Tarriffs

[RiverDog]

I thought I'd start another thread about tariffs rather than building on a miles long DJT discussion.

I read an interesting article that highlighted some of my concerns about the trade war that we seem to be heading for. Here are some of the key points in the discussion:

Financial markets have tanked several times on news of new tariffs, suggesting investors fear Trump’s protectionism is bad for the economy and for corporate profits. But then markets have recovered, as if correcting from an overreaction. For the year, the S&P 500 index is up about 3%, a relatively weak performance, given the sharp cut in corporate taxes Trump signed into law late last year. That probably means protectionism fears are depressing stocks.

Trump’s metals tariffs, for instance, will allow domestic producers to raise prices, produce more and hire additional workers. But they’ll also raise the cost of domestically built cars, which will reduce sales and kill some jobs. A Council on Foreign Relations study predicts auto-industry job losses will outnumber job gains in steel and aluminum.

There’s also major uncertainty about what Trump will do next. He has threatened, for instance, tariffs on an additional $100 billion of Chinese imports, twice what he has targeted so far. And the Commerce Department is studying the feasibility of imposing tariffs of up to 25% on some 8 million imported autos. If Trump did both of those things, new tariffs would affect 17% of all imported goods, equivalent to 2.1% of US GDP. Retaliatory measures would raise the stakes even more. All of that could stoke inflation, suppress demand and hasten a recession.

https://finance.yahoo.com/news/heres-sc ... 29784.html

I don't get the impression that the Administration has a clear plan of attack or has thought this one out. Trump is too impulsive and changes his mind far too often for me to have any confidence that he has a coherent strategy. It seems like every day he comes up with a new villain that's taking advantage of us.

[idhawkman]

Long and short of it is that protectionist policy is just as good for us as it is for them, except we have more room to deal with. If a trade war breaks out, we'll win it. So far, it is all bluster and positioning. Let it play out.

[NorthHawk]

They could avoid tariffs by renaming their companies ZTE, I suppose.
Sarcasm aside, a lot of people don't know that part of the great depression of 1929 started after tariffs and trade embargoes were implemented.
They had a great bull market like we have seen for the past 8 or so years then trade restrictions were enacted and it all fell apart. It probably wasn't
the sole cause, as the market was getting tired as it is today, but lessens can be learned from it.
The other concern is businesses are carrying a lot of debt. There are some businesses that are making money that are having trouble renewing loans
and a recession caused by tariffs could hit harder than it might otherwise would. Personal debt is a real concern as well. With low interest rates, we
have a whole generation who have borrowed cheap money and when the rates rise, they're going to be hit hard.

It's hard to imagine this ending well if tariffs are fully implemented.

Edit:
Nobody wins a trade war. There are only lesser impacts to some.

[c_hawkbob]

It's just a way to separate the consumers (on both sides of the ocean) from more money for the same products. It's got nothing to do with politics.

[RiverDog]

They could avoid tariffs by renaming their companies ZTE, I suppose.
Sarcasm aside, a lot of people don't know that part of the great depression of 1929 started after tariffs and trade embargoes were implemented.
They had a great bull market like we have seen for the past 8 or so years then trade restrictions were enacted and it all fell apart. It probably wasn't
the sole cause, as the market was getting tired as it is today, but lessens can be learned from it.
The other concern is businesses are carrying a lot of debt. There are some businesses that are making money that are having trouble renewing loans
and a recession caused by tariffs could hit harder than it might otherwise would. Personal debt is a real concern as well. With low interest rates, we
have a whole generation who have borrowed cheap money and when the rates rise, they're going to be hit hard.

It's hard to imagine this ending well if tariffs are fully implemented.

Edit:
Nobody wins a trade war. There are only lesser impacts to some.

I'm not going to go so far as to blame the Great Depression on tariffs. The stock market was hugely bloated and Wall Street was almost completely unregulated. Investors were allowed to purchase stock for as little as 10% of their value. Speculators like Joe Kennedy could inflate a stock then sell it when it reached a certain point. When the market started to crash, calls were put out for money that didn't exist. People stormed the banks to withdraw their funds, causing them to fail and many customers lost their life savings as at the time, there were no federal guarantees on deposits. And that's just a condensed version. There were multiple reasons for the depression.

Like the article said, it's hard to tell which countries will take it on the chin in a trade war. The auto industry is almost certainly going to get hit hard as they're already behind the 8 ball with pensions and other legacy costs to pay that the foreign makers don't, and now they're going to have to raise their prices due to the rising cost of raw materials while foreign automakers will still pay the same prices. Out here, farmers are sure to take a hit as we sell huge amounts of apples, cherries, potatoes, and other fruits and vegetables to China, Mexico, Canada, et al, all countries Trump has targeted.

But I agree with you about not being able to win a trade war. Some people think that just because the United States economy is the 500lb gorilla that we can win. But it's not like sports where you have a clear winner and loser. It's more like winning a nuclear war, where we could say that we won because we only lost 50 million people while the Soviets lost 200 million.. We won't get hurt nearly as badly as any of the other countries, but we'll still end up losing more than we had when we started out, and in my mind, that's losing.

[RiverDog]

So far, it is all bluster and positioning. Let it play out.

No, it's not. This is more than just bluster and positioning. Tariffs are already being imposed. Last Friday, China retaliated to Trump's metal tariffs by imposing tariffs of their own. Trump has fired the first shot.


