Why does the United States government allow China to place a huge import tax on American goods and yet let them flood the American market with cheap low quality goods?

Would mirroring their import taxes help level the playing field for American goods and bring back jobs? Why or why not?

Two important issues need to be addressed: First an import tax is actually a tariff targeting specific merchandise and second the U.S. trade deficit with China is mainly due to semi-manufactures that U.S. companies used as inputs for finished products.

Another big ticket items is that almost 90 percent of the decline in U.S. manufacturing jobs between 2000 and 2010 was caused by productivity gains (robots and computers), rather than import competition. So, unless we want to destroy all the robots, those jobs just aren’t coming back, tariff or not. Furthermore, the idea that the U.S.-China trade balance proves that we’re “losing” at trade is short sighted. An examination of the past 30 years of U.S. economic performance offers no evidence that a larger level of imports or growing trade deficits have negatively affected the U.S. economy.

Academic economists that have studied these issues teach that that trade balances reflect national savings, consumption and investment, not trade policy. In other words, we buy goods and services from foreigners, and they buy an equal amount of our exports plus our financial dollar-assets.

The U.S. Constitution gives Congress the sole authority to impose tariffs on foreign-made goods and would need legislation for a tariff regime on China however the current record of Congress passing new legislation is dismal at best.

A new tariff would be blatantly inconsistent with two of the United States’ most fundamental obligations under WTO agreements: (GATT Article I the principle that a WTO member must treat imports from all other members equally) and (ii) the United States’ tariff bindings (GATT Article II—the rule that a WTO Member cannot impose tariffs above the “bound rate” set forth in its tariff schedule).This WTO-sanctioned retaliation would effectively close the United States’ third-largest export destination. Furthermore, China could go straight to the WTO and easily win the right to impose retaliatory tariffs on U.S. exports in the amount of the damage caused by the tariff.

Finally, considering that U.S. exports to China totaled only about $115 billion in 2015, this WTO-sanctioned retribution would effectively close the United States’ third-largest export destination a shattering effect for American exporters.

How is the trade deficit calculated in specific instances?

A widget conceived/designed in the US, costs $20 per unit to manufacture in the Philippines, sells in US for $50, saves the consumer around $250/yr. How does that effect the trade deficit as it is calculated and quoted in the various literature? Wanted to provide more detail but the space is limited

For example, if Americans buy televisions from China, and have no other transactions with China, the Chinese end up holding dollars. These monies can be held in the form of bank deposits in the United States or in some other U.S. investment. The payments of Americans to China for televisions are balanced by the payments of Chinese to U.S. individuals and institutions, including banks, for the acquisition of dollar-monies. Put another in another way, China sold the United States TV sets, and the United States sold China dollars or dollar-denominated assets such as Treasury bills. These dollar-assets become China’s reserve currency for additional transactions in other parts of the world that require payment in dollars.

Despite the fact that the totals of payments and receipts are necessarily equal, there will be inequalities such as excesses of payments or receipts, in the form of deficits or surpluses for a given kind of transaction. As a result, there can be a deficit or a surplus in any of the following economic areas: merchandise trade, services trade, foreign investment income, unilateral transfers-- like foreign aid—remittances by foreign workers, private investment, flow of gold-- money among central banks and treasuries, or any combination thereof and other international transactions like credit and insurance as a specific source of particularity.

How does managerial economics have a relationship with general economics, mathematics and statistics?

Managerial economics has a close interaction with Economics, Mathematics and Statistics but also Management theory and Accounting concepts. Managerial economic integrates concepts and methods from these disciplines and brings them together to solve managerial problems.

Economics applied to decision making is a special branch of economics, joining pure economic theory and managerial practices. Economics has been divided in two main branches: Micro-economics and macro-economics.

Micro-economics studies the behavior of the individual units and small groups of units. In particular firms, households, prices, wages, incomes, individual industries and commodities. Thus micro-economics gives a cellular view of the economy.

The background of managerial economics originates from micro-economic theory. Theory of price, elasticity of demand, marginal cost marginal revenue, the short and long runs and theories of market structure. It makes use of well-known models in price theory such as monopoly price, the elasticity of demand and the many pricing models for market competition.

Macro-economics on the other hand, deals with the behavior of the large aggregates in the economy. The large aggregates are total saving, total consumption, total income, total employment, general price level, wage level, cost structure, etc. As such, macro-economics is aggregate economics and examines the interrelations among the various elements, and causes of fluctuations in them.

