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Trump’s tariff gamble — 26 Comments

  1. I think the fact the Fed raised and are going to continue raising interest rates might have has as much to do with the slide as the tariffs.

    There is not going to be a trade war, although perception now passes for reality anymore. It’s the narrative, don’tcha know.

    The Trump administration signals $50 billion in tariffs against a China that has been gaming the system for decades. They strike back with tariffs amounting to $2 billion– for domestic consumption and life goes on.

    They do have much more to lose than we do, since the trade imbalance is nearly $400 billion between the US and China.

    We have been trading our future security for cheap stuff for a long time. What Khrushchev said is still true, though instead of selling us the rope, they’re selling us cheap toasters.

    For some, “Free trade” is just the means toward globalism. I’m all for getting along with other countries, but not at the price of our sovereignty.

    And this is as much about the extortion and theft of our intellectual property as stuff. It’s long overdue.

  2. Brian E says it well.
    The “experts” all have dogs in the hunt. Despite their reimbursements, they are more often wrong than weather forecasters of 30 years ago.
    Globalism is for the multiculti self-serving wizards, not for those (nationalist is NOT a dirty word, though they try to make it so) who stay at home and wish to eat their own cooking.
    Read about the “budget” passed today, and about our beloved congresscritters. My Rep. voted against, Yay!
    https://economics21.org/html/trillion-dollar-spending-bill-exemplifies-dysfunctional-congress-2981.

  3. Trump’s trade war has started. He arrogantly stated that trade wars are easy to win. As easy as getting his little wall built on the border? Anyway, here is an example of exactly how this will play out in California’s agricultural export market.

    The Chinese have announced a 15% tariff on 128 items ranging from fresh fruit like grapes, peaches, oranges, and apples to their converted products like grape juice and almond butter. They also targeted California wines. The table grape and almond growers have cultivated an extensive export market in Asia. For instance, 20% of the exclusive and very high end table grapes grown by The Grapery, those Cotton Candy and Moon Drops you see at Whole Foods, are exported to China. If that market dries up it may not by itself put the grape growers out of business. But coming after a record drought which forced them to spend heavily on ground water pumping, and with the minimum wage in California heading toward $15, the loss of 20% of their income will have very adverse consequences.

    Unlike the federal government, The Grapery can’t print and borrow its way out of this, nor can any of the other growers and farmers. Pork producers are also being hit.

    It’s one thing to argue for protection of strategic industries like steel, but a tariff war on consumer items will end up being to our disadvantage. Trump is a moron, like Tillerson said.

  4. For Chinese consumers, flavor is king

    It may be surprising to know that China is the biggest overseas market for Grapery, which has dealt with the Chinese market for around two decades. Its annual exports to China have reached thirty containers in recent years. As to what makes China Grapery’s top export market, Mr. Beagle noted that, “Some of our grape varieties are not privately-owned by us and are also available to other growers around the world, including Chinese growers. Fortunately for us, some of these varieties haven’t adapted well to the grape-growing regions in China so far. As a result, we enjoy the advantage of facing less competition in the Chinese market. However, I believe that the Chinese consumer preference for high quality fruit is overall more important.”

    The company has chosen to partner with Hong Kong-based P&C International Trading Ltd. to better serve the Greater China market. At the retail level, Grapery has also taken some concerted effort to tap the Chinese market through co-operation with Pagoda, Fruitday, and Sam’s Club. As Chinese consumers learn more about Grapery and its jaw dropping products, the brand is increasing in popularity and demand in China.

    http://www.producereport.com/article/grapery-ceo-perfect-taste-simple-goal-tough-road

  5. I’m okay with bold and risky if the alternative is the status quo. The Chinese have been stealing from us, via an imbalance of trade rules, for as long as I’ve been an adult.

  6. I heard Ron Paul this morning who was PO’d because he claimed that constitutionally, tariffs are the purview of congress. Yet, Trump’s claim is that these are national security protections of the steel and alum. industries, which I agree with and might even be constitutional if he stays limited to that aim.

    Ken Fischer is another guy who’s been around the investment world a long time and was in the media today. He spends quite a bit of time on macro econ issues and market trends and seemed pretty smart. He talked about the effect of the tariffs here and markets in general here. If you care about this stuff, play the second one first and it will play thru to the other one.

    Fischer’s point on tariffs is that they aren’t remotely big enough to damage the macro economy, though he thinks the net effect, however small, is bad. I’d say, the net effect is bad, but good none the less for the steel and alum. industries.