Here's another perspective on how a trade war could damage us:

National Retail Federation president and CEO Matthew Shay warned on Friday that tariffs could dump cold water on this momentum (growing economy). “Tariffs are taxes on American consumers, plain and simple,” he said in a statement. “They will strain the budgets of working families by raising consumer prices.” A study jointly commissioned by the National Retail Federation and Consumer Technology Association said that tariffs on $50 billion worth of Chinese imports plus in-kind retaliation would shrink GDP by $3 billion over the next one to two years and cost 134,000 jobs. “More than four jobs would be lost for every one gained, with the gains in metals and machinery coming at the expense of agriculture, transportation equipment and services,” the report predicted.


https://www.nbcnews.com/business/busine ... ts-n884231

[burrrton]

"More than four jobs would be lost for every one gained, with the gains in metals and machinery coming at the expense of agriculture, transportation equipment and services,” the report predicted.

Ding ding ding.

I've made my feelings on stupid ideas like this known, so I won't chime in again (although I guess I just did ).

[idhawkman]

Now is the best time to fight this battle since companies are flush with cash to invest in building up our own factories, the economy is growing rapidly currently projected at 4% for the second quarter and interest rates are being raised and we have more jobs than workers. No other time will be as advantageous for us to level the playing field than now.

The EU and China have targeted tarrifs on the states that Trump won to try and leverage political pressure on him. That's great, they've fired their volley back at us but what do they have left in their quiver after that? Trump has imposed new tarrifs on China today to the tune of $100B. What are the Chinese going to do now? Raise their tarrifs even more on our Soy beans and beef? We can't compete now so who cares if they raise the rates more?

On a side note, don't think I am ambivalent toward this issue. I manufacture products in China and import goods from China and sell them online throughout the U.S. Canada and Mexico. The reason I do this is because our factories in the US can not compete with China. So your hard earned dollars that pay for my goods I send to China and then China buys more businesses in the US with those dollars. We can not afford to keep doing this.

The fight may be on but the first salvo's are not going to effect us much at least no more than the fed's interest rate increases and the debacle of a slow economy over the last 8 years.

[burrrton]

We can not afford to keep doing this.

If I'm a customer of yours who enjoys the low prices you're offering for my chatchkis from China, I sure as h3ll can.

[RiverDog]

Now is the best time to fight this battle since companies are flush with cash to invest in building up our own factories, the economy is growing rapidly currently projected at 4% for the second quarter and interest rates are being raised and we have more jobs than workers. No other time will be as advantageous for us to level the playing field than now.

You keep throwing your 4% projected growth rate as if it were a fact, but ALL of the sources I can find have the growth rate pegged between 2% and 3%. Here's the latest one I could find:

U.S. GDP growth will rise to 2.8 percent in 2018, 2.4 percent in 2019, and 2.0 percent in 2020. That's according to the most recent forecast released at the Federal Open Market Committee meeting on JUne 13, 2018. This estimate takes into account Trump's economic policies.

https://www.thebalance.com/us-economic-outlook-3305669

But I did find a 4% reference in that same article, which is where I suspect you're getting your information:

President Trump promised to increase economic growth to 4 percent.

J/B the President, especially this president who pulls all sorts of stuff out of thin air, says it as a promise does not make it a forecast. Please start validating your information if you're going to state them as a fact.

The EU and China have targeted tarrifs on the states that Trump won to try and leverage political pressure on him. That's great, they've fired their volley back at us but what do they have left in their quiver after that? Trump has imposed new tarrifs on China today to the tune of $100B. [u]What are the Chinese going to do now? Raise their tarrifs even more on our Soy beans and beef?[/I] We can't compete now so who cares if they raise the rates more?

I get the Impression that you don't even read much less comprehend what I post, but the information I referenced above. I even increased the text size and highlighted it in bold: More than four jobs would be lost for every one gained, with the gains in metals and machinery coming at the expense of agriculture, transportation equipment and services,” the report predicted.


Transportation equipment includes cars, motorcycles, and airplanes. Agricultural product include apples, cherries, potatoes, and other fruits and vegetables. There are a lot of items we export to them that they can target in a trade war.

On a side note, don't think I am ambivalent toward this issue. I manufacture products in China and import goods from China and sell them online throughout the U.S. Canada and Mexico. The reason I do this is because our factories in the US can not compete with China. So your hard earned dollars that pay for my goods I send to China and then China buys more businesses in the US with those dollars. We can not afford to keep doing this.

The company I was employed with for 25 years does a lot of business with China exporting frozen processed potatoes to them and has even acquired a processing facility there. They represent a huge growth potential that will mean more jobs in this country as our company will always be headquartered here in this country where 90% of our production facilities are at. A trade war has the potential to bring all that to a crashing halt.

The fight may be on but the first salvo's are not going to effect us much at least no more than the fed's interest rate increases and the debacle of a slow economy over the last 8 years.

As I showed above, it's already affecting us as it's depressing the stock market.

Please start referencing your information rather than just throwing stuff out there and expecting us to buy what you are saying. CBob has already caught you simply parroting what the Administration says, and I suspect that's all you've been doing in this thread.

[idhawkman]

For River:

The new forecast is now 4.8% for second quarter. A simple google search finds these top three results:

https://www.frbatlanta.org/cqer/research/gdpnow.aspx

https://www.fxstreet.com/news/atlanta-fed-gdpnow-rises-to-47-from-4-for-q2-201805311512

https://www.reuters.com/article/us-usa-economy-atlantafed/atlanta-fed-upgrades-us-second-quarter-gdp-view-to-47-percent-idUSKCN1IW2EH

So as you can see, the 4% I stated is actually conservative. You'll also note that our exports are up in those articles, too.

