TRUMP TAX REVOLT

TIME FOR REBALANCING THE TAXATION SYSTEM

Taxation on imported goods is mostly negative. There are few reasons for taxation of imports, because it causes more harm than good to the population where the taxes are collected.

Some of the few good reasons for taxation is to have some form of control of the volumes imported and being able to fund the enforcement of douane rules with the proceeds from the activity, thus tying the expense to the activity and not collecting other taxes to fund the control. The rules enforced are on the controlled substances from chemicals to produce ordnance, drugs of abuse and actually people smuggled into cargo ships.

THE WORLD IS DENOUNCING TRUMPS HIKE IN TAXES

The decision from president Trump to rise taxes on goods from countries that have high taxes is a bad move, everyone agrees. This will impact the world trade and disrupt supply chains that are in place to serve the American market.

Trump must reduce taxes immediately to restore the market. This must be done in consonance with the reduction in taxes of the countries that are exporting to the American market and actually have enormous taxes on goods imported.

There are countries that charges 243%, 298% on dairies imports beyond a quota. This is done to protect their own industries. Some other countries charge 700% on rice imports.

China has retaliated the 25% tax on Chinese imports in America with a 34% tax on imports from America. It seems that taxes are bad only when America slaps taxes on Chinese products and it is good for China to retaliate with even higher taxes on American products.

HOW WE ARRIVED TO THIS MOMENT

The world trade has been played by all countries which engaged in trade by themselves or by forming clusters like the commerce practiced by the Phoenicians, Carthaginians, the Greeks, the Hanseatic League, the thalassocratic league of cities in medieval Italy, COMECON, the British Commonwealth of nations, Methuen treaty, the EU, the Mercosul, NAFTA, USMCA.

The trade agreement allowed the participants to enjoy access to each other markets by custom, by means of forcing the opening of commerce or by bilateral agreements where goods not available locally were imported.

One such events is the opening of ports in Brazil in 1808, where the exclusive commerce between Brazil and Portugal was ended and Brazil was free to trade with other nations.

Some of the trade was started by private enterprises like the commerce between India and the West, with the English East India Company, the Dutch East India Company and the French Compagnie des Indes.

One despicable event is the opening of ports by the British Empire in China, where military might was used to open trade of Opium, a dark page of the Western history.

Trade is explained by David Ricardo, a liberal politician, “Ricardo observed that trade was driven by comparative rather than absolute costs (of producing a good). One country may be more productive than others in all goods, in the sense that it can produce any good using fewer inputs (such as capital and labor) than other countries require to produce the same good.

This meant that it is better for the population of the country to produce what is more comparatively advantageous than to fight against the conditions. The corollary is that a country must create the comparative advantages to be in that position and thus have other countries at a comparative disadvantage.

The lesson from the paragraph above was learned by South Korea, Taiwan, Japan, Germany, Holland, France and many other countries, including some recalcitrant ones, which profess communism as Communist China, Viet Nam, Brazil, Chile.

Some countries are proof that David Ricardo is correct because they prospered when following Ricardo’s advice and floundered when rejected the same advice. Brazil, Argentina, Zimbabwe and South Africa were prosperous when Ricardian lessons were applied and turned into failed states when abandoned the lessons.

WORLD TRADE ORGANIZATION

As many collegiate arbitration organizations, the WTO was captured by the majority of votes. The WTO system of solving disputes was used by nations with intentions of abusing the system.

There are provisions for nations to manage imports but the WTO took to itself to be the dispenser of just commerce, protecting some nations while punishing others, taking longer time to act or even forfeiting the violation of the rules.

Some countries have lied to the WTO without consequences, imposing tariff barriers while denying these barriers to the WTO. When the judges were summoned to punish the bad behavior, there was no significative punishment.

Other countries engaged in Intelectual Property Theft and the WTO was unwilling to enforce the rules, preferring to dismiss the complaints. This eroded the goodwill from the developed nations, which had more to lose.

The WTO also failed when during a pandemic of world proportions, chose to enforce the Intelectual Property rules, barring the countries for producing vaccines during a critical time of need.

The WTO allowed people to violate some medicines patents on some diseases affecting 1% of the world population but prohibited the production of medicines that would affect 100% of the population, sealing it uselessness.

CHINA TARIFFS

The main target of the Trump tariffs is Communist China. Communist China have a tremendous surplus in trade, selling more value than it imports, making it a hoarder of hard currency in the range of 3,4 trillion dollars.

The Former Chief of the WTO, Pascal Lamy acknowledges the illegal subsidies but doesn’t call it cheating for some obscure reasons. Lamy also allows China, the second largest economy in the world to use the rules applicable to non-developed countries. This made WTO a puppet of the Communist China government. Remember Pascal Lamy after leaving the WTO became associated to the Chinese Europe International Business School.

WORLD ALLIGNMENT – USA vs CHINA

Trump tariffs shakes the world of commerce and the commerce of the world.

The choices are clear. Trump reserves low tariffs for American markets for countries that have low tariffs on American imports. As of today, 75 out of the 191 countries in the world has requested meetings to reduce tariffs.

Viet Nam, Taiwan, Israel and Zimbabwe and many other countries have offered zeroing of their import tariffs to Trump in public. The European Union has offered removal of all industrial tariffs.

Tariffs are bad and if all countries reduce tariffs David Ricardo lessons are applied and there is room for prosperity to all participants.

China has chosen the path of rising tariffs in revenge to Trump’s 25% tariffs. The Communist China government has slapped 34% tariffs on American imports. Trump responded with 104% tariffs on China.

The countries can choose who to trade with. The best choice is to have less tariffs, but all nations are free to deal with China.