Trump's tariff wars...long post.

[Owen]

6 hours ago, mcnach said:

 

No, I didn't miss it, but the guy is as reliable as a Scottish Summer

That is not fair. You know exactly what to expect from a Scottish summer. 

Edited yesterday at 22:18 by Owen
because of the spelling. Always because of the spelling.

[Downunderwonder]

6 hours ago, tegs07 said:

Indeed but you missed the second part which is having decided that he is doing the opposite but against his allies. The weird thing is that with all the various conspiracy theorists there doesn’t seem to be a conspiracy that Trump is a fully bought up and paid for Russian asset. I don’t believe that by the way. I prefer the simple explanation that he is a buffoon.

Search Trump Russian sleeper agent

 

2 hours ago, PaulWarning said:

the USA are very proud of their democracy, land of the free and all that, there's no way free elections won't happen in the future

That Gerry Mander bloke has a lot to answer for. He plays on both sides but Republicans really fed him the ball last time.

[tauzero]

3 hours ago, chris_b said:

Trump's main job is to end the Constitution and declare martial law. After that he's expendable because there won't be any more elections.

 

He'll be well advised to keep to the ground floor of Trump Towers.

[SteveXFR]

I wouldn't wish death on anyone, even Trump but I would wish sniper assassins success in their missions, whatever they may be.

[Geek99]

33 minutes ago, SteveXFR said:

I wouldn't wish death on anyone, even Trump but I would wish sniper assassins success in their missions, whatever they may be.

I just wish they were better at it. He is a total Cnut. He was averagely bad last time, but off the scale of insane this time 

if Joe was too old, so is trump 

[tauzero]

I await the civil war and Canada's subsequent annexation of the USA with interest.

[tegs07]

Rather dull point with my limited economic knowledge being put to the test. Let’s suppose that the ultimate aim of tariffs is to tackle the trade deficit. This would in theory boost domestic demand and favour local producers. The secondary effects would be to reduce the amount of $ flowing overseas and by association the volume of overseas investment (aka foreign ownership of infrastructure and treasuries). 

The theory long term is sound. The issue I don’t understand is who bridges the gap in the short to mid term?

China, one of the biggest purchases of US treasury debt is unloading at unprecedented levels and diversifying its holdings particularly in gold.

Will this drop in demand increase yields?  If demand drops yield increases and with this so does the cost of borrowing and servicing debt.

 

Investment from internal US stakeholders in theory will replace foreign ownership of capital (treasuries and physical assets) BUT if the cost of borrowing is increasing, inflation is also increasing how do you persuade the billionaires to embrace the risk of short term volatility (including the possibility of recession) and not to invest in the pretty much guaranteed return offered by inflation proof assets like gold?

 

Interesting times for the US consumer and borrower who I suspect are in for a shock.

Edited 13 hours ago by tegs07
clarity

[SteveXFR]

Just wondering, do Mexican made Fenders come here directly from Mexico or do they travel via the US (with tariffs added)?

Tariffs could make a Mexican Fender expensive.

[tegs07]

2 minutes ago, SteveXFR said:

Just wondering, do Mexican made Fenders come here directly from Mexico or do they travel via the US (with tariffs added)?

Tariffs could make a Mexican Fender expensive.

The way I understand supply chains in the USA raw materials cross the border (mexico and canada) multiple times before the finished product is shipped. This was the brown trousers moment for the automotive sector and I suspect it will be similar for other industries.

[prowla]

9 minutes ago, tegs07 said:

Rather dull point with my limited economic knowledge being put to the test. Let’s suppose that the ultimate aim of tariffs is to tackle the trade deficit. This would in theory boost domestic demand and favour local producers. The secondary effects would be to reduce the amount of $ flowing overseas and by association the volume of overseas investment (aka foreign ownership of infrastructure and treasuries). 

The theory long term is sound. The issue I don’t understand is who bridges the gap in the short to mid term?

China, one of the biggest purchases of US treasury debt is unloading at unprecedented levels and diversifying its holdings particularly in gold.

