Category Archives: Banking & Lending Issues

Trump’s $60 billion in China tariffs will create more problems than they solve

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Business such as California winemakers could be hurt by the new tariffs as a result of retaliation. AP Photo/Mark Schiefelbein

William Hauk, University of South Carolina

After spending seven months investigating whether China is engaged in unfair trade practices, the Trump administration announced March 22 that it will impose tariffs on as much as US$60 billion in Chinese imports.

The tariffs are meant to address two problems: intellectual property theft by China and a steep and persistent trade deficit.

As an economist and expert in international trade, I don’t see how the proposed tariffs will resolve either one. In fact, it’s more likely that they will create two new problems by hurting both consumers and businesses.

IP theft and trade deficits

The administration formally justified its tariffs by invoking Section 301 of the Trade Act of 1974, which allows the president to impose tariffs on countries in violation of international trade deals.

In particular, the Trump administration accused China of engaging in intellectual property theft forbidden by World Trade Organization agreements.

Intellectual property theft has been a major complaint of American companies doing business in China for decades. Sometimes this theft occurs through illicit means, such as industrial espionage. It also occurs through legal channels, such as when U.S. companies are forced to form a joint venture with a Chinese business. In other cases, technology transfers are a precondition of doing business in China.

Altogether, the U.S. trade representative estimates that these policies cost U.S. businesses around $50 billion a year.

The other problem that has long irked the president is the significant trade deficit. Since the U.S. normalized trade relations with China in 2000, the deficit ballooned from less than $84 billion to over $375 billion in 2017.

This “China shock” of cheap goods has caused considerable disruption in the U.S. economy. The labor market has been surprisingly slow to adjust, leading affected workers to earn far less money over a lifetime.

President Trump signs a presidential memorandum imposing tariffs and investment restrictions on China. AP Photo/Evan Vucci

The wrong solutions

It remains to be seen, however, whether the tariffs will alleviate either problem.

The administration’s calculation seems to be that China will back down on intellectual property theft if faced with less access to U.S. markets.

But China is less dependent on U.S. trade now than it was a decade ago, making its economy resilient to these sorts of punitive measures. The U.S. accounted for 18.4 percent of Chinese exports in 2016, down from 21 percent in 2006.

The U.S. likely would have better luck resolving this problem at the WTO, which China joined in 2001 and must abide by its rulings. The best part about a WTO ruling is that it would affect all of China’s exports, not just those to the U.S.

Similarly, the trade deficit is unlikely to be resolved through higher tariffs. The primary cause of the persistent trade deficit – $566 billion in 2017 – is an imbalance between savings and investment in the U.S. economy.

The U.S. personal savings rate has fallen steadily since the late 1970s. At the same time, the government has run persistently large budget deficits, both of which have increased the level of borrowing in the U.S. economy.

As a result, foreign investment, particularly from China, has become increasingly critical to financing U.S. economic growth. This is great news in terms of helping Americans buy cheap Chinese goods and the government finance its budget deficit. But all that foreign cash going into the financial market isn’t being used to buy the stuff Americans are producing, like Harley Davidson motorcycles and Iowa corn.

This results in lower exports and a higher trade deficit. Tariffs will not change this reality.

Two new problems

While the full details of the tariffs have yet to be released, it’s clear they’ll cause at least two immediate problems.

One is that U.S. consumers will be hurt. The typical consumer has about $260 in extra purchasing power as a result of trade with China. Those benefits, which disproportionately go toward working-class Americans, will fall due to the U.S. tariffs, as American importers will pass some of their increased costs along to consumers.

Secondly, American companies that export to China will be exposed to retaliation in the form of tariffs on U.S.-made goods. Shortly after Trump’s announcement, China released its own policy statement targeting $3 billion worth of U.S. exports.

Particularly vulnerable to Chinese retaliation are the pork and soybean industries, which are concentrated in the Trump-friendly Midwest. This list could grow if a trade war with China escalates.

A broader concern is that, by acting unilaterally, the Trump administration is undermining the broader system that has facilitated the growth of international trade and adjudicated grievances between countries since World War II.

The ConversationWhile far from perfect, organizations such as the WTO have limited the scope of trade wars since the chaos of the 1930s. Failing to uphold these institutions could have major consequences in the future.

