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Tariff Wars, or Don’t They Care?

I’m trying, I really am trying to keep pace with President Trump’s so called Tariff War with the Chinese but then I get confused when Ms Huckabee Sanders explains to us that President Trump reserves the right to retaliate to the unfair and punitive tariffs that the Chinese have imposed on US imports (which were in response to unfair and punitive tariffs that Trump imposed on imports from China).

I do understand that all of this is to do with making America great again and the rest of us not so much, but what I failed to appreciate was the impact that tariffs have on global trade, as indeed did our BFF Donald. He tells us that, just like the Mexican wall, somebody else will pay and it’s going to be win-win all the way. But is it?

I’ve been doing some reading and I understand that a tariff is an imposition that an importing country places on imports at their point of entry, either all imports or selected commodities, services and manufactured goods: what Tony Abbott would call a ‘Great Big New tax’ if it was being imposed by anybody but him and our good mate Donald. The tax is payable by the importer and thus lowers the importer’s margin of profit when he on-sells the goods etc: that last was a fib, the importer actually passes on the tariff tax to the consumer.

So what happens to the tariff once collected as a tax on imports? Well it goes straight into the government’s back pocket. As some uncharitable people would say, as a means of offsetting the corporate tax revenue losses to government when you give big companies a massive tax cut as Trump has just done: so, the punter also known as the man (or woman) on the street and previously known in legal circles as the ‘man on the Clapham Omnibus’ cops it in the neck or rather it comes straight out of your back pocket and into the government’s. So it’s all good, the government’s loss of revenue due to corporate tax cuts is made up for by the tariff impositions which are paid for by the bloke in the mirror: the old pea and thimble trick.

As I understand it, the idea behind the tariff tax on imports is to encourage punters to buy locally made goods as, theoretically, they will be cheaper than imported goods because of the tariff imposed. A bit like, if you will, Australia imposing a tariff on imported automobiles so that instead of you mob buying your Audis and BMWs you buy a Holden thus supporting employment and the economy of … err South Australia Korea: not such a good example, but you get the picture.

So, Turnbull with much enthusiasm says that he too will cut company taxes but unlike Donald he doesn’t have a plan B to recoup the diminished government revenues but then, who needs hospitals, schools, roads and all those other uppity socialist things. We’ll just privatise healthcare, put tolls on roads and everybody can go to a private school. In the May budget, which in many respects will be the election budget he will, to get his company tax cuts through the Senate, foreshadow a reduction in personal income taxes, again unfunded. This personal income tax cut will probably be scheduled for the first year of a post-election government which will be his principal gambit for re-election and also a firm wedge on Labor who will find it very hard to campaign against tax cuts.

We live in interesting times: I just hope that our children and grandchildren will find it in their hearts to forgive us for what we are doing to their endowment.

 

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12 comments

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  1. nonsibicunctis

    Thank you for an excellent summary of how the tariff system is yet another burden on the average or under-average punter.

  2. New England Cocky

    The ABC TV programme “Planet America” is another reliable source analysing the twitterings of the President of the USA (United States of Apartheid).

  3. Florence nee Fedup

    PM is correct. We have no need to fear what his great mate is doing. After all Howard’s wonderful trade deal means we import many time more, mostly defence, from the US than we sell to them.

    After all, he has made us safe from any trade war with all the trade pacts this government has signed.

    Doesn’t explain why it is easy for Trump to rip up what he doesn’t like.

  4. Harry

    Imports are a benefit, Exports are a cost.

    We send our precious assets overseas in exchange for the one thing of which we have an infinite amount: dollars.

    We also need to challenge the idea that the federal government cannot “afford” to properly resource public programs mentioned in the article because not enough tax dollars are being collected- and that therefore we need to have the private sector provide them. Self-serving nonsense but believed by so many.

    http://rooseveltinstitute.org/deficit-nine-myths-we-cant-afford/

  5. totaram

    Thank you Harry,

    Please carry on the good fight. I’m getting too old and too tired to care. But I do appreciate people like you. Cheers,

  6. Andreas

    pardon me if I’m wrong, but was it not Trump who started the tariff imposition? And when China responds in kind, it is all unfair? Sounds like another application of deluded “Exceptionalism” to me.

  7. Max Gross

    Every federal election in Australia hinges on a relatively small group of swinging voters with the memory span of goldfish. It was ever thus. So… Be afraid, be very afraid.

  8. Matters Not

    Max Gross re:

    Every federal election in Australia hinges on a relatively small group . … Be afraid, be very afraid.

    The coming election is not yet over. Certainly not a lay down misere as it ought to be. Shorten is quite capable of losing what, for many, will be the unlosable election.

    Shorten’s career is characterised by deal making – not principles nor policies – which are always of secondary importance to the deal. While deal making is both a strength and a weakness, it may prove to be his undoing.

    In short, Bill Shorten has a problem re trustworthiness. And the LNP knows it. So be careful, be very careful.

  9. wam

    My tariff aficionado is the rabbott’s robb. This hero got the chinese signature on a paper that took our tariffs off in 2015 but the poor chinese kept theirs till 2024. In addition there would be unlimited working visas(the silly kiwis put limits like 100 per sector) and robb would be forced to endure a part-time job at $800000. It is a wonder they signed but perhaps seeing the rabbott they felt sorry for us??

  10. Paul

    Thanks for the warning Matters Not….i really want to be careful, very, very, very careful.

    Re your last sentence… are you suggesting that as Shorten cares little for principle or policy if these impede a deal he could prove untrustworthy in government? Do you think that we should stick with the current unprincipled policyless dealmakers rather than risk the unproven “drovers dog”?

  11. Matters Not

    Paul April 8, 2018 at 11:31 pm

    are you suggesting that as Shorten cares little for principle or policy if these impede a deal

    Seems like it – and that’s what probably makes him a good politician. All tactics (short term) and little strategy (long term). I am reminded that – *Political platforms are like railway platforms – there to get in on – but not remain on. * The cynical manipulation of Gonski is a classic example when Shorten was the Minister for Education in the dying days of the Rudd government. I cite Boston:

    It set aside what the Gonski panel regarded as an essential recommendation: to establish a national schools resourcing body, similar to a schools commission, responsible to all education ministers, to determine in a nationally consistent way the school resourcing standard, the minimum public contribution, the loadings and the indexation factor.

    Instead, the Labor government sought to negotiate those matters unilaterally and separately with the state authorities, non-government school organisations, church leaders and unions – after we had consulted with them all for more than 18 months – thus repeating the pattern of the past 40 years

    Because I have an ongoing interest in the education debate, I tend to follow such matters.

    This Gonski national schools resourcing body is now established under the LNP administration with a credible membership but is not due to report for some months. Yet Shorten undermined its credibility with a special deal for the Catholic sector just before the Batman by-election. While special deals advantage some, they also disadvantage others and as any glance at history will show, the disadvantage impacts on the public sector.

    https://www.qtu.asn.au/index.php/collections/conferences/ken-bostons-address-qtu-educator/

    Politicians assume that there is a ‘base’ which will always remain true and winning is about those in the ‘middle’. That’s where Shorten excels. Principles – matter not.

  12. Matters Not

    Paul, Perhaps I should add, that I don’t like to compare the progressive side of politics with what the other mob are doing. Simply, I want to critically discuss how and why progressives might do better.

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