Will this drop in demand increase yields and if so does the cost of borrowing increase?

Investment from internal US stakeholders in theory will replace foreign ownership of capital (treasuries and physical assets) BUT if the cost of borrowing is increasing, inflation is also increasing how do you persuade the billionaires to embrace the risk of short term volatility (including the possibility of recession) and not to invest in the pretty much guaranteed return offered by inflation proof assets like gold?

 

Interesting times for the US consumer and borrower who I suspect are in for a shock.

Yep - the problem is that, having built up a reliance on imports, the domestic suppliers simply don't have the capacity to meet current demand.

Therefore the consumers will pay the tariff-based price increases.

It will likely reduce demand and imports, but will also impact exports due to reciprocal actions (eg. Canada's response) at the government level and personal choices by buyers (eg. I've decided not to buy a couple of US-produced/owned items this past week - small potatoes, but maybe indicative).

Further, the decision to withdraw support to Ukraine will impact the US companies who have been producing the equipment which was being manufactured to go there; presumably there'll be associated lay-offs (or stockpiling to offset the issue).

Trumpinomics is coming across a bit like Trussinomics: seems great, if you're living in a fantasy world.

[Agent 00Soul]

14 hours ago, chris_b said:

 

As above. If everything goes to plan, 2024 was the last US election. 

 

 

14 hours ago, peteb said:

 

I don't think that is really the plan. I think it is more to establish a political structure (Project 25) to serve the oligarchy that makes elections irrelevant. 

 

The aim is for the USA to become what Hungary under Orban is. I think Orban himself called it “illiberal democracy” or something. Whatever it’s called, the modern Hungarian state is the model. It’s ironic that such Europhobes as the MAGA Republicans are quite open in their desire to copy a European country and EU member. 

[SteveXFR]

The future is not bright.

[Buddster]

1 hour ago, tegs07 said:

Let’s suppose that the ultimate aim of tariffs is to tackle the trade deficit

Or maybe the ultimate aim is to cause chaos in the infrastructure of the political system across US and EU, which is the ideology behind trumps liberation backers and money suppliers to brexit. 

[bass_dinger]

I am enjoying this thread, and am learning a lot from it. Mostly, I am learning that there is no single correct answer - and that people are impeccably polite when debating their points. 

 

One minor plea, however.  Rather than saying "we" or "our", or "here", where necessary for context, can people say what countries they are referring too? 

 

So, not "our importers here have already seen that we don't want to pay more for their products ", but "Canadian importers here have already seen that we don't want to pay more for American products"

 

Otherwise, I am finding that I am having to look at people's profile to see where they live, to fully understand their point!

 

Yours, with a big map, bass_dinger. 

[tegs07]

58 minutes ago, Buddster said:

Or maybe the ultimate aim is to cause chaos in the infrastructure of the political system across US and EU, which is the ideology behind trumps liberation backers and money suppliers to brexit. 

I honestly don’t know what the ultimate goal is. I can see some logic behind the usual flack, bombast and smokescreen but the problem with theory (particularly in inter-dependent economies) is that there are so many different variables sticking to a straight course of action is extremely difficult even with a determined steady hand on the rudder. When you constantly change direction then theory mutates to chaos which (if it’s a master plan rather than a consequence maybe potentially crippling in the short term. I would not like to be holding sizeable debts or be in a vulnerable job in the USA right now.

[peteb]

4 minutes ago, tegs07 said:

I honestly don’t know what the ultimate goal is. I can see some logic behind the usual flack, bombast and smokescreen but the problem with theory (particularly in inter-dependent economies) is that there are so many different variables sticking to a straight course of action is extremely difficult even with a determined steady hand on the rudder. When you constantly change direction then theory mutates to chaos which (if it’s a master plan rather than a consequence maybe potentially crippling in the short term. I would not like to be holding sizeable debts or be in a vulnerable job in the USA right now.

 

The ultimate goal is political rather than economic and that is Project 25. Whether that is a burning issue with Trump, or just what he had to sign up to for the backing to get elected is another thing. 

