What about those tariffs?
I don’t really have a knowledgeable point of view on what Trump’s tariffs are likely to actually do. Not my strong suit. But I pass along this evaluation that seems equally devoid of Trump-shilling and anti-Trump hysteria:
“The impact of tariffs on $50 billion here and there, on its own, is relatively limited,” said Torsten Slok, chief international economist at Deutsche Bank AG. “The real danger continues to be the uncertainty about what’s next.”
The damage could get serious if trade tensions sap business confidence, causing executives to put off capital spending and other investment decisions, he said…
U.S. corporate chiefs said the president’s trade policies risk raising costs and dragging down growth, a Business Roundtable survey showed Tuesday. Ninety-five percent of chief executive officers who responded said reduced exports from foreign retaliation was a “moderate” or “serious” risk, the poll found.
The International Monetary Fund has warned that a trade war could undermine the strongest global upswing in seven years…
For now, Trump’s trade assault hasn’t severely dented confidence among American businesses, according to the Fed’s beige book, which polls firms across the U.S. While some respondents “noted some concern about the uncertainty of international trade policy,” outlooks for near-term growth remain “generally upbeat,” the May beige book reported.
Some economists are stopping short of using the term “trade war.” Analysts at ING Bank NV are calling the current situation a “cold” trade conflict with a muted economic impact.
Much more at the link.
I do a lot of out of the country engineering work and have a good appreciation of local taxes, tariffs and restrictions. For my clients in South America and other places, high tariffs keep them from getting the high quality parts and supplies in a timely manner. So when Peru has a high tariff, US suppliers get hurt. Trump understands tariffs only as punishment for some kind of cosmic insult to some part of the USA. He lives in the 1970s when UAW overpaid deals bankrupted the big three and USW contracts broke the back of US Steel makers. I remember the days when UAW goons damaged Japanese cars in company parking lots. At the time US cars were terrible in design and quality. Now my Ford domestically built trucks are high quality and value. Tariffs will only limit USA products reach into the rest of the world.
If Donald would stop and think for a minute (I know its tough) he would see that Chinese are really not eligible for WTO membership based on they are not a real ‘market economy’. Nail them on that as well as IT theft and you get a lot of value. He looks to be bought off by Beijing with a few billion in shiny trade goods.
Trump’s mercantilism went out of fashion at about the same time slavery lost its appeal.
Not to worry. Trump is simply getting the other countries’ attention: “We’re the world’s biggest market. You want to trade with us, great. We want to trade with you. But we’re not going to pretend anymore that your tariff and non-tariff barriers don’t exist. Now, sit down and let’s negotiate.”
I hope Trump is trying to get a better deal for the U.S. We have been taken advantage of by other nations and went along because, as a wealthy nation, we didn’t want to seem too overbearing or greedy. Those days should be coming to an end.
Certain basic industries such as steel, aluminum, and certain areas of agriculture, etc. are worth supporting as necessary for national security. China has been subsidizing steel and aluminum and dumping it in the U.S. and other markets to cripple our steel and aluminum companies. Those two are very important to national security. Trump could solve that problem with quotas and subsidies versus tariffs. The same goal, but less in your face than tariffs.
Bargain hard, be willing to compromise, and always aim for as much free and fair trade as possible. That’s what I believe Trump is doing. I don’t think he’s aiming to start trade wars, but his detractors will claim that’s the case no matter what he does. He has excellent advisors in this area – Peter Navarro, Wilbur Ross, and Larry Kudlow are top notch, IMO.
For various reasons, the USA has bent over backwards to promote global trade under the assumption it would decrease global tensions. That worked for a while post WW2, it stopped working circa 1990. We have been the patsy for nearly 2 decades. Enough.
Trump is trying to turn that around.
Trump wants free trade – but fair trade. Meaning low/no tariffs in the US AND low/no tariffs in the trading country.
That’s not the current situation.
What is the best strategy to get to: Cooperation? Tit for Tat. Start out no tariffs, and if they have tariffs, or non-tariff barriers, you put barriers in.
Deals are always successful efforts at cooperation. But the deals the US has been accepting are not fair.
Let’s look at Trump’s 4 Jun tweet (and I think if we talk about any Trump policies, we should have the curiosity and integrity to look at his tweets):
Donald J. Trump Verified account @realDonaldTrump
Jun 4 More
Farmers have not been doing well for 15 years. Mexico, Canada, China and others have treated them unfairly. By the time I finish trade talks, that will change. Big trade barriers against U.S. farmers, and other businesses, will finally be broken. Massive trade deficits no longer!
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Reducing trade barriers against the US is the goal.
Putting up equal trade barriers is the strategy he's choosing.
Nobody's offering any alternative strategy with a better likelihood of succeeded (altho quotas, mentioned above seems also likely to succeed, but is less efficient for US tax collection).
Is anyone surprised that an official at Deutsche Bank takes a rather dim view of Trump’s actions–or more accurately threatened actions?
There seems to be a consensus that Trump is out of his element and blundering into chaos. Of course, as we should all recall, there was a consensus about two years ago that he was a buffoon who could never even be elected, and was unqualified to serve. I was part of that consensus.
Now, I tend to give him the benefit of the doubt. I am not at all qualified to critique international trade policies. I suspect that many critics aren’t either; and I would include among them those responsible for the current state.
“Trump understands tariffs only as punishment for some kind of cosmic insult to some part of the USA.”- dirtyjobsguy
What is your evidence this is true.
Since the 1980″s President Trump has talked about our inability to negotiate favorable trade deals.
Many countries already have high trade barriers to US products, not always in the form of import tariffs but barriers just the same. President Trump is actually doing something about this.
By choosing basic commodities that are in our security interests, he’s starting the dialogue. Whether it becomes a larger “trade war” depends on the reaction of our trading partners (which is unlikely to happen).