The sky is not falling. The market has reacted but has rebounded each time there are fears of a trade war. Much of the drops are from machine trading and not based on fundamentals which is why it rebounds quickly when the stocks go on sale. The Dow closed yesterday within a whisper of 25,000 (near all time highs) and the S&P and NASDAQ keep making new highs. I know it is nerve racking being on a fixed income but it isn't as bad as you think it is.

The best time to take care of a problem is in the beginning - just like cancer. Waiting until it matasticizes only makes the cure more dramatic but doing nothing at all leads to death. This issue has gone on for over 4 decades and must be solved now. The methods are going to be more extreme because no one wanted to spend the political capital needed to fix it. Doing nothing at this point is not an option.

Oh and Cbob didn't catch me in anything. Every charge of such has been rebutted so unless you show me where that is that he rebutted me and I didn't respond accordingly, it doesn't exist.

[RiverDog]

For River:

The new forecast is now 4.8% for second quarter. A simple google search finds these top three results:

https://www.frbatlanta.org/cqer/research/gdpnow.aspx

https://www.fxstreet.com/news/atlanta-fed-gdpnow-rises-to-47-from-4-for-q2-201805311512

https://www.reuters.com/article/us-usa-economy-atlantafed/atlanta-fed-upgrades-us-second-quarter-gdp-view-to-47-percent-idUSKCN1IW2EH

So as you can see, the 4% I stated is actually conservative. You'll also note that our exports are up in those articles, too.

The sky is not falling. The market has reacted but has rebounded each time there are fears of a trade war. Much of the drops are from machine trading and not based on fundamentals which is why it rebounds quickly when the stocks go on sale. The Dow closed yesterday within a whisper of 25,000 (near all time highs) and the S&P and NASDAQ keep making new highs. I know it is nerve racking being on a fixed income but it isn't as bad as you think it is.

The best time to take care of a problem is in the beginning - just like cancer. Waiting until it matasticizes only makes the cure more dramatic but doing nothing at all leads to death. This issue has gone on for over 4 decades and must be solved now. The methods are going to be more extreme because no one wanted to spend the political capital needed to fix it. Doing nothing at this point is not an option.

Oh and Cbob didn't catch me in anything. Every charge of such has been rebutted so unless you show me where that is that he rebutted me and I didn't respond accordingly, it doesn't exist.

Thanks for responding with some actual links, but I disagree with your assertation that a 4% growth rate is conservative. It grew last quarter at just 2.3%, less than the 2.9% of the last quarter of 2017 despite the effect of the tax cuts:

The US economy grew at a rate of 2.3% in the first quarter, according to the Commerce Department's preliminary report on Friday. That's slower than the 2.9% pace in the fourth quarter of 2017.

http://money.cnn.com/2018/04/27/news/co ... index.html

Especially given the trade war that we're entering into which WILL raise prices and slow spending, IMO a 4% growth rate is exceedingly optimistic. Besides, a growth rate that high is not necessarily a good thing. A 2-3% growth rate is more than satisfactory.

I'm not going to dig up past threads as there's really no point in doing it. But the impression I was left with in your exchange with Cbob is that you kept citing the Adminstration as your source of information. You carry so much water for Trump that it tends to paint everything you post as highly biased, at least in my eyes.

[idhawkman]

The fed stated in their recent announcement when they raised the interest rates that they are not concerned by the global events including tarrifs.

NOTE 1: The tax cuts hadn't taken effect yet in the first quarter so you can't say despite the tax cuts.

NOTE 2: The trade war may slow the economy enough to where the fed doesn't make any new rate hikes. Remember, the fed wants to peg the inflation rate to 2.0 - 2.5% annually. So whether or not the wages start to rise, the economy heats up, the tarrifs and trade wars roar, it doesn't matter as long as the fed controls the supply of money.

NOTE 3: Trump has now threatened $200B of tarrifs for China and the market is down between 1.0 to 1.5% in mid day trading. That's not even close to what the Nikkei and Heng Seng markets are down. They are in "Correction" territory. So again, the trade wars will hurt them much more than it hurts us and now is the time to fight this fight.

NOTE 4: I understand you don't want to search for the post not only because there are a lot of posts to search through but also because I don't believe it exists. I may not answer every charge immediately or at all if I don't think the rebuttal is valid but if it is important I always respond.

[RiverDog]

The Dow closed yesterday within a whisper of 25,000 (near all time highs) and the S&P and NASDAQ keep making new highs.

Not anymore.

Stocks fell sharply Tuesday after President Donald Trump's latest threat to China increased fears of an impending trade war between the world's largest economies.

The Dow was down 300 points after sinking more than 400 points earlier, with Boeing, DowDuPont and Caterpillar lagging. The 30-stock index erased all of its gains for the year. The S&P 500 was off by 0.65 percent, with materials, industrials and tech all falling. The Nasdaq slid 0.85 percent.

"At some point you've got to wonder how many times stocks are going to react to the same general bit of news. It may all just be a game of one-up-manship as a negotiating tactic to get to some sort of deal," said Willie Delwiche, investment strategist at Baird. However, "with investor optimism as high as it is, there might not be much margin for error, and there is a real risk that this starts to erode consumer and business confidence."

