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Trump trade policy will turn the US into Brazil

By Feux Follets following x   2018 Mar 2, 2:56am 1,966 views   49 comments   watch   sfw   quote     share    


Shielding raw materials exporters while ignoring the decline of America's high-tech capacity, defensive trade action stands no chance of rejuvenating the US industrial base.

The broad US stock market gave up an early rally and fell over 5% after President Trump’s announcement of punitive tariffs of 25% on steel and 10% on aluminum, the highest in US history. US Steel, the country’s largest producer of the metal, rose 6.4% on the news and aluminum producer Nucor gained 2.4%, while the S&P 500 average lost 1%. General Motors fell almost 4%, Ford fell 3%, United Technologies fell 2.8% and Boeing fell 3.4%.

Raw materials prices have little to do with the erosion of America’s industrial base. Chronic underinvestment in capital-intensive manufacturing is the underlying problem, and American manufacturers avoid big capital commitments because they can’t compete with Asian subsidies for industrial plant and equipment.

Asian economies view a $10 billion semiconductor fabrication plant the way Americans view a bridge, stadium or airport, as a public good that merits taxpayer support. China’s economy is so big that its subsidies distort capital investment around the world.

By protecting raw materials exporters while ignoring the decline of American high-tech capacity, the Trump trade policy nudges the US economy towards the economic profile of a Brazil: a producer and exporter of agricultural goods and raw or semi-finished materials with an atrophied industrial base.

As the equity market plunge suggests, Trump’s announcement is anything but smart. America’s greatest commercial challenge comes from China, which dominates many categories of high-tech manufacturing and has committed tens of billions of dollars to a campaign for supremacy in semiconductors.

But China’s steel and aluminum exports to the US amount to less than 1% of the total; America’s main suppliers are Canada, Brazil, South Korea, Mexico, Russia, Turkey and Japan, in order of importance.

China has been accused of depressing world prices of industrial metals, although aluminum prices have risen by 60% and steel prices have doubled since the Nov. 2015 low. US Steel’s stock price has jumped from $7 a share in early 2016 to $43 before Trump’s announcement.

US Steel’s 29,000 employees won’t determine the outcome of any major election, but the White House evidently believes that it needs to show the flag on trade to maintain credibility with its working-class supporters.

If Trump’s trade announcement was a cynical political gesture with domestic politics in mind, the damage will be limited. But earlier this week, the president promoted trade warrior Peter Navarro to a rank equal to that of Economic Policy Council head Gary Cohn, which suggests that other shoes are likely to drop.

More, including charts etc. http://www.atimes.com/article/trump-trade-policy-will-turn-us-brazil/


David P. Goldman also writes under the name "Spengler" and is typically 100% pro Trump.


#Economics #Trade #BananaRepublic


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10   RafiMaas   ignore (0)   2018 Mar 2, 7:37am   ↑ like (1)   ↓ dislike (0)   quote        

lostand confused says
Liberal logic in full display


Yes, high gas prices not equal to MAGA. Are you saying you want to pay more at the pump?
11   lostand confused   ignore (0)   2018 Mar 2, 7:42am   ↑ like (0)   ↓ dislike (1)   quote        

RafiMaas says

Yes, high gas prices not equal to MAGA. Are you saying you want to pay more at the pump?

LOL-you guys now favor cheap thrid world imports, cheap third world competetion sow e cna get cheap junk and be on welfare-oh that si right-that si what democrats stand for these days!
12   zzyzzx   ignore (1)   2018 Mar 2, 7:45am   ↑ like (4)   ↓ dislike (1)   quote        

When you import everything and export nothing, you can impose tariffs and always win.
13   RafiMaas   ignore (0)   2018 Mar 2, 8:15am   ↑ like (1)   ↓ dislike (0)   quote        

zzyzzx says
When you import everything and export nothing, you can impose tariffs and always win.

That's not what the stock market said.
14   zzyzzx   ignore (1)   2018 Mar 2, 8:21am   ↑ like (2)   ↓ dislike (1)   quote        

RafiMaas says
That's not what the stock market said.


The stock market is wrong (and very short sighted) in this case.
15   RafiMaas   ignore (0)   2018 Mar 2, 8:25am   ↑ like (1)   ↓ dislike (0)   quote        

zzyzzx says
RafiMaas says
That's not what the stock market said.


The stock market is wrong (and very short sighted) in this case.


So then it could be that the stock market was wrong on the tax cuts too.
16   HappyGilmore   ignore (2)   2018 Mar 2, 8:31am   ↑ like (0)   ↓ dislike (0)   quote        

zzyzzx says
When you import everything and export nothing, you can impose tariffs and always win.


