"Waddya want? Tariffs ain't my forte. I only graduated Wharton 'cause I cheated my way through!"
"The DOW is now nearly 1300 points lower than in January 2018 when Mr. Trump began his tariff offensive - despite the best 12 months of economic growth since 2005 and healthy corporate profits.... Mr. Trump seems to sincerely believe tariffs are a free lunch....But tariffs are taxes that raise the price of Chinese goods for U.S. consumers and producers." WSJ editorial today 'The Cost of China Tariffs.'
"Every time Trump opens his mouth about tariffs he adds to economic illiteracy in America". Lawrence O'Donnell, last night on 'Last Word'.
"Not for the first time in his life, Donald Trump seems intent on taking a massive inheritance and lighting it on fire. But this time instead of his daddy's money it's in the form of the nation's entire macro-economy. It's worth noting the economy is doing pretty well by the traditional metrics... there is no reason Trump should do anything but watch his shows, and ride the strong economy into the next election.
But he's been crowing about how fixing trade with China will be his key. And the same guy who managed to lose money running casinos, who lost money selling America football steaks and alcohol, seems intent on destroying the American economy too." Chris Hayes, last night on 'All In'.
The headline on the front page of today's Wall Street Journal ('Trade Threats Hit U.S. Markets') ought to have had the sub-header 'Trump Trade War Threatens To Scuttle His Economy') As the DOW tanked yesterday to the tune of 617 points, it was clear Trump's trade antics were weighing heavily on the Street. And why not? Because even the few remaining floor traders know Trump is an imbecile on trade and his belief that the U.S. is "getting the better of China" is bollocks. I.e. because we have tariffs on $200b of their goods compared to their tariffs on $60b of ours is nonsense. As oil trader Dan Dickers pointed out on 'All In' last night, "this is the simpleton's kind of view of what trade is really about." Adding:
"He's a salesman. He sells steaks and airline rickets and hotels and what have you. So as far as he's concerned if I'm selling you more than this guy I'm winning. So that's why the trade is good for this country - according to him- because I can slap on half a trillion in tariffs on Chinese goods and they can only hit us for sixty or seventy billion. So hey I'm winning."
The other piece of flat out ignorance from the Dotard is how "China will have to pay these tariffs" unable to process it is not countries but consumers that do the paying. And in this case, U.S. consumers will be paying out the wazoo. As former Clinton Treasury Secretary Robert Reich explained last night ('Last Word') we've known how tariffs work for 130 years now. The worst case was Smoot-Hawley which "plunged us into a deeper Depression than we were already in". Why? Because tariffs always hit the consumer as an added cost sales tax - often on essential goods. When those foreign goods, whatever they are - toilet paper or backpacks- enter U.S. ports with tariffs tagged on, the companies that pay those tariffs get their money back by charging U.S. consumers the amounts they had to pay and on each and every item, This isn't rocket science but for Trump maybe it is.
Earlier (May 6 post), I indicated the only way we may be able to get rid of Trump and his criminal cabal is for the economy to crash. That prospect may now be a lot closer, given Trump has gone batshit crazy, imposing 25 percent tariffs on $200 billion of Chinese imports and also planning to impose the same tariffs on $325 billion more. Essentially putting a sales tax on all Chinese imported products Americans may buy.
Trump claims the payment will be on the Chinese side, but as Jill Schlesinger noted yesterday this isn't true. Schlesinger also emphasized the problem with these new tariffs is that the U.S. importers cannot afford to absorb the 25 % increased costs so they will have to be passed on to U.S. consumers. A case in point as noted in the WSJ (May 10, p. A3): More than 1,000 Chinese companies import auto parts to the U.S. Because of these new tariffs, a new car (using them) will now cost $4, 400 more. Process that!
Besides auto parts, what sort of Chinese imports are we talking about? According to Ms. Schlesinger:
"Furniture is a big one, building supplies is a big one, shampoo, dog collars, toilet paper, art supplies, ceramic tiles, windshield glass, Christmas tree lights, backpacks, luggage, baseball gloves, leather handbags, any of the fabrics that go into fleece. There are thousands of items on this list including foods - beets, carrots, kale."