Shares of some of the biggest chipmakers fell given their large exposure to China. Qualcomm and Nvidia both dropped at least 1.5 percent. On average, semiconductor and semiconductor equipment companies get 52 percent of their revenue from China, according to a recent report from Morgan Stanley.
Ford Motor, which also does a large amount of business in China, saw its stock pull back about 2.2 percent. Meanwhile, Caterpillar and Boeing — considered to be two bellwethers for trade tensions on Wall Street —both dropped at least 3.5 percent.

https://www.msn.com/en-us/money/markets ... spartanntp

Please, don't tell me that we aren't going to suffer any consequences.

[NorthHawk]

I'm not going to go so far as to blame the Great Depression on tariffs. The stock market was hugely bloated and Wall Street was almost completely unregulated. Investors were allowed to purchase stock for as little as 10% of their value. Speculators like Joe Kennedy could inflate a stock then sell it when it reached a certain point. When the market started to crash, calls were put out for money that didn't exist. People stormed the banks to withdraw their funds, causing them to fail and many customers lost their life savings as at the time, there were no federal guarantees on deposits. And that's just a condensed version. There were multiple reasons for the depression.

Here's a quote from a Bloomberg article and like I said tariffs weren't the sole reason:

"History suggests that investors should be cautious about extrapolating the immediate reaction of financial markets. The Smoot-Hawley tariff act passed in June 1930 is widely considered to have been a factor in deepening the depression and causing equities to plunge. However, the Dow Jones Industrial Average rose from that June to August 1930 as investors believed initially that the tariffs would provide a boost for American companies by deterring foreign competition. As late as Oct. 15 that year, a euphoric Irving Fisher, the well-known Yale University economist, declared that equities had reached a “permanently high plateau.” The stock market crashed two weeks later. While the tariffs were not the instigator of the drop in share prices, they added to the bearish sentiment over time."

The markets have been deregulated to prior to 2008 standards and some of the same practices that sent the economy reeling are being used again so in concert with the negative impact of tarriffs, we could see a major decline. After all, this bull market should be nearing the end and many companies have borrowed themselves into positions to where they can not get refinancing or can get it at much higher rates than they can afford.

The above quote comes from this article and it's an interesting read if you're interested.
https://www.bloomberg.com/view/articles ... al-markets

There's also another article directly below which is interesting as well.

[idhawkman]

Oh my, the NASDAQ is off by .85% and the dow is down as of right now, 1.12% how are we ever going to live given that the Dow was at 18,000 range when Trump took office. It is short term intraday right now. Give it a week and see where we are then, I'm pretty sure we won't be that bad off at the end of today let alone this week.

Remember, you don't lose money until you sell in the Stock market.

[Aseahawkfan]

It's just a way to separate the consumers (on both sides of the ocean) from more money for the same products. It's got nothing to do with politics.

The Tariffs will benefit the government, c-bob, to help pay for things. I thought you were ok with higher taxes to pay for things the government gives us?

[Aseahawkfan]

From a financial perspective I see this as a buying opportunity. If you have some extra cash and are looking for opportunities to obtain quality companies at a reduced price, then buy on the drops. China is a growing financial monster with a strong consumer culture. You want to be in companies that will benefit from that.

My opinion has not changed. I'll wait and see the final deal. China's been muscling us a long time and no one has stood up to them. There''s finally a president in office that will force some issues. What he manages to obtain in negotiations we will see.

Unfortunately the reality is that China eventually will win any trade war with anyone int the world. Their market will be the biggest and most powerful market in the world. We will be the producer for China at some point. You just can't beat that population short on natural resources and in severe need of products. I expect at the end of this Trump might obtain some short-term concessions that will eventually be a moot point as the rest of the world becomes producers for China because they consume so much.

[c_hawkbob]

It's just a way to separate the consumers (on both sides of the ocean) from more money for the same products. It's got nothing to do with politics.

The Tariffs will benefit the government, c-bob, to help pay for things. I thought you were ok with higher taxes to pay for things the government gives us?

I'm not OK with anything designed to separate the working class from more money for the elite.

If you want more of my money I want assurances it's going to roads and bridges and medicare and schools and not to fund more tax breaks for corporations and billionaires or to the already bloated military budget.

[Aseahawkfan]

I'm not OK with anything designed to separate the working class from more money for the elite.

If you want more of my money I want assurances it's going to roads and bridges and medicare and schools and not to fund more tax breaks for corporations and billionaires or to the already bloated military budget.

You just stated the problem with taxes. People are only ok with them if they go to what they want. Which is why it is best to leave as much money in the hands of the people that earn it and let them spend it on what they desire to support.

You'd be ok with them taking my money to pay for drug addicts, criminals, and lazy and unproductive people because you can no more assure me that my money will only go to the truly handicapped, truly disenfranchised, and those that truly need it than I can assure you that taxes won't go to bail out banks, launch questionable wars, or enforce a corrupt and foolish drug policy that jails a bunch of people that don't need to be in jail.

That's why the best way to do this is disempower the government by limiting their funds through reduced taxation for all. As long as the government can continually take money from the collective, they will have the power to engage in activities some group of Americans don't find agreeable. Our government is drunk on the power we provide them with the immense tax monies they collect. Even when you complain about the wealthy, they still generate the money the government collects. Which is why they usually get the breaks. Jobs would move to a standstill without those wealthy folks growing businesses so people have jobs to work. The government knows it, thus even the Democrats ensure to protect where the bread is buttered.

