Hi koan,
no, I think Trump was being Trump when he said that. He has diarrhea of the mouth. However, Trump didn't start the trade wars. The trade wars have been going on for decades and the US has been losing them dramatically. Let me give you one example. Brazil imposes 103% taxes and duties on many technology imports from the US, whereas, we impose negligible import taxes from Brazil. I know this for a fact, because when I was in tech, I dealt with this Brazilian tax issue many times. That and many other imbalances result in a trade deficit with Brazil, which really is nothing more than Brazil treating the US unfairly and stealing money from us. This is happening all over the world. Most of our steel trade is with China. The same thing is occurring there. China has built up their steel manufacturing capacity way beyond demand using cheap loans and gov't subsidies, which has driven supply way up and prices around the world way down, driving many steel businesses in the US and elsewhere out of business. This increases the deficits with the US, as we import steel (i.e. China dumping), instead of making it here. That is again, theft from the US.
So Trump is right about these things, but now I'm going to get critical as hell. Trump has handled this like a complete f_cking amateur. How did he impose those tariffs? With a tweet and he did it unilaterally. These are the actions of a child. If it had been me, I would have sat with all my economic and corporate community advisors and told them, we are going to retaliate against all those countries that have been imposing unfair trade practices on the US. We're going to a policy of full reciprocity on the full range of economic goods. I'm going to target the top 10 trading partners first and we'll expand from there. I would work with my team to come up with all the pros and cons, the order of implementation and what the marketing campaign should be to explain it to the American people. I'd warn all our friendly Western allies with phone calls and tell them we are going to implement reciprocal measures against them as well in Europe (they have 10% import duties on our cars, but we have 2.5% import duties on there cars...not fair) and that if they retaliate, it will do no good, because we will match them tit for tat to ensure all import duties are exactly equal between all countries the US does business with. In short, my policy would be full trade reciprocity with all countries of the world and I would engage the full range of organizations and people at my disposal to ensure the execution and marketing plans are as good as they could be.
But make no mistake, the Democrats are wrong on trade. It is not fair that the US must subsidize the world in trade, while we rack up giant debts and become insolvent. The world will be a much more dangerous place with an insolvent US that cannot wield our power to keep countries like Russia, China, Iran, and North Korea at bay.
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These Countries Are Responsible For America's Trade Deficit
"It's not the economy, it's China stupid!"
While establishment globalists doth protest loudly of the Steel (and Aluminum) impositions that President Trump is proclaiming, it appears their memories of recent historic reality is gravely absent (or willfully being ignored).
On Friday, Peter Navarro, Trump's newly reincarnated foreign trade advisor, made clear that this is not a 'first strike' in the 'trade war', this is America's retaliation to years of abuse:
“I don’t believe any country in the world is going to retaliate for the simple reason we are the most lucrative and biggest market in the world,” Navarro told Fox News Friday.
“They know they’re cheating us. All we’re doing is standing up for ourselves.”
One look at the record US trade deficit, with both the entire world, (and more specifically China alone and Europe alone), and one could make the case that he is correct.
The US administration appears to be taking an increasingly aggressive stance on trade and the following chart is the breakdown of which countries Trump will - or should - be going after...
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Source: BNP Paribas
As we noted previously, while many have been quick to slam Trump's strategy, at least one hedge fund believes that Trump is correct in his trade war stance. Here is Stephen Jen from SLJ Macro Partners:
The US is the least protectionist large economy in the world, while China is the most protectionist. In our note on this subject a couple of weeks ago, we pointed out that the US, based on data from the WTO, is by far the least protectionist nation in the world (with the exception of a tariff-free city state like Hong Kong) — far more open than Europe, Japan, and especially China. And it seems a bit hypocritical to us that more protectionist nations are complaining about the actions of the least protectionist nation.
Excess capacity in China. China has half of the world's steel production capacity, much of which is excessive and unnecessary, even Beijing would admit. The 2008-09 RMB4 trillion stimulus in China further boosted China's industrial capacity, including in steel and other sunset industries. This has led to a situation where Chinese steel production had to be exported to the rest of the world at very low prices. Some in the US, not surprisingly, consider this 'dumping'. Further, both the US and the EU share the verdict that China is still not a 'market-based' economy, because of the large and persistent explicit and implicit government subsidies, and other forms of support from the public sector, that make Chinese products unfairly competitive.
Why is Europe not held to the same standard as the US? Europe is complaining about the US' latest policy. Investors should know that Europe has already imposed two dozen anti-dumping measures against Chinese steel exports. What then is the substantive difference between the anti-dumping measures imposed by the EU and what the Trump Administration is doing? Is Europe less protectionist than the US? If Europe were so open, what is all the fuss about Brexit and the inability of the UK to access the European market?
As Jonathan Ferro (@FerroTV) so eloquently tweeted, "hate to puncture some of the narratives out there. But... EU tariffs on US autos = 10% US tariffs on EU autos = 2.5%" |