 

The point of the tariffs seems to be a bit of political posturing and an attempt to sow chaos and confusion. This hurts everyone, but in every scenario, the USA comes out of it worse and will ultimately be politically unpopular. I assume that this is why he keeps backing down every time the tariffs are due to come into effect. 

 

[Buddster]

6 minutes ago, peteb said:

The ultimate goal is political rather than economic and that is Project 25. Whether that is a burning issue with Trump, or just what he had to sign up to for the backing to get elected is another thing. 

 

Very much agree peteb. 

trump isn't the spearhead of all this. He's a blunt tool, the Bez to get the MAGA clan going. 

 

It's a long read, and although from 2017, this article is very interesting. Follow the money... 

 

https://www.newyorker.com/magazine/2017/03/27/the-reclusive-hedge-fund-tycoon-behind-the-trump-presidency

[Russ]

3 hours ago, SteveXFR said:

Just wondering, do Mexican made Fenders come here directly from Mexico or do they travel via the US (with tariffs added)?

Tariffs could make a Mexican Fender expensive.

If they work the same way as my employer (a big, well known and long-established acoustic guitar manufacturer with operations in the US and Mexico), once the Mexican-made guitars are ready, they get shipped back up to the US and distributed from there, hence attracting the tariff. 

 

There’s been talk of how to sidestep them, possibly by setting up an international shipping department in Mexico to ship the Mexican-made stuff directly to dealers outside the US, but, right now, that’s a longer-term plan and we’re probably just going to have to raise our prices, both on the Mexican-made guitars and on the (much more expensive) US-made ones.  

[Beer of the Bass]

I can make bass strings last a long time, so the strings I buy and change most often are my acoustic guitar strings. Currently I like Martin Retros, made in Mexico for a US company, and it seems like buying those in the UK might be quite badly hit by the tariff arrangements. I might start looking at Newtone again...

[Russ]

26 minutes ago, Beer of the Bass said:

I can make bass strings last a long time, so the strings I buy and change most often are my acoustic guitar strings. Currently I like Martin Retros, made in Mexico for a US company, and it seems like buying those in the UK might be quite badly hit by the tariff arrangements. I might start looking at Newtone again...

There’ll be some new coated strings from that particular company soon, so you might have to change them less often.  

If there ends up being a change to how distribution from the Navajoa factory works, ie, they start shipping internationally directly, I’ll let you know… 

[bass_dinger]

37 minutes ago, Russ said:

 

If there ends up being a change to how distribution from the Navajoa factory works, ie, they start shipping internationally directly, I’ll let you know…

So, if that happens, the strings will bypass the USA tariffs, and go directly from Mexico to (say) the UK.  That will reduce salary tax income, from staff at the existing USA distribution centre - and there will be no tariff income either.  So, rather than more American jobs, or tariff income, there will neither. 

 

Oh, and I have just learnt that I might be able to use Newtone strings,  manufactured here in the UK, rather than the (other) American brand that I usually use. 

 

Those tariffs are certainly having an impact on the USA's economy...

 

Edited 8 hours ago by bass_dinger

[Beer of the Bass]

I mention Newtone because the Martin strings I like are monel wound, and there are only a few companies offering monel strings, Newtone being one of them.

[Russ]

32 minutes ago, bass_dinger said:

So, if that happens, the strings will bypass the USA tariffs, and go directly from Mexico to (say) the UK.  That will reduce salary tax income, from staff at the existing USA distribution centre - and there will be no tariff income either.  So, rather than more American jobs, or tariff income, there will neither. 

 

Oh, and I have just learnt that I might be able to use Newtone strings,  manufactured here in the UK, rather than the (other) American brand that I usually use. 

 

Those tariffs are certainly having an impact on the USA's economy...

 

They've done the maths on that one - the US distribution centre does plenty of business with the US-made stuff, is largely automated and won't require any turnover of staff. But it will require substantial investment in a new premises in Navajoa, as well as hiring new staff there.

