Tarrif Man was at it again last week imposing massive tariffs on nearly $200 billion of Chinese imports...the end of the world as we know it. For those paying attention, Trump has also imposed new tariffs on Mexican tomatoes to appease farmers in Florida who are feeling the sting of higher labor costs (thanks to ICE & its friends).
The question is what does it mean; well first off its evident that, so far, the Chinese exporters have not absorbed the additional costs of tariffs -- that is usually how these things work, right now supply chains are being examined (on both sides) and decisions about future production are being made. Nevertheless in an US$18 trillion economy -- even a few hundred billion is not that much! So far some consumer (actually as farm products are an important staple for most household) are being affected by some rising costs (imported vegetables) and some lower costs (hog feed prices are the lowest they've even been having collapsed). So meat is cheaper!
So again the overall harm to the US economy is hard to quantify to show that its a substantial hit. Now if this was Canada or even Mexico, that are far more open the cost to the economy could be greater. The funny thing is that since Trump has imposed Tariffs on Canadian goods the Canadian economy has been booming, with record new job being created....
Now, I don't agree that mercantilism is a good idea or that Tariffs are a good idea, they do harm the economy and they do impact GDP -- but fuel prices probably have more of an impact than do tariffs, and we don't make s scene about that!
The reality is that Tariff Man's project will shift economic growth in ways he cannot anticipate; as example jobs were lost at Harley Davidson that decided that to avoid tariffs on its motorbikes exported to the rest of the world, it should manufacture these motorbikes in other countries. Moreover, America exports services (Facebook, Google, Uber etc) these could face regulatory hurdle from other countries DiDi, for example, could suggest that withholding tax be paid on capital repatriation from China to America for Uber...
The most important cost, however, is something else entirely; competition between America (the big power) and China (the pretender) is only going to grow; historically the "new guy" had to "fight his way to the top -- with very few exceptions (from the UK to America is one). A trade "war" could escalate -- China could decide that it is ready to purchase oil from Iran...and enforce this right with military might -- or at least make things for the US uncomfortable in the middle east. For years, China and the US have worked very well in the middle east -- since a large percentage of the oil in the region goes to China.
When geopolitics get into a change sequence the outcome are almost impossible to predict. Trump is looking for a fight to help his chances in 2020, Iran seems to be the big winner. China could also step up its strong-arm tactics in the South China Sea forcing America to commit more of its assets out there, forcing America to build long-range supply routes. It was always assumed that a confrontation between America and China would not go to the military route because the distance between the two players are too great...but that assumption could be wrong.
Trump is playing a very serious game, whose ramifications he may not fully appreciate. Afterall Trump could have played the statesman on the Muller Report and instead played the bully. His instinct are ultra short gains, China is playing the long game.
The question is what does it mean; well first off its evident that, so far, the Chinese exporters have not absorbed the additional costs of tariffs -- that is usually how these things work, right now supply chains are being examined (on both sides) and decisions about future production are being made. Nevertheless in an US$18 trillion economy -- even a few hundred billion is not that much! So far some consumer (actually as farm products are an important staple for most household) are being affected by some rising costs (imported vegetables) and some lower costs (hog feed prices are the lowest they've even been having collapsed). So meat is cheaper!
So again the overall harm to the US economy is hard to quantify to show that its a substantial hit. Now if this was Canada or even Mexico, that are far more open the cost to the economy could be greater. The funny thing is that since Trump has imposed Tariffs on Canadian goods the Canadian economy has been booming, with record new job being created....
Now, I don't agree that mercantilism is a good idea or that Tariffs are a good idea, they do harm the economy and they do impact GDP -- but fuel prices probably have more of an impact than do tariffs, and we don't make s scene about that!
The reality is that Tariff Man's project will shift economic growth in ways he cannot anticipate; as example jobs were lost at Harley Davidson that decided that to avoid tariffs on its motorbikes exported to the rest of the world, it should manufacture these motorbikes in other countries. Moreover, America exports services (Facebook, Google, Uber etc) these could face regulatory hurdle from other countries DiDi, for example, could suggest that withholding tax be paid on capital repatriation from China to America for Uber...
The most important cost, however, is something else entirely; competition between America (the big power) and China (the pretender) is only going to grow; historically the "new guy" had to "fight his way to the top -- with very few exceptions (from the UK to America is one). A trade "war" could escalate -- China could decide that it is ready to purchase oil from Iran...and enforce this right with military might -- or at least make things for the US uncomfortable in the middle east. For years, China and the US have worked very well in the middle east -- since a large percentage of the oil in the region goes to China.
When geopolitics get into a change sequence the outcome are almost impossible to predict. Trump is looking for a fight to help his chances in 2020, Iran seems to be the big winner. China could also step up its strong-arm tactics in the South China Sea forcing America to commit more of its assets out there, forcing America to build long-range supply routes. It was always assumed that a confrontation between America and China would not go to the military route because the distance between the two players are too great...but that assumption could be wrong.
Trump is playing a very serious game, whose ramifications he may not fully appreciate. Afterall Trump could have played the statesman on the Muller Report and instead played the bully. His instinct are ultra short gains, China is playing the long game.
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