Metal tarriffs- cockamamie scheme, or real sales tactic?

In reply to _ :

History has shown us the folly of a trade war.  Just look at the fundamental cause of the Great Depression.   

My wife works in the banking industry and suddenly announcements of cut backs and lay offs dominates the trade “ papers”  not just big banks either.  So far they have all been lower level people, Tellers, mid level managers, and phone center people. Most telling is no new major projects are in the planning stages and quietly  branches are closing with no big fanfare.  

Projected Growth this year has cut back  by .6% and next year by  1%, back to 2% 

In reply to racerdave600 :

So far this year the Chinese currency has devalued 10%  compared to the Dollar.  Enough to offset some of the effects of Tariffs at least in sales to America. 

That hurts America because the price of our goods has gone up by 10% in their currency. Then you add the tariffs they imposed on us.  The combination makes American goods hopelessly over priced and not the only supply.  

I just talked to our controller. We're not seeing many price increases due to the most recent round of tariffs. Thinking about it, we actually don't sell all that many Chinese-made products. A big part of the reason is as Racerdave stated - there's a lot of extra work involved to maintain quality. Our brake kits, our suspension kits, our turbo and supercharger kits, exhausts, intakes, engine management, roll bars - all mostly US-made and none of them from China. The 6UL wheels we sell are Chinese-made, but we have a BIG stock of those so the prices won't be moving for a while.

Maybe I need to follow up Goodwin's email with one of our own

In reply to AnthonyGS :

Like I said, "interesting engineering challenges"... 

Russia is an interesting comparison. I guess you're right, They've more or less been self reliant since WW2. They don't contribute much on the global economic scale and they provide nothing in terms of security to allow trade for other countries. They have the 11th largest economy but Its only about 1/10th the size of the US economy.

I think you're absolutely right that the rest of the world deciding to try and work together without the US would be the worst case from a US perspective. But without the US buying up goods, producing/selling our goods abroad, and providing security That nobody else is capable of, I'm not confident that they can do that even if they're willing and able. And that doesn't even consider the financial states of most foreign countries or their aging demographics that are likely to hurt their economies moving forward.

STM317 said:

In reply to alfadriver :

When I look at the wealth gap in the US, I think it might. Wall St and the wealthy are making money through global trade, but when accounting for inflation, the average American's buying power peaked in the 70s. We're rapidly returning to a society of haves and have nots that existed  before WW2. It's becoming more and more difficult for a normal person to afford a decent life.

Im lucky enough to have a decent job. I work for a big corporation that is incredibly reliant on international trade. My community was found to be the most dependent on foreign trade in the entire US. Tariffs are going to hurt, and might hurt me more than the average American. I'm not a fan. But I'm not concerned for myself. I'm concerned for my daughter. If it might give my daughter better odds of having a good life then I'd happily sacrifice now due to tariffs. I'm already sacrificing for her benefit in other ways to ensure she has the best chances for success and happiness and if tariffs cause more sacrifice then that's how I'll view them.

I've followed your discussion with alfadriver and the point I don't get about your argument is why manufacturing in the US is a "good" thing.  Is it self reliance?  Is it we could be more efficient, adjusted for labor cost?  I keep on bringing up comparative advantage because just as not everyone can make their own clothes, shoes, car, appliances, phones, food, etc. etc. I don't believe it's in the best interest of every country to do the same.  Can you help me understand where you're coming from?  Or am I misreading or understanding your argument?

Dave M said:

Well, trade is only ~10% of the US economy, so the direct effects will by definition be small overall. I think it is hard to predict what the "ripple" effects on the consumer will be. If people start thinking there will be a really big brouhaha and start pulling back on spending, then yes, the effects could be quite large. So far they are small!

Imports are closer to 15% of GDP, and once you add in margin for retailers and the supply chain, the impact to GDP is bigger, though I don't know the number.  And even beyond that, I can't predict the ripple effect of that on the rest of the economy, so I think we agree that it's hard to predict the impact.  I just think we're starting with a bigger portion of the economic base (I'm thinking closer to 25% - 15% + 10% for impact to ultimate consumer, but that's just a wild guess.)

In reply to bcp2011 : Good point, now I’m going to have to check on what percentage of the GDP IMPORTS AND EXPORTS MADE IN THE 1920’s In order to do a comparison  between the Great Depression and today. 

I do know the sudden over supply happened because manufacturing failed to account for the sudden drop in demand as American products got hit with retaliatory tariffs. 

