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August 25, 2005

Ridiculous trade war, Thurs., August 25, 2005, 9:23 AM

For political reasons, U.S. politicians are about to slap tariffs on Chinese imports. They think that China is going to be hurt by this. Dream on.

U.S. consumers, who wish to continue buying those Chinese goods will simply pay more, and the U.S. govt will collect more, in tax. Moreover, Japanese, Taiwanese and Korean exporters will raise their prices to the level of the increased U.S. tariff on Chinese goods because they want to stay in line with the price competition. So those manufacturers now have what's called pricing power.

Who in America benefits?

Today, there is talk of the Canadian govt raising tariffs against U.S. wine, as a direct retaliation against Canada's inability to collect monies taken illegally by the U.S. govt on cross-border trade in softwood lumber. I say illegal" because an international panel in place to resolve these disputes has deemed the U.S. actions so. But the U.S. now fails to abide by international law in this regard, and Canada will retaliate.

But, again, who in Canada benefits?

Today, also, I am headed to the wine store where I intend to buy about eight bottles of California wine. Fortunately I will avoid the extra tariffs, which are to come in the near future, apparently.

But if and when I have to pay, I'll pay extra. So, I (and other Canadian families) will pay this tax. We, not the U.S., pay the cost. Thanks a lot.

And, if I don't buy the California wine in future because of this ridiculous tariff (that has zero to do with softwood lumber, and everything to do with political pay-offs to lobbies for the Canadian wine industry), then who in America gets hurt? Well, you know that the wine is going to be sold. So, if the extra inventory in California forces a lowering of price to move it, then the U.S. consumer wins, offsetting any loss by the manufacturer.

So, I'm still the only loser, because I don't get to buy the products I want to buy. I now have to visit the wine store aisles labelled Australia, South Africa, Chile, France, Italy, and so forth.

But, being an unhappy loser, I certainly am not going to foray into the Canadian wine section of the store, even to buy the few bottles of Cdn wine I usually do. Am I?

Traders hate trade wars because all it means, really, is extra tax.

Same old. Same old.

Posted by Posted by Bill Cara on August 25, 2005 09:23:55 AM | Category: Economics