Stock Markets See the US Winning the Trade War, Defying Corporate Lobby & Media Propaganda

Moody’s chimes in. 

The trade war talk has been going on since the presidential campaign but markets just brushed it off and rallied. In 2018, the trade war verbiage moved to the foreground. But until June 14, the administration vacillated between thinking about tariffs and putting the trade war “on hold,” depending on who was doing the talking or tweeting.

This vacillation ended on June 14 (Thursday) evening, when it was reported that Trump had approved to hit an initial list of $50 billion in goods (1,300 products) from China with tariffs of 25%. At the time, the administration was also preparing a second list of products, accounting for another $100 billion in imports from China.

On the evening of June 19 (Monday), Trump threatened to hit another $200 billion of imports from China with tariffs of 10%. And on Tuesday, the Shanghai stock market plunged. Markets were taking it seriously.

Since then, Corporate America’s propaganda machine – the same that for the past two decades had extolled the unrivalled virtues of offshoring production to cheap countries – fired up the mainstream media, which launched into incessant, deafening, repetitive, and manipulative coverage of how these tariffs would hurt US jobs more than anything.

Two glorious examples are Harley-Davidson and GM, which had been laying off workers and shutting plants in the US for years as they were offshoring production to cheap countries. For example, in July 2017, Harley-Davidson announced layoffs in the US as it was building a factory in Thailand. GM has been laying off workers in the US since 2016, even as it opted to produce more models in Mexico

Now they had a fig leaf – the threat of future tariffs – behind which to hide their long-planned offshoring strategies. You couldn’t get on the internet or turn on the radio without being bombarded by how it was tariffs that were driving these noble companies, which had been offshoring production for years, to offshore more of their production.

But beyond the propaganda of Corporate America whose margins would be squeezed by tariffs and who’d have to invest in the US to rejigger their supply chains back to the US, how did markets see it?

Chief Economist at Moody’s Capital Markets Research, John Lonski, had the good idea to check on it, and found in his current “Credit Markets Review and Outlook” that markets had distinctly different ideas. The two key time periods for his analysis are the stock market results for the period since the close of June 14, and for the year so far, through July 12. And this is what he found:

In the US, the stock market, as measured by the total market Wilshire Index, “defied the expectations of many.” Despite the red-hot Trade War rhetoric, the Wilshire Index has risen 0.5% since the close of June 14 and is up 5.3% year-to-date. The S&P 500 is up 4.7% year-to-date.

But the stock markets of countries that have large trade surpluses with the US – and that “have the most to lose from a protracted trade war,” as Lonski put it – have been getting battered. For example:

  • China’s Shanghai Composite: -6.8% since June 14, -14.2% YTD
  • Korea’s KOSPI: -5.7% since June 14, -6.8% YTD
  • Germany’s DAX: -4.7% since June 14, -3.3% YTD
  • Japan’s Nikkei -2.4% since June 15, -2.5% YTD

The reasons that Moody’s cited as being behind the markets’ moves – up in the US, down in the big-trade-surplus countries – are the obvious ones that the markets have been seeing from day one but that the US media are totally and willfully blind to:

  • The US is less dependent on exports than these countries in terms of overall business activity.
  • The US has a huge trade deficit with these countries, and thus imports far more from them than it exports to them, and any retaliation by those countries would by definition hit those countries far harder than the US.
  • The US economy is currently strong, and now “well outperforms other major economies.”

“Nevertheless, though the US is better able the withstand the direct and collateral damage of a trade conflict, it is still expected suffer casualties in a trade war,” Lonski says.

This is very true. There will be winners and losers. And missteps could lead to some broader economic consequences in the US and globally. But not doing anything would allow the continuation of a trade war that has been waged against US workers for over two decades, largely by Corporate America’s own ambitions to offshore production, profits, and cash.

Tariffs are similar to “sin taxes,” such as on cigarettes and alcohol. They encourage healthier behavior that is less costly for society. Tariffs will give Corporate America a financial incentive to bring some production back to the US in order to avoid the margin squeeze that tariffs represent. While this strategy will not bring back the old jobs from the 1970s – they have been obviated by automation – it will create high-value jobs in the US and whittle down the huge and unsustainable trade deficits that US has with the rest of the world.

So we go beyond the hysteria about auto tariffmageddon. Read… After decades of relentless offshoring, the equation may change for automakers and component makers.

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  180 comments for “Stock Markets See the US Winning the Trade War, Defying Corporate Lobby & Media Propaganda

  1. Gershon says:

    How refreshing it is to have Wolf Street, a bastion of truth and light amidst the propaganda, lies, and dissembling of the corporate media, to turn to for cogent analysis of the economic stories and trends that affect us all.

    • Steve Graves says:

      I love reading Wolf too. He provides a MUCH needed alternative to the mind-numbing drone of the mainstream media. I would stop short, however, of describing Wolf Street as “a bastion of truth and light.” Wolf expresses his opinions (most of which I happen to agree with) but he ain’t handing down tablets from some mountain. A dozen people can take the same sets of raw data and come up with a dozen entirely different interpretations of what it all means. Human truth is invariably flawed and relative, always reflecting our own unique dispositions and experiences. And in my humble opinion, that applies to everyone – even Wolf Richter!

      That being said, I share your enthusiasm for Wolf Street. He is doing a HUGE public service with this incredibly informative and unique website. I just take everything, including Wolf, with a grain of salt.

      • Álvaro (from Spain) says:

        It is my favourite site now. It is the only site providing actual economic analysis (free of propaganda) that does not indulge in political opinions or weird conspiracy theories (or even blatant racism).

        I only disagree with this site’s thesis in one matter: that this is just another economic cycle and a new recession will just come and go. I don’t believe that. I think that the next recession will be brutal and dramatic decisions and consequences will be seen.

        • Steve Graves says:

          Agreed. We seem to be nearing the end of a major credit cycle, some seven decades in the making… John Mauldin has a lot to say about that in his weekly (and free) “Thoughts From the Frontline” newsletter. You should check it out, Alvaro, if you haven’t run across it yet. Wolf is still my favorite economic commentator, but JM has some powerful insights as well.

      • Setarcos says:

        Steve, good post and agree that truth and light are not typically concepts I associate with for economic analysis/discussions, so I’ll simply describe it as the most objective piece on tariffs that I have read. I read many very one sided pieces of propoganda concerning Harley Davidson. Very fatigued with wading through all the dung to find the diamonds in other publications.

        And make no mistake, beliefs drive speech/behaviors and behaviors lead to actual results in this dismal science/place …and everything else. Relatively false beliefs MUST lead to relatively poor results! Always analyze the tree by it’s fruit and everyone is served best by starting in their own orchard.

    • Setarcos says:

      Thanks for your comment …it reminded me that I pay too much for a WSJ subscription and and they have never published an objective piece on tariffs. So I am now shifting more of my subscription dollars to this site because it has become a go to read for me each day.

      • Gershon says:

        There’s a great scene in “The Big Short” (a true story of a group of Wall Street mavericks who bet against the 2007 housing bubble) where, having uncovered incontrovertible evidence of the level of fraud and financial chicanery underpinning the housing bubble, the protagonists take their findings to a WSJ reporter. Of course he refuses to touch the story, knowing his corporate overlords would never publish such an expose. It is a very teachable moment as to the perfidy of the corporate media.

  2. Pete Stubben says:

    Am delighted Wolf you and Lonski are reporting the facts and not the wild hysteria. Even Bloomberg New radio is reporting that Trump is putting us on the precipice of disaster…just as – in their face – the nasdaq is making new highs. Like everybody else in the media, they misreport the facts and wrap it in a cacoon of hyperbolic disaster!!! Terrible…if u can’t count on Bloomberg business news, who can u count on???… PJS

  3. TropicalSunset says:

    Good post. Very well said Wolf. The media has been very anti-tariffs for the most part.

  4. Top-GUN says:

    Nothing good about tariffs. Just drives up the costs of what we buy.
    I’m more than glad to have foreigners subsidize what I buy.
    Tariffs,, just interfering with Free Trade..

    • TropicalSunset says:

      “But not doing anything would allow the continuation of a trade war that has been waged against US workers for over two decades, largely by Corporate America’s own ambitions to offshore production, profits, and cash.”

      ……what do you think about this quote from Wolf’s blog post? Do just propose continuing on as is and not doing anything? Also, is it really “free trade” as you say if lopsided trade agreements and tariffs favor countries we trade with?

      • Paulo says:

        The US market is only so big. Obviously, for companies to grow their sales and profits (regardless of where they are based) they needed to include the other 7 billion people on the planet. In order for that to occur those people need money…and if they need money then that means they must have jobs to purchase all these goods offered for sale. Tobacco did this decades ago. They needed to get the Japanese, Chinese, and SE Asians hooked on smoking. And so they did…with a vengence. They are still rabid smokers ‘over there’ while the rest of the Europe and NA are butting out , the Tobacco Industry is still doing well because of it.

        If anyone thinks companies will relocate back to the US in order to avoid tariffs and thus limit their sales to the US market they have a real surprise in store. The trade imbalance is secondary, and a fabricated irritant/issue for political purposes.

        The poorest American (okay…not the destitute and homeless, but call it the bottom rung), all sport phones, adequate clothing, and many have cars. They have weight problems as opposed to food shortages. Sure, people need cars to find work and keep employment, but in most of the world this isn’t the case at all. I watched garbage trucks working in Melaque (Jalisco) and it was a staked flatbed with three kids stomping the trash down with their feet while others heaved the bags into the back.

        Trump’s tariffs are the work of an out of touch idiot. He can ramp up outraged nationalism all he wants but it won’t change a damn thing. These companies will sell into the largest market they can, and if that means leaving the US then so be it.

        As a Canadian, I wince when I have to listen to the man speak. I am also prepared to personally take an economic hit to see him fail. I suspect that many, if not most people in the rest of the world feel the same way.

        Companies come and go, and towns follow suit. I am just finishing a book on Ghost Towns of Vancouver Island. I have lived here most of my life and yet remained mostly unaware of their histories; except for the names. Unaware, mainly because the failures were overshadowed by apparent local growth and prosperity. Yet the sawmill I stacked lumber in as an 18 year old was torn down in the 80s, and the multi-national forestry company that owned most of the mills and timber rights on the Island, including my mill, folded up over 20 years ago. By the wasy, when I worked on the ‘green chain’ that mill employed 600 people and ran 3 shifts…5 days per week.

        Trade wars can be fought in other ways. If this one continues I would expect Canada to discontinue patent protection for all US products. I would expect China to unload treasuries and further lower their currency. The World will pull together in opposition to US bullying. It will be painful and economies will suffer, but to knuckle under is to publicly bend over for the orange headed monster and that isn’t going to happen.

        Countries, and their leaders, will not bow down and be shamed. Wars have been fought for less and I suspect one will arise from this one as well.


        • Wolf Richter says:

          Changes in taxation change behavior. EVERY TIME. Companies don’t want the extra costs. They’ll do what they can to avoid them — including changing their supply chains and bringing some production back to the US. The US tax code has favored offshoring. That’s part of the problem. Tariffs will reverse that.