I realize the Boeing 737’s that are stacking up aren’t really because of the tarriffs.  But what about other exports? 

In reply to alfadriver :

Not sure why you don't think this is political- the whole point of taking THIS path to get China to do something is to placate a group of voters.  There are a ton of different paths to deal with this, and this may or may not work out in the best way- if you give up a big chunk of the economy and China now behaves- is that really worth it?  And listening to supporters, some of who have lost businesses, they are happy. 

I don't believe the tariffs are politically motivated. Balanced trade has been a major issue for the president decades before he ran for office. I don't believe his actions were meant to placate a handful of voters. The decision was definitely not politically expedient. Both parties are against it. No polls were taken. He certainly ignored an advisor or two. He is just doing what he believes is right. 

Now that doesn't mean he is right. Just pointing out that this doesn't appear to be a politically motivated decision. 

In reply to bcp2011 :

I feel like I should start by saying that I'm not "pro tariffs". But I am ok with the adoption of an "America First" mindset when negotiating. I don't expect this trade war, or whatever it is, to last long enough for it to actually bring significant manufacturing back to the US as that would take several years. One side will give in before that happens. But I do think that the US is in prime position to renegotiate trade deals that can put US companies in a better position to compete fairly and that those trade deals could dis-incentivize off shoring somewhat. Or at the very least compensate the US for providing the security that keeps it all going now that we don't have to do it in exchange for oil.

Maybe it's foolishly idealistic, but I'd like to think that when US companies are able to compete fairly, I think they'll do even better than they have, which should create demand for workers and raise wages naturally. Or increase infrastructure investment from these companies, which creates work which increases demand for workers. Or reduce everybody's tax burden if we're not singularly funding a global police force.

In reply to STM317 :

Thank you for the explanation.  Seems sensible.  I think China has been particularly bad with respect to IP, so if nothing else hopefully the tariffts will demonstrate resolve such that it's no longer so blatant.  Where I have questions on is why we are doing this to Canada, and many of our European allies as well (separate from the global police point you're raising in regards to increased contribution for NATO).  

And on the global police force point - I think it'll be impossible for people like us (assuming you're not a high ranking govt official...) to understand the true complexities of international agreements and what's traded for what.  As an example, in the opening pages of Fear, the book on the Trump administration by Bob Woodward, there was a description about the trade agreement with South Korea, and one of the "benefits" of the deal is that it will allow US to detect a ICBM launch from North Korea 7 seconds after launch.  That seems really valuable if there ever was an incident (fingers crossed), but how much is it worth?  I don't know anyone can say.  My point is simply that at a certain level economics and national security and other topics become intertwined, and common people like us are unlikely to have the full view (nor should we).  

In reply to STM317 :

America first has been tried before by some very rich and powerful Americans. Look at the 1930’s. 

The upshot of their position would have allied America with the Germans during WW2.  In short isolationism has never worked and it’s not in America’s best interest. 

frenchyd said:

In reply to STM317 :

America first has been tried before by some very rich and powerful Americans. Look at the 1930’s. 

The upshot of their position would have allied America with the Germans during WW2.  In short isolationism has never worked and it’s not in America’s best interest. 

I think STM's argument is more nuanced.  To paint it as black and white would imply all trade is fair and all traders are acting ethically (which for China at least, I do not believe they have, given how much technology they've stolen, not dissimilar to the US stealing cotton gin tech way back from England).  To the extent that's not true, there are gray areas for debate, and while I don't totally agree with the approach or STM's argument, I can understand and appreciate his (her?) position.  

In reply to bcp2011 :

Is this the opening salvo of the next global war?  

In the last one Germany tried very hard to break us from our traditional allies of England & France. They invited leading American figures Such as Henry Ford And Charles Lindbergh to see how Hitler made the trains run on time and made Germany prosperous again. 

In reply to bcp2011 :

Let’s assume that events aren’t planned and they just happen.  In that situation then everyone is just along for the ride and what happens happens.  

If one country acts unfairly towards another there are plenty of places where differences can be resolved.  Places like the UN, WTO, or military alliances like NATO.  

Lacking that we should be able to get our traditional allies like Europe and Canada  to join with us to pressure that country into modifying their trade policies. 

Finally maybe we could unite with other Pacific rim nations to bring that nation into alignment.  

frenchyd said:

In reply to bcp2011 :

Let’s assume that events aren’t planned and they just happen.  In that situation then everyone is just along for the ride and what happens happens.  

If one country acts unfairly towards another there are plenty of places where differences can be resolved.  Places like the UN, WTO, or military alliances like NATO.  