[idhawkman]

This may help ensure that the tarrifs are not a problem as of now - even after the announced new tarrifs on China.

https://www.bloomberg.com/news/videos/2018-06-19/goldman-s-blankfein-talks-trade-credit-markets-and-bitcoin-video

Another couple indicators that the markets are not scared is that Gold has dropped instead of going higher and the Chinese have not dumped their bonds dropping the bond rate.

If you want to hedge against the trade war, buy gold now while it is low at $1200+ per ounce.

[RiverDog]

https://www.bloomberg.com/news/videos/2018-06-19/goldman-s-blankfein-talks-trade-credit-markets-and-bitcoin-video

Another couple indicators that the markets are not scared is that Gold has dropped instead of going higher and the Chinese have not dumped their bonds dropping the bond rate.

If you want to hedge against the trade war, buy gold now while it is low at $1200+ per ounce.

For every article you post that claims the markets aren't scared, I can post 5 showing that they are. But we'll see how the market reacts, whether or not they rebound. They obviously don't like the tariffs as every time Trump starts talking about them, the market drops.

One of the disadvantages Trump is going to have is that the Chinese can play politics with their tariffs whereas he can't. They'll pull out their electoral map and figure out what tariffs they can put on that would hurt those red states that Trump can ill afford to lose. China, on the other hand, doesn't have to worry about elections.

[burrrton]

...already bloated military budget.

C'mon, Bob.

First, we spend like 3-5% of our GDP on our military (or something like that). As with the rest of the Federal budget, it could (probably) certainly use a trimming, but it's hardly one of our budget-busting items.

Second, defense is arguably the single most clearly defined and necessary function of the Federal government. There is literally nothing more important, but *that's* where you want to get slashing?

Third, who says our military budget is too big? Beyond the obvious waste that exists at that level of bureaucracy, it'd be pretty easy to argue it should be expanded, not contracted, if one were so inclined.

[RiverDog]

NOTE 1: The tax cuts hadn't taken effect yet in the first quarter so you can't say despite the tax cuts.

From my original post:

Financial markets have tanked several times on news of new tariffs, suggesting investors fear Trump’s protectionism is bad for the economy and for corporate profits. But then markets have recovered, as if correcting from an overreaction. For the year, the S&P 500 index is up about 3%, a relatively weak performance, given the sharp cut in corporate taxes Trump signed into law late last year. That probably means protectionism fears are depressing stocks.

We're not talking about reported earnings, we're talking about the stock market. The corporate tax cut has an immediate impact on stocks as investors are antiipating higher profits.

[Aseahawkfan]

Financial markets have tanked several times on news of new tariffs, suggesting investors fear Trump’s protectionism is bad for the economy and for corporate profits. But then markets have recovered, as if correcting from an overreaction. For the year, the S&P 500 index is up about 3%, a relatively weak performance, given the sharp cut in corporate taxes Trump signed into law late last year. That probably means protectionism fears are depressing stocks.

We're not talking about reported earnings, we're talking about the stock market. The corporate tax cut has an immediate impact on stocks as investors are antiipating higher profits.

Most of the tax cuts were already priced in last year. That's a bad argument that anyone following the financial news consistently knows. Stocks don't price when news break. Usually the big traders have the information in advance and drive the price up long before the news makes it way to the public. Tax cuts were priced in the second half of last year. Heck, a part of the tax cuts were priced in as soon as Trump was elected.

The market being up 3% this year means nothing. The market rose such an insane amount last year that 3% this year would normalize increases. It can't keep rising without earnings. The market prices good and bad news well in advance of it happening.

[idhawkman]

For every article you post that claims the markets aren't scared, I can post 5 showing that they are. But we'll see how the market reacts, whether or not they rebound. They obviously don't like the tariffs as every time Trump starts talking about them, the market drops.

One of the disadvantages Trump is going to have is that the Chinese can play politics with their tariffs whereas he can't. They'll pull out their electoral map and figure out what tariffs they can put on that would hurt those red states that Trump can ill afford to lose. China, on the other hand, doesn't have to worry about elections.

China already did that with their $50B tarrifs. Trump responded with $200B more and raised the stakes. Since our total exports to China is only $130B, they don't have much more room to re-raise let alone match the pot...

[idhawkman]

NOTE 1: The tax cuts hadn't taken effect yet in the first quarter so you can't say despite the tax cuts.

From my original post:

Financial markets have tanked several times on news of new tariffs, suggesting investors fear Trump’s protectionism is bad for the economy and for corporate profits. But then markets have recovered, as if correcting from an overreaction. For the year, the S&P 500 index is up about 3%, a relatively weak performance, given the sharp cut in corporate taxes Trump signed into law late last year. That probably means protectionism fears are depressing stocks.

We're not talking about reported earnings, we're talking about the stock market. The corporate tax cut has an immediate impact on stocks as investors are antiipating higher profits.

I was responding to your 1st Qtr GDP numbers post, not your original post, but I think you knew that.

[RiverDog]

I was responding to your 1st Qtr GDP numbers post, not your original post, but I think you knew that.

You made an assumption that was incorrect. I did not know which statement of mine you were responding to as I made several. It would help if you copied and pasted my direct quote followed by your response.

But to your point, the tax cuts, announced in late 2017, has an immediate affect on business activity. Stocks rise, giving companies more borrowing power, consumer and business confidence rises in anticipation of having more money available, and so on. But my main point was that the stock market has been relatively sluggish when it should be doing gangbusters due to the tax cut, that something is retarding it, and that something is the trade war. I was using those facts as evidence that our economy is going to take a hit if Trump follows through with all the tariffs he's threatening to impose.

