Why Trump's Tariffs Are Idiotic And Will Wreak Havoc On His Own Voters

The WSJ editorial of June 13th (p. A20) was spot on in its assessment of the Trump tariffs:

"Tariffs are inherently regressive because low income Americans spend more of their income on household goods.  Wilbur Ross argued that no one will notice price increases...But people in Mr. Ross  income class are not the Trump base."

And indeed, that base is already getting clobbered by the stupid, counterproductive tariffs on steel and aluminum that this fool has already imposed.   In Iowa the Trump tariffs on steel and aluminum directed at Mexico have already cost hog producers $560 million according to an Iowa State University economist.   What do steel and aluminum tariffs have to do with pork? Well, in response Mexico has imposed countervailing tariffs on pork- with the result that hog prices are tumbling.

Next to get hit will be soybean producers in the Midwest as Trump threatens $450b in tariffs on China. China buys a quarter of American soybeans so will now pull back Many think China will be the worse off but they are wrong. The Chinese have been quietly pursuing an independent agricultural strategy for years.

American consumers will also get clobbered - given their love for cheap Chinese made stuff, including  HDTVs, cell phones etc. as the trade war ramps up.  Look for that TV and DVD player to now go up an additional $50 and that cell phone another $100.

Meanwhile, local papers across "flyover" nation are replete with tales of woe regarding value destruction and lost income from Trump's trade wars.  We can debate from now until doomsday the definition of "trade war" but the fact is that Trump's tariffs are already costing millions millions.

Then there are the stupid tariffs against Canadian goods, which makes zero sense and only antagonizes an economic partner and ally.  For reference, when one tallies up goods and services exchanged between the two countries the U.S. enjoys an $8.4 billion surplus.  But all the moron Trumpies focus on are the goods, minus the services.

The Trump bunch, including Wilbur Ross- and the Dotard himself - also don't grasp that trade itself is not purely transactional in the Trump real estate grifter sense of being a zero sum game. Trump barked at one point, highlighting his ignorance:

"Why should I allow countries to make massive trade surpluses as they have for decades?"

Well, dummy, because those  trade surpluses mean more Americans are able to buy those goods because they are cheaper!  More cheap goods =  more items bought, i.e. from the Chinese, so the Chinese run up a trade surplus.   Trump, senseless buffoon that he is, can't seem to appreciate that lower income Americans (i.e. the Trump base) benefit from competitively priced Chinese electronics, or Mexican produce, Japanese cars and Canadian steel. What does Trump want, his voters reduced to having to pay 50- 100 percent more for everything when his tariffs are already eating away at his tax cut benefits?  (The WSJ (ibid.) estimates those in the lowest income quintile "could lose 49 percent of their tax cut gains")

So who is Trump fooling? Well, his own base for sure if they fail to see through what he's doing. But hey, maybe they're ok with anything this turd does like they're A-ok with incarcerating toddlers in wire cages and pup tents.

The other aspect is that Trump and most Trumpkins fail to process that trade deficits are neither good or bad. Indeed, the WSJ's Greg Ip  answered the question of why the US. itself runs 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."

Hence,  the only way to counter that is for Americans to invest less, and save more.  If then average people-  even Trumpies - saved more, they'd be able to afford higher end U.S. goods if they wanted them, as opposed to buying cheaper Chinese, or Japanese electronics or cars.

Basically then tariffs don't solve any trade or economic imbalance problems - other than in the short term.    Trump and his lackeys may brag about the steel jobs being saved thanks to his 25 % tariffs on foreign steel imports, but left unsaid are the estimated 11,000- 15,000 job losses for the steel users. That is, those who USE steel to manufacture other goods.

So why are tariffs bad then? Because they are a tax on imports which ultimately turn out to be a tax on citizens, especially dinging those with low incomes.  By way of example, say an American retailer purchases 100 umbrellas from China for $5 each.   The U.S. tariff rate is 6.5 % on each one.  Then the retailer would have to pay a total of:

(100) x (0.065) x $5   =   $32.50 

Or the tariff the retailer would then have to pay on the shipment.   This raises the total price for the retailer to:   (100) x $5   +   $32.50  =   $532.50,

Some of which will be passed on to customers since the higher tariff amount would be unsustainable for the retailer to 'eat' over time. The same sort of calculations apply to electronics good, cars, or other import goods.

 It seems kind of dumb to enact a tax cut, then to clobber your people with a tax increase, no?

