Categories:
International Trade
On The O’Reilly Factor last night, Bill O’Reilly asked Donald Trump for, in order of priority, which were the most important butts to kick. Number 1 for Trump was the Chinese government for keeping the value of China’s currency artificially low, making Chinese goods cheaper than otherwise to Americans. Number 2 was OPEC for keeping the price of oil too high. So he was more upset at the Chinese government for giving American consumers a low price than at OPEC for charging Americans too high a price. What is one to say?
READER COMMENTS
Adam
Dec 13 2011 at 4:56am
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tim
Dec 13 2011 at 8:30am
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Lauren [Econlib Editor]
Dec 13 2011 at 9:24am
Note from the Econlib Editor:
David Henderson’s post is about analyzing the possible policies concerning China, OPEC, and perhaps other policy considerations that are related to the post. All comments with content that pertains to China, OPEC, or other policy considerations or economic analysis pertinent to Mr. Trump’s ideas will likely be approved.
Comments that solely remark on or attempt to characterize Mr. Trump as an individual are ad hominem. Ad hominem comments are explicitly unacceptable by EconLog’s long-standing rules. It should also go without saying that talking about what people can do with their private body parts is against the rules. Those comments will not see the light of day.
Hector
Dec 13 2011 at 10:16am
I believe that both China’s and OPEC’s strategy are very sensible from an economic point of view. They do what is best for them, which might not be what is best for us – but there is just no reason for kicking anyone.
joeftansey
Dec 13 2011 at 10:19am
Mfw trump does not complain about china buying our debt.
Floccina
Dec 13 2011 at 10:38am
Trump knows real-estate. Economics not so much.
David R. Henderson
Dec 13 2011 at 11:13am
@Hector,
Who is”them?” OPEC clearly benefits from keeping the price of oil high. But China’s government, if it really is keeping the price of its currency low, is hurting its own people more than it’s helping the subset who are exporters.
Lord
Dec 13 2011 at 11:25am
The way to wealth is not through consumption?
Noah Yetter
Dec 13 2011 at 11:34am
Consumption is the purpose of all economic activity. It may not be the “way to wealth” but it is the sole justification for pursuing wealth.
Bill
Dec 13 2011 at 1:08pm
Prices of imports from China are too low. Prices of imports from OPEC are too high. Which region’s imports to the USA are just right?
Costard
Dec 13 2011 at 1:34pm
To the extent that OPEC maintains large dollar reserves in the same manner as China – as a group they are the 3rd-largest holder of treasuries – they are guilty of exactly the same thing: depressing prices in the US for the benefit of local export. Whether their production quotas are real or not, and manage to compensate for this crude mercantilism (pun intended), is anyone’s guess.
Lord – clearly not. Trump’s example proves to us that the way to wealth is through bankruptcy.
Noah – couldn’t someone also say that “the sole justification for wealth is to increase production”? Why would you prioritize one point in a circular system? Gods, economic or otherwise, defy logical proof.
Robert Paul
Dec 13 2011 at 1:42pm
Trump’s understanding of economics is just fine. Negotiation has always been a part of price discovery, unless economics assume price discovery comes from magic.
It seems feasible that there was a cause and effect relationship between the economic prosperity of the ’90s and the low gas prices during that period.
As far as China, I am not convinced that exchange rates have as large of an effect on imports and exports as some believe. I do believe that the restrictions on capital flows, ownership, property rights, etc. do provide restictions on trade which are harmful to both American producers and Chinese consumers. Why would the Chinese government not be trying to maximize the standard of living and economic properity of their people? My guess would be power.
dave smith
Dec 13 2011 at 3:12pm
Makes me wonder what Trump would think if our oil came from China….
Notorious B.O.B.
Dec 13 2011 at 3:31pm
This particular national corporatist circle can be squared…by their lights anyway….