    He also said that the market is forming a classic double bottom correction which should be perfect for another couple years of strong returns. This is market technicals “voodoo speak” which I suspect is not all voodoo. He also said that typically the last hurrahs of a bull market feature very strong growth just before the end. I’ve actually seen that feature many times in the past.

  7. All I know is that metal fabricators are facing huge price increases by their suppliers. The reason for charging more appears to be: because now they can.

  8. I guess no one else heard the part where Trump said this will be useful as a negotiation point. The Chinese are affected much worse than we are — we are the largest market for their stuff. They can’t live without us, (I don’t think the EU will let in anything like the level of Chinese exports we do. Anybody else remember when the Japanese were still making TVs, the French impounded a warehouse full of them?) but there will always be people to buy our bonds.

  9. Anything that brings down our trade imbalance with China merits serious consideration.

    Yes, some people and businesses will be hurt. A President’s focus has to be on the overall picture however. And the overall picture is that China has been stealing the proverbial shirt off America’s back for decades and, using its ill gotten gains to build up a military with the goal of challenging America for alpha dog status.

    When rivalry in military prowess is considered, a primary focus upon financial considerations is ultimately a suicidal one.

  10. A $400 billion annual trade deficit with China, and Other Chuck is worried about Grapery? He will seize any tiny point if he can make it against Trump. He wants Obama the Self-Proclaimed Righteous back! For sound reasons, like skin color.

  11. The U.S. needs strong basic industries. Mining, metals fabrication, agriculture, oil and gas production/refining, timber harvesting/replanting, and production of electricity are all basic to a modern economy. If we don’t produce those things, we become dependent on others for them. It appears that China has knowingly embarked on a plan designed to make other countries dependent on them for steel and aluminum. Trump has recognized these facts and the tariffs are an attempt to change course. There may be better ways to achieve these goals,(government subsidies or quotas) but tariffs are a straightforward instrument for bolstering our basic, essential industry sectors. I have no opinion about whether they will work as hoped for. All I know is that we must bolster our essential industries so they can survive and thrive.

    These first 14 months of the Trump administration remind me of a sight seeing flight I took back in 1957. I was on a WESPAC cruise on the USS Hancock and we tied up in Hong Kong for a week. I happened to meet an RAF pilot in a bar in Hong Kong and we hit it off. He invited me to take a sight seeing flight. I thought it would be a smashing good way to see that exotic British Colony. Next day we got in a T-55 Vampire – a twin boom jet with a bubble canopy. Great airplane for sightseeing, I thought. Then the flight began. With the undercarriage quickly raised, the airplane was seldom ever in a normal attitude until we landed about 45 minutes later. Water, hills, city, water, ships, sampans, sky, hills, city, ships, water, sky, all in rapid sequence. My Brit friend kept up a rapid patter about what we were seeing. Me, although I was used to doing acrobatics and pulling Gs, I was struggling to stay oriented and keep my breakfast down. About halfway through the flight I finally got my bearings and was able to enjoy the flight but it was still an exciting and risky experience. My RAF friend had done his best to scare the bejeezus out of this Yank and was a bit disappointed that I hadn’t lost my breakfast. He probably broke every rule in the book, all though in those days in WESPAC rules were regularly broken and pilots pushed the limits.

    Anyway, Trump is taking us on a wild ride, breaking the rules, disorienting a lot of people, and doesn’t mind if a few can’t keep their breakfasts down. He intends to make change. After so many years of Presidents who were captives of the establishment, it is quite a change. Hang on, we’ve got another 34 moths to go.

  12. Since WW2 the US has been willing to run trade deficits to help development – first in Europe and around the world including Japan and China. I think a readjustment is necessary but both parties, experts and the elites in general have become reluctant to change policy and, and as we have seen, are still lecturing the losers – the domestic working class – that they are better off. My perspective is based on my Keynesian father’s view of what happened from the 1929 on as the country shifted from lessez faire capitalism to regulated capitalism. Whet I see the both parties and the experts doing is just repeating the Keynesian playbook over and over even though – to put it crudely – the price of real estate in DC has through the roof to house the regulators. Again roughly speaking Sarbanes Oxley did not prevent the housing bubble and Dodd Frank will not prevent the next bubble because the regulatory process has become corrupt in that it does not stop too large to fail institutions from continuing to create false wealth ultimately derived from printing treasury bonds.

  13. Trump is taking from Wall Street to give to Main Street.

    Wall Street does NOT like that.

    The USA can live without Wall Street.

    It can’t live without Main Street.

    Naturally, the media pundits — paid by Wall Street — are giving us stomach content.

