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How Harley Davidson may expose another problem with tariffs

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How Harley Davidson may expose another problem with tariffs

The logic that many on the right and even some on the left understand about tariffs is the increase cost to overseas producers inevitably falls back on the American consumer. This is the primary argument made by many federalist-minded Libertarians and Republicans who oppose President Trump’s continued embrace of the practice. As we’re now seeing, there’s a potentially bigger problem with these tariffs.

Instead of bringing jobs back to America, they can actually drive jobs overseas. Case-in-point: good ol’ American Harley Davidson.

The motorcycle company that for many embodies the American rebellious spirit is at a crossroads. The European Union has raised its tariffs on American-made motorcycles from 6% to 31% in response to President Trump’s tariffs on steel and aluminum.

US to hit EU with steel and aluminum tariffs, report says

https://www.theguardian.com/us-news/2018/may/30/trump-administration-tariff-steel-aluminum-eu-trade-tensionThe move is likely to bring retaliatory action from European Union trade regulators, who have warned they will target US products as motorcycles, jeans and bourbon if additional US tariffs are imposed.

Signs of increasing friction between the US and Europe over trade came early on Wednesday when Wilbur Ross, the US commerce secretary, drew a sharp line with the EU over Chinese trade negotiations, telling counterparts at a trade development panel in Paris that Europe is using tariffs as an “excuse” to refuse trade negotiations.

Predictably, Harley Davidson is in a precarious situation. They must decide whether to continue exporting to Europe and pay the tariff, which averages around $2,200 per finished motorcycle, or move a portion of their operations to Europe to avoid the tariff. While they’re unwilling to admit it at this point, the latter will almost certainly force the company to cut it’s American workforce and even shut down some of their domestic facilities.

This isn’t the type of result we were promised when the President was selling us on tariffs, but it was easy to foresee.

Free trade works when it’s done right

The President was correct when he bashed NAFTA and TPP. However, his reasoning for doing so was wrong. Free trade empowers the real job creators in US companies to put Americans to work. It also allows for many to move jobs offshore, but the benefits of a freedom in trade greatly outweigh the detriments. As some jobs move offshore, more jobs are subsequently created in America.

NAFTA and TPP were never really free trade agreements. NAFTA was trade redistribution that ended up being detrimental to the whole continent and TPP was a handover of power to multinational companies without the benefit of proper oversight. To use them as the reason for imposing harsh tariffs and abandoning free trade is a farce. As a self-proclaimed master negotiator,Trump should have made better deals and embraced free trade. Let Americans go head-to-head with companies in other nations. Put their cheap workforce against our innovations and financial prowess. That type of free trade is good for them and better for us.

Harley Davidson won’t be the last company forced to make hard decisions because of the tariffs. Our best case scenario is that damage can be mitigated and some jobs truly do come back. Unfortunately, that may be wishful thinking.

Reference

Harley-Davidson offers no further detail on overseas production shift as European tariffs take hold | PennLive.com

https://www.pennlive.com/news/2018/07/harley-davidson_offers_no_furt.html“We never contemplated moving our European volume out of the United States,” Olin said Tuesday.

“Consequently we’re analyzing the capacity options that we have… and we are working on the overall plans, and when we have them we’ll provide more information.”

Economy

To those who don’t care about the national debt, consider this

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To those who dont care about the national debt consider this

The national debt has been growing dramatically for decades. It’s so great that most Americans seem to dismiss it altogether; if we haven’t been harmed by it already, it obviously can’t hurt us, right? This sort of “head in the sand” thinking is why lawmakers refuse to tackle it. As long as the people don’t seem to care, why should they?

It’s time to care. It’s been time to care for a while but the collective ignoring of it has brought it to the level that now, in 2018, we are nearing the point of no return.

Why? Because the astronomical interest is now going to noticeably affect how the government operates. We’ve spent years pretending like the interest isn’t a big deal even though it was growing to unsustainable levels during the Clinton administration. Now, we’re seeing it reach levels that are tangible. Why? Because the cost to cover it is now great enough that other areas are going to need to be cut.

In 2017, the interest on our debt was $263 billion. That’s 6.6% of federal government spending. We’re on track to spend more on interest than Medicaid in 2020 and more on interest than defense by 2023. Let me repeat that:

By 2023, we will spend more in interest on the national debt than we spend on national defense.

Normally, we can take CBO predictions with a grain of salt because they’re usually off (see Obamacare predictions for CBO’s epic failures) but this one relies on simple math. Even in a humming economy with the best case scenarios in play, you can’t overcome interest without paying down the debt.

