Trump's tariff wars...long post.

[NancyJohnson]

I have a reasonably decent grasp on the economics of tariffs and the protectivism this alludes to give to home market manufactured product.  (In case you don't understand how tariffs work, who actually pays what and where the money goes, I've links a pair of videos below).

 

If Trump's tariff directive pans out the way he wants this will, in all probability, lead to tit-for-tat tariffs; if the UK then imposes a tariff on US imports, everything will go up in price from your preferred bourbon to those much desired Musicman and Fender USA basses.  

 

Even if a 10% tariff is applied on a £1,500 USA bass, sure as hell this won't go up to £1,650...we've adopted (and improved) the greed model in this country, so expect a number nicely rounded up to £1,750.  Well, maybe.  It won't be a flat 10%.

 

If all this pans out and everyone is paying more, will this make you look to homegrown, far-eastern or European manufacturers over US ones?

 

 

 

 

 

Edited February 3 by NancyJohnson
Renamed subject ..

[BassApprentice]

I understand the want to keep everything on home soil and create jobs - but it can't be as simple as just imposing a tariff and there you go.

 

Can only imagine that the people who benefit from this are, once again, the super rich.

Edited February 3 by BassApprentice

[chris_b]

Laurence O'Donnell is always very good.

 

The US can probably outlast most world economies in a stand off.

 

The UK needs to find other markets, and quick.

[Crusoe]

I read something earlier that the US exports more to the UK than it imports from us, so there is a chance that he may not apply tariffs to that market. Europe, on the other hand, could be in trouble, especially car manufacturing.

[NancyJohnson]

It's interesting watching a handful of MAGA-types being quizzed about tariffs, this belief that it'll be China (etc.) who will be paying, not the importer.

 

[Obrienp]

Trump has said that his differences with the UK on trade can probably be worked out. Hasn’t stopped the stock market following European markets in losing value.

 

There are multiple reasons why it would be a good thing for the world to make manufacturing more local: less pollution; less energy consumption; increased security of supply, etc, but you have to create the environment for local manufacture to flourish first. That means investment in science, technology, infrastructure, training, the list goes on. It can’t just be turned on by a bit of protectionism.

[zbd1960]

Protectionism doesn't work, and was a major cause of the depression when the US did similar in 1929...

 

If your country is able to source, supply, and make everything, but prices are being undercut by 'dumping' |(something China has indulged in) then that is a valid case where tariffs would make some sense as it would encourage use of local resources.

 

However, that is not where the world is. No-one - not US, not Europe, not UK - has all the resources they need to make things, has the manufacturing capability to make things, has the infrastructure to make things.

 

Tariffs will not work in this scenario. It is highly inflationary. It will do a lot of damage to many economies, many of which still have not recovered from the impact of Covid. Many economies, e.g. UK, are now service based economies not manufacturing based. Such economies cannot avoid importing components and finished goods.

 

Edited February 3 by zbd1960

[neepheid]

But we on the whole don't want your stupid big cars... tariffs aren't going to change that.  Hey, America - make better/more appropriate stuff that we'd want to buy if you're so concerned about a trade deficit, you dunces!

[Woodinblack]

1 hour ago, NancyJohnson said:

If all this pans out and everyone is paying more, will this make you look to homegrown, far-eastern or European manufacturers over US ones?

 

For me, largely irrelevant, in that there are no US guitars that I would particully be in the market for, and if I was, they wouldn't be new ones, although I realise the new price also affects the second hand market. I think from a stringed instrument point of view I would pretty safe there, although there are other musical instrument things that would be a problem. Either way, I can't see it as that major an issue compared to many other day to day issues.

I think is however a clear indication that we should be putting more effort into our fractured trade relationship with europe.

[12stringbassist]

Trump basically wants to brutishly offend other countries and wield power.
It doesn't matter what the fallout is as far as he is concerned. He's there for the fight.
I imagine the effect here will be that a number of guitar and amp stockists give up on the big USA names.
Well done, Don.

As said in the post above, we need to sort some things out with Europe.

[Woodinblack]

1 hour ago, BassApprentice said:

I understand the want to keep everything on home soil and create jobs - but it can't be as simple as just imposing a tariff and there you go.

 

Unless you can quickly ramp up that manufacturing, no. If you could make iPhones in the US for the same price as you could in china, you wouldn't be making them in China. You can apply a 100% tarrif on them, they would still be cheaper there, but noone would be buying because they would be too expensive (more than they already are).

[chris_b]

Trump will get around to us in time. He wants the NHS and to offload their additive and pesticide ridden food stuffs on us, and that will be the basis of any trade deal. If we don't give it to him then watch out for massive tariffs. The US is our largest market so Trump can destroy our economy in a matter of months. We need a deal with the EU and France knows it. We will pay either way.

Edited February 3 by chris_b

[Bolo]

2 hours ago, chris_b said:

The US is our largest market so Trump can destroy our economy in a matter of months. We need a deal with the EU and France knows it. We will pay either way.

