The most practical solution for the US trade imbalance with China comes from remembering that all countries should tax “what they want to have less of”. The word “to tax” is derived from a concept of “being a burden”.
We can normalize the US trade deficit with China (currently $250 billion per year) by imposing a temporary tax on imports from China to the US, until our trade deficit with China shrinks to the size of the US deficit with the European Union countries.
Therefore as President, I will immediately ask Congress to tax imports from China to the US, by a percentage which will make the US trade deficit with China be equal to the US trade deficit with the European Union nations, (which is currently about $80 billion on an annualized basis. i.e. the US had a $7 Billion deficit with the EU for the month of September 2007 http://www.census.gov/indicator/www/ustrade.html ) .
My new import tax rate percentage should be adjustable, not cast in concrete. And the tax should only be temporary, until the structural imbalance is repaired. I will ask for a tax on US imports from China to be set at 30% immediately, but with subsequent quarterly increments of +/- 10% until our Chinese trade deficit is equal to the US trade deficit with EU nations. (i.e. One year later, the import tax rate will have risen to 70%, unless our Chinese trade deficit has become the same size as the US trade deficit with the EU.)
Filed under: Charles Skelley |