Tariffs Are A War On American Consumers

[TheTexan]

A few things...

First, you are forgetting about the $40 of unused material that James still has if you bought this chair from Li Zhao. That material can be used to serve other needs. It is wealth that was not consumed.

I didn't "forget" the materials. Materials don't just generate out of thin air. They are produced or purchased and that requires effort or spending. That effort and spending (or lack thereof) is accounted for in my examples.

If you want to build into the assumptions that James has $40 of free materials lying around it doesn't change the math.

Secondly, the $10 I saved will be spent on something else. So in addition to the chair and James' unused materials, I can also buy $10 more worth of other goods someplace else. Let's say a haircut. Now I have a chair and a nice haircut and James still has his materials to sell elsewhere. And my barber has one more client that day.

Ok. So you saved $10 that will be spent on something else (for your benefit we can assume its spent in America and not again on foreign trade). As a group, the nation still exported $60 dollars to a foreign economy that you're not accounting for.

Finally, there's the case of what Li needs to do to make his FRN's worth anything. He needs to circulate them back to the US.

Perhaps you can elaborate because I don't see where Li "needs" to do anything. He has money he didn't before and he can choose where to spend it.

So, for $70 I have a chair and a haircut, James still has his materials, my barber Jim is gainfully employed and Li has an incentive to turn his FRN's into usable goods or services.

If I bought from James, I'd have a chair and James would have $20 for his labor and $10 to spend elsewhere, but his materials are gone.

I know this is a simplistic analogy, but the math still works out.

Your math is still wrong cus your haircuts can be applied to the other side of the equation as well:

If you buy the chair for $60 from China:
1) America gains a chair
2) America loses $60
3) America gains a $10 haircut
4) America loses the human effort to do the haircut (valued at $10)

If you buy the chair for $70 assembled in America but using materials from Zimbabwe:
1) America gains a chair
2) America loses the human effort to assemble the chair (valued at $20)
3) America loses $40 from purchasing materials from Zimbabwe
4) James spends his $10 profit on a haircut
5) The laborers spend their $20 income on haircuts
6) America loses the human effort to do the haircuts (valued at $30)

Either way, you are losing $60 in net value. The difference however, is that if you buy the chair from America, you are supporting $50 worth of local industry versus $10 worth of local industry in your example.

If we were to change the above example so that the $40 in materials were American made, then buying the chair from America would result in supporting $70 ($140 if you count everyone's haircuts) worth of local industry versus $10 in your example.

 

[PAF]

Perhaps you can elaborate because I don't see where Li "needs" to do anything. He has money he didn't before and he can choose where to spend it.

Maybe he/his company will buy something from the U.S.?

https://tradingeconomics.com/china/imports/united-states

 

[Brian4Liberty]

This is flawed logic and I can demonstrate so.

Imagine that:
James Dean has a lawn chair factory and he sells lawn chairs at $40 material cost, $20 labor, $10 dollars profit for $70 each
Li Zhao has a lawn chair factory and he sells lawn chairs at $40 material cost, $10 labor, $10 dollars profit for $60 each

If I buy a lawn chair from Li Zhao the net result is:
1) Me and James (collectively) gain 1 lawn chair and we lose $60
2) Li Zhao gains $10
3) $50 goes to third parties for material and labor -- in China

If I buy a lawn chair from James the net result is:
1) Me and James (collectively) gain 1 lawn chair and we lose $60
3) $60 goes to third parties for material and labor -- in America

As you can see above, if you assume that materlal costs and profit margins are the same, and the main differentiating factor in foreign trade is labor, nothing is "gained" from foreign trade. Much more is lost, when you take into account the vast majority of the $ value that is spent on an item, will go to neither of the parties that are conducting the trade, but instead goes to the nation from which the product was purchased.

What this demonstrates, is that what may be best for the individual (saving $10 dollars) is not always what's best for the group (exporting $60 to a foreign economy).

If you don't care about "the group" I can respect that but it doesn't change the math as to how it affects the group.

A few things...

First, you are forgetting about the $40 of unused material that James still has if you bought this chair from Li Zhao. That material can be used to serve other needs. It is wealth that was not consumed.