I'm in favor of tariffs, but we shouldn't pretend that there aren't going to be some consequences to this action. The US is a huge exporter and there are a LOT of jobs in the US that depend on exports. If it turns into a trade war, it will hurt us.

The good thing is I don't think it will come to that. Nobody wants to lose the US market.
17   RafiMaas   ignore (0)   2018 Mar 2, 8:32am   ↑ like (1)   ↓ dislike (1)   quote        

zzyzzx says
When you import everything and export nothing, you can impose tariffs and always win.


I must say this sounds logical.

What I wonder is why people cheered on a tax cut of which the majority went to rich people. Doesn't this just put more money into the pockets of the rich so they can spend more on politicians to sway more favorable legislation. What is the ¢ents in that?
18   TwoScoopsOfWompWomp   ignore (2)   2018 Mar 2, 8:58am   ↑ like (2)   ↓ dislike (0)   quote        

It's funny. Every President and pretty much every major party candidate in the past 30 years has been a Free Trader.

Al Gores insistence that free trade with Mexico was going to create US Manufacturing Jobs in a debate with Ross Perot was just posted on this board.

We finally get a guy who expresses skepticism about Trade Agreements and walks away from TPP within days of entering office, something no President has done in decades to any free trade deal, and we get nitpicking about how and when and why.

Steel is a specialty material. It's an alloy, and steel alloys are so specific regarding application, that the trend has been for small specialized mills concentrating almost exclusively on one kind of product. For example, skyscraper girders or locomotive rails.

Aluminium is vital to aerospace and electronics industries. Does you no good to have jet engines without a body to put it on.

What I would love more than anything is to get out of the WTO.
19   TwoScoopsOfWompWomp   ignore (2)   2018 Mar 2, 9:18am   ↑ like (1)   ↓ dislike (0)   quote        

But what we really need to do is have CNN host a town hall so we can find out what 16 year olds think about the Steel Tariff.
20   Malcolm   ignore (1)   2018 Mar 2, 10:05am   ↑ like (2)   ↓ dislike (0)   quote        

Kakistocracy says
When was the last time a country "won" a trade war ?


China, Japan, Taiwan, they've been winning the trade war. I visited China and saw exactly how a trade deficit translates to a loss of quality of life here and literally a new apartment, car, electric scooter, nice clothes, healthcare and 55 year retirement age for men and 50 for women. That's how. Oh, and every residence seems to be within walking distance of a "Central Park." I found myself impressed, humbled and pissed off.

It has nothing to do with "under-investment."
22   Feux Follets   ignore (0)   2018 Mar 6, 3:13am   ↑ like (1)   ↓ dislike (1)   quote        

"Trade wars are good"? 3 past conflicts tell a very different story

But what exactly is a trade war and what are its consequences? It would be worth recalling some illuminating examples, each of which led to disastrous results.

France and Italy go to ‘war’

Soon after Italy’s unification in 1871, the young nation turned to protectionism to foster its “infant” industries, whereupon it terminated its trade agreement with France in 1886.

Italy raised tariffs as high as 60 percent to protect its industries from French competition. The French government responded by refusing to negotiate and instead threatened the Italians with punitive tariffs if Italy did not lower its own.

Tariff retaliation followed tariff retaliation. In France, this resulted in the passage of the highly protectionist Méline Tariff of 1892, which famously signaled the death knell of the country’s flirtation with free trade.

The GOP takes on the Canadians

Although the GOP has in recent times called itself the “party of free trade” – before Trump anyway – it wasn’t always thus. In the years following the U.S. Civil War, for example, when Republicans dominated the presidency, it was the proud party of protectionism and took efforts to solidify its economic nationalist platform.

The U.S. abrogated its reciprocity treaty with Canada in 1866, following which Canadian economic nationalists sought to pay their southern neighbor back “in their own coin” – that is, through tariff retaliation.

By 1879, Canadian Conservatives consolidated around their own national policy of protectionism. Some American companies – Singer Manufacturing, American Tobacco, Westinghouse and International Harvester – decided to move their production to Canada rather than pay the high import taxes. By the late 1880s, 65 U.S. manufacturing plants had relocated to Canada. In this case, far from halting outsourcing, protectionism caused it.

Trade tensions reached a breaking point in 1890. Republicans, in charge of the executive and the legislative branches, passed the highly protectionist McKinley Tariff. Agricultural exports to Canada fell by half from 1889 to 1892.