UK trade with EU and non-EU countries in the 4 quarters to the end of September 2024

 

Trade value in £billion

UK exports to the EU 346.1 -1.9%

UK imports from the EU 444.8 -0.4%

UK exports to the non-EU 496.5 -3.5%

UK imports from the non-EU 417.6 -3.2%

 

The EU is your largest market. Of the non-EU exports only ~188b is with the USA.

 

Trump CANNOT destroy your economy, let alone "in months".

 

This fear and panic mongering is worse than useless. 

 

Edit for source: https://www.gov.uk/government/statistics/uk-trade-in-numbers/uk-trade-in-numbers-web-version

Edited February 3 by Bolo

[Obrienp]

I’m in risk of using the B word here. Suffice it to say: together we stand, divided we fall.

 

WRT US musical instrument and gear companies, I would venture a guess that the majority of units sold in this country are manufactured in the Far East and shipped here directly.  Gibson and the other acoustic guitar makes (Martin, Taylor, etc) perhaps being exceptions. I doubt Fender’s US made ranges sell anything like the number of units that Squier do. Would the Far Eastern and MIM made stuff avoid any retaliatory tariffs the UK might impose? Nearly all the electronic stuff like amps, cabs, pedals, etc, is definitely made in the Far East.

 

Tariffs against US components could have a knock on effect on UK and European manufacturers. Barefaced for instance, use Eminence bass drivers, which are made in the US. Now might be a good time to get your order in for a Barefaced cab! 

[Obrienp]

19 minutes ago, Bolo said:

UK trade with EU and non-EU countries in the 4 quarters to the end of September 2024

 

Trade value in £billion

UK exports to the EU 346.1 -1.9%

UK imports from the EU 444.8 -0.4%

UK exports to the non-EU 496.5 -3.5%

UK imports from the non-EU 417.6 -3.2%

 

The EU is your largest market. Of the non-EU exports only ~188b is with the USA.

 

Trump CANNOT destroy your economy, let alone "in months".

 

This fear and panic mongering is worse than useless. 

 

Edit for source: https://www.gov.uk/government/statistics/uk-trade-in-numbers/uk-trade-in-numbers-web-version

I get what you are saying but it depends on your perspective. The UK exports more to the USA than any other single country by a huge margin. It represents over a third of our non-EU exports. That is a big chunk to lose (potentially) and given the perspective of the UK press (mostly right-wing anti-EU biased) and populist politicians, it will cause a huge political storm for the Government to deal with, when they are already embattled.

 

It is not logical but you can’t apply logic to UK politics. It is almost entirely driven by emotion and fear.

[TimR]

It's a form of Disaster Capitalism, but unlike any other. Intentionally crashing the world economy in order for the few billionaires to steel absolutely everything. 

 

My next door neighbour lost his business to a very shady venture capitalist during/after Covid. I have no doubt this is their ultimate aim. 

 

 

[TimR]

US Markets are falling as we write. 

[JoeEvans]

I think Trump is doing a Truss here - a policy move based on the wilfully ignorant application of dogmatic belief, that will crash the US economy and his own political support.

[Obrienp]

2 minutes ago, JoeEvans said:

I think Trump is doing a Truss here - a policy move based on the wilfully ignorant application of dogmatic belief, that will crash the US economy and his own political support.

Some might say it’s a good thing then. In the meantime my pension pot will lose value hand over fist as markets nose dive. It’s only just recovered from the last 5 years of chaos! 😭

[chris_b]

9 minutes ago, JoeEvans said:

I think Trump is doing a Truss here - a policy move based on the wilfully ignorant application of dogmatic belief, that will crash the US economy and his own political support.

 

Trump will just blame everyone else, like Truss does. The US mainstream media won't hold him to account, because the billionaires who own the media are Trump donors. Sadly his supporters will accept his lies.

[tegs07]

I haven’t got a clue what the potential upsides are. It seems to me that big businesses got a hard on offshoring manufacturing and lower tier service sector jobs to countries that have labour conditions that should be outlawed in this century. Now these countries have high level engineering, technical, services, financial sector etc and are looking increasingly likely to take the business away from their western counterparts.

Not sure what the solution is but Tariffs are certainly not going to help in the short term.

[chris_b]

54 minutes ago, Bolo said:

Trump CANNOT destroy your economy, let alone "in months".

 

 

Where are we going to sell goods worth £188 billion if the US stops buying expensive UK products? No one is going to wave a magic wand or step in to bail us out. They will be fighting their own battles with tariffs. Where will domino effect end?

[Count Bassy]

6 minutes ago, chris_b said:

 

Where are we going to sell goods worth £188 billion if the US stops buying expensive UK products? No one is going to wave a magic wand or step in to bail us out. They will be fighting their own battles with tariffs. Where will domino effect end?

I think the key word is "destroy". Badly affect, yes. Destroy, No.

[Al Krow]

32 minutes ago, TimR said:

US Markets are falling as we write. 