 

But all of this will be cheaper than what they stand to lose from the tariffs - it's not just shipping finished guitars to the US that will attract tariffs, a lot of the wood, components, etc come in from the US or via the US, and every stage of that process will attract tariffs. 

[Phil Starr]

5 hours ago, tegs07 said:

Rather dull point with my limited economic knowledge being put to the test. Let’s suppose that the ultimate aim of tariffs is to tackle the trade deficit. This would in theory boost domestic demand and favour local producers. The secondary effects would be to reduce the amount of $ flowing overseas and by association the volume of overseas investment (aka foreign ownership of infrastructure and treasuries). 

The theory long term is sound. The issue I don’t understand is who bridges the gap in the short to mid term?

China, one of the biggest purchases of US treasury debt is unloading at unprecedented levels and diversifying its holdings particularly in gold.

Will this drop in demand increase yields?  If demand drops yield increases and with this so does the cost of borrowing and servicing debt.

 

Investment from internal US stakeholders in theory will replace foreign ownership of capital (treasuries and physical assets) BUT if the cost of borrowing is increasing, inflation is also increasing how do you persuade the billionaires to embrace the risk of short term volatility (including the possibility of recession) and not to invest in the pretty much guaranteed return offered by inflation proof assets like gold?

 

Interesting times for the US consumer and borrower who I suspect are in for a shock.

Given some previous posts I suspect your knowledge of economics is more than passable. Probably a lot better than the current administration in the USA

 

 

I suspect the current tariffs are more about bullying than economics. Hit your trading partners hard and they will scurry around trying to appease you, figuring the cost will be less than trying to fight with an irrational and unpredictable but powerful neighbour.

 

However the long term theory is quite interesting, I'm not convinced it is sound for most advanced economies but it does have plus points. In many ways the model of this sort of economy is Japan. I have a family connection in that my son leved there for 10 years and it is a fascinating place. A kind of science fiction story set in a planet that has split from out universe decades ago and has drifted from ours in ways which are perfectly reasonable but different frm the assumptions we take for granted. One of these is that in many ways Japan is a planned economy and deliberately protects itself from much of the rest of the world. Japan has a lot of tariffs and the state invests heavily into what it sees as strategic industies, recent trade agreements have eaten into this but one example is the tariff on rice. Rice has an almost spiritual significance in Japan and the Japanese believe their home grown rice is the best in the world, however thay are a long way from being self sufficient in agricultural production. To protect the farmers and to keep rice prices high they have an 800% tariff on rice imports, That's not a miss-pring 800% and I checked the figure yestrday. 800% on American rice imports brings the price up to match the cost of Japanese grown rice. Similar tariffs if less extreme protect the home market in many other goods and you see very few goods not produced in Japan in the shops or in peoples houses. There is very little of the cheap Chinese c**p we find in most of our shops. Taxes are strikingly low in Japan and employment is high and their relationship with the consumer society is very different from ours, the provision of services from the state puts us to shame most of the time. The trick of good state provision with low taxes is to insulate themselves from the rest of the world and tariffs are a part of that. The exchange rate is really volatile which is a downside. When my son first went there the exchange rate was 107Y to the £. currently it is 192Y so the cost of UK goods will have nearly doubled. This of course is of no consequence to the Japanese as they only buy things produced within the Yen economy. The downside is you need to be self sufficient as far as possible as any imported goods/raw materials are extraordinarily expensive.

 

The USA is in a great position to become a closed economy, it is a huge country with extensive raw material wealth (including extensive rare earths btw) the realtively low population density means it can easily feed itself and the huge geographical are it covers means it can grow almost anything somewher in the country. It also has protected many strategic industries and the high levels of investment in tech companies means it is almost impregnable there too.

 

My belief is that the US could erect trade barriers with a lot of short term issues for it's population but whch could allow it to maintain a very high standard of living. They gain a lot of benefit from the dollars position as the leading reserve currency  but changes in that position would largely only affect the wealthy. The US is in a better position than almost anywhere else in the world to run an isolationist economy. I don't think they need international trade in the way that Europe or China do. 