          Other countries, such as China, have practiced this from day one. THERE IS NOT FREE TRADE. Why does the US have to lie down in front of its companies and let them do as they please to maximize their short-term profits at the expense of the overall economy?

          The term “Trade War” is a fun hyperbole. Tariffs are just a form of sin taxes. Like so many others. That’s it. Companies adjust to it, and that’s the purpose.

        • Guido says:

          Trump’s moves have long term goals. Hate him or love him, he’s been working from day one on building a brand for himself — he delivers on his electoral promises.

          He’s building the base for 2020. His message is that he’s there for those left behind. If you were in his shoes, you’d play the same game. He needs voters that’ll show up for him no matter what — kinda Like what dubya had.

          As for removing patent protection and other irreversible stuff, no leader of foreign country will dare to do so. They’ve way too much to lose, as Wolf explained. These countries are like unhappy employees who dream of stomping out but will do no such thing. They stand to lose a lot in the longer run. So like a middle manager, the leaders of these countries will make deals to satisfy various constituencies and somehow survive the day. These tariffs also have the advantage of throwing a wrench into long term strategic plans, if you were say, China.

          My guess is that these trade wars are meant to show that the countries Importing to us have blinked. All they need to do is negotiate with him. If these countries were car dealers, trump is a shrewd buyer playing their game.

        • Nicko says:

          Hold fast fellow Canuck, Shell’s $40 billion LNG terminal in Kitimat (northern BC) is on track (again) to launch. Good times ahead for BC. Perhaps the NDP know what they’re doing after all. ;)

        • Annette says:

          Spoken like the socks and sandals BCer you are. ROC are not militant like you. It’s you guys that have caused the decrease of investments into Canada. You and Boy Wonder Justin.

        • Bobber says:

          Paulo a country cannot run a continuous trade deficit and survive. It needs to be fixed regardless of presidential personality involved.

        • nick kelly says:

          For the majority of Chinese imports, there is no US industry to protect.
          Largest single category: consumer electronics at 27 %.
          There is no US industry. Last US TV Zenith 1995.
          US was taken out mainly by Japan.
          Now Japan is out, Toshiba exiting.
          There is more profit in a latte than in a 32 inch flat panel for TV assembler.
          This is not a biz to chase.

          Next largest: apparel.
          There is no US industry.

          Oh sure there are niches the 200 $ fleece etc. I’m talking about clothing for the middle class.
          China’s competitors are Mexico, India, Sri Lanka etc.

          Then there is a bunch of Walmart stuff: toys, budget housewares, etc. I will bet that 75- 80 % of Chinese imports are in Walmart.

          Americans are not going to sew clothing panels or solder and assemble circuit boards.

          It runs a trade deficit with China for the same reason a wealthy American has a deficit with his gardener, maid, driver, etc.
          The US is a wealthy country and China is a poor country.
          Only about 15 % of its pop is remotely what the US would call lower middle- class. They aren’t the ones sewing clothing panels.

          I’ve been trying to avoid politics but this idea that Trump is playing the long game is too much. Read the people who have talked to him about anything. Even pro- Trump sources say he has almost no attention span. His point of view is that of the last person who talked to him. The last person who talked to him re: steel was Wilbur Ross, who had just come from meeting steel execs.
          Former Econ Adviser Cohn quit (NOT fired) when Trump invoked national security the next day to announce a 10% tariff on steel supposedly aimed at China.
          Then it turns out that China is a distant number 11 for steel imports and Canada is # 1 !.
          This was news to the Admin and it was quickly walked back with exemptions. Since extending them would mean admitting error they’ve expired.

          Then comes (and more comes every day) the cries from the 40 times larger US sector that uses steel.

          Trump has said: ‘who knew health care was complicated?’

          Ditto trade.

        • Peter Mott says:

          This from an article in the Financial Times ( paywall):

          “The sad truth is that if you impose tariffs, production will move around,” said Arndt Ellinghorst, lead automotive analyst at Evercore ISI. “If nationalist trends continue, the inevitable outcome will be more production where you sell the car because that’s the only way to avoid larger tariffs.”

          Other things being equal a Trump tariff on German cars will move production that was in Germany to the US.


        • Anon1970 says:

          In the years before Amazon, before the Internet, before NAFTA and before backpacks became popular on college campuses, the price of a Samsonite 5″ attache case was $50 in Toronto and $25 in Rochester, NY. The Toronto version was made in a small branch plant in London, Ontario. The US version was made in Denver. There were no Chinese knockoffs in those days. The Toronto phone book was filled with business listings of Canadian subsidiaries of US Fortune 500 companies. High Canadian tariffs and non-tariff barriers kept Canadian prices high and overall living standards lower than in the US. I suspect that more than a few Canadians developed smuggling skills to take advantage of the large price differences between the two countries.

        • Anon1970 says:

          Wolf, the last big push for tariff protection was the Smoot-Hawley Tariff of 1930. It caused major dislocations in the economies of central Europe, a major bank failure in Austria and a sharp spike in German unemployment. In the July 1932 German national election, the Nazi party more than doubled its vote of 1930 and became the largest party in the Reichstag. The November election produced similar results, but slightly less favorable results for the Nazis. The rest, as they say, is history.

          My father’s Polish relatives lived in small towns in the former Austro-Hungarian province of Galicia, which became part of the new Poland in 1919. I doubt that they had ever heard of Smoot-Hawley. But they became some of its casualties. In Sept. 1939, their part of the world was occupied by Soviet troops to be followed by German troops in June 1941. As far as I know, none of my relatives who lived in Poland in August 1939 survived the war. For them, the end of the line probably came in the fall of 1942 at a place called Belzec.

          There is no guaranty that the Trump tariff will just be another “sin tax”.

        • Jon says:

          Not a Trump fan but love his courage to stand up for the working middle class and not need to the corporates.
          Very rarely usa would get s a potus like this
          I salute him

      • biznit says:

        He apparently thinks everything’s awesome as long as he can buy a cheap widescreen TV.

        • Vexser says:

          He can use the TV to watch the chinese build islands and military bases all over the place with his dollars. He can also use the TV to watch the growing number of unemployed as the corrupt corporates export more jobs overseas. That TV (and his other “cheap” electronics) will be spying on him (phoning home) so that when the chinese army comes in, they will have all the intelligence they need. All so “awesome!”

        • nick kelly says:

          And cheap computers.

      • endeavor says:

        Absolutely, this is the crux of the matter.

    • RD Blakeslee says:

      What most of us buy is paid for by the money we earn.

      My job just went overseas.

      What do I use to buy those low-cost (or any other) goods?

      • Prairies says:

        High cost goods once they move into the USA for production. All low cost items will become high cost. American labour costs and freight costs will outpace the savings of what were once cheap imports.

      • Mean Chicken says:

        Convert your home into an ATM and teach your children to speak Mandarin.

    • Bobber says:

      Perhaps you need to appreciate what your country does for you. Right to vote. Own property. Free speech. Etc. Do you think these rights magically stem from your IPhone or Tesla?

    • Setarcos says:

      Top Gun, if a trip from the US around the world costs only a dollar and I don’t have a dollar, then I can’t take that trip. Many of us would like to keep our job in the US so we can earn the dollar.

  5. David Calder says:

    What are the chances that a trade war will bring about a financial crisis? The last one was homegrown which nearly brought down the whole world but wouldn’t a crisis brewing in China and Germany and other countries, which are export driven, bring about a crisis if this thing escalates and it’s beginning to look like it could? According to Varoufakis, German and French banks were in just as sad shape as the Greek banks with the phony bailout of Greece going directly to the German and French banks. Goldman Sachs and Morgan Stanley couldn’t pass the stress test so I’m betting there are a number of European banks that can’t either..

    • Wolf Richter says:

      There will be financial crises, even without a trade war. There always are financial crises. They happen fairly regularly. It’s just when the financial crisis is in the gigantic economy of the US, the whole world catches pneumonia. I don’t think the next financial crisis will be in the US. It will be somewhere else.

      • Gershon says:

        There will be financial crises, even without a trade war. There always are financial crises.

        Au contraire, Wolf, you nay-saying so and so. Old Yellen, that most peerless prognosticator for the Great and Wonderful Fed, has assured us there will be no more financial crises “in our time.” So our debt-fueled “prosperity” is at a permanently high plateau, friends and neighbors. And to clinch the deal, Jim “Jo-Jo” the Clown” Cramer just assured me that those bubble stocks are in fact undervalued. To the moon, Alice! Buy moar stawks! It’s different this time!!! Baaaaah! Baaaah!

        • Mean Chicken says:

          To be fair, Yellen was no doubt speaking of her jurisdiction when she made her prediction.

      • KPL says:

        “There always are financial crises.”
        True but then since 1987, when Greenspan started his intervention and meddling, it has now grown so much that the central bankers in 2007 used acronym money, TARP, QE1, 2, 3, Operation Twist in between the QEs and generally pandering to the markets by raising rates ever so slooowly, all in the guise of saving the financial system and then throwing the savers, retirees and prudent people under the bus for good measure (to save the banks) while making out that the average citizen will be worse off and have created a moral hazard of unimaginable proportion.

        “It will be somewhere else.”
        If I were a betting man, I would bet that somewhere else would be Europe. The problem with financial crisis is also the world is much more interconnected now and thus spreads faster. Also due to the constant intervention each problem is bigger than the earlier one.

        The only question is how big a financial crisis it will be when it bursts and what will be actions of the central bankers. Of course there is a non-zero probability that there may be a civil war if they once again put the average citizen under the bus and ask the tax-payer to foot the bill.

      • Tim says:

        Of course there will be financial crises, they are as much a part of big business, as expansions are.

  6. So when do we get a hard overnight devaluation — like 10% — of the CNY in response?

    Maybe Sunday night?

    • Gershon says:

      Not sure a “hard overnight devaluation” is needed, as the Yuan is sinking like.a mob informant in the East River.

    • Drango says:

      A hard devaluation is just what the Chinese don’t want. People forget that the offshoring of America was a very expensive event, paid for by European, Japanese and Chinese banks. A weakening yuan is a very bad indicator of China’s ability to pay off those bills, and continue with business as usual. Trump doesn’t need tariffs to stop the trade deficits. All he has to do is spark the crisis that stops these foreign banks from gaming America’s economy.

    • Mean Chicken says:

      A hard devaluation brings disinflation to the remainder of the world. Those who speak of reflation will conveniently gloss over this minor detail as those with excess debt become squeezed into marginville.

      Add my obligatory note: “Rinse and Repeat”.

  7. Sporkfed says:

    Everyone assumes tariffs mean higher prices for the US consumer
    but what if it just means lower profits for those importing the
    goods ? Is the profit margin for foreign made goods sold in the US
    higher the the profit margin for the same goods sold elsewhere ?

  8. Rates says:

    Mish has a different take. Apparently BMW is now moving more production from the US to China. And of course he also mentions Harley. He’s wondering how much more “winning” Team Trump will deliver?