 Not by that much though: they fell much more a week ago wiping $billions off tech companies when a little $6m upstart outfit by the name of DeepSeek came to everyone's attention.

 

23 minutes ago, Obrienp said:

Some might say it’s a good thing then. In the meantime my pension pot will lose value hand over fist as markets nose dive. It’s only just recovered from the last 5 years of chaos! 😭

 

Don't panic: UK stock markets are still pretty much at the highest they've ever been! Sure they are down 1% today but they're still up 4% (instead of 5%) in just one month since the start of the year. That doesn't feel like a crash to me! By way of comparison they fell 30% in two days when Covid hit.

 

The pound is surging against the Euro right now - why? 'Cos the expectation is we're not going to be hit with these Trump tariffs anything like as badly as the EU. 

 

Think I'm gonna pick up my bass and do some fretting in a different way 😅

[hiram.k.hackenbacker]

Prof Honig has this to say. Just about sums DT up I think….

 

“I’m going to get a little wonky and write about Donald Trump and negotiations. For those who don't know, I'm an adjunct professor at Indiana University - Robert H. McKinney School of Law and I teach negotiations. Okay, here goes. 

 

Trump, as most of us know, is the credited author of "The Art of the Deal," a book that was actually ghost written by a man named Tony Schwartz, who was given access to Trump and wrote based upon his observations. If you've read The Art of the Deal, or if you've followed Trump lately, you'll know, even if you didn't know the label, that he sees all dealmaking as what we call "distributive bargaining." 
 

Distributive bargaining always has a winner and a loser. It happens when there is a fixed quantity of something and two sides are fighting over how it gets distributed. Think of it as a pie and you're fighting over who gets how many pieces. In Trump's world, the bargaining was for a building, or for construction work, or subcontractors. He perceives a successful bargain as one in which there is a winner and a loser, so if he pays less than the seller wants, he wins. The more he saves the more he wins. 

The other type of bargaining is called integrative bargaining. In integrative bargaining the two sides don't have a complete conflict of interest, and it is possible to reach mutually beneficial agreements. Think of it, not a single pie to be divided by two hungry people, but as a baker and a caterer negotiating over how many pies will be baked at what prices, and the nature of their ongoing relationship after this one gig is over. 

 

The problem with Trump is that he sees only distributive bargaining in an international world that requires integrative bargaining. He can raise tariffs, but so can other countries. He can't demand they not respond. There is no defined end to the negotiation and there is no simple winner and loser. There are always more pies to be baked. Further, negotiations aren't binary. China's choices aren't (a) buy soybeans from US farmers, or (b) don't buy soybeans. They can also (c) buy soybeans from Russia, or Argentina, or Brazil, or Canada, etc. That completely strips the distributive bargainer of his power to win or lose, to control the negotiation. 

 

One of the risks of distributive bargaining is bad will. In a one-time distributive bargain, e.g. negotiating with the cabinet maker in your casino about whether you're going to pay his whole bill or demand a discount, you don't have to worry about your ongoing credibility or the next deal. If you do that to the cabinet maker, you can bet he won't agree to do the cabinets in your next casino, and you're going to have to find another cabinet maker. 

 

There isn't another Canada. 

 

So when you approach international negotiation, in a world as complex as ours, with integrated economies and multiple buyers and sellers, you simply must approach them through integrative bargaining. If you attempt distributive bargaining, success is  impossible. And we see that already. 

 

Trump has raised tariffs on China. China responded, in addition to raising tariffs on US goods, by dropping all its soybean orders from the US and buying them from Russia. The effect is not only to cause tremendous harm to US farmers, but also to increase Russian revenue, making Russia less susceptible to sanctions and boycotts, increasing its economic and political power in the world, and reducing ours. Trump saw steel and aluminum and thought it would be an easy win, BECAUSE HE SAW ONLY STEEL AND ALUMINUM - HE SEES EVERY NEGOTIATION AS DISTRIBUTIVE. China saw it as integrative, and integrated Russia and its soybean purchase orders into a far more complex negotiation ecosystem. 

 

Trump has the same weakness politically. For every winner there must be a loser. And that's just not how politics works, not over the long run. 

For people who study negotiations, this is incredibly basic stuff, negotiations 101, definitions you learn before you even start talking about styles and tactics. And here's another huge problem for us. 

 

Trump is utterly convinced that his experience in a closely held real estate company has prepared him to run a nation, and therefore he rejects the advice of people who spent entire careers studying the nuances of international negotiations and diplomacy. But the leaders on the other side of the table have not eschewed expertise, they have embraced it. And that means they look at Trump and, given his very limited tool chest and his blindly distributive understanding of negotiation, they know exactly what he is going to do and exactly how to respond to it. 

 

From a professional negotiation point of view, Trump isn't even bringing checkers to a chess match. He's bringing a quarter that he insists of flipping for heads or tails, while everybody else is studying the chess board to decide whether its better to open with Najdorf or Grünfeld.” 

 

— David Honig