[NorthHawk]

China already did that with their $50B tarrifs. Trump responded with $200B more and raised the stakes. Since our total exports to China is only $130B, they don't have much more room to re-raise let alone match the pot...

China takes the long term view on economics so they can wait it out.
As well, since the USA is restricting trade with not just China, but the other allies, they see an opportunity to make some of that up with the EU, Mexico, and Canada.
This won't help the American worker because those markets will disappear to some extent because of the tariffs. China might just say sorry, we don't need as many of
your products as we used to as we have found alternative sources and destinations elsewhere. The long game with a ruler for life then punish America for a time after the trade disputes
settle down - if it gets that far.
Had Trump not alienated America's allies, there could have been a united front against China and their Intellectual Property theft among other things. However, with the POTUS dividing
the rest of the world, it makes it much easier for China to continue on its current path.

Here's an article from the US-China Business Council that explains the trading relationship in a somewhat different light.

"As China has become an integral part of the global manufacturing supply chain, much of its exports are comprised of foreign-produced components delivered for final assembly in China. If the value of these imported components is subtracted from China’s exports, the US trade deficit with China is reduced by half, to about 1 percent of GDP—about the same as the US trade deficit with the European Union."

\https://www.uschina.org/reports/understanding-us-china-trade-relationship

They may have a biased perspective, but still it's an interesting point of view.

[RiverDog]

China already did that with their $50B tarrifs. Trump responded with $200B more and raised the stakes. Since our total exports to China is only $130B, they don't have much more room to re-raise let alone match the pot...

There are other things that China can do to retaliate besides tariffs. Due to the controled nature of their media, they can undermine the reputation of many of our US brand name products...Starbucks, McDonald's, and so on. It can also spill over into other areas of foreign policy, including our improving relationship with North Korea:

"China still has plenty of weapons to use once it runs out of quantitative measures," economist Andrew Polk said in a newsletter. Could Beijing end cooperation on North Korea? Punishing UN sanctions on North Korea -- approved and enforced by Beijing -- drove Pyongyang to the negotiating table, analysts say, landing Trump his made-for-TV summit with Kim Jong Un in Singapore earlier this month.

To achieve the North's complete denuclearisation, Trump likely needs Beijing to stay on board with the sanctions, but a trade war could change Chinese thinking, said Cheng Xiaohe, an international relations professor at Renmin University.

Cooperation between China and the United States on the North "will become very complicated and very difficult," Cheng said.
In an indication of China's leverage on the issue, Kim visited Beijing exactly one week after the summit to brief President Xi Jinping, his third trip to China this year.

http://www.dailymail.co.uk/wires/afp/ar ... e-war.html

It's the same story with our allies and other countries that we need cooperation on with non economic issues. For example, if Trump wants cooperation with countries like Mexico over border security, he's not going to get it if he has a stranglehold on their necks via tariffs.

[idhawkman]

You made an assumption that was incorrect. I did not know which statement of mine you were responding to as I made several. It would help if you copied and pasted my direct quote followed by your response.

But to your point, the tax cuts, announced in late 2017, has an immediate affect on business activity. Stocks rise, giving companies more borrowing power, consumer and business confidence rises in anticipation of having more money available, and so on. But my main point was that the stock market has been relatively sluggish when it should be doing gangbusters due to the tax cut, that something is retarding it, and that something is the trade war. I was using those facts as evidence that our economy is going to take a hit if Trump follows through with all the tariffs he's threatening to impose.

Ok, here's your quote above that I'm responding to.

NO, as Asea has already pointed out to you that the stock market does not reflect GDP numbers. The stock market buys the rumor and sells the news. Always has and always will. So the stock market reacted when the tax cuts were being seriously discussed on capitol hill and then when it was passed it was old news. Now for the stock market to go higher it takes time for the tax cuts to get to the people's hands and they start buying stuff. Then you have to wait for earnings reports to verify that the proper activity is being carried out. So in the first quarter, the news was old on the tax cuts but the spending had not caught up to the amount of money in people's pockets yet because the new tax rates didn't hit until Feb. In Feb when people had more money in their pockets they have to wait until the next pay period to realize the money in their bank account. Then they start to spend in March. That's not going to effect the Q1 numbers to any great degree. Now in Q2 people are buying and companies are hiring which will have an impact on the GDP and one of the reasons that the Fed increased interest rates to hedge against inflation.

Now to carry this out a bit more, next thing to rise is real wages since employees will be harder to find and get, employers will have to pay them more, increasing the threat of inflation more which will make the Fed raise rates more to keep inflation in check. Now, if the Tarrifs have a dampening effect on the economy due to higher prices for goods, then the fears of inflation will go down and the Fed won't have to raise rates. Additionally, since you'll have less money in your pocket to pay for cheap trinkets, employers won't need as many employees and real wage increases won't be as big a factor.

So you see, now is the time to fight this fight.

[idhawkman]

China takes the long term view on economics so they can wait it out.
As well, since the USA is restricting trade with not just China, but the other allies, they see an opportunity to make some of that up with the EU, Mexico, and Canada.
This won't help the American worker because those markets will disappear to some extent because of the tariffs. China might just say sorry, we don't need as many of
your products as we used to as we have found alternative sources and destinations elsewhere. The long game with a ruler for life then punish America for a time after the trade disputes
settle down - if it gets that far.
Had Trump not alienated America's allies, there could have been a united front against China and their Intellectual Property theft among other things. However, with the POTUS dividing
the rest of the world, it makes it much easier for China to continue on its current path.