 

I stress that this is strictly a thought experiment on my part, a break from worrying about speaker designs and the intricacies of PA systems. I honestly don't think in a million years the White House incumbency is thinking this way but I didn't think the Russians would invade Ukraine so what do I know

 

 

[Al Krow]

1 hour ago, Phil Starr said:

Given some previous posts I suspect your knowledge of economics is more than passable. Probably a lot better than the current administration in the USA

 

 

I suspect the current tariffs are more about bullying than economics. Hit your trading partners hard and they will scurry around trying to appease you, figuring the cost will be less than trying to fight with an irrational and unpredictable but powerful neighbour.

 

However the long term theory is quite interesting, I'm not convinced it is sound for most advanced economies but it does have plus points. In many ways the model of this sort of economy is Japan. I have a family connection in that my son leved there for 10 years and it is a fascinating place. A kind of science fiction story set in a planet that has split from out universe decades ago and has drifted from ours in ways which are perfectly reasonable but different frm the assumptions we take for granted. One of these is that in many ways Japan is a planned economy and deliberately protects itself from much of the rest of the world. Japan has a lot of tariffs and the state invests heavily into what it sees as strategic industies, recent trade agreements have eaten into this but one example is the tariff on rice. Rice has an almost spiritual significance in Japan and the Japanese believe their home grown rice is the best in the world, however thay are a long way from being self sufficient in agricultural production. To protect the farmers and to keep rice prices high they have an 800% tariff on rice imports, That's not a miss-pring 800% and I checked the figure yestrday. 800% on American rice imports brings the price up to match the cost of Japanese grown rice. Similar tariffs if less extreme protect the home market in many other goods and you see very few goods not produced in Japan in the shops or in peoples houses. There is very little of the cheap Chinese c**p we find in most of our shops. Taxes are strikingly low in Japan and employment is high and their relationship with the consumer society is very different from ours, the provision of services from the state puts us to shame most of the time. The trick of good state provision with low taxes is to insulate themselves from the rest of the world and tariffs are a part of that. The exchange rate is really volatile which is a downside. When my son first went there the exchange rate was 107Y to the £. currently it is 192Y so the cost of UK goods will have nearly doubled. This of course is of no consequence to the Japanese as they only buy things produced within the Yen economy. The downside is you need to be self sufficient as far as possible as any imported goods/raw materials are extraordinarily expensive.

 

The USA is in a great position to become a closed economy, it is a huge country with extensive raw material wealth (including extensive rare earths btw) the realtively low population density means it can easily feed itself and the huge geographical are it covers means it can grow almost anything somewher in the country. It also has protected many strategic industries and the high levels of investment in tech companies means it is almost impregnable there too.

 

My belief is that the US could erect trade barriers with a lot of short term issues for it's population but whch could allow it to maintain a very high standard of living. They gain a lot of benefit from the dollars position as the leading reserve currency  but changes in that position would largely only affect the wealthy. The US is in a better position than almost anywhere else in the world to run an isolationist economy. I don't think they need international trade in the way that Europe or China do. 

 

I stress that this is strictly a thought experiment on my part, a break from worrying about speaker designs and the intricacies of PA systems. I honestly don't think in a million years the White House incumbency is thinking this way but I didn't think the Russians would invade Ukraine so what do I know

 

 

Nice post about Japan - very interesting, thanks Phil.

 

I'm not so sure it's going to be plain sailing at all for the US: tariffs are very likely to be inflationary and make the average US worker poorer in the short and medium term. And in the long run...well we're all dead anyway (Keynes).

Steel is a good example. Tariffs up will play well with the 200,000 US steel workers, for sure. But the for the millions who work in US manufacturing, when one of their key raw materials goes up in price and either the US consumer picks up the tab or they can no longer compete with overseas goods (more tariffs?), how is that going to help? Either way it's inflationary and a key election pledge Trump made was to deal with the cost of living. He's currently doing the opposite.

 

And, for the first time, starting to get flak from who would have believed it... the likes of Fox News, over his tariff grandstanding.

 

Edited 6 hours ago by Al Krow