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2018 Trump Tariff

 
 
Reply Thu 8 Mar, 2018 08:05 am
I saw this post and thought the topic deserved it's own thread.



I'd like to start with a quiz

1. What percentage of Steel in use in the US is mined and refined in the US?

2. Who is the leading Steel exporter to the US?

3. What percentage of steel imports do the Trump tariffs effect?

4. How much should we actually care about this?

Have your answers? Highlight next for answers:
1. 75% 2. Canada 3. 2% 4. No

I believe that these Trump Tariffs are nothing more than a negotiating tool to change NAFTA as Canada and Mexico are 2 of our largest trade partners. Trump has never liked NAFTA and this may be his way of changing the terms.

There is worry about this starting a trade war and to those folks I would suggest taking a valium. Anyone choosing to start a trade war with the US would lose. The US imports too much stuff and spends way too much money to lose as a trade partner. This is a case where being the 800 pound gorilla is a good thing.

I am willing to pay 1 cent more on a can of soda if that means more US aluminum is being used. Are you?
 
edgarblythe
 
  4  
Reply Thu 8 Mar, 2018 08:16 am
Even the Republicans want Trump to back off, or at least refine his plan.
0 Replies
 
engineer
 
  5  
Reply Thu 8 Mar, 2018 08:31 am
@McGentrix,
McGentrix wrote:

There is worry about this starting a trade war and to those folks I would suggest taking a valium. Anyone choosing to start a trade war with the US would lose. The US imports too much stuff and spends way too much money to lose as a trade partner. This is a case where being the 800 pound gorilla is a good thing.

I am willing to pay 1 cent more on a can of soda if that means more US aluminum is being used. Are you?

That's a clever selling point for the administration, talking about pennies per can, but it misses the big point. For companies buying parts (many, many parts), they are not willing to pay their suppliers more because steel and aluminum go up in price, they will just buy from foreign suppliers. We don't have to guess about this, we can go back to the 2002 sanctions that Bush applied for eighteen months. From this article:

Quote:
In the case of the Bush tariffs, the WTO ultimately decided they did not conform with global rules. Facing retaliation from the EU and others, Bush removed the tariffs after just 18 months, instead of having them in place for three years as he wanted.

For Dave Arndt, president and CEO of Pentaflex, an auto-parts manufacturer based in Springfield, Ohio, those days are a painful memory.

At the time, he was working for another supplier that had a contract with one of the Big Three automakers. The company’s situation deteriorated rapidly when Bush imposed the steel tariffs and its customer balked at absorbing the higher cost. From this article:

“That was one of the key reasons that pushed us into Chapter 11,” Arndt said. “We were a three-quarter of a billion dollar company with a couple thousand workers that went out of business. So we had a very bad experience.”


There are a lot of little players employing a lot of people who will find themselves uncompetitive with foreign companies that have access to cheap raw materials, and remember that more expensive steel in the US results in less expensive steel abroad, it is a double whammy. There are no economists that predict that a steel/aluminum tariff will result in more net US jobs, no models that show an overall win for the US. There will be winners and losers, but there will be more losers than winners in the US. That should outweigh any political calculations.
McGentrix
 
  -1  
Reply Thu 8 Mar, 2018 09:35 am
@engineer,
engineer wrote:

There are a lot of little players employing a lot of people who will find themselves uncompetitive with foreign companies that have access to cheap raw materials, and remember that more expensive steel in the US results in less expensive steel abroad, it is a double whammy. There are no economists that predict that a steel/aluminum tariff will result in more net US jobs, no models that show an overall win for the US. There will be winners and losers, but there will be more losers than winners in the US. That should outweigh any political calculations.


MAGA. That is Trump's theme and imposing a tariff like this falls in place with his goals and objectives.

Mainly, this tariff only effects a very small small percentage of steel and aluminum imports. I believe the goal of this is to re-negotiate the terms of NAFTA and once that is done, this tariff will be lifted. The US economy has grown tremendously with Trump in office. His pro-business administration has demonstrated time and again that Making America Great Again is Priority One. Encouraging some companies to switch to US steel and aluminum will not be a giant catastrophe and it certainly won't start a trade war.

Secondly, the economy is vastly different than when Bush was in office and the world was in a different state of mind.

Lastly, do you feel that something has to be done about US trade deficits? What do you have in mind? Trump promised he would do something like this, and here he is. Doing what he said he would.

I appreciate your reply.
hightor
 
  5  
Reply Thu 8 Mar, 2018 09:54 am
@McGentrix,
If the amount of steel and aluminum affected is so insignificant it sort of undercuts the whole "national security" rationale.



McGentrix
 
  0  
Reply Thu 8 Mar, 2018 10:08 am
@hightor,
Possibly. But, I am sticking to the NAFTA aspects for now. It will be interesting to see what shakes out.
0 Replies
 
centrox
 
  5  
Reply Thu 8 Mar, 2018 10:41 am
@McGentrix,
McGentrix wrote:
There is worry about this starting a trade war ... Anyone choosing to start a trade war with the US would lose.

But the US is starting the trade war by erecting the tariff barriers. If you attack someone and they fire back, who "started" the war?
izzythepush
 
  1  
Reply Thu 8 Mar, 2018 11:42 am
@centrox,
There will be no winners in a trade war, only the simple minded could think otherwise.