Macro-economies are also extended managerial economics. The setting, in which a business operates, variables in national income, deviations in fiscal and monetary measures and variations in the level of business activity that have relevance to business decisions. The understanding of the complete process of the economic system is very useful to a managerial economist in the formulation of policy such as business forecasting. The most widely used model in modern forecasting is the gross national product model and its component parts.

A relatively new subject in economics is the theory of decision making and has gained significant importance for managerial economics. In the process of management such as planning, organizing, leading and controlling, decision making is always essential. Managers face a number of problems connected to production, inventory, cost, marketing, pricing, investment and human resources training.

Economist are interested in the efficient use of scarce resources and as a result their interest in business decision problems as applied to economics in the process of managing a business thus, managerial economics is economics applied to decision making.

Mathematicians, statisticians, engineers and others have joined together and developed models and analytical tools which have grown into a specialized subject known as operations research. The basic purpose of the research and development is to designed scientific model for the micro and macro systems which can then be utilized for policy making.

The development of techniques and concepts such as Linear Programming, Dynamic Programming, Input-output Analysis, Inventory Theory, Information Theory, Probability Theory, Queuing Theory, Game Theory, Decision Theory and Symbolic Logic and more recently neural training networks have each had a defining contribution towards the understanding of socio-economic systems.

Statistics provides the basis for the empirical testing of theory. It provides the individual firm with measures of appropriate functional relationship involved in decision making because a business runs on estimates and probabilities. Technique like multiple regression is used; measures of central tendency normal distribution, correlation, regression, least square, estimators are widely used in conjunction with computer software programs.

Managerial economics is also related to accounting as it records financial operation of a business. A business is started with the main aim of earning a profit. Capital is invested and engaged in purchasing properties such as building, furniture and daily running cost of the firm.

Goods produced are bought and sold for cash as well as credit, expenses are met and incomes derived. This goes on the daily routine work of the business transactions that must be transparently accounted for and evaluated for performance, specially, when the firm goes public and sells stock in the market.

Mathematics and numerical analysis have helped in the development of economic theories and now mathematical-economics has become a very important branch of economics. The most important branches of mathematics generally used by a managerial economist are geometry, algebra, calculus and computer software developed with powerful algorithms that solve complex problems and dynamic analysis.

BREXIT David Davis said he expected to conclude trade deals with the US, China, India and Japan by September 2018. What’s the news on these deals?

impoverishing England should no be considered a success!

In a letter made public the Prime Minister of the UK Theresa May, stated on 29 March 2017 to Mr. Donald Tusk President of the European Council her views on Brexit:

“We should engage with one another constructively and respectfully, in a spirit of sincere cooperation. Since I became Prime Minister of the United Kingdom I have listened carefully to you, to my fellow EU Heads of Government and the Presidents of the European Commission and Parliament. That is why the United Kingdom does not seek membership of the single market: we understand and respect your position that the four freedoms of the single market are indivisible and there can be no "cherry picking". We also understand that there will be consequences for the UK of leaving the EU: we know that we will lose influence over the rules that affect the European economy. We also know that UK companies will, as they trade within the EU, have to align with rules agreed by institutions of which we are no longer a part - just as UK companies do in other overseas markets.” It follows a paraphrase of concerns:

· Citizens first.

This issue is of obvious complexity because is at the center of the talks and will affect the interest of citizens on both sides of the channel. Many of these citizens are living in the United Kingdom, and UK citizens living elsewhere in the European Union thus, the rights of those citizens are at stake in the negotiations.

· Economic and security cooperation.

Discussions are needed to determine a fair settlement of the UK's rights and obligations as a departing member state, and the United Kingdom's continuing partnership with the EU on these issues. Moreover, it is necessary to agree the terms of future partnership alongside the rights and obligations that must remain after withdrawal from the EU.

· Investment and businesses.

This matter will require a great deal of attention to minimize disruption and to give as much certainty as possible to all Investors, businesses and citizens in both the UK and across the remaining 27 member states. In addition, the concern of citizens from third countries around the world must be addressed and be given the ability to plan ahead of the withdrawal. Both people and businesses in the UK and the EU would benefit from implementation periods to adjust in a smooth and orderly transition period.

· European liberal democracy.

Working together to advance and protect shared European values are going to be a challenge for the UK when internal frictions raise anew as a consequence of the separation from the EU for political and geographic issues play an important role in the process.

