July 2021 – Page 10 – Lone Candle

China Is Paying Less Than 8 Percent of Tariff Costs. Americans Are Paying the Rest.

Posted on July 3, 2021 by Lone Candle

“American consumers are bearing nearly 93 percent of the costs of the tariffs applied to Chinese goods, according to a new report from Moody’s Investors Service. Just 7.6 percent of the added costs of the tariffs are being absorbed by China, the investment firm found.

And it gets worse. When China responded to Trump’s tariffs by slapping new tariffs on many American goods, American firms paid a significant price. That’s because “U.S. exporters, unlike China’s exporters, lowered by roughly 50 percent the prices of goods affected by foreign retaliatory tariffs, carrying a much higher cost burden than foreign importers of goods under U.S. tariffs,” writes Dima Cvetkova, an associate analyst at Moody’s and author of the report.

In other words, American companies ended up on the losing end of the trade war both going and coming. Importers absorbed most of the cost of the Trump tariffs, and American businesses that export to China got hit by the retaliatory tariffs worse than Chinese exporters to the U.S. did.”

…

“More than half of the goods traded between the world’s two largest economies are now subject to tariffs, according to PIIE data, up from less than 1 percent before the trade war began. The so-called Phase One trade deal inked by the Trump administration and Chinese government in December 2019 (there never was a second phase) barely had any impact on those figures.”

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“According to the American Action Forum, a free market think tank, Trump’s tariffs (and retaliatory tariffs imposed by other countries) have increased annual American consumer costs by about $57 billion. The Tax Foundation estimates that Trump’s tariffs amount to an $80 billion tax increase on U.S. businesses. And researchers from Columbia University, Princeton University, and the Federal Reserve Bank of New York concluded that the tariff costs “have been passed on entirely to U.S. importers and consumers.”

More than three years after Trump launched his trade war and four months after President Joe Biden inherited it, the consequences of the tariffs should no longer be subject to debate. The evidence is overwhelming and one-sided: American consumers are being hammered.”

Teen Cigarette Smoking Went Up Following Flavored Tobacco Ban

Posted on July 3, 2021 by Lone Candle

“In newly published research, she looked at youth smoking rates in San Francisco, which banned flavored tobacco products—including flavored cigarettes and flavored vaping liquids—in June 2018. Previous research suggested the ban actually increased cigarette smoking in 18- to 24-year-olds while decreasing overall tobacco product use in 18- to 34-year-olds. Friedman wanted to measure the ban’s effect on high school students under 18.

Using data from the 2011-2019 Youth Risk Behavior Surveillance System (YRBSS), Friedman was able to look at under-18 cigarette smoking rates in Los Angeles, New York City, Philadelphia, San Diego, San Francisco, and Florida’s Broward, Palm Beach, and Orange counties. This allowed her to compare youth smoking in San Francisco with districts that did not ban flavored cigarettes and vaping products.

“Comparing recent smoking rates by wave revealed similar trends in San Francisco vs other districts prior to 2018 but subsequent divergence,” writes Friedman of her findings. “San Francisco’s flavor ban was associated with more than doubled odds of recent smoking among underage high school students relative to concurrent changes in other districts.”

“While the policy applied to all tobacco products, its outcome was likely greater for youths who vaped than those who smoked due to higher rates of flavored tobacco use among those who vaped,” she adds. “This raises concerns that reducing access to flavored electronic nicotine delivery systems may motivate youths who would otherwise vape to substitute smoking. Indeed, analyses of how minimum legal sales ages for electronic nicotine delivery systems are associated with youth smoking also suggest such substitution.””

America’s Semiconductor Industry Doesn’t Need $52 Billion in New Subsidies To Stay Ahead of China

Posted on July 3, 2021 by Lone Candle

“Rather than countering a perceived threat from China, lawmakers risk bogging down one of the most innovative and successful parts of the American economy with an industrial policy that will force chipmakers to care more about what makes Washington happy than what is best for their own businesses.”

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“Companies that, by the way, admit they don’t need the cash to be competitive. Intel, one of the world’s biggest chipmaking companies, is in the process of building a $20 billion fabrication facility in Arizona. In March, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)”

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“According to the Semiconductor Industry Association, a trade group, American-based firms control 47 percent of the global share of the semiconductor industry—a far cry from congressional concerns about the U.S. losing its competitive edge.”

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“The trick that lawmakers are trying to pull here is to focus on where semiconductors are made. But this doesn’t really matter. It’s true that a smaller share is manufactured in the U.S. today than 30 years ago, but that’s the result of natural shifts in the market, not evidence of a collapse in American technological prowess.
Indeed, American companies are still at the forefront of semiconductor development—earlier this month, American-based IBM announced a breakthrough in the development of the world’s first two-nanometer chip.”

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“It takes a long time to make semiconductors—up to 26 weeks, in some cases—and production is still ramping up again in the wake of last year’s disruptive pandemic. This isn’t a nationalist issue in which some evil foreigners are cutting off America’s share of semiconductors, but a market-based issue that will be resolved as chipmakers increase production capacity to catch up to increasing demand.
But what about China? Yes, the Chinese government is investing heavily in semiconductor-making technology, but it remains far behind America in terms of technological know-how. A recent Nikkei report shows that China mostly manufactures nothing smaller than 14-nanometer chips, which are several generations behind the most advanced chips being made elsewhere—remember, IBM just announced plans for a two-nanometer chip. Closing that gap will be difficult now that America has banned the sale of semiconductor-manufacturing equipment to China (and enforced that ban even when the sale involved other countries).