Lacking that we should be able to get our traditional allies like Europe and Canada  to join with us to pressure that country into modifying their trade policies. 

Finally maybe we could unite with other Pacific rim nations to bring that nation into alignment.  

 

1. Except "we" have basically told the UN, WTO, and NATO to go pound sand unless they do what "we" say

2. Except we're busy putting sanctions on our allies like Canada and Germany as well, in addition to bailing out of the Iran agreement that they all stand by, and then threatening them for staying in it with economic and financial penalties.

3. We had that....The TPP was specifically envisioned to serve as a counterweight to China (China was not part of it). But "we" bailed out of it and left all of our Pacific Rim "partners" hanging out to dry.

Not sure if it's notable that stocks took a plunge today and the chief market strategist for on eof the big trading firms stated "the rhetoric on China has only gotten worse, and not better." Likely a response to rising interest rates, but market share losses due to increase in costs of domestic and imported goods can't be a good thing for the financial sector either, apparently.

irish44j said:

frenchyd said:

In reply to bcp2011 :

Let’s assume that events aren’t planned and they just happen.  In that situation then everyone is just along for the ride and what happens happens.  

If one country acts unfairly towards another there are plenty of places where differences can be resolved.  Places like the UN, WTO, or military alliances like NATO.  

Lacking that we should be able to get our traditional allies like Europe and Canada  to join with us to pressure that country into modifying their trade policies. 

Finally maybe we could unite with other Pacific rim nations to bring that nation into alignment.  

 

 

1. Except "we" have basically told the UN, WTO, and NATO to go pound sand unless they do what "we" say

2. Except we're busy putting sanctions on our allies like Canada and Germany as well, in addition to bailing out of the Iran agreement that they all stand by, and then threatening them for staying in it with economic and financial penalties.

3. We had that....The TPP was specifically envisioned to serve as a counterweight to China (China was not part of it). But "we" bailed out of it and left all of our Pacific Rim "partners" hanging out to dry.

Not sure if it's notable that stocks took a plunge today and the chief market strategist for on eof the big trading firms stated "the rhetoric on China has only gotten worse, and not better." Likely a response to rising interest rates, but market share losses due to increase in costs of domestic and imported goods can't be a good thing for the financial sector either, apparently.

Yeah I think you two agree, and I generally agree with both as well, as noted above.  Doing what we're currently doing would not have been my approach, but nobody cares about what I think... 

Having said that i'm not sure this leads to WWIII... 

bcp2011 said:

irish44j said:

frenchyd said:

In reply to bcp2011 :

Let’s assume that events aren’t planned and they just happen.  In that situation then everyone is just along for the ride and what happens happens.  

If one country acts unfairly towards another there are plenty of places where differences can be resolved.  Places like the UN, WTO, or military alliances like NATO.  

Lacking that we should be able to get our traditional allies like Europe and Canada  to join with us to pressure that country into modifying their trade policies. 

Finally maybe we could unite with other Pacific rim nations to bring that nation into alignment.  

 

 

1. Except "we" have basically told the UN, WTO, and NATO to go pound sand unless they do what "we" say

2. Except we're busy putting sanctions on our allies like Canada and Germany as well, in addition to bailing out of the Iran agreement that they all stand by, and then threatening them for staying in it with economic and financial penalties.

3. We had that....The TPP was specifically envisioned to serve as a counterweight to China (China was not part of it). But "we" bailed out of it and left all of our Pacific Rim "partners" hanging out to dry.

Not sure if it's notable that stocks took a plunge today and the chief market strategist for on eof the big trading firms stated "the rhetoric on China has only gotten worse, and not better." Likely a response to rising interest rates, but market share losses due to increase in costs of domestic and imported goods can't be a good thing for the financial sector either, apparently.

Yeah I think you two agree, and I generally agree with both as well, as noted above.  Doing what we're currently doing would not have been my approach, but nobody cares about what I think... 

Having said that i'm not sure this leads to WWIII... 

I hope not, I like my 40-hour weeks doing what I do, which would turn into 80 hours weeks if that happens :P

In reply to STM317 :

I don't necessarily have an issue with getting the best deal possible. 

This is hard to say in a nuanced way...

Globalization, and the flow of revenue and ideas created through trade, benefits the counties further from the current economic peak than it does the country at the peak.

Since the US is always the larger economy in these deals, the coalition of counties we negotiate with almost always stand to gain more than the US does. 

