Former Goldman CEO Lloyd Blankfein: Trump’s tariffs aren’t a bad idea

Discussion in 'Economics' started by bone, May 15, 2019.

  1. bone

    bone ET Sponsor

    Former Goldman CEO Lloyd Blankfein: Trump’s tariffs aren’t a bad idea

    • “Tariffs might be an effective negotiating tool,” former Goldman Sachs CEO Lloyd Blankfein says in a tweet Tuesday evening New York time.
    • “China relies more on trade and loses more,” he adds.
    • Tariffs may cause U.S. buyers to switch their purchases to local or non-Chinese companies, causing Chinese companies to lose revenues, Blankfein says in a separate tweet.
    The United States may be feeling the pain of tariffs now, but they will hurt China in the longer term, said former Goldman SachsCEO Lloyd Blankfein.

    “Tariffs might be an effective negotiating tool,” Blankfein said in a tweet Tuesday evening New York time. “Saying it hurts us misses the point. China relies more on trade and loses more.”

    Trade tensions between the world’s two largest economies escalated in the last week. U.S. President Donald Trump’s administration raised tariffs on $200 billion worth of imported goods from China to 25% from 10%. In response, Beijing retaliated with duties of up to 25% on $60 billion worth of U.S. goods that are set to take effect on June 1.

    In a separate tweet Tuesday, Blankfein said tariffs may cause U.S. buyers to switch their purchases to local or non-Chinese companies. Although that will cause the American side to pay slightly more than they do now, he pointed out that as a result, Chinese companies will lose revenues.

    “Not great but part of the process to assert pressure to level the playing field,” he said.

    Responding to Blankfein’s tweet, Eric Robertsen, head of global macro strategy and FX research at Standard Chartered said: “I do think there’s an oversimplification there.”

    “Certainly in the short term, if tariffs are increased across the board, the idea that there are winners and losers in this trade war, I think is actually missing the point: Everybody loses. That’s the key factor from a growth point of view,” he told CNBC Wednesday.

    Robertsen also said that U.S. companies importing from China have contracts in place which might be difficult to change overnight.

    Other analysts have noted anecdotally that some non-Chinese companies have already been moving their manufacturing out of the country to Southeast Asia due to rising labor costs.

    While the U.S. has a host of demands for China around creating a fairer business environment — including the protection of intellectual property and technology transfer — Trump has focused on reducing the U.S. trade deficit with China. The U.S. is the Asian giant’s largest trade partner.

    dealmaker likes this.
  2. @bone I really appreciate you exposing me to a position on this matter besides “orange man = bad.” Keep these coming.

    I’m trying to better understand the grievances. Hows my list looking?:
    - currency manipulation
    - free ride on the WTO
    - blocking foreign companies from entering their market
    - closed financial markets with really silly rules
    - putting the interests of their oligarchs above those of the common man and creating a competitive advantage by hiding the suffering of their labor force from the western consumer who just wants a new TV

    I hear all these anecdotes about stolen trade secrets but I don’t know if I have the evidence to put that on the list yet, but that’s what you’re here for! Thanks for doing the legwork to inform my opinion.
    bone likes this.
  3. bone

    bone ET Sponsor

    That's a decent list, but it leaves off the most egregious and financially damaging grievance - which is also the major sticking point in the US/China trade negotiations. [the US wants IP protections codified into Chinese law, because words and promises from Chinese government officials have been absolutely meaningless]

    The biggest one is forced Intellectual Property transfers and the outright theft of IP from US Companies. Some dillweed posted on another thread that forced IP wasn't a thing - and I have convincing personal knowledge of it from my own sister, who is a Senior VP at an American Tech Company.

    In fact, when CNBC and then the Harvard Business Review polled American CEO's, the results were rather terrifying:

    There are several other grievances as well. For example, US Companies doing business in China are restricted as to moving their profits out of China. Conversely, Chinese Companies doing business in the US are free to move profits in and out of the US as they please. Also, Chinese Companies doing business in America enjoy the same freedoms, property rights and legal protections, and access to due process and the American Court System as American Companies have. Obviously the same is not the case for US Companies operating in China.
    Last edited: May 15, 2019
  4. ironchef


    Yet, most US tech companies including your sister's still stepping over one another to set up shop and to sell in China?
  5. bone

    bone ET Sponsor

    Not my sister’s so much. Not the products where the Chinese insisted on a forced IP transfer as a precondition to sale.
    Last edited: May 16, 2019
  6. Thanks, @bone, for making note of the IP thing.

    What recourse does China have?
  7. LacesOut


    We aren’t bullying China
    They should come to the table with a fair deal and concede they have been busted and help us sort this out.
    If they don’t - it will be on them - and they will suffer more than us.
    I’m happy to pay more for crap at Walmart if it means negotiating fair trade and practice with the 2nd largest economy in the world.
  8. bone

    bone ET Sponsor

    The Chinese Communist Party has an indoctrination app available in the App Store.