Trump hasn't indicated a dispute with any one bloc or nation, he's targeted the rest of the World.
centrox
 
  3  
Reply Thu 8 Mar, 2018 11:58 am
@izzythepush,
izzythepush wrote:
Trump hasn't indicated a dispute with any one bloc or nation, he's targeted the rest of the World.

Foreseen by Swift, maybe?

http://l7.alamy.com/zooms/64c009b6b5ae4913ab1b1e6124e72a98/gullivers-travels-cpm01e.jpg
0 Replies
 
engineer
 
  5  
Reply Thu 8 Mar, 2018 12:51 pm
@McGentrix,
McGentrix wrote:

Mainly, this tariff only effects a very small small percentage of steel and aluminum imports. I believe the goal of this is to re-negotiate the terms of NAFTA and once that is done, this tariff will be lifted. The US economy has grown tremendously with Trump in office. His pro-business administration has demonstrated time and again that Making America Great Again is Priority One. Encouraging some companies to switch to US steel and aluminum will not be a giant catastrophe and it certainly won't start a trade war.

Tariffs are not "pro business". If you doubt that you can ask all the businesses that are complaining about it. Outside of the steel and aluminum business, no businesses are supporting this move. As for NAFTA negotiations, that seems to be tacked on after the fact after just about every business person in the President's team advised him not to start a major trade war with our largest trading partners. His original pronouncement did not carve out any exceptions.

Raising tariffs also does not encourage companies to switch to US steel, it encourages them to outsource their intermediate part supply to foreign countries. I was reading an interview with a guy whose company makes steel kegs. He figures this will just put him out of business since he was already competing with kegs from China and his costs will go up while theirs will go down. There are many businesses in the US like this, companies who use steel and aluminum to make the parts that other US companies use in manufacturing. Those end use companies are not going to say "sure, we'll pay you more", they are going to go with the lowest bidder which increasingly will not be a US company.
McGentrix wrote:

Secondly, the economy is vastly different than when Bush was in office and the world was in a different state of mind.

This is true, but not in the way you mean. Bush's tariffs were after 911, before the Iraq war, when there was a lot of positive sentiment about the US in the world. Today, the US is seen as increasingly throwing its weight around and reneging on agreements made in good faith under previous administrations. Regardless of how targeted these tariffs are, expect the EU to retaliate, not against steel manufacturers where the US is an importer, but against industries where the US is an exporter. The idea that the US is the 800lb gorilla because it is such a large consumer is erroneous. The market is not one global mash of activity, it is many separate, individual markets. The US might be a big steel importer, but it is a big exporter of aircraft, machinery and drugs. A punitive EU tariff in those areas would hammer the US economy.
McGentrix wrote:

Lastly, do you feel that something has to be done about US trade deficits? What do you have in mind?

Engage and trade with every country on Earth. The US has a huge advantage in infrastructure, financing and wealth compared with many places. The optimum thing to do would be to open foreign markets to US goods. We can already see the impact of not doing that. Canada is taking many markets that we were scheduled to open up with the Trans Pacific trade pact, especially in Japan where tariffs on agriculture that prevent US shipments will stay in place instead of phasing out like they do for Canada. Our conflict with Mexico has stalled growth in our exports of agricultural products to that country as well as encouraging Mexico to look for other suppliers.
Quote:
As America threatens to close its agricultural export door, it has damaged Mexico’s confidence in the reliability of its major supplier — perhaps permanently. In a January 2017 Washington Post opinion piece, former Mexican president Ernesto Zedillo wrote that it was a “waste of time” to play “Nafta tweaking games with the Trump administration”.

Though Mexico currently has free trade agreements with 45 countries (more than any other country in the world), agriculture has consistently been the most sensitive issue in Mexico’s free trade agreements. Trump has changed that.

Today, the country is accelerating its search for new partners to meet its national agricultural needs. Sensing long-term opportunities, Brazil and Argentina — both major exporters of beef, wheat, soybeans and other prized U.S. agricultural products — are elbowing their way to the front of the queue. Neither currently has a free trade agreement with Mexico.

Mexico Deputy Economy Minister Juan Carlos Baker has said that the country is “pretty far advanced with Brazil. Argentina is a few steps behind”, confirming that Mexico could offer South American producers terms similar to those currently enjoyed by American farmers “if it suits us”.

Brazil Agriculture Minister Blairo Maggi has announced that the country is “back in the game”.

If the US is viewed as an unreliable trading partner, there are other players who can take up the slack - at the expense of US exports. But we can do it the other way was well, make win-win agreements around the world that expand US exports.
hightor
 
  3  
Reply Thu 8 Mar, 2018 01:22 pm
@engineer,
Quote:
Engage and trade with every country on Earth. The US has a huge advantage in infrastructure, financing and wealth compared with many places. The optimum thing to do would be to open foreign markets to US goods.

The whole MAGA preoccupation is really bizarre. It's as if we're admitting that we can't compete, as if we were some precious little landlocked nation afraid of the outside world.
0 Replies
 
Brand X
 
  1  
Reply Thu 8 Mar, 2018 04:25 pm
So he's been talking about implementing tariffs since middle of 2016, finally gets to do it today. Announcing it like he did got everyone's attention on the international stage, not unlike his style on everything else.

The tariff plan as it turns out has a lot of flex built into it, some of the tariffs will even go away if trade deals become more favorable. Also, it has provisions to stop workarounds where steel comes in through other countries via China, for example. Mexico and Canada exempt.

Walked back quite a bit from last week.
0 Replies
 
 

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