Secondly, the $10 I saved will be spent on something else. So in addition to the chair and James' unused materials, I can also buy $10 more worth of other goods someplace else. Let's say a haircut. Now I have a chair and a nice haircut and James still has his materials to sell elsewhere. And my barber has one more client that day.

Finally, there's the case of what Li needs to do to make his FRN's worth anything. He needs to circulate them back to the US.

So, for $70 I have a chair and a haircut, James still has his materials, my barber Jim is gainfully employed and Li has an incentive to turn his FRN's into usable goods or services.

If I bought from James, I'd have a chair and James would have $20 for his labor and $10 to spend elsewhere, but his materials are gone.

I know this is a simplistic analogy, but the math still works out.

Once again, the part of the equation being left out is that some "geniuses" from Harvard came up with the idea, for some nefarious reasons such as enabling monetary inflation, to recommend that everything be outsourced to Li Zhao. This philosophy was handed out with the diplomas. Many of these indoctrinated graduates went on to become executives, where they pushed to outsource to Li Zhao, because it was the "in" thing to do. Or they went to work for management consulting firms, where they shared this grand new idea with the lame executives that hired them. They went to work on Wall St. at places like Goldman Sachs, and when they got controlling interest of companies, they shut down US production and gave it to Li Zhao, because it was the "smart" thing to do.

It's group think, from an indoctrinated class that was also told that they are the superior class. Your job is outsourced? Sorry, you just don't understand global economic trends.

 

[tebowlives]

Ron does support tariffs to replace other taxes.
He just doesn't support them as defense against enemy trade warfare.
He's closer to my position than yours.

Something like if you want to do it, it's better than the income tax. Low and even across the board and not for goods that are not made in American

 

[tebowlives]

A few things...

First, you are forgetting about the $40 of unused material that James still has if you bought this chair from Li Zhao. That material can be used to serve other needs. It is wealth that was not consumed.

Secondly, the $10 I saved will be spent on something else. So in addition to the chair and James' unused materials, I can also buy $10 more worth of other goods someplace else. Let's say a haircut. Now I have a chair and a nice haircut and James still has his materials to sell elsewhere. And my barber has one more client that day.

Finally, there's the case of what Li needs to do to make his FRN's worth anything. He needs to circulate them back to the US.

So, for $70 I have a chair and a haircut, James still has his materials, my barber Jim is gainfully employed and Li has an incentive to turn his FRN's into usable goods or services.

If I bought from James, I'd have a chair and James would have $20 for his labor and $10 to spend elsewhere, but his materials are gone.

I know this is a simplistic analogy, but the math still works out.

James has money that will be spent here though. Hopefully not on a Vikings ticket. What a waste that would be

If you don't buy from James his materials will sit for a bit and he won't make any money. Opportunity lost.

 

[CaptUSA]

If we were to change the above example so that the $40 in materials were American made, then buying the chair from America would result in supporting $70 ($140 if you count everyone's haircuts) worth of local industry versus $10 in your example.

Let's simplify it more...

American only starting position:
James has $40 in materials and let's say an hour of labor valued at $20.
I have $70.

American only ending position:
James lost his materials, used his time, but has $10 in profit
I lost my $70 but have a $70 chair.

Total economic benefit of the transaction to America = $10 to be spent on other things

Free trade starting position:
James has $40 in materials and let's say an hour of labor valued at $20.
I have $70.

Free trade ending position:
James saved $40 in materials and let's say an hour of labor valued at $20.
I lost $60 but have a $60 chair plus $10

Total economic benefit of the transaction to America = $10 to be spent on other things + James still has his materials and time to spend on other things.

I could literally just donate that $10 to James and he will have saved his materials and his time and still got $10 and I still will have gotten the chair.

Any clearer??

 

[TheTexan]

Let's simplify it more...

American only starting position:
James has $40 in materials and let's say an hour of labor valued at $20.
I have $70.

American only ending position:
James lost his materials, used his time, but has $10 in profit
I lost my $70 but have a $70 chair.

Total economic benefit of the transaction to America = $10 to be spent on other things

Free trade starting position:
James has $40 in materials and let's say an hour of labor valued at $20.
I have $70.