Here's an article from the US-China Business Council that explains the trading relationship in a somewhat different light.

"As China has become an integral part of the global manufacturing supply chain, much of its exports are comprised of foreign-produced components delivered for final assembly in China. If the value of these imported components is subtracted from China’s exports, the US trade deficit with China is reduced by half, to about 1 percent of GDP—about the same as the US trade deficit with the European Union."

\https://www.uschina.org/reports/understanding-us-china-trade-relationship

They may have a biased perspective, but still it's an interesting point of view.

The US exports $130B of goods to China and China exports $505B of goods to the US. China will not find $505B of goods to send to other markets.

Addiitonally, these figures don't account for the IP theft. If China puts stuff together, they'll need the IP to make it work.

So for manufacturers, there's a $375B opportunity to fill in the US if it gets that far.

[idhawkman]

There are other things that China can do to retaliate besides tariffs. Due to the controled nature of their media, they can undermine the reputation of many of our US brand name products...Starbucks, McDonald's, and so on. It can also spill over into other areas of foreign policy, including our improving relationship with North Korea:

"China still has plenty of weapons to use once it runs out of quantitative measures," economist Andrew Polk said in a newsletter. Could Beijing end cooperation on North Korea? Punishing UN sanctions on North Korea -- approved and enforced by Beijing -- drove Pyongyang to the negotiating table, analysts say, landing Trump his made-for-TV summit with Kim Jong Un in Singapore earlier this month.

To achieve the North's complete denuclearisation, Trump likely needs Beijing to stay on board with the sanctions, but a trade war could change Chinese thinking, said Cheng Xiaohe, an international relations professor at Renmin University.

Cooperation between China and the United States on the North "will become very complicated and very difficult," Cheng said.
In an indication of China's leverage on the issue, Kim visited Beijing exactly one week after the summit to brief President Xi Jinping, his third trip to China this year.

http://www.dailymail.co.uk/wires/afp/ar ... e-war.html

It's the same story with our allies and other countries that we need cooperation on with non economic issues. For example, if Trump wants cooperation with countries like Mexico over border security, he's not going to get it if he has a stranglehold on their necks via tariffs.

Pffft, Mexico didn't help us in any way on the border when NAFTA was in effect. Changing tarrifs is not going to get them to help us in the future.

[NorthHawk]

The US exports $130B of goods to China and China exports $505B of goods to the US. China will not find $505B of goods to send to other markets.

Addiitonally, these figures don't account for the IP theft. If China puts stuff together, they'll need the IP to make it work.

So for manufacturers, there's a $375B opportunity to fill in the US if it gets that far.

The United States is isolating itself within the trading world.
Tarriffs are already announced against the EU, Canada, Mexico, and China being the largest partners, but also India whose market may be larger than China in the future if they get their act together as well as other lesser trading partners and economies.
Who is left to trade with and if those outside of the US coalesce as a single unit against the US, what kind of deal will result? All trading countries need outside and new markets for businesses to expand and keep workers employed. By limiting export markets, it necessarily means less production is required which results in fewer employed. The unintended consequence of Trumps view of America First is America isolated if the current trends continue. A better tack would be to make theslight improvements to the NAFTA to make it better for all, tweak the trade agreements with the EU, then use these agreements and common viewpoints to resist China's theft of IP and market protections. As it is, China is stronger now than they
have ever been since Nixon's visit to China in the 70's because we are divided.

[idhawkman]

The United States is isolating itself within the trading world.
Tarriffs are already announced against the EU, Canada, Mexico, and China being the largest partners, but also India whose market may be larger than China in the future if they get their act together as well as other lesser trading partners and economies.
Who is left to trade with and if those outside of the US coalesce as a single unit against the US, what kind of deal will result? All trading countries need outside and new markets for businesses to expand and keep workers employed. By limiting export markets, it necessarily means less production is required which results in fewer employed. The unintended consequence of Trumps view of America First is America isolated if the current trends continue. A better tack would be to make theslight improvements to the NAFTA to make it better for all, tweak the trade agreements with the EU, then use these agreements and common viewpoints to resist China's theft of IP and market protections. As it is, China is stronger now than they
have ever been since Nixon's visit to China in the 70's because we are divided.

As the saying goes, "If 'ifs and buts were candy and nuts, oh what a Christmas it would be.'"

The reason China is strong is that they've been taking our money and building their defenses along with Clinton giving away our rocket technology, they have become a formidable foe. Before we keep empowering them with more and more cash, we need to balance the trade.

Additionally, if we don't import as much, we need more employees to produce the products we consume, not reduce the number of employees.

[NorthHawk]

As the saying goes, "If 'ifs and buts were candy and nuts, oh what a Christmas it would be.'"

The reason China is strong is that they've been taking our money and building their defenses along with Clinton giving away our rocket technology, they have become a formidable foe. Before we keep empowering them with more and more cash, we need to balance the trade.

Additionally, if we don't import as much, we need more employees to produce the products we consume, not reduce the number of employees.

Are you saying you can generate wealth by trading only within your own country?
If so, you are sadly mistaken. It's a recipe for economic disaster.