    NakedCapitalism has an article where the US is dependent on China for production of critical drugs and even US Military boots!! If export of the former gets cut, there could be a health crisis here.

    And of course the Yuan has dropped 7%. Another drop of 10% and Trump alone might bring down Twitter with his TwitterStorm.

    The market is expecting a victory for someone.

    • MB732 says:

      Rates you read Wolf every day. You know he has addressed US mfgs using current events to justify existing/exiting strategies. Someone said a different thing? So what…what’s your point?

      USA will have will have a health crises without Chinese drugs? Better keep offshoring our manufacturing then…good point again.

      It’s sad that 90% of USA don’t understand that manufacturing creates wealth and just about everything else is ancillary. In the 1800’s Pittsburgh PA used the local resources of water, coal, iron, oil etc to become a manufacturing powerhouse. This became the foundation of an economy around which communities, schools, utilities, government, public projects, healthcare, etc all grew and thrived.

      Today most people work in the service and public sector and think that manufacturing is ancillary. Without manufacturing, where does the money come from? Current answer: The Future!

      • RangerOne says:

        I would say trade deficits create wealth. Looking at the break down of the EU.the countries exporting the most like Germany are doing great. Countries who barely export like Greece are on Austerity measures.

        Manufacturing is complicated. The US still makes a lot of IP and stuff like software. Means of production for most products of any complexity is global.

        Should we use free trade as a means to encourage companies to offshore work? Probably not.

        I don’t trust Trump to hire the right people to take advantage of a trade war. But the reality is I don’t think any regular politician would have done it at all. Maybe Bernie… I would rather have someone intllegent like wolf leading that charge. But the best and the brightest in these areas rarely put up with politics for too long.

        • BridgetownBeast says:

          Germany seems to be in a relatively good position relative to other mercantile nations. They have used the balance of trade to develop their economy by funding education, public infrastructure and health programs. Having trade disrupted will still hurt for them, but not so much as the other countries which rely on trade deficits with the USA to keep their economies running. China is a massive exporter and has done a lot of shady currency manipulation to keep trade flowing, but relatively little consumption of the product of their economy is domestic. Won’t the devaluation of the currency and the disruption of work cause massive unrest in pretty much every industrial city?
          Wolf, will you chime in for me?

      • Mean Chicken says:

        Hard to believe we threw it all away on a pipe dream of financial engineering and still to this day hoards cannot comprehend to the point I believe, they’re being disingenuous.

    • Laughing Eagle says:

      Rates-On a health crisis, ask any American hospital about the shortage of opioid injectible drugs all this year (morphine, hydromorphone (Dilaudid), and fentanyl). And these types shortages have been going on for 15 years. Every year it can be a different product but always a generic drug. But it seems some supplier has product but at a higher price. Do they get inside info about a coming shortage? Trade name drugs no shortages usually.
      We cannot blame China because some drugs come from there. These plants are owned by the Big Pharma multinationals. And to sell drugs in our country, those plants must be inspected by the FDA.
      They also produce drugs in India and Puerto Rico and as little as possible in the U.S.A. They are like all the rest of the multinationals-move to cheaper labor countries.

    • nick kelly says:

      ‘Spartanburg, S.C. BMW Manufacturing announced today that it exported 272,346 BMW X models from the Spartanburg plant during 2017. Nearly 87 percent of these Sports Activity Vehicles and Coupes were exported through the Port of Charleston with an export value of approximately $8.76 billion, according to data from the U.S. Department of Commerce. This confirms that the South Carolina factory is the leading U.S. automotive exporter by value.’

      How about that folks! The leading US exporter.

      And BEFORE The Donald was even a factor.
      Will this success continue after his expert tuning?
      Do you feel lucky?

      • Wolf Richter says:

        Yeah, BMW’s largest plant anywhere is famously the Spartanburg plant in the US. It is BMW’s only plant that builds the X-Series crossovers for the entire world — about 400,000 a year.

        However, that 272,346 exported vehicles is a minuscule 1.6% of the 17 million passenger vehicles sold in the US, many of them imported, including BMWs, and so it’s not a big deal overall.

    • RepubAnon says:

      The market is dominated by folks whose long-term thinking is measured in milliseconds. Remember, the markets were bullish just before the big 2008 recession. Once the stampede starts, it’ll swing too far low, then correct back.

  9. VarAway says:

    Thank you Wolf, for another excellent post!
    There will be only ONE winner in the trade ” war “.
    The US. Manufacturer!
    In spite of all the msm bias.
    They still try us to convince us the opposite.
    I would even call it criminal behaviour…

  10. Gandalf says:

    Wolf, you seem to be ideologically inclined to be in favor of a worldwide trade war.
    Dunno if you remember the Smoot Hawley Act of 1930, or the Stagflation of the 1970s.

    The worldwide trade wars caused by Smoot Hawley resulted in the collapse of world trade by two thirds. Back then, the US was a net exporter with a trade surplus, and this meant that US products and jobs were severely impacted by this loss of world trade. The overall result has been much debated, but it almost certainly exacerbated the recession that was already starting in the US.

    With the situation reversed now, with the US heavily dependent on cheap goods from overseas, these new tariffs will likely cause inflation to rise rapidly, by the same amount as the tariffs.
    The result will be similar to the Stagflation of the 1970s, which most economists now attribute to the Arab Oil Embargoes and other disruptions to the supply of imported oil to the US (e.g., the Iranian revolution) which caused the price of oil to skyrocket. The US economy was heavily dependent on cheap imported oil at the time, and the sudden oil price increases both froze economic growth (recession) and caused prices to skyrocket (inflation). Stagflation.

    If nothing else, this new developing trade war will provide more data points to address two not quite answered questions:

    1. Did the trade wars set off by Smoot Hawley cause the recession of 1930 to turn into the Great Depression?
    2. How much of the low wage and price inflation in the U.S. of the last two decades was due to globalization and offshoring of jobs and manufacturing/production into cheaper countries?

    My answers would be “Yes”, and “A lot”.

    The US economy may be strong and booming, but it is a boom stolen from the future as it is fueled by ever growing Federal deficits from the corporate tax cut. This trade war will be just the thing to flip the economy into Stagflation. An inflating dollar will make financing US debt less desirable worldwide, which is what will force interest rates on US Treasuries to go up and up, at a time when US debt is skyrocketing.

    Finally, there are the geopolitical consequences of what happens if we do end up severely hurting the economies of the exporting nations targeted by the trade war.

    We no longer manufacture huge swaths of consumer goods, or produce the raw materials to make them. The deleterious effects of Stagflation are likely to go on for years before a new equilibrium is reached

    • Wolf Richter says:

      It seems you’ve swallowed the offshoring-is-awesome propaganda hook, line, and sinker :-]

      • BobT says:

        It has certainly been awesome for my home country, Thailand, where the standard of living has exploded since the Asian crisis. However I see a major bump in the road ahead thanks to lax credit expansion with much targeting of the sub-prime sector and heavy borrowing in US$ by the corporate sector….again.

      • Gandalf says:

        Yeah, I sort of suspected you would say something like that.

        There is a difference between making targeted and responsible political changes in trade agreements to limit the loss of manufacturing jobs and and this current nonsensical Trumpetarian shotgun blast of a trade war.

        A classic example of a targeted and responsible adjustment of trade in order to protect American jobs would be the Reagan administration’s negotiated voluntary caps on the imports of cars made in Japan. The result was that in order for the Japanese car manufacturers to grow their market share to more than oh, I think it was 20-25% of the US car market, they had to build car factories in the U.S. that hired American workers.

        We still see the fruits of those negotiations today. If you want to buy a sedan, Honda currently makes some of the highest U.S. content cars sold in America. Right, a Japanese company, employing ‘Mericans, its parts and final assembly almost completely made here in ‘Merica. Hondas are my favorite cars. Honda, not Ford, not Chrysler, not GM, has figured out how to build great cars here in ‘Merica with ‘Merican workers.

        Meanwhile, Chrysler no longer manufactures cars at all in the U.S., having moved into Canada and elsewhere, and Ford will soon stop manufacture of all sedans in the U.S. also. GM is rapidly becoming a Chinese company.

        It has never been the case that the bottom line short term profit motives of American corporations have been for the benefit of American workers. This is where a responsible government can step in and force industries to stay here in the U.S. and employ Americans. As we have seen, it doesn’t have to be an American company even.

        We used to build IBM PC’s and Macintoshes here in ‘Merica. At some point, it got to be more profitable to ship those factories overseas, first to Taiwan, then to China. Nobody stepped in in alarm at that point to say, hey, we need to be building those things here. It’s important for our future. So off they went. Gone.

        We no longer even have the infrastructure to produce the parts for computers anymore, other than some of the chips.

        The list of things that we no longer build, and the things which we have NEVER built, here in America is now so long that a shotgun blast trade war can only end up having not the desired result of a rational preservation of American jobs, but will simply produce
        Stagflation as prices go up because of the tariffs.

        A global trade war will muck up the complex global supply chains – what few parts that we do make for certain items may end up being moved to other countries as a result of this global trade war. For example, if China retaliates with a tariff on US made chips, those US companies may be motivated to move their plants to China or other countries not involved in the trade war.

        Here’s the big picture analogy – the horses all escaped from the barn a long time ago. Instead of a targeted roundup of groups of horses at a time, this trade war is like trying to get them to come back by setting fire to the entire praire.

        It’s not going to come close to actually accomplishing anything concrete in terms of bringing jobs back because the job losses from the stagflation and disruption of the global supply chains are likely to be worse. Instead, just like Trump’s posturing meeting with Kim Jun Un, it’s just designed to be Grand Theater and a Reality Show for Trump’s supporters.

      • Nicko says:

        Offshoring is great for globalists….not so good for under-educated and poorly resourced nationalists/nativists.

        Globalists will win every time, there is no turning back the world.

        • Bobby Dale says:

          Ask the Romanov family about “globalists will win every time”. You can’t turn back, but the way forward is fraught with peril.

        • EMHO says:

          Hi Bobby Dale, in regard to Russia the globalists did win against the communists. Not only that, they have a full blown oligarchy now.
          Now come to think about, isn’t that what you have in the good ole USA?
          Voter suppression, gerrymandering, electoral college etc.
          long live he Coporate States of America!!!

        • Gershon says:

          Ask the Romanov family about “globalists will win every time”.

          This reference seems misplaced. Czar Nicolas and his family were overthrown and executed by Lenin’s Bolsheviks, whose revolution was financed by New York bankers. The Bolsheviks were the ultimate globalists.

      • Gershon says:

        The globalist owners of our corporate media propaganda outlets must take great satisfaction from the success of their incessant brainwashing and indoctrination of the rubes, especially when the latter bleat the corporatist talking points they absorbed from their TV.

        • nick kelly says:

          Where are you getting this stuff about the Bolsheviks being financed by the US ?

          The US sent 5000 troops to join the White faction fighting the Bolsheviks in the Russian civil war, of whom over 200 were killed.
          They were not withdrawn until 1919.

          So let’s have a source.