· Scotland

A burning item on the domestic list to be addressed is the recent statement from Scotland's First Minister, Nicola Sturgeon who “said in the wake of the Leave result that it was "democratically unacceptable" that Scotland faced being taken out of the EU when it voted to Remain. She said Theresa May's decision to rule out the UK staying in the single market meant Scotland should have a choice between a "hard Brexit" and becoming an independent country, possibly in the EU. Ms Sturgeon has officially asked for permission for a second referendum to be held, saying that she wanted the vote to be held between the autumn of 2018 and spring 2019.” Theresa May has said "this is not the time" for a second referendum.

· Northern Ireland

The land border between Northern Ireland and EU member the Republic of Ireland is going to be a center piece of the Brexit talks as for now there is a common travel area between the UK and the Republic. However, like Scotland, Northern Ireland voted to remain in the EU in last year's referendum and Sinn Fein, which was part of the ruling coalition in the Northern Ireland Assembly before it was suspended, has called for a referendum on leaving the UK and joining the Republic of Ireland as soon as possible. Conservatives have rejected this call in favor of a united Ireland but Conservative Brexit spokesman David Davis has said “that should the people of Northern Ireland ever vote to leave the UK, they would "be in a position of becoming part of an existing EU member state, rather than seeking to join the EU as a new independent state".

Former Prime Minister, John Major, has warned the issue could adversely affect the peace process and mean the UK government would no longer be seen as an "impartial honest broker" in restoring the power-sharing arrangements and upholding Northern Irish institutions.

· Gibraltar

The Spanish have talked openly about this being an opportunity to get Gibraltar back. Jose Manuel Garcia-Margallo, its minister of foreign affairs, said in September the UK's vote to leave the EU was "a unique historical opportunity in more than three hundred years to get Gibraltar back".

· Brexit cost by the end of the day

The EU wants the UK to settle any outstanding bills before it leaves but there have been no official estimates published of the size of the bill, which covers things like pension payments to EU officials, the cost of relocating London-based EU agencies and outstanding EU budget commitments. Various figures ranging from 50 to 100 billion euros have been floated about but although the UK has agreed to meet its financial obligations, Brexit secretary David Davis has said: "We will not be paying €100 billion. This rhetoric could leave without any Brexit deal but that would probably mean everyone ending up in court.

The advocates of the “leave movement” argued that Britain was being held back by the EU, which they claimed imposed too many rules on business and charged billions of pounds a year in membership fees for little in return. They also wanted the UK to regain “lost sovereignty” and make all of its own laws again, rather than being created through shared decision in Brussels with other EU nations.

Immigration was a big ticket item for Brexit supporters. They wanted Britain to take back control of its borders and reduce the number of people coming here to live and/or work. One of the main principles of EU membership is the free movement of people across geographic borders. The Leave campaign also objected to the idea of "ever closer union" between EU member states and what they see as moves towards the creation of a "United States of Europe".

The challenge for the separatists in the UK to reach such wide scope separation from the European continent, might may be that the United Kingdom ends up without a Kingdom as other constituents of the Union Jack break apart and leave behind an isolated an isolated impoverished England!

The Economist says that a 'soft Brexit' will cut trade by at least 20% over 10 years; a "hard Brexit” will cut by 40%. Is that sustainable?

The Economist leader 22/07/2017, see Britain faces up to Brexit.

Alfonso Llanes, Master Degree in International Development

Answered just now

Many experts assent that there is no compelling agreement between the meanings of hard or soft Brexit, however, one could argue that the terms befits border crossings and its administration. Good examples of this is the case will be Ireland and Scotland who want to remain in the EU and whether a new border would be soft for people or hard for both people-services and merchandise crossings.

According to a report from the HOUSE OF LORDS European Union Committee 16th Report of Session 2016–17 Brexit: trade in Goods:

The UK’s global trade accounted for around” 60% of all UK exports to the EU, and almost 77% of total UK imports from the EU in 2015. The Prime Minister’s approach may result in the introduction of both tariff and non-tariff barriers to trade in goods between the UK and the EU. This report considers the impact of trade under World Trade Organization (WTO) terms. In the absence of a FTA with the EU after Brexit, tariffs would apply.”

The introduction of Tariffs as a result of Brexit would be particularly damaging for sectors with a highly integrated EU supply chain, such as the automotive sector as tariffs could be imposed multiple times in the production process. Another big issue is non-tariff barriers such as rules of origin that would be more difficult to resolve.

A FTA that went some way to mitigating this non-tariff barrier would require a trade-off between the UK’s sovereignty and its desire to pursue close trade relations with the EU. More likely than not, this would require a legal obligation to maintain harmonization or mutual recognition of standards with the EU. It might also require the UK to agree oversight or to an arbitration authority in Brussels which, is one of the reasons advocated by supporters of Brexit to leave the EU.