Free trade ending position:
James saved $40 in materials and let's say an hour of labor valued at $20.
I lost $60 but have a $60 chair plus $10

Total economic benefit of the transaction to America = $10 to be spent on other things + James still has his materials and time to spend on other things.

I could literally just donate that $10 to James and he will have saved his materials and his time and still got $10 and I still will have gotten the chair.

Any clearer??

There's two separate components in your argument, "materials", and "time".

For "materials", you have built into the assumption that James has $40 of materials lying around. I could address your points by basically re-posting all of my scenarios with that assumption built into it and show that it doesn't affect the outcome. But it's a lot easier to address your point on this by assuming that James does not have materials laying around. Can we just agree to assume that James does not have materials laying around, and that he purchases the materials immediately prior to assembly of the product? If that's not satisfactory for whatever reason I'd be happy to provide the scenarios with your assumption included into the scenarios... but ugh... it's tedious.

As for "time", you are somewhat right. One "benefit" of purchasing from China is that you are saving your labor so it can be used on something else. I say "benefit" because it depends on whether or not you want a job. If the goal is higher industry, then it's not really a benefit. You can say the labor will still be used, but "on something else". That "on something else" however is an abstract concept whereas the labor for the lawn chair is a very concrete opportunity. Considering that the labor is valued at $20/hour and you'll get paid that in either scenario, a concrete opportunity is better than an abstract one down the line.

If however you choose to indeed save your time for "something else", you're still losing $60. Is it worth saving $20 worth of of time, just to lose $60 anyway? If the item was made in America, you're "losing" $20 worth of time but you keep your $60. (again, "losing" is in quotes as it may be a good thing if you want the increased industry)

 

[TheTexan]

It's really not that complicated though. Organizations of large enough size often face a "build vs buy" decision. Is it cheaper to build it, or buy it?

In the examples provided, it would cost America $40 + $20 (in labor) to build the lawn chair, and it would cost $60 to buy it.

So the question really is, do you want the industry or not? And do you want to keep the $40 within the American economy, or not?

 

[CaptUSA]

There's two separate components in your argument, "materials", and "time".

For "materials", you have built into the assumption that James has $40 of materials lying around. I could address your points by basically re-posting all of my scenarios with that assumption built into it and show that it doesn't affect the outcome. But it's a lot easier to address your point on this by assuming that James does not have materials laying around. Can we just agree to assume that James does not have materials laying around, and that he purchases the materials immediately prior to assembly of the product? If that's not satisfactory for whatever reason I'd be happy to provide the scenarios with your assumption included into the scenarios... but ugh... it's tedious.

As for "time", you are somewhat right. One "benefit" of purchasing from China is that you are saving your labor so it can be used on something else. I say "benefit" because it depends on whether or not you want a job. If the goal is higher industry, then it's not really a benefit. You can say the labor will still be used, but "on something else". That "on something else" however is an abstract concept whereas the labor for the lawn chair is a very concrete opportunity. Considering that the labor is valued at $20/hour and you'll get paid that in either scenario, a concrete opportunity is better than an abstract one down the line.

If however you choose to indeed save your time for "something else", you're still losing $60. Is it worth saving $20 worth of of time, just to lose $60 anyway? If the item was made in America, you're "losing" $20 worth of time but you keep your $60. (again, "losing" is in quotes as it may be a good thing if you want the increased industry)

Wait, what?!

I showed what James and I had before the transaction and then after the transaction. To simplify it even more, I gave James $10 for nothing so he'd still make the same profit AND he kept his time and materials! I still got a chair and a donation to Jim for $70. Any which way you cut it, it's an increase in wealth for America.

You used a bunch of logic gymnastics to arrive at a conclusion you wanted. But it doesn't make any sense. It doesn't matter if James bought the materials or not - if he bought them, he'd still have them; if he didn't buy them then he'd have his $40. As for James' surplus in time - yes, he'd have to figure out how to utilize that time, but at least he has that opportunity!

So the question really is, do you want the industry or not? And do you want to keep the $40 within the American economy, or not?

