Archive for September, 2010

Congress to Punish China by Taxing America’s Poor

Thursday, September 30th, 2010

Yesterday the US House voted overwhelmingly to explore levying heavy tariffs on Chinese imports in retaliation for that country keeping its currency at an artificially low level. The Senate has yet to consider theĀ  bill. This is all about the view that the weak Chinese yuan is creating a huge trade deficit that is crushing America.

Regardless of whether or not you believe the trade “deficit” is a serious problem (and I don’t), the government’s threat to retaliate via tariffs is beyond stupid. Chinese firms export a wide variety of products to the US, and these are disproportionately purchased by poor and middle class Americans. You don’t see wealthy Americans buying Chinese luxury cars, boats, or designer clothing. So if the US government slaps a 25% tariff on Chinese goods, the poor and middle class people buying these products will see their standard of living reduced. It has the same effect as a tax increase.

Raising trade barriers always harm’s a country’s own citizens. Whenever this policy threat emerges I always see the image of Cleavon Little’s Sheriff Bart in “Blazing Saddles” taking himself hostage. If US politicians think it’s necessary to punish China, I wish they’d comeĀ  up with something that doesn’t hammer Americans. Then again, I think most of us understand they’re really not trying to solve a problem. Politicians are focusing on November 2 elections and are counting on voters being economically ignorant enough to reelect them.