Trump and trade wars

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Is Trump trying to trigger the next great depression all by himself?

By the way, if you are a Trump supporter, before responding, please look at:

- how many major countries have massive debt (Japan and Italy are the most worrisome, but there are so many more), with ever increasing debt (I mention this factor because it would eventually, just by itself, if not corrected, lead to a depression, and possibly a great depression); and
- then look at how intertwined markets are now; and
- the tariff war that immediately preceded the last great depression

First he's looking at upping tariffs on Chinese goods, blacklisting Huawei etc. By itself, per above, the tariffs are a major issue, but my true concern is that Trump at heart:
- loves shooting his mouth of without fully considering the consequences
- is a loudmouth who thinks he's can bully anyone and everyone (and as he's so often gotten away with it, doesn't fully consider the consequences)
- is going to put himself into a situation where he has to back up his words (and he has pride, and internal anger issues)
- won't have the diplomatic nous to manouver himself out of such
- will eventually have to go through with it to save face (in his mind 'show them that I mean what I say, else I look weak, and that just won't do!')

While the China saga is still festering, he comes up with the idea of also imposing tariffs on Mexico:

https://www.couriermail.com.au/news/donald-trumps-tariff-threat-with-mexico-china-may-spark-recession/news-story/54193d06a16e93a17203801d18ce4857

Quote:

US stocks have fallen broadly, hit by fears that US President Donald Trump’s shock threat of tariffs on Mexico could prove the trigger that pushes the world’s largest economy into recession.

Washington will impose a 5 per cent tariff from June 10, which would then rise steadily to 25 per cent until illegal immigration across the southern border was stopped, Trump tweeted on Thursday...

“American companies needed to find supply chains outside of China when it looked like the (US-China) trade deal is going to take much longer and one of those countries that was pointed to outside the Pacific was Mexico,” he said. ..

The United States imports more than $US350 billion in goods from Mexico including $US128 billion in autos, auto parts and engines key to the integrated North American auto market, which already is facing challenges and massive lay-offs.

The only saving grace is that the Chinese may wish the U.S. to go into a recession (they are without doubt aiming for a reserve currency status, and U.S. instability helps), but they won't want the U.S. to go into a depression (likely to trigger economic problems within their own country). But internal politics (what allows people to stay in power) sometimes overrule common sense decisions (ie. what's good for both the country, and the world).

In any event, it appears to me that Trump is currently doing a mighty fine job of manoeuvring himself into a position that (has the potential to) wreck of lot of economies.

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[+3] - InfraBlue - 06/02/2019[quote="oralloy"] Once people start buying American-made steel and aluminum, they will no longer have to pay the tariffs. [/quote] That still leaves the higher cost of American-made...

Quote:

Supporters of Trump’s tariffs, such as the Alliance for American Manufacturing, counter that more than 12,700 well-paying jobs have been created or saved at steel and aluminum factories since the president put this policy in place in March of 2018. They also point to substantial amounts of investment in U.S. metal mills that should benefit the nation for years to come, including $1 billion that was just announced at a U.S. Steel plant outside Pittsburgh.

http://www.washingtonpost.com/business/2019/05/07/trumps-steel-tariffs-cost-us-consumers-every-job-created-experts-say

Imagine if Mr. Trump did this for the auto industry too.

2 Replies

Trump has 2 plans. Economic collapse and international war.

0 Replies

@oralloy,

Quote:

Supporters of Trump’s tariffs, such as the Alliance for American Manufacturing, counter that more than 12,700 well-paying jobs have been created or saved at steel and aluminum factories

Out of curiosity - was your steel industry was predicted to lose 12.700 jobs in the time frame between when tariffs were implemented by the Trump administration?

By the way, as a general rule, I favour targeted protectionist systems. But absolutely not when implemented fast and hard, and not in a trade war situation, with the 2nd biggest economy in the world, with much of the developed world in ever increasing debt. It's a recipe for disaster, with historical precedent.

1 Reply

@vikorr,

Thought I'd go looking for the 12700 myself, and found a couple of interesting articles. Further below, highlighted in red, appears to be mostly where the 12700 figure came from.

The below articles back up my thoughts regarding targeted protection (ie. tailored protection), and gradual implementation.

As the auto industry has been commented on, and the Washington Post article actually has a comment on the affect of the steel tariffs on the auto industry, I've highlighted it.

These are cut down versions, with the fluff removed:

https://www.washingtonpost.com/business/2019/05/07/trumps-steel-tariffs-cost-us-consumers-every-job-created-experts-say/?noredirect=on&utm_term=.cb74854c7c52

Quote:

U.S. consumers and businesses are paying more than $900,000 a year for every job saved or created by Trump steel tariffs, according to calculations by experts at the Peterson Institute for International Economics.