I DO want industry! Wealth creates more industry! I showed you how that transaction abroad not only saved me $10 to donate to James, but he also kept his materials (or didn't have to buy them) and he has time to labor elsewhere. You can argue that this surplus of wealth will also be spent overseas and James won't be able to find something else to do, but you can't plausibly argue that the wealth has not increased! Since wants are unlimited, I know that James CAN indeed use his skills elsewhere. And you would rob that industry of James' skills. It's the seen vs. the unseen, brother. It really works. Protectionism will help James, but it hurts everyone else and it harms the wealth growth of our nation.


ETA: I do thank you for the example, though. Post #46 was probably the most clear and succinct demonstration I've been able to do, yet. The argument for free trade can be counter-intuitive and it can be hard to understand. By showing the position of both parties before and after both transactions turned out to be the clearest explanation.

 

[TheTexan]

I DO want industry! Wealth creates more industry! I showed you how that transaction abroad not only saved me $10 to donate to James, but he also kept his materials (or didn't have to buy them) and he has time to labor elsewhere.

Your example has glaring problems. Below is one of them:

American only starting position:
James has $40 in materials and let's say an hour of labor valued at $20.
I have $70.

American only ending position:
James lost his materials, used his time, but has $10 in profit
I lost my $70 but have a $70 chair.

Total economic benefit of the transaction to America = $10 to be spent on other things

This is blatantly wrong on its face, because $10 can't just be created out of nowhere. From America's perspective, exactly $0 money has moved -- or $40 if the materials were bought through foreign trade.

The below is still missing a very important factor that you keep ignoring. (Or doing mental gymnastics so that you don't have to address it)

Free trade starting position:
James has $40 in materials and let's say an hour of labor valued at $20.
I have $70.

Free trade ending position:
James saved $40 in materials and let's say an hour of labor valued at $20.
I lost $60 but have a $60 chair plus $10

You lost $60 and where did that money go? It went to China. In the buy America scenario the money stays in America. This is an important distinction that you have consistently failed to capture in any of your arguments.

 

[CCTelander]

This is flawed logic and I can demonstrate so.

Imagine that:
James Dean has a lawn chair factory and he sells lawn chairs at $40 material cost, $20 labor, $10 dollars profit for $70 each
Li Zhao has a lawn chair factory and he sells lawn chairs at $40 material cost, $10 labor, $10 dollars profit for $60 each

If I buy a lawn chair from Li Zhao the net result is:
1) Me and James (collectively) gain 1 lawn chair and we lose $60
2) Li Zhao gains $10
3) $50 goes to third parties for material and labor -- in China

If I buy a lawn chair from James the net result is:
1) Me and James (collectively) gain 1 lawn chair and we lose $60
3) $60 goes to third parties for material and labor -- in America

As you can see above, if you assume that materlal costs and profit margins are the same, and the main differentiating factor in foreign trade is labor, nothing is "gained" from foreign trade. Much more is lost, when you take into account the vast majority of the $ value that is spent on an item, will go to neither of the parties that are conducting the trade, but instead goes to the nation from which the product was purchased.

What this demonstrates, is that what may be best for the individual (saving $10 dollars) is not always what's best for the group (exporting $60 to a foreign economy).

If you don't care about "the group" I can respect that but it doesn't change the math as to how it affects the group.

Why would a male porn star branch out into manufacturing lawn chairs?

ETA: Wrong spelling apparently. In that case why would a dead actor branch out into manufacturing lawn chairs? Even more curious as to HOW he might accomplish that feat.

 

[TheTexan]

Why would a male porn star branch out into manufacturing lawn chairs?

ETA: Wrong spelling apparently. In that case why would a dead actor branch out into manufacturing lawn chairs? Even more curious as to HOW he might accomplish that feat.

Why wouldn't he branch out into manufacturing lawn chairs? Lawn chairs are a gold mine of opportunity.

The how is quite obvious... he'd just use a time dilating necromantic generator which is gonna be built in approximately 24 years from now after robots have conquered the world. But the more pertinent question is, will we still need lawn chairs at that point? (And the answer is yes, even robots will want lawn chairs)

 

[CCTelander]

Why wouldn't he branch out into manufacturing lawn chairs? Lawn chairs are a gold mine of opportunity.