See also:

https://www.ft.com/content/6aa73e08-7566-11e8-aa31-31da4279a601

And:

http://www.smirkingchimp.com/thread/nomi-prins/79783/imperial-president-or-emperor-with-no-clothes-how-donald-trump-s-trade-wars-could-lead-to-a-great-depres

Excerpt:

"What the American working and the middle classes will see (sooner than anyone imagines) is that actions of his sort have unexpected global consequences. They could cost the U.S. and the rest of the world big time. If he were indeed emperor and his subjects (that would be us) grasped where his policies might be leading, they would be preparing a revolt. In the end, they -- again, that’s us -- will be the ones paying the price in this global chess match."

The Dark Side Of That Unemployment Report: A Labor Shortage Leaving Many Businesses Adrift

Crabbers, e.g. crab processors, at a plant in Maryland. Most MD crab processing businesses are critically short of workers - thanks to Trump's draconian immigration controls, and his miserly "lotto" program for issuing H2B visas.

The glowing unemployment report released yesterday -  only 3.8 percent unemployment,  or the lowest seasonally adjusted rate in nearly 17 years  -  which naturally has Trump bragging and exaggerating.  The truth, however, is that his draconian immigration policies - especially to do with H2B visas and available foreign guest workers - have many businesses in near panic.  And we haven't even gotten to his 25 %  steel tariffs, enacted against allies like Canada, the EU and Mexico yet.

Let's get it out right now: This nation's economic growth - which Donnie J. Dotard so often brags about, especially the stock market  - is on the verge of circling he drain thanks to his tight- fisted, even cruel immigration -labor policies.  From home construction, to agricultural crops (harvesting) to landscaping, to wait staff and cooks, the nation is reeling from a lack of enough workers.

WSJ columnist Gerald Seib ('Immigration Debate Misses Economic Reality',  May 22, p. A4) summarizes the issues nicely:

"The American birthrate has slowed dramatically...hitting a thirty year low. At the same time, Alaska fisheries, New Hampshire restaurants, and Maryland crab processors all say they are critically short of workers. Farmers say they need thousands more workers and some production is moving overseas for lack of labor.   There are 6.6  million job openings in the U.S. which means for the first time in history there are enough openings to provide a job for every unemployed person in the country."

One of the largest, emerging unemployed contingents is the legion of new college grads. But ...will they take the jobs available? Say in construction, landscaping, agriculture, short order cooks at restaurants or even janitors there?  I doubt it, which perhaps others also know given the op-ed piece  by Tyler Bonin appearing on Tuesday (WSJ,  'My Advice To Grads: Start Mopping', A17) admonishing new grads:

 "There is a time to be bold but also a time for humility. A task once considered beneath you could be the key to your success.Do the job nobody wants, because believe it or not, somebody appreciates it. Volunteer to learn and to provide value to others."

Of course, the new grads' student loan schedule and amounts to be paid off may be a tad more than a $10 an hour job mopping floors at Safeway can provide.    But let's get real, the spectrum and number of jobs going begging is far in excess of what all this year's college grads could fill.

In Thursday's WSJ  ('Housing Shortage Shadows Rural Areas', p. A3) we read, for example,  how the labor shortage, especially in construction, is adversely affecting new home starts. Hence,  if the housing supply remains low it means the demand will continue to drive up prices. (Like here on the front range in Colorado, with the median home price in Denver now $529,000.)  We further learn, e.g. for a town in Ohio:

"The labor shortage is so bad  that the chamber of commerce goes from town to town to recruit workers."

With one member noting: :"The fear is that if we don't solve this in some way we're going to lose big employers."

Even the WSJ editorial writers entered the fray three days ago ('A Miserly 15,000 More Visas')   referencing how the  H2B visas "allows businesses to hire foreign guest workers for busy seasons" and congress had given the Trump  administration  authority to issue as many as 69,000 more visas to meet employer needs.

And yet the Department of Homeland Security has handed out "a mere 15,000 extra H2B visas this summer."

Adding:

"The 15,000 won't come close to meeting the demands across the country from resorts, fisheries, landscapers and restaurants among many other industries."

The most choice aspect was the editor's reference to the Trump "restrictionists" who claim "more foreign busboys or crab pickers will replace Americans when employers can't come close to finding enough Americans."

In other words, the dumb Trumpies are - as the Journal notes - seeking to protect mythical American jobs (i.e. that Americans won't take) at the expense of business viability and economic growth, e.g.

"Mr Trump says he wants the economy to grow by 4 percent or more but it won't happen if employers can't find enough workers."

This isn't just  aimless conjecture either. In the case of Maryland crabbers, we've learned for the first time the demand for crab processors in eastern Maryland was so high that the "U.S. had to award them by lottery". ('Crab Country Craves More Visas', WSJ,  May 12-13, p. A3).   The problem? Under this absurd system some companies - like G.W. Hall - got all the workers they requested, but other companies got zilch, zero, none.   In the words of Bryan Hall, quoted in the piece, referring to another owner:

"It's not right for me to have the girls and not him" referring to Russel Hall owner Harry Phillips.