“It’s very high. It’s arresting,” said Gary Hufbauer, a senior fellow at the Peterson Institute who did the steel tariff cost calculation. “The reason it’s so high is that steel is a very capital-intensive industry. There are not many workers.”

Supporters of Trump’s tariffs, such as the Alliance for American Manufacturing, counter that more than 12,700 well-paying jobs have been created or saved at steel and aluminum factories since the president put this policy in place in March of 2018.

They also point to substantial amounts of investment in U.S. metal mills that should benefit the nation for years to come, including $1 billion that was just announced at a U.S. Steel plant outside Pittsburgh.

Trump has claimed that other countries are paying the tariff bill, but evidence shows the tariffs are taxes paid by Americans. U.S. companies that buy metals are either absorbing higher costs or passing them along to consumers. General Motors and Ford said Trump’s tariffs have cost them $1 billion each.

Raw steel prices surged after Trump put 25 percent tariffs on imported steel on some countries in March and then expanded the tariffs to most countries in June, including Canada, Mexico and the European Union. The result is that domestic steel prices have been higher than foreign ones, boosting profits for U.S. steel mills but putting U.S. manufacturers that use steel, such as Riverdale, at a disadvantage to European and Chinese competitors.
There is debate among economists about how many jobs have truly been created or saved because of Trump’s tariffs, but Hufbauer and Jung decided to take the Alliance for American Manufacturing’s figure for 12,700, which works out to over $900,000 a job. AAM said about 9,300 of those jobs are steel alone, which means the cost could be more than $1.2 million per steel job.

https://www.nytimes.com/2019/05/30/us/politics/norway-trump-aluminum-tariffs.html

Quote:

Industry statistics and stock prices suggest a more complicated story. Shares of America’s largest aluminum and steel makers have plunged over the last year. There are fewer aluminum production jobs in the United States than a year ago, while steel mills have added only a few thousand jobs. In April of this year there were 381,000 Americans working in the primary metals industry, which includes steel and aluminum. That’s up from 376,400 a year ago — a 1.2 percent gain — and down from 398,000 in April 2015.

Tariffs on primary industries are a particularly complex thing, because of the flow on effect. It's one of the reasons why the U.S. used to subsidise their Wheat growers (I haven't read lately if they still do) - it has much less flow on effect than tariffs. Tariffs on end products (eg. cars) have less of a flow on effect (but still some)

1 Reply

@vikorr,

Quote:

General Motors and Ford said Trump’s tariffs have cost them $1 billion each.

If they start using steel and aluminum made within the US, then they will not have to pay those tariffs.

Hypothetical 25% tariffs on car parts can be avoided by buying car parts made in the US.

Hypothetical 25% tariffs on cars can be avoided by making cars within the US.

1 Reply

@oralloy,

A simplistic version:
- The U.S. uses more steel than it produces
- Supply contracts were in place prior to tariff introduction
- specific steels are sometimes needed to manufacture X, and may only be made by certain manufacturers
- specific quantities may be needed that particular manufacturers can't produce

Supply is as much about requirements and reliability, as it is about price. As the CEO's of Ford etc would be very, very far from stupid, I'm sure they have done everything they can to decrease the effects of the tariffs - and yet it still cost them $1B each.

In any event, such is a sideshow to the main point of my OP.

1 Reply

@vikorr,

Domestic production may not be enough to meet demand now.

But after domestic production expands to meet the demand, then it will be enough.

1 Reply

@oralloy,

Doesn't deal with the short term issue, which is very real, ignores all the other issues I mentioned, and hypothetical besides.

But as I mentioned, a sideshow to the main point of my OP.

1 Reply

@oralloy,

oralloy wrote:

Quote:
Supporters of Trump’s tariffs, such as the Alliance for American Manufacturing, counter that more than 12,700 well-paying jobs have been created or saved at steel and aluminum factories since the president put this policy in place in March of 2018. They also point to substantial amounts of investment in U.S. metal mills that should benefit the nation for years to come, including $1 billion that was just announced at a U.S. Steel plant outside Pittsburgh.

http://www.washingtonpost.com/business/2019/05/07/trumps-steel-tariffs-cost-us-consumers-every-job-created-experts-say

But from the same report, "U.S. consumers and businesses are paying more than $900,000 a year for every job saved or created by Trump steel tariffs, according to calculations by experts at the Peterson Institute for International Economics. The cost is more than 13 times the typical salary of a steelworker, according to Labor Department data, and it is similar to other economists’ estimates that Trump’s tariffs on washing machines are costing consumers $815,000 per job created.[/quote]

1 Reply

@InfraBlue,

Once people start buying American-made steel and aluminum, they will no longer have to pay the tariffs.