And when the Republicans passed the even more protectionist Dingley Tariff in 1897, Canada decided that the best response was a double dose of tariff retaliation and closer trade ties with the British empire rather than the United States.

Smoot-Hawley wars and the age of protectionism

Trade wars were by no means unique to the late 19th century. Far from it.

The trade wars that followed the Republican passage of the protectionist Smoot-Hawley Tariff Act of 1930, which raised duties on hundreds of imports, similarly contain illustrative lessons for today. Canada responded with tariff increases of its own, for example, as did Europe.

In a widely cited study from 1934, political economist Joseph M. Jones Jr. explored Europe’s retaliation. His study provided a warning about the trade wars that can arise when a single nation’s tariff policy “threatens with ruin” specialized industries in other countries, arousing “bitterness” throughout their populations.

To provide but one example from Jones’ study, the Italian public responded violently to the Smoot-Hawley Tariff. American-made cars were attacked and befouled on the streets of Italy. And in June 1930, Benito Mussolini vowed that “Italy will defend herself in her own way.” Tariff duties were increased on U.S. goods, and total U.S. exports to Italy plunged from US$211 million in 1928 to $58 million in 1932.

An indignant Italy added insult to injury by signing a commercial treaty with Soviet Russia in August 1930, followed by a nonaggression pact two years later.

More broadly, economist Douglas Irwin notes how the 1930 tariff “was very damaging from the standpoint of U.S. commerce” because it sparked tit-for-tat trade discrimination against the U.S. and “diverted existing trade away.”

More: http://theconversation.com/trade-wars-are-good-3-past-conflicts-tell-a-very-different-story-92801
24   anonymous   ignore (null)   2018 Mar 6, 4:18am   ↑ like (1)   ↓ dislike (0)   quote        

Malcolm says
Kakistocracy says
When was the last time a country "won" a trade war ?


China, Japan, Taiwan, they've been winning the trade war. I visited China and saw exactly how a trade deficit translates to a loss of quality of life here and literally a new apartment, car, electric scooter, nice clothes, healthcare and 55 year retirement age for men and 50 for women. That's how. Oh, and every residence seems to be within walking distance of a "Central Park." I found myself impressed, humbled and pissed off.

It has nothing to do with "under-investment."


American free market Capitalist travels to China and is impressed and humbled by the Command Economy of the Communist

We used to declare war against those type of heathens
25   MisterLefty   ignore (0)   2018 Mar 6, 4:48am   ↑ like (3)   ↓ dislike (1)   quote        

Trump! Emperor! For Life!
26   Quigley   ignore (0)   2018 Mar 6, 5:56am   ↑ like (1)   ↓ dislike (1)   quote        

Steel and aluminum are national strategic resources. Letting your domestic manufacturers be destroyed by trade wars is not only irresponsible, it’s dangerous. What happens if we go to war with our steel provider? No more tanks and aircraft!
27   zzyzzx   ignore (1)   2018 Mar 6, 7:16am   ↑ like (2)   ↓ dislike (0)   quote        

HappyGilmore says
The US is a huge exporter


Our trade deficit suggests otherwise.
28   anonymous   ignore (null)   2018 Mar 6, 7:34am   ↑ like (2)   ↓ dislike (0)   quote        

zzyzzx says
HappyGilmore says
The US is a huge exporter


Our trade deficit suggests otherwise.


We are one of the worlds largest exporters

We are the largest importer

The trade deficit suggests that we import more than we export

He didn’t say we are a NET exporter
29   Feux Follets   ignore (0)   2018 Mar 6, 11:45am   ↑ like (0)   ↓ dislike (1)   quote        

Quigley says
Steel and aluminum are national strategic resources


They do not take up all our steel output, not even a serious majority.

Quigley says
What happens if we go to war with our steel provider?

No more tanks and aircraft!
Not true.

Quigley says


Letting your domestic manufacturers be destroyed by trade wars is not only irresponsible, it’s dangerous.


Please refer to comment # 2 on the following thread: http://patrick.net/post/1314118/2018-03-01-trump-says-u-s-to-impose-steel-aluminum-tariffs-next-week

We are still the number three steel producer in the world, we export some of our steel product and also import steel.

On a side note why wasn't Potus concerned about country of origin for the steel in his buildings ? Is he going to lead by example and pay tariffs on all of that steel just to show true concern ?
30   TwoScoopsOfWompWomp   ignore (2)   2018 Mar 6, 11:55am   ↑ like (0)   ↓ dislike (0)   quote        

Brazil and Mexico were poor from Free Trade. For most of their history, the Land-based Wealthy Class of those countries who owned the Plantations and Mines used cheap labor to export raw materials, and wanted the latest and greatest products imported from around the world. Because they didn't give a damn about national manufacturing, only themselves, they never cared about creating an Industrial base and thus a middle class.