William Hauk, Associate Professor of Economics, University of South Carolina

This article was originally published on The Conversation. Read the original article.

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What We Found in Trump’s Drained Swamp: Hundreds of Ex-Lobbyists and D.C. Insiders

 

By Derek KravitzAl Shaw and Isaac Arnsdorf. Published 3-7-2018 by ProPublica

When the Trump administration took office early last year, hundreds of staffers from lobbying firms, conservative think tanks and Trump campaign groups began pouring into the very agencies they once lobbied or whose work they once opposed.

Today we’re making available, for the first time, an authoritative searchable database of 2,475 political appointees, including Trump’s Cabinet, staffers in the White House and senior officials within the government, along with their federal lobbying and financial records. Trump Town is the result of a year spent filing hundreds of Freedom of Information Act requests; collecting and organizing staffing lists; and compiling, sifting through and publishing thousands of financial disclosure reports. Continue reading

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As Trump Threats Stir Global Arms Race, New Report Details the Nuclear War Profiteers

“If you have been wondering who benefits from Donald Trump’s threats of nuclear war, this report has that answer.”

By Andrea Germanos, staff writer for CommonDreams. Published 3-7-2018

The new report “names those that are still okay with trying to make a profit from producing nuclear weapons.” (Photo: ippnw Deutschland/flickr/cc)

A new report offers a comprehensive look at who’s profiting from the new nuclear arms race.

“If you have been wondering who benefits from Donald Trump’s threats of nuclear war, this report has that answer,” said Beatrice Fihn, executive director of the International Campaign to Abolish Nuclear Weapons (ICAN), winner of the 2017 Nobel Peace Prize.

ICAN, along with Netherlands-based peace group Pax, released the report, entitled “Don’t Bank on the Bomb,” on Wednesday. It shows that 329 financial institutions in 24 countries invested $525 billion into the top 20 companies involved in the production, maintenance, and modernization of nuclear weapons from January 2014 through October 2017. Continue reading

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17 Democrats Decried for Sending This Clear Message: “I Work for My Bank Donors, Not My Constituents’

“Voters have seen this movie before. It didn’t work out in 2008 and it’s no wiser today. There is simply no excuse for a Democrat to add their name to Wall Street deregulation.”

By Jon Queally, staff writer for CommonDreams. Published 3-6-2018

Senators Tim Kaine and Angus King. Both senators were among the seventeen Democratic caucus members who voted in favor of a financial dergulation bill on Tuesday. “This bill wouldn’t be on the path to becoming law without the support of these Democrats,” said Sen. Elizabeth Warren (D-Mass.) following the vote. Photo: flickr

Sens. Elizabeth Warren and Bernie Sanders are not impressed.

And they were not alone Tuesday as outrage and disgust erupted among consumer watchdogs and progressives after Sen. Angus King (I-Maine) and sixteen Democrats joined with 50 Republicans in the U.S. Senate to advance a bill that critics say is just another handout for Wall Street banks—one that also sets the stage for the next major financial meltdown. Continue reading

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New Report Details How Americans Who Have Debt Held by Collection Agencies Can Get Thrown in Jail

New ACLU publication looks at how “debt collection industry uses prosecutors and judges as weapons against millions of Americans who can’t afford to pay their bills.”

By Andrea Germanos, staff writer for CommonDreams. Published 2-21-2018

“Consumers have little chance of justice when our courts take the debt collector’s side in almost every case—even to the point of ordering people jailed until they pay up,” says report author Jennifer Turner. (Photo: Bill Smith/flickr/cc)

Threatened with arrest for a case involving a few dollars in debt held by a collection agency?

This is not a science fiction, nor a scenario from the United States more than 185 years ago when debtors prisons were still allowed. Rather, it’s a part of the current justice system where, in states across the country, state courts and local prosecutors abet debt collectors in arresting and jailing some of the tens of millions of Americans who have debt held by private collection agencies.

The injustice is laid out in new report from the ACLU, “A Pound of Flesh: The Criminalization of Private Debt.” Continue reading

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Instability Mounts in Puerto Rico Amid Privatization Efforts and Power Authority’s Cash Shortfall

“If this is not disaster economics and this is not setting the stage for commercialization of services that are there to promote equality, I don’t know what is.”