The net effect of this strategy is that eventually everyone engaging in global trade is brought up to the same standard of living as the cheaper labor starts to disappear. Ideally automation has caught up by then.

How certain people take it is that the trade deals may increase other counties economic positions by several percentage points while the US's only increases by a fraction of a percentage point and that's bad. That isn't the case though because the position of the US economy allows our economy to grow as well, just not as rapidly due to diminishing returns.

Now, that isn't to say that the forced technology transfer or outright theft of IP is ok. But people in power need to make their case on those issues not by stating "unfair because we import more than we export from country X."  That's why the WTO exists and partially why the TPP was being formed with US involvement.

I'm not for unfettered trade, but the reasonable period of peace that we're living through (between highly industrialized nation's) also has links to the push for globalization in several studies. I'm less than keen to upset that to add a couple extra percentage points in my portfolio a bit sooner.

In reply to The0retical :

That's a totally reasonable take. I really don't disagree with you. I do feel like I should clarify that I don't necessarily think that imports vs exports should be equal or anything like that. I don't expect the US economy to grow equally to that of our trading partners. I understand that by most metrics the US is the largest economy in the world, and that by nature some of the wealth here will spread to smaller economies through trade. I do think the US should push back against unfair trade policies that put the US at a disadvantage to other nations. Consider the example that RacerDave gave at the top of this page. He has a customer in Brazil. That customer can buy Dave's US product and pay a 110% mark up or the customer can buy from Dave's German competition for just a 35% mark up. If Brazil wants to heavily tax imports, that's fine, but do it equally. Why did Germany get a lower rate there? If you want access to the world's largest economy, then make your import rules and taxes equal across the board. I'm not suggesting we should bully other countries into giving the US sweetheart deals, I just think they should be equal to what other countries have in place. And if we're playing the same games with our imports from other countries, and taxing them differently from each other, then I'd support making them all equal as well. It's a two way street. I see it as opening up fair, equal trade rather than putting restrictions or limitations on it.

I also agree with you that this period of large scale peace is due to international trade, and have no desire to see that end. But the US military really enables all of that global commerce by acting as a singular, stable security force across the world since WW2. That's expensive, but it was necessary when the US needed to import oil to survive. Now that the US is a net exporter of oil and has full energy independence, the need for us to act as that security force has diminished. I think that should be addressed.

In reply to frenchyd :

Lacking that we should be able to get our traditional allies like Europe and Canada  to join with us to pressure that country into modifying their trade policies.

You meant EX allies right?   

irish44j said:

frenchyd said:

In reply to bcp2011 :

Let’s assume that events aren’t planned and they just happen.  In that situation then everyone is just along for the ride and what happens happens.  

If one country acts unfairly towards another there are plenty of places where differences can be resolved.  Places like the UN, WTO, or military alliances like NATO.  

Lacking that we should be able to get our traditional allies like Europe and Canada  to join with us to pressure that country into modifying their trade policies. 

Finally maybe we could unite with other Pacific rim nations to bring that nation into alignment.  

 

 

1. Except "we" have basically told the UN, WTO, and NATO to go pound sand unless they do what "we" say

2. Except we're busy putting sanctions on our allies like Canada and Germany as well, in addition to bailing out of the Iran agreement that they all stand by, and then threatening them for staying in it with economic and financial penalties.

3. We had that....The TPP was specifically envisioned to serve as a counterweight to China (China was not part of it). But "we" bailed out of it and left all of our Pacific Rim "partners" hanging out to dry.

Not sure if it's notable that stocks took a plunge today and the chief market strategist for on eof the big trading firms stated "the rhetoric on China has only gotten worse, and not better." Likely a response to rising interest rates, but market share losses due to increase in costs of domestic and imported goods can't be a good thing for the financial sector either, apparently.

I’m glad that you picked up my intent.  I’m slowly figuring out how to make a point without the lecture. 

bcp2011 said:

irish44j said:

frenchyd said:

In reply to bcp2011 :

Let’s assume that events aren’t planned and they just happen.  In that situation then everyone is just along for the ride and what happens happens.  

If one country acts unfairly towards another there are plenty of places where differences can be resolved.  Places like the UN, WTO, or military alliances like NATO.  

Lacking that we should be able to get our traditional allies like Europe and Canada  to join with us to pressure that country into modifying their trade policies. 

Finally maybe we could unite with other Pacific rim nations to bring that nation into alignment.  