Brexit will result in the introduction of a customs border between the UK and the EU-27. Moreover, Customs procedures will result in delays and increased administration, which in turn would add costs for businesses, and extra work for government officers. The report sustains the view that the UK is unlikely to be able to maintain access to the EU’s preferential trade agreements with third countries and FTA’s will need to be negotiated with each country.

The timetable for withdrawal negotiations under Article 50 is very tight and completing a UK-EU FTA in that same period is exceedingly ambitious. So, it seems that after the two years set out by Article 50— if this period is not extended by the unanimous agreement of the EU-27—WTO rules would apply to trade between the UK and the EU.

Serious consideration to a transitional agreement must be taken for the following sectors of the economy more likely to be“ Brexit hard” affected:

• Pharmaceuticals and chemicals

• Capital goods and machinery;

• Food and beverages;

• Oil and petroleum;

• Automotive; and

• Aerospace and defense.

Other enterprises expected to be affected are:

· International businesses which are not structured along sector lines or national boundaries.

· The manufacturing and primary commodities sectors are important employers.

· The production of goods and services is often intertwined.

· A new approach to immigration must take account of the needs of businesses in the UK.

· The UK economy as a whole is dominated by services which, account for 80% of the economy.

· Whether the UK’s existing level of research and funding with the EU-27 will continue.

Mr. Hardwick Head of Exports, the Agriculture and Horticulture Development Board said that the “transaccional” costs alone would be significant “for such checks between the UK and the EU estimated them to be “in the region of 8% to 10%, and perhaps more. The Government should not want to return to the hard borders of the past. The EU’s customs union means that there are no customs duties at internal borders between EU Member States.

From the perspective of the supply chain of the aerospace and defense sector, Meggitt PLC estimated that the administration of “tariff barriers would pose a significant amount of red tape costs (+200%)” and this “would be counterproductive”.

Another Issue related to tariffs is the additional bureaucracy that will be needed to administer a new Customs regime. There is also risk in that a “lengthy customs import process could lead to refinery production issues should products not be delivered promptly for time-critical industries.

So at one extreme one could have a "hard" Brexit that could involve quitting the EU without a deal in place.

In contrast, a "soft" Brexit could involve keeping close ties with the EU, possibly through some form of membership in the European Union single market, in return for a degree of free movement across borders.

Will the Mexican trade deficit be higher than the trade deficit with China soon?

Alfonso Llanes, Master Degree in International Development

Answered just now

Throughout his campaign, Donald Trump has insisted that most of what is wrong with the U.S. economy comes down to big trade deficits. However, this view is not only naïve and simplistic but lacks economic understanding as the underlying causes for the ills of the U.S. economy are far more complex than just trade deficits.

Trump argues that if United States sold more to the rest of the world than it bought from overseas the U.S. economy would take a dramatic turn for the better, especially, in manufacturing where the shift to foreign factories has cost millions of American jobs.

Focusing on the trade deficit as a tally of economic health is not only misguided, but it also diverts attention from fundamental issues that will have far bigger effects on the log run of American’s economic health.

There is no doubt that U.S. trade in goods is askew but while Trump’s obsession with trade deficits is a good political message for his base, he overstates the economic importance of trade deficits. His logic is faulty if used uniquely to measure deficits or surpluses of commercial relations with any country and ignores the complexities of trade in today’s global economy.

The trade gap with Mexico, looks very big — $63 billion last year. But the reality is that about 40% of the value of the goods imported from Mexico is made in the U.S.

Contrary to Trump’s thinking experts say trade deficits:

• Reflect a low savings rate relative to consumption and investment.
• Jobs loses due to automation
• The informal, veering to right and left approach to trade policy

The link between trade deficits and jobs is not so clear;

• Change in the balance of trade and manufacturing jobs have often moved in opposite directions.
• During economic downturns, U.S. trade balances tend to improve during steep drops in imports as factories cut back on employment.
• Trade deficits don’t give the U.S. leverage to force trading partners into conceding better trade deals.
• Trump’s tax cuts lack spending offsets to pay for the cuts and it will increase the national debt.
• That higher borrowing by the U.S. government will push up interest rates.
• Higher rates will attract global investments in U.S. Treasury bonds.
• Increased demand for U.S. bonds will tend to strengthen the U.S. dollar.
• With a strong dollar American exports will become more expensive and imports will be cheaper.
• Weaker demand for U.S. exports and cheaper prices for imported goods will worsen the trade deficit and throw the U.S. economy in a loop.