Just like the Confederacy would have been poor if it won independence and built it's future on low wages and free trade with agra/mineral exports.

Like Germany, Japan, Italy, China, South Korea, etc. the US became rich from protecting nascent industry from being wiped out by cheap exports due to big fat tariffs that the Founding Fathers put in place right at the beginning of the Republic.

What neoliberals don't want you to know is that fairly strong tariffs existed on a wide range of goods for most of the Republic's history until fairly recently.

Just like in the past, the Neoliberals in the US are increasingly living off Rents in the form of Real Estate (Only in the past few years have Investment Firms brought and rented SFH houses in any quantity). This also explains why the Neoliberals tell you:

The large scale manufacturing isn't coming back
The American Dream is Over
Yet we need millions of migrants each year

They tow they same in Europe as well. The reason is Big Finance is heavily deployed into real estate and needs ever increasing rents and prices to support themselves. So they want a growing population, despite the job creation weakness for many many years. Owning the Media and funding Think Tanks, they're able to deploy what seems like "All Experts Agree" "No Serious Person believes" we need mass migration and one-sided "free" trade. Mind you this is the same Media and Think Tanks that said in 2006 we had reached a Permanent Plateau and that Neoliberal Economics was the pinnacle of Human Achievement.
31   Feux Follets   ignore (0)   2018 Mar 6, 12:00pm   ↑ like (1)   ↓ dislike (1)   quote        

Uh - no. We rested on our laurels after World War II in both the steel industry, auto industry and most everywhere else.

We are where we are because of ignorance, hubris, and greed.

While everyone else was improving and getting more efficient, we thought the world we knew would go on forever just because we're Murica - just like in those treaties we gave to the Indians

As long as the wind blows, water flows - blah blah blah....didn't work well for the Native Americans or for us.
32   APOCALYPSEFUCKisShostikovitch   ignore (30)   2018 Mar 6, 12:02pm   ↑ like (1)   ↓ dislike (0)   quote        

These pictures are useless without NIPPLES!
33   TwoScoopsOfWompWomp   ignore (2)   2018 Mar 6, 12:07pm   ↑ like (1)   ↓ dislike (0)   quote        

Feux Follets says
As long as the wind blows, water flows - blah blah blah....didn't work well for the Native Americans or for us.


Mass Immigration turned out poorly for the Native Americans, also.

Very interesting that in 1950s a fellow in his late 20s with a factory job could support a family of 4 on one income with a modest home, car, radio, television, phone, a week at the lake in the summer, etc.

But college graduates today of a similar age can barely support themselves with a 4-year degree from a major university.

Despite the huge explosion of productivity and far better educated workforce and support from digitalization.

Yet, despite the claims of "lost of competitiveness", this is not reflected in the living standards of executives, or profits of multinational companies, especially financial companies.
34   Feux Follets   ignore (0)   2018 Mar 6, 12:16pm   ↑ like (1)   ↓ dislike (1)   quote        

TwoScoopsPlissken says
But college graduates today of a similar age can barely support themselves with a 4-year degree from a major university

Posted a chart with the turning point the other day concerning wages. Something wonderful and magical happened during the latter part of the Carter era and the start of the Reagan era for the top 1% and for the rest not so much.
35   Feux Follets   ignore (0)   2018 Mar 6, 12:22pm   ↑ like (1)   ↓ dislike (1)   quote        

Management along with elected officials bear the brunt of the blame when all of downward spiral started - people continuing to buy poorly made goods including cars etc. did the rest and when the cheap prices arrived - it was like Manna from heaven.

To this every day most (above 90%) of a company's problems are a direct result of something management did or didn't do - not the workers, not the competition, not the regulations - nothing except piss poor management.

MBA = Management By Assholes.

Most of them wouldn't know MBWA (Management By Walking Around) if it hit them in the face with a 2 x 4 or piece of rebar.
36   TwoScoopsOfWompWomp   ignore (2)   2018 Mar 6, 12:23pm   ↑ like (1)   ↓ dislike (0)   quote        

Feux Follets says
Posted a chart with the turning point the other day concerning wages. Something wonderful and magical happened during the latter part of the Carter era and the start of the Reagan era for the top 1% and for the rest not so much.