By Julia Conley, staff writer for CommonDreams. Published 2-19-2018

Many rural areas in Puerto Rico remain without power, and San Juan Mayor Carmen Yulin Cruz said Monday that privatization has directly resulted in delays to restoration. (Photo: Western Area Power/Flickr/cc)

As nearly 250,000 Puerto Ricans remain without power five months after Hurricane Maria struck the island territory—the longest blackout in U.S. history—the Puerto Rico Electric Power Authority (PREPA) said Sunday it will reduce its operating reserve to save money, as the island’s government moves toward privatizing the authority.

A federal judge denied PREPA a $1 billion loan over the weekend, saying the authority could not prove it needed the additional cash injection. The company will now reduce its reserve by 450 megawatts, saving $9 million per month but likely resulting in more power outages. Continue reading

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Consumers are biggest losers of Trump’s ongoing war on regulations

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Some worry Mick Mulvaney is putting banks before consumers as head of the CFPB. Reuters/Yuri Gripas

Jeff Sovern, St. John’s University

President Donald Trump has been waging a war on regulation since he got into office on the ground that government red tape costs the economy billions of dollars a year.

Among the victors in this battle have been energy companies, banks and the president himself, who recently promised he’s “just getting started.” Perhaps the biggest losers, however, have been consumers.

The best illustration of this is the neutering of the Consumer Financial Protection Bureau, which began immediately after Mick Mulvaney stepped in as interim director in November. Continue reading

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Reproductive Rights Groups Slam WH Report on Trump’s ‘Unconscionable’ Global Gag Rule

State Department assures that “disruption of services” has been minimal, but women’s rights groups decry loss of the massive and destructive healthcare services in impoverished countries around the world

By Julia Conley, staff writer for CommonDreams. Published 2-8-2018

Health clinics in developing countries were put at risk for losing funding last year when President Donald Trump announced he would reinstate the global gag rule, taking U.S. aid from NGOs and their local partners unless they agreed to stop providing abortion care and counseling. (Photo: World Bank/Flickr/cc)

Women’s rights groups on Thursday denounced a report issued by the State Department on the impact of the Trump administration’s reinstatement of the global gag rule, also known as the Mexico City policy—saying the misleading document ignores the clear negative impacts the policy is having on poor communities and women around the world that have lost access to vital health services.


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‘Kicking Off Black History Month,’ Trump Guts CFPB’s Ability to Curb Racial Discrimination by Banks

“These changes threaten effective enforcement of civil rights laws and increase the likelihood that people will continue to face discriminatory access and pricing as they navigate their economic lives.”

By Jake Johnson, staff writer for CommonDreams. Published 2-1-2018

Mick Mulvaney press conference about President Donald Trump’s budget plan. Screenshot: YouTube

In a move immediately condemned as yet another “shameful” effort by the Trump administration to roll back civil rights and reward big banks, the White House reportedly “stripped” a key Consumer Financial Protection Bureau (CFPB) office of the power to take action against financial firms accused of breaking laws against racist lending practices.

Instead of enforcing anti-discrimination laws and penalizing criminal banks, the CFPB’s Office of Fair Lending and Equal Opportunity will now be focused on “advocacy, coordination, and education,” according to an email sent to bureau employees by White House budget chief Mick Mulvaney, who was installed as the CFPB’s acting director by President Donald Trump over objections of consumer advocates.  Continue reading

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US Surpasses Cayman Islands to Become Second Largest Tax Haven on Earth

“This is not a ranking in which the U.S. wants to be number one or even number two. We have one of the strongest economies and one of the most secret. It’s a perfect recipe for attracting the proceeds of crime, corruption, and tax evasion.”

By Julia Conley, staff writer for CommonDreams. Published 1-30-2018

The U.S. holds 22 percent of global offshore services, up from 14 percent in 2015. (Image: Offshore Shell Games)

Proving its role in the global race to the bottom on tax avoidance and  contributing to a multitude of abuses around the world, the United States is now second-largest tax haven on the planet, according to an updated international index.

The Tax Justice Network found that the U.S. has surpassed the Cayman Islands as the number-two place where corporations can easily stash their money to avoid tax liabilities. Switzerland retained its top place on the list. Continue reading

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