Today, many American workers compete head-to-head with foreign workers for jobs that require modest skills and education. U.S. workers cannot win this contest, because workers in most other countries are paid less and what they produce can be sold for less. The answer given by many economists is to train Americans for jobs that require more technical skills than the low-wage foreign workers possess.

Investing in more education and training will pay especially big dividends because the increasingly high-tech economy of the future will make lower-skilled workers less and less valuable. Nevertheless, such investment does not seem to be a priority for Trump.

Another long-term problem is that Americans save at much lower rates than the countries that have risen to become major economic challengers, especially China.

Trump’s tax plan would only make matters worse, analysts say, because his proposal for tax cuts would increase U.S. government debts by trillions of dollars, which would tend to push up the trade deficit.

In one sense, the most important U.S. export is the dollar. Because the dollar is considered the safest currency in the world, foreign nations and wealthy firms and individuals buy and hold huge reserves of this currency, even though, it earns very little interest.

Trump may, in fact, end up disrupting financial markets and discouraging savings with deregulation of the banking and capital financial institutions. Many observers have said that Trump administration officials, “are not exactly informed by economic literacy.”

If a central bank buys large amounts of foreign currency how does it affect the national currency?

Some definitions need be made before the question about currency trades is properly addressed. Notwithstanding, the short answer is that large disparities in the exchange rates triggered by speculators have affected--in many cases-- the sovereignty of many nations. These speculators either as individuals or financial institutions often convert large quantities of one currency into another provoking overnight devaluations of the smaller economy. Currency appreciation or depreciation in the same context is an increase or decrease in the value of the currency.

Following World War II the Bretton Woods Conference, pursued exchange rate systems to promote global economic stability. Countries will usually peg their currency to a major convertible currency. The collapse of "soft" pegs in Southeast Asia and Latin America in the late 1990s led to currency substitution becoming a serious policy issue. Panama, Ecuador and El Salvador became fully “dollarized” economies and adopted the US dollar as legal tender.

The “Eurozone” adopted the euro as its common currency and sole legal tender in 1999, which amounted to full currency substitution despite some evident differences in other country’s economy i.e., Germany and Greece.

In a floating exchange rate system, a currency's value moves up or down in the short run this can happen unpredictably for a variety of reasons, having to do with trade flows, speculation, or other factors in the international capital market. For instance, China purchases of foreign materials by home industries pay with one or more reserve currency, thus, causing a depreciation of the home currency. However, this method of purchase with a reserve currency is far more efficient than converting from one currency to another when a commercial transaction takes place. Typically, foreign commerce is conducted with a reserve currency basket such as the US dollar, the euro or the British pound. This basket of currencies is traded in international currency exchange markets with only minor adjustments mainly due to differences in GDP output, fiscal policy and the monetary policy of each country according to the principle of long-run purchasing power parity.

The foreign exchange market (Forex) or currency market is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices.

Financial centers around the world function as anchors of trades between a wide range of buyers and sellers around the world. Currencies are always traded in pairs. The foreign exchange market does not set a currency's absolute value but rather determines its relative value by setting the market price of one currency pegged to another. For example 1 USD is worth X Canadian or Japanese yen etc.

The modern foreign exchange market began forming during the 1970s. This followed three decades of government restrictions on foreign exchange transactions, when countries gradually switched to floating exchange rates from the previous fixed exchange rate regime set by the Bretton Woods system. The foreign exchange market today trades in many other financial products such as currency swaps and forward transactions.

"Arbitrage" is a French word and denotes a decision by an arbitrator or arbitration tribunal. For example interest rate parity is a no-arbitrage condition representing an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two countries. The relationship between spot and forward is known as the interest rate parity.

What are trade intangible product businesses?

Alfonso Llanes, studied at Florida International University

Answered just now

Theodore Levitt explains in the Harvard Business Review that tangible and intangible markets have very specific distinguishing characteristics:

· Tangible products differ in that they can usually, or to some degree, be directly experienced—seen, touched, smelled, or tasted, as well as tested. Often this can be done in advance of buying. You can test-drive a car, smell the perfume, work the numerical controls of a milling machine, inspect the seller’s steam-generating installation, pretest an extruding machine

· Intangible products—travel, freight forwarding, insurance, repair, consulting, computer software, investment banking, brokerage, education, health care, accounting—can seldom be tried out, inspected, or tested in advance. Prospective buyers are generally forced to depend on surrogates to assess what they’re likely to get.

The convenience of the difference becomes apparent when we consider the question of how the two markets differ from one another. While some of the dissimilarities might seem apparent, it is obvious that, along with their variances, there are important harmonies between the marketing of intangibles and tangibles.