One estimate in the WSJ is that U.S. consumer will pay an additional $767 a year in higher prices for the goods they purchase, and that's on average.
When CBS' John Dickerson mentioned that Trump suggested buying goods made in other nations, Schlesinger quickly slapped that down saying all that happens is that U.S. manufacturers use the tariffs on China as an excuse to jack up their own prices. She mentioned the case of dryers being jacked up by $86 and $92 each last year from the tariffs issued then.
Apart from that secondary vendors would pose other problems, namely inferior quality. According to Jay Foreman, a CEO of one importing company in Boca Raton FL: "We've all worked for more than twenty years to get the manufacturing safety levels to the highest standards" so "cannot simply switch" to vendors in India, Vietnam or Singapore.
Bottom line, as Jill Schlesinger put it:
"Everyone better be making more money because these things are going to cost us way more money."
But can consumers make that much more money? The average U.S. consumer did benefit somewhat from the Trump tax cuts (avg.. $355 a year) but the increased de facto tax wrought by tariffs essentially wipes that out. It also isn't sanguine that the Federal Reserve has now noted many in the so-called middle class (claimed to range from $40,000 - 85,000 income) cannot afford a single emergency expense of even $400.
It is also a spun narrative to depict China as the singular trade "bad guy" because we have a $417b trade deficit with them. As pointed out in the James Bacchus article 'America's Abusive Trade Practices (WSJ, May 13, p. A19) "U.S. regulators continue to drag their feet on WTO compliance, and gravitate toward the outer edge of WTO rules - and find new ways to discriminate against Chinese imports. The prospect of ending these practices could be a powerful inducement for China to abandon its own unfair trade practices."
So, contrary to Trump's twaddle, the offenses on trade practice are not all one way on China.
Oh, another thing. Last year the WSJ's Greg Ip answered the question of why the U.S. itself runs a continuing trade deficit:
"Because it consumes more than it produces while its trading partners collectively do the opposite.. Another way of saying this is that the U.S. invests more than it saves while other countries save more than they invest."
Let's parse those words a bit because they may seem inscrutable or counter intuitive to many. Why not invest? Save? Aren't you saving when you invest? Well, no. Saving means stashing money, capital into fixed income instruments like CDs, money markets (not funds), and regular bank savings accounts, as well as in immediate fixed annuities. Anything which is unlikely to be perturbed, affected or lost in a stock market correction or crash.
"Investing" means plowing money into regular stocks or into mutual funds - say as offered in your IRA or 401(k). These stocks or funds are tied to actual products or services, say Apple Iphones, or Musk's Tesla, or even Chipotle - as incredible as that sounds. The investor puts his or her money into investment devices and instruments which he believes will offer a return on the investment because the product will grow in share value, or in actual distribution- which ultimately leads to higher market valuations.
But as we've seen the past week, with $1 trillion in stock market losses from Trump's trade tantrum, that doesn't translate into strict saving. No way.
At the other end of the Trump trade fracas, it's the midwestern farmers getting clobbered as they have lost a huge market (in China) for their soybeans, nuts etc. There are actually now huge soybean crops - unable to be exported- and going down the drain. One might say they are basically operating on fumes, and with margins so low they could face farm or home foreclosures soon. (59,000 more farm jobs are expected to be lost with this current trade face-off, according to reports on CBS this morning.)
We now know from the Congressional Research Service, that because of Trump's trade tactics, national net farm income dropped by more than $9 billion in 2018 or more than 12 percent. Meanwhile, a trillion dollars has been lost in the stock market since last weekend.
But not to worry! Trump has announced he plans another handout ("subsidy") to the farmers....errrrr Trump voters - from the hands of U.S. taxpayers- and to the tune of $15 billion. To get that done without incurring more deficits he wants to cut food stamps by 750,000 recipients as well as using HUD to limit access to public housing - which could displace 55,000 children.
This is the traitor, nincompoop and rat we have running our country right now - into the ground, along with the Constitution and rule of law.
See also:
And:
‘It Could Break a Lot of People’: Iowa Farmers Bear the Brunt of Trump’s ‘Ugly’ Trade War with China
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