    • philbq says:

      Milton Friedman, the Nobel-winning god of conservative economics, said that Smoot-Hawley DID NOT cause the Great Depression. That false assertion is part of the standard “free-trade” propaganda.

      • Alex says:

        Europe defaulted on the massive Wall Street it used to rebuild with American products after WW1. America “rebuilt” with cheap low quality Chinese products so if America defaults what will happen to China? Following this analogy America can expect a dictator to appear.

      • Mr. Knoss says:

        What caused the great recession was the run up of credit by the Federal Reserve in the 1920’s (roaring 20’s). Murray Rothbard documented that run up quite well in “America’s Great Depression”.

        And as Henry Haslit points out, there is a limit to the amount of future purchases that can be forced into the present by borrowing. Once that limit is reached, the boom phase ends.

        • nick kelly says:

          If you think credit creation by the Fed caused the Depression then you must think we are really done this time because then it was nil by comparison.
          One of the reasons the stock crash turned into a depression was the Fed’s refusal to create liquidity.

      • nick kelly says:

        Economics is notorious for no two agreeing but over 1000 did oppose the SH tariffs.
        If you think being a Noble winner in econ makes you all- knowing, check out the Nobel laureates behind the Long Term Capital Management Crisis.

        Note: Germany could only pay the reparations insisted upon by the Allies IF she could sell to them. It was the collapse of a German bank that helped turn stock crash into a financial crash.

        • nick kelly says:

          The idea of the stock market being a truthful oracle is a new one. Apart from tariffs we are in a FED tightening cycle. 10 of the 13 times since WWII this led to a recession.

          So I guess when it hits the stock market it won’t be assigned the same clairvoyance in this space.

    • Bobber says:

      Sure, but have you thought of consequences to the U.S. of doing nothing and letting trade imbalances continue? We need to pick the best alternative from a list of bad ones. Trump is doing that. It’s easy for an alcoholic to rationalize another drink, but the strong actually fix the problem cold turkey.

    • Anon2017 says:

      See my comments on Smoot-Hawley above.

  11. fajensen says:

    Well. The squealing will begin in earnest when those high performance magnets used for missile guidance becomes rare.

    Nothing matters more than bombing things, it is like Religion to some folks.

    Technology has a lot of soft spots; we had component failures for years because some epoxy factory in japan burned and a different material had to be used to seal chips.

    People forget that Thanks to “competition” and “globalisation” there are often only one or two “root” manufacturers of a lot of magical items that make things work, base materials, I think one calls them.

    If we lose access to those, we can spend years re-developing similar products (and after doing it, investors get will knifed in the back when trade is liberalised again while their investment is not paid off).

    The markets doing whatever doesn’t mean anything.

  12. timbers says:

    Wow! Economic Nerd populism suits you well, Wolf! I looooove it!

    Besides tariffs screwing American workers, let’s not forget about American tax subsidies to Rich Gigantic Corporations if they fire America workers and relocate their business to Poland, Mars, Antartica, India…anywhere but Chicago, Michigan, Iowa, Indiana, or the Untied States. I’ve been on job interviews in the financial services industry in Boston and the guy I’m interviewing with tells my how the Feds pay their company to fire Americans in American and move there business to Poland/India…etc. Plus I’ve read about it…so it must be true.

    • Edweirdo says:

      I am about half-way down the comments on this article. It’s an interesting discussion, which I am not yet ready to judge. Strangely, though, no one has mentioned that, except for China, the tariffs and subsidies and other trade-distorting factors on the U.S. side are about the same as those on the side of nations that Trump says have been treating the U.S. unfairly. There is no unfairness here as I see.

      What then is the cause of the U.S. trade deficits (or surplus in the case of Canada)? I think it’s the fact that it’s the price the U.S. is paying for the U.S. dollar being the primary international reserve currency, which leads to overvaluation of the USD. The U.S. has always had the advantage of being able just to “print” money to pay its bills, especially its bills for oil in past decades. So, as I see it, there is none of the unfairness in trade Trump, the sociopath of our time, has claimed. I can give you specific examples of this with respect to, say, Canada, where most of his “facts” are completely inaccurate and demonstrate a complete misunderstanding of reality.

  13. John Blackwell says:

    Clearly, as a Labour Party Voting Brit, who doesn’t like Trump AT ALL …. Nevertheless, he is the best President USA has had since Eisenhower … Americans are SUPPOSED to get a President for AMERICA and THAT is what they have finally got with Trump. Past Executives have been fleecing USA .. riddled with Corporate quislings. China takes the piss … so does EU … both use SHOCKING Trade Protections. To people above who say they like having cheap phones and shiny things cheap …. grow up you moronic imbeciles … since when did any of tat make America Great?
    “21st Century is China’s Century” my arse! USA + Trump FTW!
    BTW Melania is the most stunning beauty the White house ever saw, not only compared with who was there before …. yet notice how every single press photo attempts to take her from unflattering angles or wind blowing her hair up etc., to try desperately to make her look less awesome.
    The Globalist Media is in Full-scale Coup d’etat against the American People ….

  14. Jonathan Vause says:

    the problem with the idea that China can’t retaliate by imposing tariffs on US imports because it doesn’t import as much from the US as it exports to the US is that tariffs aren’t the only way to intervene in trade – if China responds to higher bilateral tariffs by devaluing its currency/allowing its currency to depreciate (I’ll get back to the difference in a moment) then China will likely run a smaller surplus with the US but a bigger surplus with the rest of the world (as a cheaper currency is effectively a tax on all imports and a subsidy on all exports). but then it is very likely (and ceteris paribus inevitable) that the rest of the world will run a bigger trade surplus with the US, so that while bilateral surpluses and deficits change, the overall balance of trade for each country remains unchanged

    tariffs are the wrong way for the US to go about reducing its trade deficit because as long as other countries (and/or high wealth individual foreigners who fear having their wealth expropriated by their governments) are able to park their excess savings in US capital markets, the US will always run a current account deficit, and in practice that means it will always run a trade deficit. if you want to reduce the trade deficit, make it harder/riskier/etc for foreigners to buy US government bonds, stocks and real estate – nothing else will work

    • Jonathan Vause says:

      oh yeah, depreciation/devaluation – when a country like China runs a large trade surplus for several decades it is pretty obvious that the government is successfully intervening in trade to reduce domestic unemployment and increase corporate profits (that’s a win-win for the government if officials are able to benefit directly from higher corporate profits, as they do in China). eg China can ‘retaliate’ against the US by increasing state-sponsored foreign investment, which will weaken the rmb – this would probably be described as a depreciation even though it’s a deliberate policy to sustain a trade surplus

      • Some old guy says:

        Thanks Jonathan, for pointing that out. Tariffs and other trade policies don’t operate in a one-dimensional world of numeric efficiency, but in a multi-faceted (and changing) kaleidoscope of political, strategic, military, cultural, and historic forces (not the least of which is sheer inertia). Analysis of any one dimension is near-sighted at best, misleading at worst.

    • prepalaw says:

      The US will index its tariffs to China at a specific rate of exchange. Yuan devalued by 5% – tariffs rise by 5%.

      • Jonathan Vause says:

        I didn’t know that – thx for the info – but it still doesn’t change the main point: US tariffs on Chinese imports might reduce the bilateral trade imbalance down to zero, but that will just push China’s trade surplus elsewhere, and the other countries that then start running trade deficits with China will start to run bigger trade surpluses with the US

        you can’t get away from the accounting identity (though Wolf sometimes tries to :-P) – as long as the US has a massive capital/financial account surplus it will have a massive current account/trade deficit, and it’s the capital account imbalance that drives the current account imbalance, not the other way round

    • Angry Renter says:

      “If you want to reduce the trade deficit, make it harder/riskier/etc for foreigners to buy US government bonds, stocks and real estate – nothing else will work”
      This is my worry re: tariffs… that the devaluing of Chinese currency will only accelerate foreign purchases of US real estate and worsen the already terrible housing affordability problem. Maybe the Chinese government wouldn’t even care about the capital flight at that point… it’s a vector of retribution towards the USA.

      There doesn’t yet seem to be a political movement to ban or otherwise dis-incentivize foreign real estate purchases. In fact, Obama relaxed those rules after the financial crisis, presumably to shore up asset prices.

    • Edweirdo says:

      Aha, do I detect someone in this discussion who actually knows something about economics! Yes, in economics, by definition, a trade deficit is automatically accompanied by a corresponding amount of capital inflows. That’s why no serious economic theorists places much stock in people who worry about trade deficits. There are many other factors to consider. In most cases, trade, whether it produces a deficit or not, is just good for the economy, period. No serious economist would quarrel with that statement.

  15. Ding Hao says:

    Tariffs are Trump’s way of getting the attention of our trading partners. As soon as our “partners” realize the gravy train is coming to a grinding halt they’ll agree to negotiated trade deals that level the playing field. Then the tariffs are lifted and everyone can quit hyper-ventilating. Trump’s got leverage and he’s using it.

    Chill folks, this will over by Christmas.

  16. Patrick says:

    It’s naive to think that American politics are capable of short-term pain for long-term gain. Tariffs will not reverse offshoring for the simple reason that Trump and Republicans will be voted out long before they see any positive effects. And when Democrats take their place, they’ll see an easy win by cancelling them to generate a market rally and gap-up in corporate profits.

    Tariffs are nothing more than a Tax. We (or rather corporations) got a tax cut earlier in the year and the US Gov is running up record deficits. The Fed, Japan, Cayman Islands, Russia and China don’t seem to be in a buying mood for that debt. The ‘buyer’ here of that debt is the consumer via tariffs. If the tariffs were cancelled then watch long-dated yields rise…leading to a larger market sell-off than any ‘tax’ on foreign goods. Trump & the Republicans are simply opting for the lesser evil here. Raise taxes to pay for US Gov debt or allow yields to rise significantly to attract buyers; and create a severe correction until the Fed pauses tightening.

    • prepalaw says:

      Hi Patrick. Brace yourself for the future. You gotta live with Trump as President for 6 more years. And so does the rest of the World.


    • Edweirdo says:

      Well, if you want to raise taxes in the U.S., you would want first to consider that the U.S., according to a study in one recent book, has the highest wealth (not income, but wealth) inequality (based on gini coefficient) in all of human history. So, you would want a very severe and highly graduated wealth tax. The same applies in lesser degrees to other countries with high wealth inequalities. Distortion of trade using tariffs just creates economic inefficiencies.

  17. As a person who understand very little about economics, I shouldn’t comment on this. But then not knowing something hasn’t stopped me ever!

    So here is my views, which could be actually stupid from an economic standpoint (maybe from every standpoint)

    I think a lot of people including Wolf is very enthused about the trade war. And as he described, there could be little China, Germany etc could do to counter these.

    But then the assumptions were exactly like all the actual Wars US have started – We are pretty strong, they can’t do anything to hurt us, they will feel the pain and succumb! But how many have actually succumbed!

    There is the problem, the outcome of Wars are decided by the amount of pain each side can absorb! Recently we saw the economic war against Russia. Weren’t the arguments same? The sanctions would hurt their economy. The country will squeeze; people will revolt etc. The markets reacted exactly the same way. Everything went down – Russian Markets, Rouble, anything and everything.