1 Reply

@vikorr,

vikorr wrote:

Doesn't deal with the short term issue, which is very real, ignores all the other issues I mentioned,

We'll just have to muddle through the short-term pain. We'll be better off in the long run.

vikorr wrote:

and hypothetical besides.

The steel and aluminum tariffs are not hypothetical. Mr. Trump is actually doing this.

The tariffs on autos and auto parts are hypothetical, but we need Mr. Trump to make them real.

vikorr wrote:

But as I mentioned, a sideshow to the main point of my OP.

I don't know much about the tariffs to oppose illegal immigration. It's a new issue and I've not studied it.

The tariffs to combat cheating and piracy by the Chinese government are designed to end those unfair trade practices. This will be a good thing.

1 Reply

@oralloy,

Quote:

We'll just have to muddle through the short-term pain. We'll be better off in the long run.

Possibly, but unlikely, though it depends on what you measure, and how you determine 'being better off' (but that is a massive topic)

vikorr wrote:

and hypothetical besides.

oralloy wrote:

The steel and aluminum tariffs are not hypothetical. Mr. Trump is actually doing this.

Umm...the hypothetical on your part should have been clear:

oralloy wrote:

But after domestic production expands to meet the demand, then it will be enough.

There is no guarantee this will happen - at this stage, stating such is purely hypothetical.

Quote:

I don't know much about the tariffs to oppose illegal immigration. It's a new issue and I've not studied it.

That wasn't the main point of my OP. I had thought it pretty clear. Engaging in tarrif wars (in the economic climate surrounding the Great Depression) is what triggered The Great Depression.

Today, many of the worlds advanced economies are in perilous financial states, drowning in debt, but propping themselves up through borrowing further - which isn't sustainable. Tarrif wars, which would bite into their export markets, would result in less federal revenue, which would result in less ability to pay debt, which would result in smaller stimulus which would result in....well...you get the picture...I hope.

That's missing a lot of flow on effects, which would make it quite a bit longer.

Still, there are many similarities to what occurred before the Great Depression.

Point being, what Trump is engaging in, played out between the two largest economies in the world, has the potential to trigger another great depression.

1 Reply

@oralloy,

oralloy wrote:

Once people start buying American-made steel and aluminum, they will no longer have to pay the tariffs.

That still leaves the higher cost of American-made steel and aluminum food the consumer to pay.

1 Reply

@InfraBlue,

Agreed. However the added employment and profits in domestic companies significantly reduces that effect. This is particularly true for imported food and consumer goods. For imported components to U.S. manufactured goods the situation is more complex and in many cases is indeed usually unfavorable.

0 Replies

@vikorr,

Trump never understood Economics. Starting any trade war defeats the whole idea of "comparative advantage." There are many things other countries can produce at much cheaper cost than the USA. We can then determine from quality and price, what we wish to buy in the open marketplace. Tariffs only increases cost to the consumers as an added tax, and results in less sales and jobs. Trump is dangerous, because he doesn't understand the underlying consequences of what he does. Trump is a danger not only to our economy, but to our country's security. Thousands of psychiatrists have determined that Donald Trump is the "most dangerous man in the world." The man is mentally unstable, and ignorant; a frightening combination. https://medium.com/@shanesnow/donald-trump-and-the-definition-of-insanity-82ab6db008c4 and, https://www.psychologytoday.com/us/blog/the-time-cure/201709/the-dangerous-case-donald-trump

1 Reply

@cicerone imposter,

Nobody can tell Trump anything, because he's a "stable genius," and "went to the best schools." https://www.dailyrepublic.com/all-dr-news/opinion/state-national-columnists/trumps-ignorance-catching-up-with-him/

1 Reply

@cicerone imposter,

I recently read about 1/3 of 'The Dictators Handbook'...which by that mark was just repeating itself over and over, but it's point had been made by then - you can **** up a country and stay in power (Mugabe is the perfect example), so long as you have the right people in your pocket, and can keep the populace in check (whether or not that is through violence, disinformation campaigns or other means)

My view is that Trump is dangerous - on a number of fronts.

1 Reply

@vikorr,

Thousands of mental health professionals already declared Trump "the most dangerous man in the world." Quote:
“We, the undersigned mental health professionals, believe in our professional judgment that Donald Trump manifests a serious mental illness that renders him psychologically incapable of competently discharging the duties of President of the United States. And we respectfully request he be removed from office, according to article 4 of the 25th amendment to the Constitution, which states that the president will be replaced if he is ‘unable to discharge the powers and duties of his office.’”

0 Replies

@vikorr,

Well, Ms. Wise, the exact causes of the Great Depression (even today) are unknown.

1 Reply

Trump and trade wars

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