The how is quite obvious... he'd just use a time dilating necromantic generator which is gonna be built in approximately 24 years from now after robots have conquered the world. But the more pertinent question is, will we still need lawn chairs at that point? (And the answer is yes, even robots will want lawn chairs)

You make a compelling case. I may have to invest. Need to make some money first, but …

 

[acptulsa]

Why would a male porn star branch out into manufacturing lawn chairs?

ETA: Wrong spelling apparently. In that case why would a dead actor branch out into manufacturing lawn chairs? Even more curious as to HOW he might accomplish that feat.

I thought he ground sausage...

 

[CaptUSA]

At the risk of continuing a trolling operation, it may be instructive to anyone who seriously wants to understand this...

This is blatantly wrong on its face, because $10 can't just be created out of nowhere. From America's perspective, exactly $0 money has moved -- or $40 if the materials were bought through foreign trade.

This is a basic misunderstanding of economics. Wealth is created due to the discrepancy in subjective value. I valued the chair at $70 (really probably somewhat more than that since I was willing to trade) and James valued it at $60 which is why after the trade, he ended up with a profit. That's precisely how wealth is created.

You lost $60 and where did that money go? It went to China. In the buy America scenario the money stays in America. This is an important distinction that you have consistently failed to capture in any of your arguments.

Again, that same basic misunderstanding. Money is a measurement of wealth - not wealth itself. I exchanged my measurement for something of greater value, so I increased my wealth. And because I added wealth to myself, I added wealth to America in the aggregate. Using your misunderstanding, wealth could never be created internally because it's like passing money from my left hand to my right hand.

Yes, I sent $60 to China, but I got $70 back in real value. When I exchanged with James instead, he only got $10 in profit - not the full $70 because he had to give up $60 in his perceived value to get $70 back.

All of this to say, that your math is obviously wrong if you'd just take some time to analyze it.

Prior to the exchange with Li, James had $40 of materials and an hour of time. After the exchange (and my donation), he had $40 of materials, an hour of time, PLUS $10. I still got the same chair. Explain that.

The problem is that in the real world, I wouldn't donate that $10 to James, I'd give it to someone else whose goods or services I desire. Which is why James lobbies the government for protection, gets corrupt politicians to waste their time passing edicts, and gets lazy bureaucrats to implement control measures - all of which COSTS money and destroys wealth - at the expense of those other industries. NOT at the expense of China.

 

[TheTexan]

This is a basic misunderstanding of economics. Wealth is created due to the discrepancy in subjective value. I valued the chair at $70 (really probably somewhat more than that since I was willing to trade) and James valued it at $60 which is why after the trade, he ended up with a profit. That's precisely how wealth is created.

No, my understanding of economics is just fine. You're just not considering my perspective.

From the perspective of America, that wealth is already accounted for in the chair itself.

If I personally build a chair, for my own use, do I gain a chair and $10 dollars? No, of course not. The wealth I gained with my labor was the chair itself, which I'm gonna use to sit on personally.

Same thing with America, when considered as a group. If America builds a chair, for its own use, it gains a chair. If I pay James Dean $10 dollars or $10,000 it doesnt matter to America, what matters to America is that it gained a chair and lost X amount of human hours to build/assemble a chair. If America used foreign trade for the materials, it also lost $40 in addition to whatever human labor was used to assemble the chair.

But nowhere in that equation, is that $10 important. The wealth and cost is already accounted for.

You're adding an imbalance to the books by adding your $10 as additional wealth that was "created".

If America was then to turn around and sell the chair to some other country for $70, then the $10 would come into play. But it's really only worth $60 in the international market anyway. So America probably wouldn't be able to sell it for $70.

Yes, I sent $60 to China, but I got $70 back in real value. When I exchanged with James instead, he only got $10 in profit - not the full $70 because he had to give up $60 in his perceived value to get $70 back.

Again, you're not considering it from the perspective of America.

From the perspective of America, you could build the chair for $60 in materials and labor. The $10 in profit that changes hands between Americans does not affect America's total number of dollars. So, from America's perspective, the chair is only valued at $60, because there's no reason that America - as an entity - would pay $70 for something that it could build for $60.

So at that point, the question is, do I want to send my $60 to China so that China can build the chair, or do I want to spend my $60 in America so Americans can build the chair?