    So by now Russia may have surrendered? Not exactly. Russians absorbed the pain; they struggled but still survived. That’s what I said, it depends on how much pain these countries are ready to take.

    I understand the Germans and Europeans will surrender easily. But the Chinese may not. The mistake you Americans always do is to assume that every people react to a situation exactly like the way you do. That’s why the Russian sanctions are still ongoing, because if it was Americans that country would have surrendered by now.

    The problem is that each countries and their people reacts differently to various situation. Russians absorbed the pain! What will the Chinese do? They also probably will absorb the pain, as much and much more that you are estimating.

    The signs that they retaliated shows that they are in here for the long run. By nature, they plan for long term! So it’s normal. They will try to counter in every places its possible. So what you are guessing may not be their plans!

    Obviously American companies will react and will move a lot of things back home, I guess! Not sure what it will do to prices in US. For example let’s say automotive industry bring back 50% of outsourced activities back to US. But how much that drive the price we need to see as there will be an increase in labor cost! The wage growth related to all these jobs which have returned will be slow to come and in a population where many live on credit; immediate price hike may have a larger impact!

    But Chinese will react; not over the top! They will play the long game; take the pain. If you couldn’t get the revolt in Venezuela by now; you are not going to see that happening in China. People will take the pain, Companies will try to take the pain, Government will absorb the pain.

    The question is are you ready for the long battle?

    • toby says:

      Most underrated comment of this post, Americans will have to adjust from extreme short term view to somewhat mid term, avoid social media during this process will help.

  18. MC01 says:

    I’d like to bring Exhibit A against Harley-Davidson (or HOG, as their NYSE handle says).

    HOG has been trying to offshore part of their production for at least two decades. And like so many in Corporate America, they have long had a thing for India, which has been touted as “the next China” at very least since 2000.
    Around 2007 HOG started negotiations with the Indian government to start selling their models there. However these negotiations to sell US-made goods in India were just a smokescreen for what the professional managers in Milwaukee (who may be selling motorcycles one year and financial services the next) had been planning for years: set up an assembly facility in a low-labor-cost paradise.
    However the big financial crisis and especially the big financial troubles HOG landed into (from which they were rescued by none other than Warren Buffet) delayed the process, and it wasn’t until 2011 that things really started to get interesting.

    HOG’s plan had been to put customers in front of the fait accompli but somehow news leaked out that HOG was setting up an assembly facility in Bawal (State of Haryana).
    US motorcycle magazines were literally flooded by angry letters and HOG’s own headquarters started to receive some many phone calls and emails their contact service collapsed.
    HOG professional managers first reacted angrily: HOG needs to manufacture small motorcycles to compete in emerging markets and cannot do that in the US.
    For once they were laughed out of the building. An op-ed asked if HOG had perhaps bought the rights to manufacture the ubiquitous Honda CG125 and another went as far as asking if the company executives really thought their customers were that stupid.

    So came phase two: HOG admitted they were planning to build “larger” motorcycles in Bawal but “only one model will be exported”. The rest of the production, they swore, would be sold in Mainland Asia exclusively.
    And again nobody was convinced, so came phase three.
    We’ll be building two models in Bawal, a 400cc for the Indian market and a 500cc for export markets. The latter may be exported in Europe and the US…

    Since this is not the season for pantomime I’ll get to the end of the story.
    Popular opinion in the US forced HOG to build the new Street 750 for the domestic market in their Kansas City plan. The rest of the Street family of motorcycles is assembled in Bawal, not from knockdown kits sent from the US as originally said, but using domestic components: as the door to the US market has been slammed shut by angry customers, these bikes are mostly earmarked for the European market.
    Where they are languishing in the dealerships because nobody wants them: turns out the average HOG customer wants a big made in USA motorcycle, not a poor copycat of the venerable Honda Shadow/Steed built by low-cost-labor.
    And all those Indian customers wanting small HOG models? Turns out, like their European colleagues, they are ready to pay a premium for big made in USA motorcycles.

    Apparently the HOG executives planning a manufacturing facility in Thailand haven’t learned their lesson: lies have short legs and don’t travel far.

    • EMHO says:

      The state government of Berlin is trying to get Harley-Davidson to move its corporate HQ and manufacturing to the city.
      One argument is that BMW already builds motorcycles here (Spandau-Werk).
      Another is excellent infrastructure.
      Highly skilled labor is another.
      State subsidy to offset moving costs etc.
      And at last the ultimate kicker: Berlin is he city of Freedom, and hence the perfect fit for HD!
      “Doch am wichtigsten: Berlin ist die Stadt der Freiheit.”
      Read the article in german here:


    • EMHO says:

      I tried to post this earlier, and it somehow disappeared.
      The city state of Berlin is trying to convince HOG to move to the city.
      Some of the reasons given, why this would benefit Harley-Davidson is as follows:
      -Excellent infrastructure
      -Existing motorcycle manufacturing (BMW Spandau Werke)
      -highly trained labour
      -Subsidies to compensate relocation, factory construction etc.
      And the big kicker: Berlin is the city of Freedom. What better place to be.
      “Doch am wichtigsten: Berlin ist die Stadt der Freiheit”
      Here is the article in german:

      • prepalaw says:

        Based on this logic, HD should relocate to Sanford University, whose motto on its pennant reads: “Die Luft der Freiheit weht” (the air of freedom is blowing).

        The relationship of Spiegel Magazin to the freedom of the press is probably about the same as Stanford’s research ethics for the military industrial complex.

        • EMHO says:

          Please explain your second statement. Spiegel Magazin is highly respected and even went after the conservative government back in the 1960s.

          Unlike many other news site, regardless wether in English or german, Spiegel has maintained high journalistic standards. The quote was from Berlin’s trade representative that mailed the letter to HD, it was not the opinion of Spiegel.
          In regard to your first statement, I think what Berlin is doing is somewhat silly. Given the state governments precarious finances, efforts should be spent on future technologies, not on loud dirty motorbikes.
          The point I was trying to convey is that opportunists will descend on many industries and attempt to reallocate manufacturing to their own benefit.
          Another example: BMW has stated that it will shift some of its SUV production from the US to China to avoid tariffs (yes, from another Spiegel article). Perhaps they will reallocate some car manufacture to the US from elsewhere, to satisfy American demand, but this was not stated.
          Let us hope that is the case, and no US jobs will be lost.

  19. Kent says:

    Wolf, I appreciate that you recognize this “trade war” is not between the United States and foreign countries, but between America’s capital owning class and its middle class.

    I will let others research it on their own, but you can find direct discussion on the topic of using globalization to weaken labor unions and government as far back as the ’50’s and ’60’s by guys like Hayek and Friedman.

    • Gershon says:

      It’s no coincidence that America’s opioid epidemic has taken the highest toll in the rust belt states where living wage jobs have long since been off-shored and factories shuttered.

      Heckova job, globalists. But hey, thanks to Ben and Janet, you’ve had limitless Fed financial crack cocaine to pump up these asset bubbles and Ponzi markets – “shareholder value” being the mantra to accompany the destruction of the middle and working classes. Surely all that accumulated wealth will someday trickle down to the pauperized masses – or at least that’s what the various Fed heads keep telling us.

    • Scott says:

      Over the weekend, I read an article (I think it was on Naked Capitalism) that quoted an analyst upset that Trump’s trade policies were prioritizing American workers over American corporations. That really speaks volumes to what is truly motivating corporations; they are clearly using tariffs as an excuse to move production oversees or raise prices, blaming it for business decisions that were likely years in the making. None of this is to say that Trump’s policies are correct, but rather the situations on the ground and motivating factors are far more complex than you’d see in most newspapers.

      • prepalaw says:

        Let’s get real about corporations. When a US citizen decides to leave the USA; when a US citizen decides to renounce his US citizenship; that person pays an export tax.

        When a US corporation develops intellectual property in the USA and decides to export that work product overseas, there is no tax. That is wrong.

        If you move a manufacturing plant overseas, the overseas folks will steal and copy your work product. It is my belief that the exportation of US know-how, trade secrets and intellectual property should be regulated and taxed.

        Corporations have no national loyalty. They will get some fast if they have to pay a very heavy know-how export tax.

        • Bobber says:

          There is a corporate tax on the export of intellectual property but the laws have many holes and companies can exploit them. Legislators are not concerned about it because they bow to the corporate master.

    • HowNow says:

      It’s unfortunate that words become weaponized for political ends. “Globalization” and “globalists” are now evil. Same for “liberal”. If it weren’t for “globalization” which is another word for “commerce”, we would be living in tribes and probably migrating from place to place for food since “sedentary” lives could only occur when labor became specialized – a result of larger populations and trade. Commerce between tribes, then cultures, and eventually civilizations, are the direct result of trade, exchanges of ideas, products & technology, social integration, warfare, etc. “Liberal” is the outcome of the Enlightenment, which improved the human condition infinitely from indentured servitude or worse, to what we have today: liberty (to varying degrees) and rule of law.

      To think that a frontal attack on tariffs is a good strategy is, imo, wrong. No, Wolf, I haven’t been drinking the media cool-aide. Inflation will inevitably follow. Some economic sectors/industries will be hurt, others prosper. Which ones will be punished? Ask your local lobbyists (“swamp” residents) to find out (oh, and I may buy some options before the winners and losers are tweeted). IMO, both trade and employment policies should be negotiated in a manner that benefits the U S to a greater degree than another nation, something that requires tact and finesse. But to launch a blunt confrontation on something that requires negotiation is a sign of ham-fisted ignorance and is totally politically motivated. Might this just be a needed distraction from scrutiny elsewhere?

      • RD Blakeslee says:

        “f it weren’t for “globalization” which is another word for “commerce”, we would be living in tribes and probably migrating from place to place for food…”


        Henry Ford (and hundreds of other arch-typical entrepreneurs) weren’t “globalists”, but their inventions and the application of them brought us increasing prosperity.

        • HowNow says:

          “Nonsense!”? Will the domestic-only businesses (Ford, Boeing, “Trump”, Johnson & Johnson, 3M, IBM, etc. etc.), please stand up? And, gee, why didn’t Henry Ford sell Model Ts to the Chinese? Because he wanted to avoid becoming a “globalist”, eh? Because the Chinese were starving and had no roads, maybe? Are you saying that for moral and patriotism, the arch-entrepreneurs were not willing or not interested in global trade?

        • EMHO says:

          Really? I would recommend that you read up on Mr. Ford. Here is a link to show you that he was very much a “globalist”.
          I have posted months before that if the US wants to restore universal prosperity, then it needs to develop a new industrial policy, revamp its educational policies, change its laws to favor real investments in the economy-that is, not finance.
          If this had been done much would be better for you and your fellow Americans.
          Greetings from Old Europe.

        • nick kelly says:

          ‘Construction started at Dagenham in 1929, and in October 1931, Britain’s and Europe’s largest car plant opened producing the Model AA truck and Model A car.’