We don’t produce (enough) oil for our needs…we cannot easily increase production so we must import oil. Whatever we must consume from outside should be cheap because we need it…so we should bully the providers…
OTOH…we do produce — or used to — bras and panties….now the Chinese do…more cheaply than we can….
Anything we can produce domestically we should…and therefore we need to keep out the cheap Asian bras and panties….we don’t want to be dependent on them in that critical industrial sector.
Autarky, baby!…yeah!…that’s the ticket….
Pandaemoni
Dec 13 2011 at 4:34pm
While OPEC would benefit in general from a higher price. It’s individual members are often known to “cheat” by selling more oil than OPEC would like, and let’s not forget that OPEC as plenty of competition from non-OPEC oil producing countries. Is there any evidence that OPEC is in fact keeping oil prices high? It seems just as plausible that oil prices are high because demand for oil is significantly higher (while supply is growing slowly), due to the influence of rapidly developing countries like China.
I suspect Trump is using OPEC as a whipping boy because it suggests a convenient scapegoat, when the reality is “there’s little we can do about oil prices.”
That being said, as we all here know. There is nothing fundamentally inconsistent about railing against both artificially high prices and artificially low prices. Both can distort the market.
Lord
Dec 13 2011 at 5:26pm
Trump certainly knows wealth is not about consumption but control. That is why his bankruptcies worked out so well for him. Power is its own reward.
Mr. Econotarian
Dec 14 2011 at 2:12am
The US imported (net) only 42.26% of its oil consumption in October 2011. Imports from OPEC countries were only 24.3% of US consumption, and imports from the Persian Gulf countries only accounted for 10% of consumption (we get much OPEC oil from Venezuela, Nigeria, Ecuador, and Angola).
Non-OPEC countries Canada and Mexico are the #1 and #3 top countries the US imports oil from. Saudi Arabia is #2.
Sources:
http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_7.pdf
http://www.eia.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html
DeepSouth Dave
Dec 14 2011 at 10:47am
There is a point to be made in the trade issues between the USA and China. Unfortunately, Trump has yet to convince me that he understands it.
Despite all its apparent reforms, China remains an un-free, Communist nation in which entrepreneurs are confined to relatively-small regions. Thus, the vast majority of the potential labor pool remains untapped, leading to massive wage depression. (Similar effects, for different reasons, exist in Mexico, where vast labor pools remain chronically unemployed due to the general corruption so endemic to Mexico’s vestigial-Bolshevik political sector, now aggravated by its ongoing drug wars.) Contrast this to the un-free status quo of the American economy, where wages and prices have been driven up and propped up by a century’s worth of Progressive-era meddling, such as our minimum-wage laws, our 40-hour work week, government subsidies of housing prices via (the now-defunct) Fannie and Freddie, tax-free health-insurance fringe benefits, massive aid for college tuition, and on and on.
Small wonder America’s currently undergoing a job shortage. In such an environment, with institutionalized imbalances on all sides, how can American labor NOT be priced out of the market? The political “fix” would be for the non-American governments to adopt “reforms” that would equalize workplace conditions to those we have here in the USA. (We’ll follow the politicians and ignore the economic fix, which would be for American politicians to remove all our Progressive-era mechanisms and “reforms,” to allow the economy to readjust prices and heal itself. That would generate far too much personal pain to be palatable to the average American.) But I doubt such political fixes will happen anytime soon — in China, because they don’t want to destroy their competitive advantages, or in Mexico, due to political inertia and probably a degree of racism against their indigenous populace.
Anyway, back to Trump: The takeaway I got from last night’s interview with O’Reilly is that with the way he ranted about the Republican candidates’ snubbing of his debate event, and his gnashing of teeth about “loyalty,” he might just jump into the November election next summer in a fit of pique over the snub.
Vangel
Dec 14 2011 at 12:54pm
What is one to say?
How about that Trump is an empty suit who believes that he knows far more than he does and is unaware of the extent of his ignorance?
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