadians are the same way. They’re grownups about this.

That’s why you saw the prime minister of Canada not respond to Trump with the same rhetoric, but to talk about the strength of the relationship and the desire for a deal.

WILLIAM BRANGHAM: The president has also said, as we touched on a little bit, that he wants to renegotiate NAFTA. How would that actually look? How could that unfold? What likely might we see?

GREG IP: So, I think one of the interesting things is that this dispute did erupt while that renegotiation is under way.

Wilbur Ross, taking questions from the press today, said he had actually preferred to have kept those things separate, because, as we discussing a minute ago, this softwood lumber dispute is a very old dispute that almost follows a dynamic entirely of its own that is actually somewhat independent of the issues of the issues that are bothering the president on NAFTA.

Unfortunately, because they could not get an agreement within the legislative window, it will end up getting sucked into that agreement. And it’s very hard to say exactly how it turns out.

We know from, for example, drafts that the administration has circulated on Capitol Hill, there are a few things they would like to change about NAFTA. They would like to, for example, have the ability to impose tariffs just because imports are surging from Canada or Mexico, not necessarily because they’re being sold unfairly.

They want the ability to not have — to be able to — they want more freedom to use our countervailing the subsidy laws against Canada and Mexico. Will the Canadians and Mexicans accept that as a price worth paying to preserve the special agreement? Will they say, no, we’d rather have no agreement? All those things remain to be seen.

WILLIAM BRANGHAM: Greg Ip of The Wall Street Journal, thank you very much.

GREG IP: All right, thank you.


http://www.pbs.org/newshour/bb/tariff-canadian-lumber-backfire-u-s/

 

[QueEx]

The Trump Administration’s War on New Housing

Americans need more affordable housing. Steel and lumber tariffs are not going to help.

New housing under construction along the Detroit riverfront in 2015. Rebecca Cook/Reuters

• NOLAN GRAY
• @mnolangray
• Mar 13, 2018

As the nationwide housing affordability crisis deepens, the Trump administration is moving to adopt steel and aluminum tariffs that will make it worse, particularly in dense urban cities.

This move follows new tariffs on Canadian lumber late last year and harsher enforcement on the migrant workers from Mexico and Central America who are essential to the industry. The combined effect could mean higher rents and more expensive housing in the years to come.

Earlier this month, the administration signaled it would increase steel tariffs to 25 percent and aluminum tariffs to 10 percent. While the goal is to inject some life into the U.S.’s steel industry—which employs just 143,000 workers, many clustered in the politically important Midwest—the Wall Street Journal and others have pointed out that the tariffs could ultimately hurt employees in much larger steel-consuming industries. President Trump has exempted Mexico and Canada from these tariffs, but these countries only make up 25.61 percent of U.S. steel imports. One industry that will be hit hardest by these tariffs is the construction industry, which could be bad news for renters and prospective homeowners. As new supply continues to fall short of rising demand, this could lead to more pressure on rents and housing prices.


Nearly half of all U.S. steel imports go into construction, with a large share of that steel going into multifamily housing. While wood frame construction is increasingly common for apartment buildings up to five stories, the taller structures that are needed in white-hot housing markets such as San Francisco, New York, and Austin depend entirely on access to steel. According to a study released by the Trade Partnership earlier this month, the proposed steel tariffs could lead to 28,000 lost jobs in the construction industry. That’s a lot of housing that won’t be built, and affordable projects that already operate on tight margins will be the first to be cut. While exemptions from the tariffs might offer hope, the price volatility in the near term could still scuttle many large projects, where price certainty is crucial for investors.

20.83 percent tariff on Canadian lumber, to the benefit of politically valuable voters in Maine. Within the construction industry, these imports commonly turn into framing lumber, which is used to build single-family homes and small multifamily buildings. As Jen Skerritt pointed out earlier this month in Bloomberg Businessweek, Canada is the major source of this framing lumber, and the rising prices that result from the tariffs mean that builders are already raising prices and looking for ways to cut costs. One alternative is to switch to other materials such as steel or concrete, but this month’s tariffs dash the former alternative.


At the same time that the new tariffs are raising the cost of construction materials, the administration is also cracking down on the labor that puts it all together. One study from the National Bureau of Economic Researchfound that over 1.1 million undocumented immigrants, many of them skilled in essential trades such as framing, work in the construction industry. There’s no real doubt that the status quo is unacceptable, but the solution is legal status and workers’ protections, not deportations. Although the industry already faces a major labor shortage, the administration is moving to deport many of these immigrant workers and hounding homebuilders who employ them. The result, according to the National Association of Home Builders, is that labor shortages are worsening, particularly in border states with high housing demand like California and Texas. With labor making up such a substantial portion of the cost to build homes and apartments, these shortages will translate into higher rents and housing costs.

affordable units are disappearing. Traditional ways of building new affordable units are also breaking down. Following tax reform, the value of low-income housing tax credits, which subsidize the construction of new affordable units, is collapsing. Local efforts to squeeze new affordable units out of developers through inclusionary zoning in cities like Portland are also proving to be a major disappointment. As life for renters is getting harder, mortgage ratesare increasing, which makes it harder for renters to turn into homeowners. There are many reasons why housing is expensive, including overly restrictive land-use regulations, but introducing tariffs and cracking down on immigrant workers will only worsen the crisis.