The problem is that in the real world, I wouldn't donate that $10 to James, I'd give it to someone else whose goods or services I desire.

Alternately, to put this into terms you may be more comfortable with:

As an individual, the tariff that is in place that is forcing me to buy from James Dean at a $10 premium, destroys $10 in wealth.

As an individual, James Dean generates $10 in wealth from the sale of his $70 chair. (according to your own logic, which I agree with, when considered as an individual)

Between these two individuals, the wealth that was destroyed by the tariff - and correspondingly generated by the sale - balances out to zero.

(I'm not saying that these numbers always cancel out. They just happen to cancel out given the numbers provided in this scenario.)

 

[Brian4Liberty]

Why would a male porn star branch out into manufacturing lawn chairs?

ETA: Wrong spelling apparently. In that case why would a dead actor branch out into manufacturing lawn chairs? Even more curious as to HOW he might accomplish that feat.

Hmmm. I thought the film actor was the famous one. Wouldn't have thought of a porn star. Now that you mention, isn't he the guy that had AIDS and was spreading's it?

 

[CaptUSA]

//

I noticed you skipped this part...

Prior to the exchange with Li, James had $40 of materials and an hour of time. After the exchange (and my donation), he had $40 of materials, an hour of time, PLUS $10. I still got the same chair. Explain that.

You can use your math, if you can make it work. You also didn't address the cost of creating and implementing the tariffs that is borne by Americans.

 

[TheTexan]

I noticed you skipped this part...

Prior to the exchange with Li, James had $40 of materials and an hour of time. After the exchange (and my donation), he had $40 of materials, an hour of time, PLUS $10. I still got the same chair. Explain that.

[/QUOTE]

Prior to an exchange with Li Zhao: (A)
1) James has $40 of materials
2) James has an hour of time (valued at $20)
3) You have $70
4) You don't have a chair
5) James has $0

After an exchange with Li Zhao: (B)
1) James has $40 of materials
2) James has an hour of time (valued at $20)
3) You have $10
4) You have a chair
5) James has $0

Difference between (A) and (B) is below: (C)
1) You lost $60
2) You gained a chair

===================

Prior to an exchange with James Dean: (D)
1) James has $40 of materials
2) James has an hour of time (valued at $20)
3) You have $70
4) You don't have a chair
5) James has $0

After an with James Dean: (E)
1) James has $0 of materials
2) James spent an hour of time (valued at $20)
3) You have $0
4) You have a chair
5) James has $70

Difference between (D) and (E) is below: (F)
1) James lost $40 in materials
2) James lost an hour of time (valued at $20)
3) You lost $70
4) You gained a chair
5) James gained $70

===============

The final difference, between buying from Li Zhao (C) and from buying from James Dean (F) is below

Difference between (C) and (F) is below:
1) You lose $10
2) James loses $40 in materials
3) James loses an hour of time (valued at $20)
4) James gains $70

Total tally in net value gained/lost between buying from Li Zhao, or buying from James Dean: ZERO.

This demonstrates perfectly what I have been saying all along, thank you for the example. The choice, again, comes down to: do you want the chair built in America, or do you want in built in China?

There is also the fact that James now has money in his pocket ($70) that he didn't before. This $70 will go towards stimulating the economy in the US --- a benefit that does not exist in the "buy China" scenario.

You also didn't address the cost of creating and implementing the tariffs that is borne by Americans.

I acknowledge that there is a cost to this and it is non-zero. I also acknowledge that I haven't included it in the math. Any costs associated with this however, could be easily offset by the benefit of keeping the money within the US economy. (as demonstrated above, with James having money in his pocket)

 

[CaptUSA]

I acknowledge that there is a cost to this and it is non-zero. I also acknowledge that I haven't included it in the math.

Well, I'm out for the weekend, but since we're acknowledging things, I should acknowledge that I made it sound like James lost his time and materials without compensation.... He still lost them but he was compensated. It's not "stimulating" like his profit because there was an equal loss, but I should have acknowledged it. In any case, his net benefit is $10, but the difference is whether American has both the chair and the time and materials, or the chair and waning FRN's. Seems like there's no need for expensive protectionism in any case.

Enjoy the long weekend!