          You would think that the early (and in some ways unique) global expansion of Ford would be common knowledge.
          It was an early example of a global business when most had geographic boundaries.

      • Nicko says:

        The Math is simple. As of yesterday, global population exceeded 7.5 billion humans.

        Over the next 25 years, add 1 billion to Africa and 1 billion to Asia. China and India alone are growing 2-3x faster than the US. Many African economies are growing even faster than that. The US is barely keeping even with inflation. That is the math, that is where economic prosperity is moving.

        • Mean Chicken says:

          It’s probably unavoidable bur I really hate to see Africa become another frontier of human sprawl. This is very concerning from wildlife habitat and environmental perspectives but you don’t hear much about this from MSM, seems like.

    • nick kelly says:

      The big X factor here is WWII. The US wants the 50’s to return…the good ole days.
      Why? The only competitors were either flattened or broke, or in the case of the UK, broke and partly flattened.
      As a result, while Germany and Japan dug out of the rubble, the US as the ONLY major developed economy not effected, achieved 80 + percent of world manufactures.

      Not coming back, no matter which record you put on.

      • Phil Gieseke says:

        Good show, Nick.

        And while we’re on the topic, this is when and why the Fed became the world’s banker.

  20. It’s a “blind leading the blind” subject. As is clearly evidenced by this article and the replies to it, nobody has a clue how the whole system works, or what to do to to keep it running smoothly. Those “in power” produce all the lies they can manufacture, to support their arguments and back up their actions. Personally, I’m trying to work out which horse will win the the Duchess of Cambridge Stake at Newmarket, at 2.25 this afternoon. I’ve a far better chance of picking the winner of that, than all you pundits have of predicting what will be the outcome of the international trade and financial shennanigans going on at the moment, and discussed in this article and in the Press generally.

    Love to everyone.


    • Jonathan Vause says:

      don’t be silly – it isn’t that complicated and the fact that the subject attracts a lot of hot air simply reflects the fact that a lot of money is at stake on all sides, so the potential losers have an obvious interest in blowing smoke in everyone’s eyes. assuming you really want to understand how it works, start here for instance:

    • nick kelly says:

      I’m going to agree. This is a chaos math situation.
      Anything could happen.
      A perennial debate here is: how will debt be liquidated (since it must be) through inflation or repudiation in a deflationary collapse?

      Our gracious and learned host has asked us to leave politics aside as far as possible but I don’t see how we can separate politics from the question of FED independence.
      Re: chaos…it is impossible to predict a political outcome.

      If populists actually seize control of the Fed and REALLY print money, we have a while to go.
      But we may regret ordering one last round.

  21. JH says:

    So does anyone know where there is a complete list of all products that will be subject to the new tariffs?

  22. Grumpy says:

    Hi Wolf,

    So far I’ve seen no mention of Triffin’s Paradox. Is it relevant to this issue?

    • Jonathan Vause says:

      yes it is – the sooner the IMF/BIS gets round to creating the bancor, or special drawing rights, or sth, the better

  23. james wordsworth says:

    Nah. What the US really needs is a VAT and higher gas taxes. The VAT will reduce end consumption (and so the trade deficit) and higher gas taxes will encourage more fuel efficient cars which will reduce imports of oil. There … problem solved. No need for a stupid trade war … just a requirement that maybe americans can for once live within their means and the means of the planet we all live on…There is a reason that one of the best businesses in the US is storage and why so many americans can not park their car in their garage. Plain and simple they buy too much crap. Solve that, solve the other issues at the same time.

    • And put all the “Crap” manufacturers out of business. Sounds a great idea.

      • Mean Chicken says:

        The crap manufacturers are probably responsible for near 50% of the waste stream, not to mention their CO2 footprint.

        I had to haul off a Chinese made chest freezer to the landfill the other day, it was just 3 years old.

    • Nicko says:

      The US desperately needs VAT and more expensive gas…to speed the transition toward a clean energy economy…and also embrace the automation revolution.

    • Anon1970 says:

      Congressman Al Ullman proposed a VAT back in 1980. It did not sit well with his constituents. He lost his 1980 re-election bid, in part due to his VAT proposal, even though he had served 13 terms in Congress. I don’t think any Congressman has proposed one since.

    • nick kelly says:

      ‘higher gas taxes will encourage more fuel efficient cars which will reduce imports of oil. ‘

      No doubt, but it sure will increase imports of cars.
      What do you expect Americans to drive if gas prices rise ?
      The three domestic auto outfits are wedded to trucks (incl SUV) where they hide behind a 25% tariff.
      Back out trucks and the domestics are in trouble.

    • Edweirdo says:

      A Value Added Tax (VAT) in the U.S. is a good idea, as the European experience likely shows. But, the real big problem in the U.S. is wealth (not income, but wealth) inequality, which, according to one book using the gini coefficient as a measure, is the highest in all of human history. You really need a very big, very graduated wealth tax in the U.S. to pay off the debt. The same applies in lesser degrees elsewhere, depending upon the degree of wealth inequality. When wealth becomes too unequal, a society falls apart, as some historians at least have theorized based on historical data.

  24. philbq says:

    THANK YOU, WOLF! I could not agree more! The destruction of the U.S. manufacturing base by corporate interests (and their politician cronies) has had a broad negative effect on the U.S. economy. Millions of good-paying family-wage jobs have vanished, and now millions of people (especially young) cannot find a good-paying fulltime job. But one would not know this because of the wall of corporate propaganda pushing the myth that trade deals and the removal of tariff barriers has been good for the majority of the American public. I did not vote for Trump (I don’t vote for Republicans) but I support the imposition of tariffs to level the trade playing field. My hope is that it will lead to more corporations bringing production back to this country. Every industrialized nation protects their manufacturing jobs – except the U.S. That must change. Wolf, you hit a home run!

    • RD Blakeslee says:

      “(I don’t vote for Republicans)”

      Too bad, since you like what the president is doing…

      • philbq says:

        Blakeslee: I am an independent thinker, and not an ideologue. It used to be that the Democratic Party was the party that supported working class jobs, but that changed when Bill Clinton sold out the American working class with his corporate-driven trade deals. Any politician that brings jobs back to America deserves my applause (at least on that issue.)

      • Bobber says:

        Don’t attribute Trumps trade policy to Republicans. They are the ones that promoted globalization and outsourcing in the first place, along with Democrats. On issues that really matter to the top 1%, you’ll find that Republicans and Democrats agree.

    • Edweirdo says:

      The U.S. has a very high average wealth level compared to other countries. It’s just that the wealth isn’t distributed well. In fact, as shown by a recent book, the U.S. has the highest wealth (not income, but wealth) inequality in human history, based on the gini coefficient applied to wealth. So, this is not about the U.S. putting up trade barriers, which any economist will tell you will just hurt the average wealth level. It’s a problem in wealth distribution. You need wealth taxes to solve that.

      • walter map says:

        “You need wealth taxes to solve that.”

        The situation is running in the opposite direction. Taking present trends to their logical conclusion, only the poor will pay taxes, and the rich will pay none, as it was in the Ancien Régime, when the rich were the tax collectors who beat the peasants for every sou they couldn’t hide and took a big cut of the proceeds for their trouble. That said, happy Bastille Day, everybody.

        Without exception, every civilization has taxed, because every civilization has costs which must be covered in order for it to exist. History clearly shows that the inability to collect taxes is an absolute indicator of the imminent fall of a civilization.

        As the Panama Papers and the Paradise Papers have shown, these days most western countries, possibly except for the happy progressive countries, have extreme and increasing difficulty collecting taxes. In particular the US recycles the taxes it does manage to collect from the rich right back to them as corporate pork and corporate welfare, so in a sense the rich are barely taxed, and who are instead subsidised by the general population. The burgeoning national debts of nearly all developed countries is a profoundly disturbing indicator for numerous reasons.

        All this can only mean that contemporary civilization’s unhappy destiny is collapse, and sooner rather than later, to be replaced with a permanent and heinous dystopia. And until it too disintegrates, that last civilization will also tax.

  25. walter map says:

    Trade war announcements can be a great way to manipulate equity markets for fun and profit, and bullying other countries is a great way to impress your friends.

    But does it do anything to help the country? No, not really.

  26. Frederick says:

    Moody’s Huh These so-called rating agencies have shown themselves to be nothing but propaganda Over and over again Is anyone still listening?

  27. RD Blakeslee says:

    Our current president, who must remain nameless here, has said: “Trade wars are easy to win.”

    Of course the mainline press hyperventilated.

    Trade wars are “original sin” in globalist theology.

  28. Steve Graves says:

    I agree that we needed to step up to the plate and address the basic unfairness in many of our trade relationships. Most reasonable people would agree that it’s wrong for China to be treated as a developing nation when their economy is on the verge of being the largest on the planet. That’s just absurd.

    The only thing more absurd than that is this dangerous notion of Trump’s that we should go about this unilaterally. Rather than approaching this imbalance strategically (i.e., not stupidly) Trump seems to be lashing out at every nation simultaneously. And all that will do, obviously, is unify the world against us. Trump’s ineptitude will bring the EU and China much closer together, for example, and even make Russia (who may have planned all this from the beginning, as it happens) look sane in comparison. This is terrible for the US and is probably inflicting serious long-term damage for our nation.

    Trump’s real blind spot, of course, is himself. As a narcissist, he lives in his own little egocentric world and thinks everything he does is fantastic and everyone who doesn’t love him is delusional or corrupt. What he fails to understand is just how much the entire world genuinely despises him. And he seriously underestimates how much this global contempt is uniting the world against the US in this “trade war.”

    So yes, Wolf, something had to be done. But sometimes the cure can be worse than the disease. We’re dusting our furniture with a jack hammer, and this will not end well.

    • Anon1970 says:

      The big US trade problem is with China. The US runs an overall trade surplus on goods and services with Canada, even if Canada does protect some sectors of its economy. Think Canadian snowbirds in Florida and Arizona during the winter months. It seems very strange that the US would want to beat up on its NATO allies.

  29. Augusto says:

    I have to say I find it hilarious how they media examine Trump’s actions using the view of academics, bankers, bureaucrats and bankers. His whole career is just hard nosed businessman where the more leverage he has, the more he wins, the more he gets out from under bankers, suppliers, and employees. There are always lots of these, customers like him, not many of him, they need him, well there is only one his size, really, and it’s big, it’s important, but once he’s your customer you don’t want to lose him, in fact you can’t lose him…if you lose him it’s disaster…and the he has you…

    Trump is a business man, and this is how he looks at the world. He has a major supplier, China Inc but many other suppliers as well: India Inc, Vietnam Nam Inc, etc…He tells China Inc he wants them to buy some of his products, otherwise he will tact a surcharge-rebate-commission (tariff) on their sales. China Inc can refuse, but where else can they find a buyer like Trump Inc? If they pay the surcharge, they will have to lower their prices, otherwise India Inc and Vietnam Inc, who are lean, mean, up and comers, will take the business with their cheap labour and growing investment. Meanwhile, what will China Inc do with all their spare capacity. Plus their workforce might get militant without work there is no safety net at China Inc…the workers sleep by their work stations…that’s their net…So, if they pay the Surcharge, they still have to meet their competitor’s price anyways,or else their capital investment is under utilized, they lose, in fact double lose. However, Trump wins because when you net it out he is net, net better off (new price-surcharge=Trump gets product cheaper). In fact, he will be stronger and they will be weaker-ever more dependent on his shrinking margin. However, If China Inc walks away, they lose business to their competition, who now richer and stronger may go after China’s other business, not just Trump Inc but others, they lose, maybe long term badly. Also, China Inc is pretty shakie as it is-lots of bad customers, bad debts, bad investments, too much bad and well China Inc might come tumbling down. Meanwhile, Trump gets more aggressive/competent pool of Suppliers, a desperate major supplier…well he wins again….
    So maybe the smart thing to do for China Inc. is to buy Trump’s stuff, lose a little margin, but keep the business….because once you lose the business…well good luck getting it back…and someone might start looking at the books, and you don’t want to go there..

