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Trade Wars Are Easy to Win
The President demonstrated his ignorance of the basics of trade once again this morning with a classic tweet:
Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that – and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed. All will be Great!
— Donald J. Trump (@realDonaldTrump) July 24, 2018
Someone should tell that to Harley Davidson and Whirlpool who just cut forecasts due primarily to the impact of tariffs. At least their workers benefit as their jobs will remain in America. Oops.
At least the American farmer, the bedrock of our nation, remains unaffected. Damn. Don’t worry about the great American farmer, however, President Trump has just the plan to fix this.
Once again we find out that it is the politically connected who are protected from the destruction wrought by trade wars:
The Trump administration plans to offer billions of dollars in aid to farmers hit by tariffs on their goods, an emergency bailout intended to ease the pain caused by Trump’s escalating trade war in key electoral states, people briefed on the plan told CNBC.
The total aid amount is reportedly about $12 billion. A senior administration official told NBC News that the aid would be temporary.
The announcement could come as soon as Tuesday afternoon, hours after the president proclaimed on Twitter that “Tariffs are the greatest!” An industry source briefed on the plan said the package could use existing programs designed to mitigate price and coverage risks, and could target dairy, pork and soy products.
So, to combat the predictable effects of an ill-considered trade war, the President is going to mortgage the future to pay off those in the present. Well, at least Trump is starting to act like a typical Washington politician.
I hate to say I told you so, but…
Published in General
I’m just not familiar with the background or fundamentals so I took Harley’s statement at face value that tariffs are behind their recent troubles. I’d like to know more about what you are talking about here. Maybe a link to something I can read on the subject as well as your analysis.
Okay so…
Trump institutes tariffs against friends and enemies alike, based on his economic ignorance about how trade works, using transparently false national security grounds. And he issues exemptions to those tariffs to a select free American firms who beg the government for them.
Then when those tariffs have completely predictable negative consequences for American producers, he decides to give them billions of dollars in subsidies.
And this is the man that so many of you think governs like a conservative?
Well…. he has a lot of other things going for him, but wisdom on trade is not one of them.
Two things:
First, the damage he is doing to international commerce outweighs anything positive he might have done.
Second, it is the story of the Trump presidency. One man, inflicting his ignorant views on the whole world, bending he Law to do so, and Republicans in Congress refuse to do anything to prevent this obscenity.
First, Harley-Davison has opened plants in South America, Australia, and Southeast Asia over the past twenty years, so overseas manufacturing is an established strategy:
As for the “smart money,” I relied on commentary (dated 3/31/2018) from a well-regarded portfolio manager:
I’m not one who thinks that President Trump governs as a conservative, although you’ve got to admit that his governance has produced some fantastic conservative outcomes.
I’ll readily concede that his chess-playing is merely two-dimensional, and that he’s prone to making poor moves on occasion. But the one-dimensional chess played by his most ardent critics is utterly ineffective.
Actually, it’s more like saying, “If you’re unfair, we’ll blow up one of our buildings.” Tariffs hurt American consumers, companies that use imported materials as inputs to their products and services, and American exporters.
I’d have a lot more confidence that Trump’s strategy would eventually work if he actually had a strategy. He has no clear idea of what he wants, he’s offered no vision of what “winning” his trade war looks like, and he hasn’t even bothered to tell our trading partners what he wants them to do in exchange for lowering his trade barriers.
So far, economic indicators do not seem to support that statement, at least as far as America is concerned. That may change in the future (tariffs are high risk and generally not good for the economy, after all), but your statement seems premature at best. I suspect that cutting the corporate tax rate and eliminating burdensome regulations will continue to compensate for any damage done by the tariffs. To say nothing of appointing conservative jurists, etc.
Many people don’t realize that we are still one of the largest manufacturers in the world. The assumption is that if we have fewer manufacturing jobs, it must mean that manufacturing itself is down. Curiously, no one claims that we don’t grow much food anymore, and back it up with statistics about how the percentage of people employed in agriculture is a shadow compared to the percentage from a century ago.