The real reason China is so strong is the pent up desire for private business and the massive population. They have an incredible entrepreneurial spirit and the giant vacuum allowed their economy to develop real quickly.
China, however, has not been a good actor in everything business related with stealing IP, but trade wars may not be the best tool to fix the problems and having the major economies on board in a united front could effect real change.
That's a Chinese Gov't focus that should be addressed at that level.

Here's an article about who would "win" a trade war (lose less is the better descriptors).

https://www.msci.com/www/blog-posts/win ... 0915122305

There are also some further reading links at the bottom should it interest you.

[RiverDog]

Additionally, if we don't import as much, we need more employees to produce the products we consume, not reduce the number of employees.

And pay higher prices. Imports from China has helped keep prices down so consumers have more money left over to spend on other items. Besides, unemployment is near record lows, so we don't need those jobs that the Chinese currently perform, most of which are unskilled and low paying.

There are some things, like tennis shoes and sweat shirts, that are going to make sense to produce elsewhere. I could care less if we have a trade deficit so long as our unemployment is low, inflation is low, and the economy is growing at a healthy rate, all of which currently exists. Besides, making China dependent on us has its advantages as it makes it less likely for a war to break out.

[Aseahawkfan]

The United States is isolating itself within the trading world.
Tarriffs are already announced against the EU, Canada, Mexico, and China being the largest partners, but also India whose market may be larger than China in the future if they get their act together as well as other lesser trading partners and economies.
Who is left to trade with and if those outside of the US coalesce as a single unit against the US, what kind of deal will result? All trading countries need outside and new markets for businesses to expand and keep workers employed. By limiting export markets, it necessarily means less production is required which results in fewer employed. The unintended consequence of Trumps view of America First is America isolated if the current trends continue. A better tack would be to make theslight improvements to the NAFTA to make it better for all, tweak the trade agreements with the EU, then use these agreements and common viewpoints to resist China's theft of IP and market protections. As it is, China is stronger now than they have ever been since Nixon's visit to China in the 70's because we are divided.

China is strong, but the majority of their money comes from the United States. Eventually we will be weak compared to them if they continue along. But you have to understand, the majority of the world does not engage in free trade like they claim. We were the most open nation for trade. I spent so much time reading on how badly other nations screw us on trade, sometimes directly like when Airbus was subsidized against Boeing and sometimes just by virtue of their weak economies and protectionist policies or just their size. Most nations are so small that they rely on selling some small set of products to a huge nation like the United States. That's why when the United States economy collapses the whole world feels it, yet when other nations economies collapse it's a minor drop in earnings for a few companies.

We're interconnected,but the United States is the engine and powerhouse of the world economy and it's not even close. China is our nearest competitor and even right now they need us more than we need them. So many other nations are so poorly run economically with so little value building business activity that I don't even know how they sustain. The level of stupid of economies like France, Spain, Italy, and Greece I don't even get. Germany is a well run nation and economy. Norway wouldn't be close to topping any lists if they hadn't nationalized their oil in such an effective way, while having larger markets to sell to. Everyone holds up Norway as some great example of life without ever realizing it has nothing to do with their tax system at all.

The world poorly run. They need to give some on these trade deals. The world cannot just keep expecting us to clean up all their messes whether it's their weak economies or their social and political unrest. They have to grow up at some point and be a contributor rather than a drainer of resources.

The only nations I don't think should be getting hit by tariffs are Canada, Britain, and Australia. We have fairly good relationships with them, especially now that that Britain is leaving the poisonous EU.

[Aseahawkfan]

And pay higher prices. Imports from China has helped keep prices down so consumers have more money left over to spend on other items. Besides, unemployment is near record lows, so we don't need those jobs that the Chinese currently perform, most of which are unskilled and low paying.

There are some things, like tennis shoes and sweat shirts, that are going to make sense to produce elsewhere. I could care less if we have a trade deficit so long as our unemployment is low, inflation is low, and the economy is growing at a healthy rate, all of which currently exists. Besides, making China dependent on us has its advantages as it makes it less likely for a war to break out.

My concerns with China are currency manipulation, piracy, intellectual property protection, and property/capital ownership. If they want to own things here, then we need to be able to own things there. They can't steal what we make and do whatever with it. That is rubbish. They have to let their currency rise with their increased GDP output. If their economic power increases, then their currency must rise. At some point China will be the engine of the world economy, they must show a willingness to be a lawful member of the world business community. We can't let them treat us like some vassal state because they can move a population large enough to take us over over here by purchasing property like they do the Phillipines or other areas in Southeast Asia.

[idhawkman]

Are you saying you can generate wealth by trading only within your own country?
If so, you are sadly mistaken. It's a recipe for economic disaster.

The real reason China is so strong is the pent up desire for private business and the massive population. They have an incredible entrepreneurial spirit and the giant vacuum allowed their economy to develop real quickly.
China, however, has not been a good actor in everything business related with stealing IP, but trade wars may not be the best tool to fix the problems and having the major economies on board in a united front could effect real change.
That's a Chinese Gov't focus that should be addressed at that level.

Here's an article about who would "win" a trade war (lose less is the better descriptors).

https://www.msci.com/www/blog-posts/win ... 0915122305

There are also some further reading links at the bottom should it interest you.

Two ways to respond to your first point. I can demonstrate the absurd by being absurd.
Are you saying you can generate wealth by trading only within your own world (earth)?

Or

I can point out the flaw in your logic.
If you can only generate wealth by trading with others, one or the other will get the better end of the deal in order to "generate wealth". So who do you think is losing in our trades with other countries? Yep, that is right, the US. But don't worry, Trump is fixing that now.