If there is one major worry for the global supply chain of semiconductors, it is the island of Taiwan. The majority of the world’s semiconductors are made in Taiwan, which is home to the Taiwan Semiconductor Manufacturing Company, by far the world’s largest chipmaker. There are obviously many complicated geopolitical issues involving Taiwan that America and the world’s semiconductor industry will have to navigate in the coming years—but it is downright foolish to believe that $52 billion in subsidies will make a meaningful impact in that complex situation, or in a global market that was worth $425 billion last year alone.”

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“All it will do is shovel $52 billion of taxpayer money (some of it probably borrowed from China, ironically enough) to successful businesses flush with cash.”

China is buying Muslim leaders’ silence on the Uyghurs

Posted on July 2, 2021 by Lone Candle

“As the world increasingly speaks out against China’s genocide of Uyghur Muslims in Xinjiang, the quietest voices continue to belong to the leaders of Muslim-majority countries.
Look no further than Pakistani Prime Minister Imran Khan’s interview this week with Axios’s Jonathan Swan. Swan asked why the premier, who often speaks out on Islamophobia in the West, has been noticeably silent on the human rights atrocities happening just across his country’s border.

Khan parroted China’s denial that it has placed roughly 2 million Uyghurs in internment camps and then evaded the issue over and over again. “This is not the case, according to them,” Khan said, adding that any disagreements between Pakistan and China are hashed out privately.

That’s a jarring statement. Instead of offering a pro forma “Yes, of course we’re concerned by this” before moving on, Khan chose instead to minimize the problem altogether.

Why would Khan do such a thing during a high-profile interview, with his self-enhanced image as a defender of Muslims on the line? The prime minister gave the game away later in the interview: “China has been one of the greatest friends to us in our most difficult times, when we were really struggling,” Khan told Swan. “When our economy was struggling, China came to our rescue.”

China has given Pakistan billions in loans to prop up its economy, allowing the country to improve transit systems and a failing electrical grid, among other things. China didn’t do that out of the goodness of its heart; it did so partly to make Pakistan dependent on China, thus strong-arming it into a closer bilateral relationship.

It’s a play China has run over and over through its “Belt and Road Initiative.” China aims to build a large land-and-sea trading network connecting much of Asia to Europe, Africa, and beyond. To do that, it makes investment and loan deals with nations on that “road” — like Pakistan — so that they form part of the network. The trade, in effect, is that China increases its power and influence while other countries get the economic assistance they need.”

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“”In 2019, Saudi Arabia, the United Arab Emirates and Egypt were among 37 countries that signed a letter to the U.N. Human Rights Council praising China’s “contribution to the international human rights cause” — with claims that China restored “safety and security” after facing “terrorism, separatism and extremism” in Xinjiang…

When Saudi Crown Prince Mohammed bin Salman visited China in 2019, he declared that “China has the right to take anti‐terrorism and de‐extremism measures to safeguard national security.” And a March 2019 statement by the Saudi‐based Organization of Islamic Cooperation (OIC) praised China for “providing care to its Muslim citizens.”””

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“In 2009 — as Chinese authorities cracked down on Uyghurs amid ethnic violence in Xinjiang, and long before there were credible reports of arbitrary imprisonment, torture, and forced labor — the Turkish leader spoke out about what was happening.

“The incidents in China are, simply put, a genocide. There’s no point in interpreting this otherwise,” Erdoğan said.

ut now his tune has changed. In January, Turkish police broke up a protest led by local Uyghurs outside China’s consulate in Istanbul, and the government stands accused of extraditing Uyghurs to China in exchange for Covid-19 vaccines.

Why such a shift? You guessed it: Money.

The Turkish economy was in a downturn well before the coronavirus pandemic, but China has come to the rescue. Erdoğan and his team have sought billions from China in recent years, and China became the largest importer of Turkish goods in 2020. Saying anything negative about the Chinese government — especially on the Uyghur issue — could sever the financial lifeline China provides.

That said, the pressure from the pro-Uyghur public in Turkey has forced a slight shift in the Erdoğan regime’s rhetoric in recent months. In March, Turkish Foreign Minister Mevlut Cavusoglu said his administration has brought up the plight of the Uyghurs in private discussions with Chinese officials.

Still, that falls far short of what the world should expect from Muslim leaders.”

There’s Nothing Modern About MMT

Posted on July 1, 2021 by Lone Candle

“A popular myth about early American fiat money claims that various colonial and state governments created hyperinflationary disasters after they experimented with currency finance. But while New England and the Carolinas occasionally made a mess of things before the Revolutionary War, most colonies had a lot of success in issuing their own currency.”

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“Early American currency finance was kept in check by several political feedback mechanisms.
First was local democratic control. Because of much smaller populations, legislatures were easier to discipline.

Second was jurisdictional competition. If a legislature let currency finance get out of hand in one place, a jurisdiction whose government had its books in order was never too far away.

Third was economic independence. Because of agriculture’s prevalence, subsistence farming and barter with neighbors provided an outside option, especially in rural areas.

Fourth was that currency finance responded to specific needs. Relatively small and targeted governments could employ fiat money as a financing mechanism more safely.

None of these conditions exist anymore. MMT advocates think their system can work on a national scale, but they’re wrong. It’s much harder for citizens to discipline the fiscal authority today, whether by “voting with their feet” or “taking to the hills.” And because MMT would transform the fiscal-monetary landscape of the entire country, it is anything but “timely, targeted, and temporary.”

Furthermore, even assuming taxes can keep inflation low, does anybody trust today’s feckless politicians to enact unpopular levies? Without the supporting economic mechanisms, MMT is exactly what its detractors claim: a sure way to turn a functioning economy into a financial basket case.”