The last article I read on the topic said that manufacturing jobs in China are also decreasing, while their manufacturing output is increasing.
This also applies to every other area of public policy.
The good news is that we may not have seen the effects of these policies yet. The biggest policy Trump has implemented other than tariffs is the corporate tax cut (Thank you Ryan, McConnell and Trump) and businesses take a while to reorient capital and for productivity gains to start making their way through the market. There’s a chance the economy could do even better than the mid 2% growth we’ve been seeing. Provided of course it’s not hamstrung by a trade war.
I am opposed to Trump’s trade policies, although I give him minimal credit for at least telegraphing them during the election runup. What I’ll continue to also oppose is this form of “analysis” characterized by unsupported generalizations, with a bit of ad hominem mixed in. I realize this comment won’t be deemed worthy of a response, but, if I can waste time writing it, somebody can waste time reading it.
That’s a knee slapper.
Questions for all about how Trump is going about this. Does he have a priority country or countries which he is trying to impact? It appears he has gone after just about everyone in the world at the same time – Canada, EU, Mexico, China etc. Is that a smart strategy?
It’s factual.
So I suppose I should ignore the factories that I worked at and watched them shut down and move to Mexico?
Why not? What are they going to do to us?
I responded to your earlier assertion that NAFTA was a terrible deal, mentioning that whenever somebody says that, they never tell you why. I was hoping you would give us an answer as to what is so bad about NAFTA.
The premise of your question assumes that we have “done something to them.” The reality is that we have “done something to ourselves.” The prices of goods will now cost more for Americans, and the extra cost goes into the Federal Government coffers. I think we really showed them!
No of course not. All economics is about trade offs. But the parties to the agreement: Mexico, Canada and the USA are all better off in aggregate than before the agreement went into effect. GDP is higher than it would have been, there are more jobs and prices are lower for all citizens.
We now have many more jobs in the U.S. than when NAFTA was signed. In fact, for the last half-dozen years or so, we’ve had the largest number of unfilled jobs in our history. Some 5 million jobs are vacant because they can’t find anybody to show up for work.
The trade off that @jamielockett mentioned is that while some jobs and factories have moved to Mexico (and other places), many more jobs have opened up that were not available before. The economy is transforming. This kind of thing has been going on for the extent of human history.
So what products are still made in the US? Very few.
Here is a listing of America’s biggest exports. This does not even include the stuff made for domestic consumption, such as this.
Capital Goods – Total $533 Billion
Industrial Supplies – Total $463 Billion
Other Major Exports
https://www.thebalance.com/u-s-imports-and-exports-components-and-statistics-3306270
I too think the playing field should be reset but believe that using tariffs is the worst possible way to do that. It has no historical record of success and basically is just a tax on consumers. The president’s incorrect view on trade deficits as a measure of trade fairness is at the root of why he thinks tariffs are the answer. Trump had a perfect vehicle to isolate China on trade with TPP. It was a large collection of nations agreeing to almost zero tariffs and excluded China. Trump’s sweetheart deal for ZTE shows he is inconsistent in whether China should be punished or not. Patience is not going to cure pursuing the wrong approach.
I know that’s a protectionist talking point, but it doesn’t match reality.
The proportion of the world’s manufacturing output from the US bobs up and down, but it’s about 25%.
It was about 25% in 2000.
It was about 25% in 1980.
It was about 25% in 1960.
It stays pretty constant. What’s changed in the number of workers involved and the products we make. There are far fewer workers involved because each individual is more productive. And now we make computer chips instead of textiles.
That’s a net gain for Americans and the world. This idea that we live some Dickensian existence because we don’t make typewriters in America anymore is nonsensical.
Do you believe this was a real proposal?
Trump is on record as someone who has levied tariffs and defended subsidies like ethanol and the export-import bank. How would he get rid of the thousands of subsidies and tariffs that we have unilaterally?
See, the problem is that Donald Trump is a pathological liar. So unless there’s independent verification, I wouldn’t believe this.
I read an article not too long ago that said HD were moving plants in to Europe to avoid European tariffs.