    When I was in Business College I remember the story of some old Robber Baron who would go to some little supplier and start buying up everything he had at the suppliers price. The Robber Baron asks for more and more… The little supplier makes a pile of money from his new customer and decides to expand. He borrows money, builds a new plant, just to meet the big buyers demand, in fact the Robber Baron is so big he has forgotten about his old little buyers. Then one day, the Robber Baron comes to the Supplier, with his new plant, his large bank loan and narrow customer base and says…New Price, New Terms, you’re going to buys these parts and services from me or you’re going to cut my price/discount my account or both….so what’s it going to be?

    • james wordsworth says:

      Ok … but we only have one planet and a finite number of countries, not like in business. Piss everyone off and they will find some way to screw you. And the US will have no where to hide.

      Look at Canada now. A rekindling of nationalism and a strong desire among many not to buy anything american, nor to travel in the usa.

      Look at grad students who do much of the research at american universities and start a lot of the new companies. Fewer and few interested in going stateside (number of applications are way down).

      These are not immediate impacts, but they can be log lasting and ultimately devastating. trump may win for a day … but it is not over in a day. In the long run the damage to america will be immense.

      • Augusto says:

        I’m a Canadian…you think I’m pissed off, damn right I am. My government wants a trade war with a country where our exports to the US make up 20% of our GDP. US exports to Canada make up less than 2% of US GDP…Ya tink we’s goin to win that one…

        We got a lot of people with protected government jobs waving Red Flags and wanting us in the Private Sector to mount the barricades….

        You think we like paying 3 times for our protected dairy and poultry products than you guys pay….

        I worked (used to work) in the oil industry in Alberta…all our young skilled young people are moving south, including one of the guys who used (note used to-my company used toemployed 3,000 in Calgary now it employs 500) to work for me…he is taking his Grad degree in Chicago…..

        Look, we got our fake, left wing aligned media here in Canada, and some of us don’t buy the propaganda or want to mount the barricades….

        • nick kelly says:

          By the mid 90’s Trump wasn’t getting anything from US bankers. No US bank would deal with him. Nor could he sell bonds. Six bankruptcies was enough for them.
          Trump had to look further afield. Much further.

          There is a recurring theme from US posters that everywhere else is unstable: Europe, the UK, China, Japan.

          From the viewpoint of THOSE places the US seems to be approaching civil war or at least major unrest. At the present rate within a decade secession or at least de facto secession seems a possibility.

        • Edweirdo says:

          Hey, fellow Canadian. You are misinformed about what we pay for dairy and poultry in Canada. The U.S. subsidizes its industries in these areas, and overproduction is dumped on Canada, while at the same time the U.S. has correspondingly high tariffs in other areas. The media is not misinforming you; you are misinformed. I suggest that you read the following articles:

          In fact, I would argue that the U.S. as a whole is taking unfair advantage of Canada on trade, including other issues like softwood lumber and tobacco.

    • EMHO says:

      Great businessman, eh? Great self-promoter definitely, but not businessman. Someone who has 6 different businesses go bust (including a casino) doesn’t know how to run a successful enterprise. He was lucky his father funded him and bailed him out too.
      Also, cheating and intimidating your suppliers/partners works only if you are bigger.
      Trump is taking on China, Europe, India, Canada, Japan etc all at the same time!
      That’s frankly stupid.
      For example, China’s GDP PPP is larger than the US since 2013, and nominal GDP will be at least equal by around 2023!
      So you are taking on a price boxer who is just as tough as you are, while the other boxers who have a dispute with him (China) stand aside, refusing to help you because you insulted/harmed them.
      China is also developing it’s internal consumer economy helping to diminish harm caused by Trump tariffs. Then there is the Belt and Road Initiative, warts and all.
      This trade war will last a long time, I am not talking a year, but easily 5 or more.
      Can you handle the damages, can your farmers? American soy futures dropped by 20% already, while brasilian soy prices have increased by 20%. Bad times for US farmers, good times for Brazil. That’s the interconnectedness of world trade.
      There is a lot of talk about China dumping treasuries, I don’t think so. I think they will do the opposite, buy more treasuries to devalue the yuan and negate the tariffs. They could exchange their long term notes for short term bills. What would that do to yields, if China did that?
      This will be a long bloody affair, the winner will be the one who organized the support of his allies or at least neutralized his opponent’s allies.

      • Augusto says:

        China is a house of cards.

        I remember when Japan was going to rule the world and had to take Kaizen Courses at work. Then one day someone opened up the books and found that half the loans on the Japanese banks were worth nada. Japan has never been the same since, and the West went on to the High Tech boom.

        Now China pads its GDP with Steel no one wants and ghost cities no one lives in. They steal to get ahead and make all the right numbers go up, up and away….but how much is real?

        Ok, what does China use soy for? To feed chickens and pigs mostly. Where are they going to buy Soybeans….from Canada??? Our rail lines are full of oil, and we and Brazil and Russia, don’t have that much Soybeans to sell anyways…Its a commodity, and you need it (food), so China pays a premium for Brazilian Soy (I bet they pay a Premium, its a one year wonder), and then where do the Brazilian buyers who can’t compete with the Chinese go? All the Chinese are doing is temporarily re-routing the supply chain, they’re not killing it. Shippers should do great though…

        China can dump their treasuries in a second, just let their own people buy them and move them out of the country….easy peasy…and why do you think the Chinese want their money out, in USD’s I might add, …because they live there they know what’s it like…They know its a facade, a paper tiger, a house of cards….

        There is so much debt out there in the world, every economy, China, Europe, US, Canada, Japan, they’re all ready to go down…but who will be first and who will be last? So if you had a million dollars where would you send it? To China? To Europe?

        China puts up a good facade, but that’s all it is, a facade….Sorry, I think Trump is right on this one, and hopefully everyone gives their head a shake, and stop with the delusions.

        As to delusions, here in Canada we got the “China is the New Great” jingo going. Our Prime Minister Justin Trudeau wants a third way, a new Free Trade Deal with China….76% of our trade is with the US and 4% with China…..What the????? We’re going to put down our NAFTA pen, and take up the China sword (or toothpick). And having dealt with the Chinese in the Supply Side of the oil business (we figured they rented some equipment, which we never saw again> to reverse engineer it), they ain’t worth the hassle (cheap, cheap, cheap) or the grief…

        The only way the US is going to lose this one is by yelling Uncle fighting itself….

        • EMHO says:

          So, you are saying IMF data about China is wrong? Mind you, I have my doubts about chinese government data, but saying everything is fake! That is just plain nuts.
          I was assigned to China in early 2011 and again in 2013, I drove trough the new town of Xi’an in 2011 it was empty, but when I visited it again in 2013 it was packed with plans for expansion. They are doing master planned communities on a completely different scale, plus of course forced relication, remember Three Gorges Dam.
          My statement in regard to soy at al stands. Trade routes and partners will shift, and there will be winners and losers-mostly losers.
          There are many legitimate concerns in regard to Chinese trade practices and thefts, but Trump’s scattershot attack on everyone will accomplish the opposite to what is needed.
          I work for a British aerospace company in Germany, so I do have very serious concerns in regard to China.

        • nick kelly says:

          ‘Japan has never been the same since, and the West went on to the High Tech boom.’

          Japan runs a huge trade surplus (see driveway near you) and has an infrastructure that puts the US to shame.

          Its gun murders run in the single digits annually and incredibly in one year it had none. (Many US cities are deploying computer- monitored microphones to quickly locate the sources of frequent gun shots)

          Violence is rare and to foreign visitors is almost zero.

          By comparison with Japan much of urban US looks like a post- apocalyptic waste land.

          The West’s high tech boom? Benefiting whom apart from shareholders? Apple doesn’t manufacture, Foxconn in Asia does it.

  30. Prairies says:

    I understand the job gains you are hoping to receive. Just don’t be surprised when they don’t amount to a whole lot of job growth. Not to the extent of what has been lost anyway.

    The reason I don’t think the results will be very strong is because he is only using tariffs as a negotiating tactic. But other nations offer what the USA is trying to sell, and other nations will do it for less money.

    It is no coincidence that the leading oil refiner in the EU is looking to expand its LNG purchases from Russia as the tariffs are implemented. USA isn’t the only kid in the sandbox, and you are about to find that out.

    This popcorn is delicious, you sure you guys don’t want some? (it’s cooked in coconut oil, something IMPORTED OMG!)

  31. Mean Chicken says:

    FYI reminder: Don’t forget, Trump and Putin meet on the 16th, in Helsinki.

  32. Winston says:

    The Truth About Tariffs And ‘Trade Wars’
    13 Jul 2018


    Let me preface this by saying that the way Trump is going about this trade issue is wrong. He’s getting a better result than doing nothing, but the fact of the matter is that he’s approaching it incorrectly, and it’s by mere accident that the outcomes are working out.

  33. Ambrose Bierce says:

    Moodys is about as independent as the Fed. When the bully wants all the marbles, bet on the bully! The Feds rate hikes make US Treasuries more desirable and probably easier to collateralize those bonds and buy US stocks, or US multinationals. On the eve of the election Jim Rickards made a surprise call that Trump would win AND to go short the market. Amazing that a top planner could understand a major turning in American politics and not understand the consequences. The world is still awash in central bank ponzi money, and when it turns a few speculators will get on the downside and they will be blamed. The ultimate tariff is on global QE and the rumor is Fed head Powell will not rescue this stock market and all that ‘furen’ money when it heads for the exits.

  34. KMOUT says:
    Like President Trump said, “Let’s just get rid of all the tariffs “.
    The USA and it’s citizens have been an economic grab bag for the rest of the planet since we rebuilt Western Europe and Japan.
    Finally, someone trying to make it return to some sort of fairness before the globalist/ liberal/ soshprog termites eat out the load bearing walls of this once great country.

    • james wordsworth says:

      Tariffs are only a small part of the story. FX rates count too. Since the trade war started, China has devalued its currency effectively mitigating much of the tariff impact. Non-tariff barriers work too. “Oh those cherries might have a bug in there somewhere. We better quarantine for a month to be sure”.