The White House may be trying to help the small number of workers in the steel and wood products industries, but this kind of protectionism could instead end up hurting them—and a great many others. What Trump wants to see are steel mills that are reopened and a handful of laid-off workers back on the job. What goes unseen are the millions of families who will pay higher rents, the homes and apartments that will go unbuilt, and the Americans who can no longer afford to move to thriving cities.


https://www.google.com/amp/s/www.citylab.com/amp/article/555437/


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[COINTELPRO]

The U.S. is imposing tariffs on China. I hardly ever buy anything from some Chinese company, the trade deficit is probably coming from American companies that import products to sell. They are just starting to establish a retail presence with TV, smartphones, and cars (Volvo).

Part of the problem with the global trade is dealing with currency exchange rates. You need to eventually move to a unified currency under these free trade deals which will never happen.

 

[QueEx]

"Last year we lost $500 billion on trade with China."

— Donald Trump on Friday, March 23rd, 2018 in in a news conference​

Did the U.S. have a $500 billion deficit with China in 2017?


PolitiFact
By John Kruzel
Wednesday, March 28th, 2018


President Donald Trump ratcheted up pressure on Beijing by announcing tariffs on up to $60 billion worth of imported Chinese goods.

Trump has long bemoaned the United States’ trade deficit with China, and as a candidate he promised to use import taxes to reorder trade arrangements along what he believes are more reciprocal lines.

"Last year we lost $500 billion on trade with China," Trump said at a March 23 news conference. "We can't let that happen."

A country’s trade balance is simply the difference between the value of its imports and exports, and a trade deficit occurs when imports exceed exports. This can be measured in terms of goods, or both goods and services.

We took a closer look at Trump’s numbers. It turns out he’s well off the mark.


U.S.-China trade in goods

The United States’ deficit with China in goods trade has grown substantially over roughly the past two decades. The deficit in 1990 was $10.4 billion. It grew to $83.8 billion in 2000 and swelled to $273 billion in 2010, according to the U.S. International Trade Commission.

In 2017, the value of Chinese goods imported to the United States ($505 billion) exceeded American goods exports to China ($130 billion) by roughly $375 billion. Americans racked up billions in purchases of everything from Chinese-made communications and computer equipment, to kitchen appliances and shoes.

Based on trade in goods, Trump's $500 billion figure is off by $125 billion.


U.S.-China trade in services

When you factor in goods and services, which economists say paints the fuller picture, his claim is further off the mark.

According to data from the Bureau of Economic Analysis, the United States actually ran a surplus in the services trade with China in 2017 — to the tune of roughly $38.5 billion.

When you factor that surplus into the two countries’ overall trade balance, the United States ran a roughly $336 billion deficit with China last year — which means Trump’s figure was off by about $164 billion.

It’s possible Trump may have confused the Chinese deficit with the United States’ overall trade deficit, which was $566 billion in 2017, according to the bureau.

However, it’s also possible Trump used the $500 billion figure as a matter of habit. We rated this claim Mostly False when he said it in 2015.


Our ruling

Trump said, "Last year we lost $500 billion on trade with China."

In 2017, the value of Chinese goods imported to the United States exceeded American goods exports to China by roughly $375 billion. Over that same period, the United States actually ran a $38.5 billion surplus on services trade with China.

Overall, in terms of both goods and services, the United States trade deficit with China in 2017 was around $336 billion — meaning Trump was off by roughly $164 billion.

We rate this Mostly False.



http://www.politifact.com/truth-o-m...p/did-us-have-500-billion-deficit-china-2017/

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[COINTELPRO]

Capitalism gives a high reward to innovators for the most part. China is a low reward system versus the U.S. where people can become mega wealthy (The U.S. has been a low reward system for me) Over time, we see how this plays out when comparing different economic systems.

With IP theft and forced technology transfers, China lowers the reward mechanism that drives the development of technology in both countries. In many cases these innovators like a Thomas Edison or Tesla go on to create many other things. Interfering in this process is foolhardy for both countries.

Another thing is these joint venture, technology transfers. To better understand this, let say Tesla wants to come into Michigan to sell cars, they have to enter into a joint venture with GM and transfer all their technology to sell. Seeing Michigan car market, they foolishly agree. Instead of being able to come into the market and driving GM out with their advanced Silicon Valley technology. They are in this joint venture limiting their profit and market share. GM can come into California market with Tesla technology and sell cars.

In China favor, their desire to acquire the know how and in many cases improve on it (hoverboards). Many countries simply consume these products with little effort put into how they are produced.

Many of these companies based themselves out of China to sell globally. If Apple did their manufacturing in the U.S., they would not be able to affordably produce in other markets. China would come in with their low labor costs and produce quality phones at rock bottom prices.

The trade deficit is one metric, I like to hear about companies relocating to China, companies driven out of business unfairly (Solyndra). I definitely do not like tariffs on food production to affect President Trump politically.

 

[COINTELPRO]

Does the U.S. steal IP? The answer is yes, however, it takes place between the small/individual inventor and large corporation/government where they are dealing with people with limited resources to fight back. In China, the government might go after the large U.S. company to gain IP.

China should impose tariffs on products made by American companies in China going into other markets besides the U.S. President Trump is trying to scare these companies back to the United States.

 

[COINTELPRO]

Many people do not realize that China ships products made by American companies globally. In Brazil, you can buy an Iphone X for $600 or an HP laptop pretty cheap. If these products were made in the U.S., it just would not be affordable in these developing countries. China, should have imposed a small temporary tariff on these products to highlight the money being made.

Investments are not counted in the trade deficit or considered a product but it should.

Many countries 'open' up their market to the U.S. but use informal means to suppress sales. They might have to move to something like this to avoid tariffs where you make it difficult to detect. You make spurious claims about quality of American products.