    They are FULL of it.

    Red China has been on a relentless trade war// mercantilist path for generations.

    Their attitude towards Trump is scarcely different than that of a thief’s view of cops. They hate him, they fear him.

    Red China’s ENTIRE economic engine is based on THEFT. This is to be expected in a Command Driven Despotic Economy// State Regime.

  14. NPR ran a piece on the negative impact on pork producers, who will need to lower prices in the US domestic market.

    All I could think was, “Mmm, cheaper bacon. Is there anything this guy can’t do?”

  15. It seems to me that the first response to the Trump Tariffs by China will penalize their “citizens” more. The ones that buy the grapes mentioned above are not the average person but the upper levels. A few Yuan more will not make them not buy the grapes they like. Or orange juice. A lot of Chicken Littles out there.

  16. Geoffrey Britain Says:
    March 23rd, 2018 at 9:54 pm
    Anything that brings down our trade imbalance with China merits serious consideration.

    Yes, some people and businesses will be hurt. A President’s focus has to be on the overall picture however. And the overall picture is that China has been stealing the proverbial shirt off America’s back for decades and, using its ill gotten gains to build up a military with the goal of challenging America for alpha dog status.

    When rivalry in military prowess is considered, a primary focus upon financial considerations is ultimately a suicidal one.
    * * *
    What Geoffrey said.
    ALL political decisions have repercussions: negative for some, positive for others.
    The ones who see a negative coming are going to object to the policy; the ones who see a positive will cheer.
    But somebody always wins, and a different somebody loses.

    The president has the task of looking at overall positives for the nation as a whole, which at least President Trump gives lip service to, which is more than Obama did, and the Dems in general for decades.

    Also, regardless of his management style and personal flaws, The Donald has been a player in international business for decades, and he probably really is a better negotiator than all of his staff (echoing Obama’s far-less-evidenced braggadocio).

  17. I worried when I heard the announcement also, but the folks at Powerline (a usually reliable source) are more optimistic:

    http://www.powerlineblog.com/archives/2018/03/real-trade-war-or-art-of-the-deal.php

    http://www.powerlineblog.com/archives/2018/03/trade-war-not-so-fast.php

    http://www.powerlineblog.com/archives/2018/03/trade-war-with-china-were-already-in-one.php

    Reading them, I learned that China requires foreign tech companies doing business in China to divulge much of their technological secrets.

  18. I have been in tech for over 20 years and have watched China brazenly steal technology over and over and over, ripping billions and billions of future revenue from the US while politicians can claim consumers have cheap microwaves in Walmart.

    Tons of US companies are outright banned in China including Facebook, the Wall Street Journal, and any maunacturer who doesn’t have a joint partner and intellectual property transfer into China. Tesla has 20% tarrifs into China while Chinese autos have 2% coming here.

    Anyone who’s against the current moves against China or who wants the current status quo is in the pocket of the Chinese (like the Clinton’s) or simply hates the USA. No one who has any self respect or wants any future for this country can be against Trump’s moves.

  19. eh, as a bargaining tool, maybe.

    Boosting the economy, no. It puts money in the pocket of producers at the expense of consumers.

    Cheaper pork and grapes are fine, until those companies can no longer survive and go out of business, leaving remaining companies with a monopoly.

  20. First reports are the Chinese are amenable to talk about increasing US imports, at least marginally– so the tariffs are having the intended effect.

    It’s unlikely tariffs can do anything about the theft of IP, since the Chinese have also had decades of practice reverse engineering. To some extent most companies do something akin to that, though probably not to the extent practiced in China.

    When my company opened a manufacturing plant in China, one of the first things noticed by management was how quickly proprietary designs were showing up on Chinese knockoffs. I suppose you could say that’s the cost of doing business, and the company moved there to penetrate the vast Asian market.

  21. I am sympathetic to industries affected by any retaliation, especially agricultural products, but as has been previously stated by others, the need to keep the big picture in mind.

    Ag products do need special consideration given the long lead time inherent in the business.

    I doubt 15% tariff on grapes is significant enough to stop the Chinese from consuming grapes, though.

  22. Trump was elected to make bold moves away from past failures. He’s doing that as much as the humanly possible.

    The establishment politicians, on both sides, have a vested interest in the status quo, as do the Democrats and the media, and they have a virtual monopoly on the news and commentary.

    They are a powerful force to go against and only a person like Trump, with his complete disdain for political correctness, would have any chance at all.

    The future of the country depends on his success because, if he fails, there won’t be another chance.

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