Neither Democrats nor Republicans have any intention of paying off the debt. This is why candidate Trump went from promising to pay off the national debt in eight years, then ten years, then paying part of it off, then finally proclaiming himself the “king of debt” – all within the period of one month on the campaign trail.

To get the national debt in line will require an ironclad commitment backed by irrevocable legislation that spans two- to four-decades. It means entitlement reform, budget limits, cutting entire agencies and possibly even departments, and commitments to rein in all forms of discretionary spending.

In other words, the only way to get the national debt to a manageable level – not even getting it to zero but somewhere much lower than it is – would require commitments by politicians that none of them are willing to make. Oh, there might be a couple of Senators and a handful of Congressmen who would embrace such measures, but even those ones won’t buck the system to the point that they’d push hard for it without a mandate by voters.

We are the only hope for the very near future. If Americans don’t care that our tax dollars are being used to pay interest on the mountainous debt that has been accumulated in recent years, let alone the debt that preceded it, then we shouldn’t expect politicians to care, either. This can has been kicked down the road for decades, but the road is coming to a very abrupt end soon. It’s beyond unsustainable. We’re on the verge of collapsing under the weight of our own mistakes.

As long as voters ignore the national debt, neither party will pay attention to it, either. We will drown in our own ignorance if we don’t act soon. In the past, they said the debt will affect our children and grandchildren. Now, the debt is starting to affect us.

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Economy

Pacific Rim summit highlights strained China-US relations

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Pacific Rim summit highlights strained China-US relations

PORT MORESBY, Papua New Guinea (AP) — A meeting of world leaders in Papua New Guinea has highlighted divisions between global powers the U.S. and China and a growing competition for influence in the usually neglected South Pacific.

The 21 nations at the Asia-Pacific Economic Cooperation summit in Port Moresby struggled to bridge differences on issues such as trade protectionism and reforming the World Trade Organization, making it likely their final statement Sunday will be an anodyne document.

U.S. Vice President Mike Pence and China’s President Xi Jinping traded barbs in speeches on Saturday. Pence professed respect for Xi and China but also harshly criticized the world’s No. 2 economy for intellectual property theft, forced technology transfers and unfair trading practices.

In Port Moresby, the impact of China’s aid and loans is highly visible. But the U.S. and allies are countering with efforts to finance infrastructure in Papua New Guinea and other island states. The U.S. has also said it will be involved in ally Australia’s plan to develop a naval base with Papua New Guinea.

On Sunday, the U.S., New Zealand, Japan and Australia said they’d work with Papua New Guinea’s government to bring electricity to 70 percent of its people by 2030. Less than 20 percent have a reliable electricity supply.

“The commitment of the United States of America to this region of the world has never been stronger,” said Pence at a signing ceremony. A separate statement from his office said other countries are welcome to join the electrification initiative provided they support the U.S. vision of a free and open Pacific.

China, meanwhile, has promised $4 billion of finance to build the the first national road network in Papua New Guinea, among the least urbanised countries in the world.

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Economy

Trump: Fund the border wall or let’s have a government shutdown

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Trump Fund the border wall or lets have a government shutdown

President Trump indicated Saturday that if he doesn’t get the $5 billion he wants for Homeland Security in the next spending bill, he may push a partial government shutdown.

“This would be a very good time to do a shutdown,” Trump told reporters as he departed the White House to visit the fire zones in California. “I don’t think it’s going to be necessary, because I think the Democrats will come to their senses, and if they don’t come to their senses, we will continue to win elections.”

The House has already passed a spending bill that includes the $5 billion President Trump wants in order to jumpstart the building of his wall along the Mexican border. The Senate is still working with the original number proposed, $1.6 billion. Senate Minority Leader Chuck Schumer said it isn’t going to happen.

“We believe Democrats and Republicans should stick with their agreement and not let President Trump interfere,” Schumer said earlier this week. “Every time he interferes, it gets bollixed up.”

Around 70% of the government is already funded beyond the December 7 deadline. The shutdown President Trump is threatening would affect State, Interior, Homeland Security, Justice and other departments.

My Take

I’m always hesitant to call for increased spending on anything. Budgets are already too high. But the border wall is one of the few things that actually does need to be funded. The long-term effects of slowing illegal immigration will actually save the country money.

Most politicians fear a shutdown. It harms federal employees and with Christmas coming up, the prospects of a shutdown are troubling. But we need the wall. We were promised the wall. It’s time to get aggressive and force Congress to do their job.

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