  35. LessonIsNeverTry says:

    Thoughts on the tariff debate nationwide… people take things far too seriously. Why is everything life or death now? Why are tariffs either a raging good or a catastrophic bad?

    Seems simple to me. Give it a shot. Try it for two years. If it doesn’t work, try something else. Have an honest appraisal. That last part is the weak link, of course. We haven’t seen honest appraisal in government in a long time, if ever.

    I know corporations don’t like the uncertainty. Who cares? They aren’t planning long term either, with all cash going to buybacks.

    • walter map says:

      “I know corporations don’t like the uncertainty.”

      How much of a problem can uncertainty be when the equity indices rise to record highs?

      History clearly shows that any troubled major corporation can be bailed out at taxpayer expense (thank you for your contribution) if it can just avoid imploding overnight from the sheer weight of its own inequities, practically eliminating risk and making the capital asset pricing model obsolete at the same time.

      What’s this ‘uncertainty’ you’re talking about?

  36. Bobber says:

    If other countries want to become more wealthy, they should not try to steal US wealth through unfair trade. They should focus on creating good legal systems, human rights, strong public education, etc. Many countries refuse to do this and wonder why they they don’t develop. The US should not be their crutch. They need to do the hard work necessary to improve themselves. It starts with recognizing the value of individuals and giving them a vote. Many US persons have given their life in support of the these principles, which US citizens hold dear.

    • walter map says:

      “They should focus on creating good legal systems, human rights, strong public education, etc.”

      Quite right.

      US education proudly ranks 15th in world education rankings, well behind its major trading partners. Too bad a college education has become unaffordable.

      On the last two report cards from the American Society of Civil Engineers, U.S. infrastructure scored a D+, and the improvements just keep coming, mostly in other countries.

      The US also proudly ranks as the greatest in incarceration rates, year after year, and still runs concentration camps and black sites all over the world and rightly traumatizes naughty children by the thousand.

      Of course, with its best of legal systems, the US has repudiated international law, repudiated treaties, and has taken to deprecating international trade organizations.

      Truly a model to be emulated by all those shithole countries, to be sure.

      But in point of fact, US corporations which have been paid by American taxpayers to send their jobs to other countries are delighted with the balance of payments situation. It’s a major contributor to their profitablity. No wonder the US is number one.

  37. Ambrose Bierce says:

    The SNB prints money to buy NYSE stocks, which benefits the US corporations whose CAPEX increases, and their liquidity, it benefits the pension funds who bought the stocks and can raise their benefits when the value of their portfolio increases, it benefits Americans generally through the wealth effect. Why isn’t there a tariff on that? Those who think America is getting ripped off are not going to like a level playing field.

    • RT Rider says:

      How about the persons who, in good faith, short grossly overvalued stocks and then get wiped out because of some money counterfeiting, central bank intervening in the markets? What’s their benefit – a good lesson in getting screwed?

      • Ambrose Bierce says:

        Shorts are just the flipside of 1929. A rising stock and real estate market is one benefit we derive from lopsided trade agreements. Recycling for dollars is a fun game. Probably the first casualty of a level playing field will be government spending. The debt ceiling moment arrives after Democrats get enough seats to control spending and House Repubs go back to their obstructionist roots.

      • nick kelly says:

        Oh no a sob for the shorts! Now that is rare.

        I believe our patient host has said he will never short a stock, if I recall from a bad experience doing so.

        If I gather the mood of the group here, I don’t think you’ll find much sympathy for a squeezed short.

  38. eastwind says:

    Historically, tariffs have been used three ways. One use is to raise tax revenue. For this purpose, the government should put the largest tariff on something that the market could bear without reducing trade. Revenue is the goal, with minimal behavior change. Trump’s tariffs are not this kind of tariff.

    The second use of tariffs is as a protectionist measure to save some uncompetitive local industry. Rates for this sort of tariff will be so high as to completely exclude the foreign good, 200 or 300 percent, for example. Note that in this case the ideal amount of tax revenue raised from the tariff is Zero, because you want to stifle trade completely.

    The third use of tariffs is as a punitive measure to sanction bad behavior by a specific foreign country. The goal is to stop or reduce trade from a specific foreign country by making the item simply too expensive to buy at all from that country. The tariff will be applied to an item or product imported from a single country, rather than applying it to a particular product regardless of foreign origin. Rates used for sanctions have traditionally been high, 100% or more. Again, the point is not to raise tax revenue but to alter behavior.

    It’s interesting that Trump is using lower rates like 25% (so far) for tariffs intended as sanctions. That departure from traditional practice reduces the initial economic impact, giving companies more time to adjust their supply chains, yet still gives Trump the flexibility to escalate by raising the percentage slider later should further escalation be necessary to achieve the desired behavior change.

    Companies should not waste time hoping that the percentage never goes any higher and that they can “ride out” the trade war. That’s tantamount to deciding that a category 1 hurricane headed your way can be safely ignored because it’s only cat 1. Trump has shown he’s serious while giving companies some breathing space. They should appreciate the consideration and rapidly move to alter their supply chains and not waste energy whining or trying to spin a fake narrative.

    • nick kelly says:

      In a competitive market like for example autos, 25 % is usually enough to severely slow imports. The US domestics get most of their profit from trucks and full- size SUV’s where they have long been protected by a 25 % tariff.

      Steel is even more competitive: there are no ‘fashions’ like the SUV versus sedan. and the world is awash in steel.

      This spells real trouble for many of the US jobs using steel, because the tariff is NOT on foreign products made of steel.

      One example: a US maker of beer kegs. He was barely able to compete against Chinese kegs before the tariff. Now his price for steel has gone up and their’s hasn’t.

      There are 40 US jobs using steel for every job making it.

      Example of workers not realizing the difference:

      One large US mill employs a thousand workers. When word of the tariff
      was announced, they cheered.
      Then the mill announced there might be layoffs.

      It’s not a primary maker. It’s a rolling mill. It imports Russian slab steel and rolls it into sheet steel.

      Who knew trade (or health care) was complicated ?

  39. Shawn says:

    The is a Corporatocracy, an economic and political system controlled by corporations or corporate interests. It’s been like that for a long time. It is not about the Right vs Left, though these days it seems that the left, in their absolute and illogical hatred for everything that is Trump, are too dumb to realize what is happening. Once in a while, there is a ‘backlash’ we saw it in the 2016 election and I believe we saw it in 2008. ‘Backlash’ is real, it’s a thing,

    The only thing we all can do is ‘cut the cord’, don’t give any money to corporate media, don’t visit click-bait infested mainstream media and read the truth on websites such as this.

  40. Laughing Eagle says:

    The way the money is flowing more to the top, there is less at the middle and bottom. If rents ,gas, insurance, food keep increasing above wage increases, the middle and bottom have less to spend, company revenues will continue to fall. Add in technology and robots, after a while fewer and fewer will be working. Crime will increase with idle citizens that cannot obtain a job or some form of welfare and jail populations may continue to grow paid by taxes.
    We will have this efficient globalization market but America will continue to have more inequality. And nation states will continue to lose control of the power and borders.
    So for future generations ethnicity of races social customs and foods may be lost, as more and more people are forced to migrate to find work from the nation in which they are born.

    • walter map says:

      “more and more people are forced to migrate to find work from the nation in which they are born.”

      It’s turned into a race to the bottom, which explains why they all want to go the US.

      • Laughing Eagle says:

        Walter I agree and it shows how bad the job situation is in Mexico. Either you move, help in the drug trade to America, or get killed. Very little good paying jobs. NAFTA killed the Mexican farmers ability to make a living.
        Cannot compete with subsidized Big American farming.
        “Dreamland” by Sam Quinones explains how town populations are decreasing caused by the men who immigrate to America to sell drugs.
        Also explains the destruction of the American community with the loss of jobs because multinational corporations moved out of a town. Along with that is the loss of local small businesses in those towns. Those were the job creators in a community.
        “Dreamland explains the Opiod Crisis in America.
        I can say globalization has destroyed communities around the United States creating economic hardships, family problems, too much idle time, and help promote the Opiod Crisis.

      • walter map says:

        I just think there’s something seriously wrong with a system where a large proportion of the population can work so hard all their lives and never be able to support themselves and their families properly, through no fault of their own, while obscenely wealthy pirates can plunder as they please. The poor will always be with you, because that’s national policy in many countries, including the US.

        Unfortunately, if the miserable groans of millions won’t move the people who decide such things, they certainly aren’t going to listen to me either.

        For the world’s more full of weeping than you can understand.

  41. Top-GUN says:

    Wolf say “Tariffs are just a form of sin taxes.”
    And who is the Sinner? Guess its American Consumers, as they are the ones paying more for the imported products due to the Tariff=Tax.

    • Wolf Richter says:

      Consumers choose from what it available. Companies make the decisions as to what is being made available.

      • Rates says:

        Wolf, you know it’s not entirely true. You are making it as if the consumers are just passive takers. Companies do respond to what consumers want.

        @Top-GUN, it is kinda a sin. And here’s my take. The sin is really throwing your neighbor under the bus in exchange for getting something you might not NEED for cheap prices. Amazon and Walmart should equally be taxed so that consumers get to see the real high price of “cheap” things.

  42. Todd H. says:

    I voted for Trump and like his tariffs, but I worry that markets are at dangerous valuations and may collapse at some point soon. Politicians are vulnerable to taking blame for things they have no responsibility for.

    • ZeroBrain says:

      Very good point, that’s why a lot of people are worried that Trump keeps taking credit for the sky-high stock market. I don’t know whether he’s really that stupid or whether he’s trying to play a cheerleader to keep up confidence in hopes of producing a self-fulfilling prophecy.

      • Todd H. says:

        Fortunately the majority of his voter base aren’t that exposed to the stock market. The so-called “blue” states have much more exposure. He’s taking credit for it now, but if things turn I could see him playing it off as a dangerous bubble built up with the help of Obama and Yellen (which is true). I don’t think the television/newspaper media has as much influence these days. That is my hope, anyway.

      • Trump should be impeached for being a part of the ongoing rigging of everything by the central bankers as well as the total lies and fabricated data coming out of America on a daily basis.

  43. KPL says:

    I do not worry about that. I think Trump is more than capable of being able to ward off any blame that may hit him should the market crash. Not for nothing is he called Teflon Trump.

  44. Trucker says:

    When exactly do the Chinese have to pay these tariffs and must they use US dollars?

    Is it when the ship pulls into the dock in Los Angeles or weeks before, after? It seems the US is telling China it wants its US dollars back!

  45. The U.S. stock market is predicting pots of gold at the end of every rainbow. Unfortunately the opposite is happening and will continue to happen with each passing year. Today the U.S. stock market is negatively correlated to the future and all unfolding world events. The crooks and shysters and central bankers are currently rigging the indexes to keep the indexes out of bear market territory just in case American loses the trade war and the central bankers decide to unload stocks.

  46. Gershon says:

    Ron Paul, still speaking truth to power after all these years. Imagine how much different things would be if he would’ve been elected President in 2008 instead of a Goldman Sachs water carrier.

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