The farm labor shortage is just as critical,  as reported in the WSJ editorial 'Exporting Jobs Instead of Food' (May 18, p. A14), e.g.

"The farm labor shortage is growing more serious as the overall U.S. jobless rate falls. The Labor Department says about half of the 1.2 million or so workers employed in agriculture are undocumented and if they were deported the shortage would become a crisis.."

The editorial concluded that the "U.S. farm labor shortage is driving production overseas,"

The labor dearth is equally parlous for construction. As per a Denver Post piece (May 13, 'Help Wanted As Applicants Are Scarce', p. 8B):. Quoting Michael Smith who runs the Colorado Homebuilding Academy:

"We've got a labor shortage. Labor is not keeping up with the change in the demand, unfortunately."

The need for more construction workers becomes self-evident when it is realized that by 2025 there will be approximately 100,000 open positions in construction and special trades but barely one fourth of the workers to fill them. Most of the projected open positions are driven by the population explosion along the front range with many would-be Denver residents  now looking to Colorado Springs for homes (and a long, e.g. 65 minute, commute).

What about getting native born Americans to get out there and get their hands dirty? (The Labor Dept. and DHS insist if employers in the short- staffed areas pay more, more Americans will take the jobs. Personally, I doubt it.)

One Maine employer - Bob Smith, owner of Sebasco Harbor Resort in Phillipsburg, quoted in the Denver Post 4 days ago, said:

"People say you should give these jobs to Americans. If you can find 'em then that's great. The only Americans we can find to do the work right now are in Puerto Rico."  (As U.S. citizens Puerto Ricans face no travel restrictions so can work wherever and as long as they want.)

On learning of all this, Janice fumed, asking why the hell enough Americans can't be found for the jobs going begging - from crabbers in Maryland to construction workers in Denver.. "You mean to tell me there are no able -bodied guys to do this work?"  Not really, hon!

Look, college grads are not  running up to Baltimore to process crabs nor are they going to go for construction jobs in Denver or Miami. And they certainly aren't going to California to help harvest oranges, prunes or whatever.  They believe, having shelled out tens of thousands for college, they are at least entitled to an indoor, office job complete with a/c even if it is done as a temp or volunteer. Especially if they had the likes of Sting (at Brown) or Hillary (at Yale College) delivering the commencement address.

Older workers are also out of the work game, like the two of us. As William Galston noted in his own WSJ piece three days ago ('Can America Grow Like It Used To?'):

"Two thousand was the last year in which the entire baby boom generation was of prime working age, and 2019 will be the first year in which none of it is. ...American men experienced the largest decline in labor participation rate of any OECD country."

Adding:

"There is no sign of a new baby boom on the horizon"

This despite Galston trying to make the case to "raise the aggregate level of work in our society."

Not even mentioned yet are the million or so (estimated) young folks who have joined the F.I.R.E. ('Financial independence, retire early') movement, aiming to cash out their chips, cubes and lockers by the age of 40 - to go globe trotting, or write blogs.  (I will have a special post next week on this movement, and how these ambitious young Turks plan to achieve that early retirement).

The point is, with all these labor participation subtractions, no economy can grow unless there are compensating additions. If it isn't coming via new births (irrelevant since these workers are needed now) then it must come via immigration. And yet the reactionary Trump bunch are cutting their noses to spite their faces. As Gerald Seib pointed out (ibid.) they are now cutting the LEGAL immigration numbers as well as the illegal, by as much as "260,000 slots per year or 25 percent".  Seib quotes the Cato Institute:

"This would be the largest policy driven reduction in legal, immigration since the racially motivated acts of the 1920s."

Galston, Seib and the WSJ editorial writers are in agreement that the fruit of this misplaced, ignorant policy position - based on bigotry - will only wreak economic havoc and dislocation as well as much lower growth,  possibly even recession. Trump should enjoy his high stock market for now, because it won't last much longer.  Especially, after he's now also declared a trade war with our allies including the EU, Canada, Mexico -  by slapping a 25 percent tariff on steels and 10 % on aluminum -  using a national security pretext.

Don't think this is any kind of biggie? Check out yesterday's WSJ 'Business and Investment' section (p. B9) on how these tariffs are roiling shares of manufacturing stocks. This is given that those companies will be most sensitive to the tariff retribution of the targeted nations- -when it comes. And it surely will: Canada is set to impose a $12.8b hit starting on July 1st.

Trump, aka Dotard, can boast all he wants of his "terrific" unemployment numbers, but as we see, he is still capable of self-destruction (including of his base) by shooting from the hip in reactive measures (via trade tariffs and immigration policies)  that are not conducive to this country's economic well being.