 

 

1. Except "we" have basically told the UN, WTO, and NATO to go pound sand unless they do what "we" say

2. Except we're busy putting sanctions on our allies like Canada and Germany as well, in addition to bailing out of the Iran agreement that they all stand by, and then threatening them for staying in it with economic and financial penalties.

3. We had that....The TPP was specifically envisioned to serve as a counterweight to China (China was not part of it). But "we" bailed out of it and left all of our Pacific Rim "partners" hanging out to dry.

Not sure if it's notable that stocks took a plunge today and the chief market strategist for on eof the big trading firms stated "the rhetoric on China has only gotten worse, and not better." Likely a response to rising interest rates, but market share losses due to increase in costs of domestic and imported goods can't be a good thing for the financial sector either, apparently.

Yeah I think you two agree, and I generally agree with both as well, as noted above.  Doing what we're currently doing would not have been my approach, but nobody cares about what I think... 

Having said that i'm not sure this leads to WWIII... 

Well I agree there is a whole lot more steps to go before WW3 happens. Like  an economic stress causing former enemies need to unite into one group and take harsh action against their former friends.  

Then there is a need for a trigger event.  

In reply to STM317 :

The US might be able to provide our basic needs but not our modern requirements. Look at the produce in your local grocery store. Note how much comes from foreign countries? I mean we don’t have Banana plantations or coffee beans.  In the middle of winter most of the fruits we eat are grown in foreign countries.

America is in love with cost cutting to the point it brought our auto industry to bankruptcy  in the last decade.  We’ve all but given up on cars preferring to use trucks and SUV’s to be profitable.  

China is building ports and roads in Africa in order to secure a long time supply of materials needed for modern  phones and TV’s.  Their labor costs are no longer that much cheaper than America and we don’t have the Capitol required to build our own plants to modernize in order to compete. 

OK our military can secure freedom of the seas but at what cost?  We are using million dollar rockets to blow up third world shanties and $5000 Toyota pick up trucks.  

America will spend over a trillion dollars keeping a Carrier battle group running its projected life. When a fishing trawler with a long rope and a semi submerged bomb can take out the fuel tanker required to bring the fuel every few days to fly the planes.  Without that fuel the carrier can’t attack, can’t really defend itself.  With nuclear power it can run for decades without refueling, but the planes need fuel to fly.  

America builds as many smaller carriers as the rest of the world combined. But we’re the only country spending a Trillion dollars building super carriers.  

bcp2011 said:

STM317 said:

In reply to alfadriver :

When I look at the wealth gap in the US, I think it might. Wall St and the wealthy are making money through global trade, but when accounting for inflation, the average American's buying power peaked in the 70s. We're rapidly returning to a society of haves and have nots that existed  before WW2. It's becoming more and more difficult for a normal person to afford a decent life.

Im lucky enough to have a decent job. I work for a big corporation that is incredibly reliant on international trade. My community was found to be the most dependent on foreign trade in the entire US. Tariffs are going to hurt, and might hurt me more than the average American. I'm not a fan. But I'm not concerned for myself. I'm concerned for my daughter. If it might give my daughter better odds of having a good life then I'd happily sacrifice now due to tariffs. I'm already sacrificing for her benefit in other ways to ensure she has the best chances for success and happiness and if tariffs cause more sacrifice then that's how I'll view them.

I've followed your discussion with alfadriver and the point I don't get about your argument is why manufacturing in the US is a "good" thing.  Is it self reliance?  Is it we could be more efficient, adjusted for labor cost?  I keep on bringing up comparative advantage because just as not everyone can make their own clothes, shoes, car, appliances, phones, food, etc. etc. I don't believe it's in the best interest of every country to do the same.  Can you help me understand where you're coming from?  Or am I misreading or understanding your argument?

Corporate America started sending work overseas to counter labor costs. In doing so instead of being forced to keep investing in new plants and equipment they could simply buy a product at a fixed cost and sell it to the American consumer.  That saved labor and investment. With Just-In-Time manufacturing they could turn all those risks to foreign manufacturers. Thus ensuring profits without investment or risk!  

The problem was foreign manufacturing found cheaper and cheaper ways of making things.  Using automation and  robotics. Meanwhile American wages stagnated and with it buying power. 

Look at all the hardwood forest land in America, yet we no longer make furniture here. Trees are sent to China in containers where they are unloaded by automation, cut, dried, milled and turned into furniture where it’s shipped back to America to be sold. The containers aren’t made here the ships aren’t made here the equipment in the factories aren’t made here, and the profit doesn’t stay here.  

Walk through a furniture store and look at where things are made.