It was also the time when Japanese Cars and Electronics began to be dumped in the US Market, and Congress, flush with Japanese cash and an unwillingness to risk Japan's Boom due to the Cold War, did little to intervene.

For many decades Japanese Goods like Cameras and TVs were cheaper shipped to Long Beach, Trucked to Kansas, and Placed on the Shelf at a Store in a US suburb... than they were 10 miles from where they were made in Japan. Despite all the intervening fuel and labor and other transportation costs in between ("Magic")
38   Feux Follets   ignore (0)   2018 Mar 6, 3:23pm   ↑ like (0)   ↓ dislike (1)   quote        

TwoScoopsPlissken says
It was also the time when Japanese Cars and Electronics began to be dumped in the US Market


It was also the same time when planned obsolescence was the product coming out of the Big Three, the oil embargo and it's ripple effects and the big three didn't have a decent product to toss out there.

Remember the Cadillac Cimarron, Vega, Pinto, Vinyl Roofs, Padded Vinyl Roofs, Cladding, etc. and some of those other fine products the Big Three were putting out ?

What was stopping us from imitating the competition ? People start ditching the Big Three like a hooker with crabs once they realized the Japanese cars were of so much better quality.

Kodak blew multiple chances to compete as did a lot of other industries.

The Japanese got their proverbial asses handed to them in their hands by South Korea in the electronics arena and they are not safe anymore in the automobile end either.

There was some car guy named Iacocca who said you either "lead, follow or get out of the way". Pretty apparent we did not lead in a lot of things while looking for someone to blame.
40   Booger   ignore (1)   2018 Mar 6, 5:31pm   ↑ like (3)   ↓ dislike (0)   quote        

The EU has a 10% duty on American cars, we have a 2.5% duty on European cars. And they're telling us not to 'upset' them?
41   TwoScoopsOfWompWomp   ignore (2)   2018 Mar 6, 5:34pm   ↑ like (1)   ↓ dislike (0)   quote        

Booger says
The EU has a 10% duty on American cars, we have a 2.5% duty on European cars. And they're telling us not to 'upset' them?



50% of the cars sold in the UK are German. 1 out of 7 Cars made in Germany are sold in the UK.

The UK is also restrained by German-backed Tariffs on non-EU Products (to protect their captured markets) , preventing the UK from making deals outside of Europe.

Yet Remainers act like the Germans hold all the cards.
42   WookieMan   ignore (0)   2018 Mar 6, 5:35pm   ↑ like (0)   ↓ dislike (0)   quote        

Booger says
duty


Duty. Definitely a top 100 word for me. Duty. I guess we put more duty on the cars we give them? ;)
43   Feux Follets   ignore (0)   2018 Mar 25, 2:53am   ↑ like (1)   ↓ dislike (1)   quote        

Navarro’s snake oil will sicken the world

Why would a Harvard PhD economist and tenured university professor make ridiculous assertions about China that no self-respecting economist would claim ownership of?

This question is hanging over prominent China-basher and director of the White House National Trade Council, Peter Navarro.

Navarro has no first-hand familiarity of China, doesn’t show any understanding of China and doesn’t speak Chinese. When asked how many times he’s been to China, he evades and doesn’t answer.”

A former UC Irvine professor and colleague confirmed this, saying, “He generally avoided people who actually knew something about the country.”

When it comes to China, Navarro is not driven by facts and has no desire to write with authenticity and scholarship. To my knowledge, none of his papers on China have been published in peer-reviewed, prestigious academic or professional journals.

During the 2016 presidential election, he co-authored with Wilbur Ross an economic plan for the upcoming administration of Donald Trump. A public letter from 370 economists, including 19 Nobel laureates, labeled the plan an unmitigated disaster.

Despite such condemnation, Navarro now stands as the key economic whisperer to President Trump.

More: http://www.atimes.com/trumps-buying-navarros-snake-oil-will-make-world-sick/#comments

When only the best and brightest will do - hire the worst and dumbest ! MAGA
44   MisterLefty   ignore (0)   2018 Mar 25, 5:51am   ↑ like (1)   ↓ dislike (0)   quote        

Because PhD economists who publish in peer-reviewed journals are doing so well....
46   Tenpoundbass   ignore (11)   2018 Apr 5, 10:08am   ↑ like (1)   ↓ dislike (0)   quote        

Just like he crashed the stock market and started world whore three.
And and and that time, he looked at the sun and pissed off Anderson Cooper for emptying his Japanese box of fishfood in the pond instead of savoring every shovel, oh and don't forget that time he said that thing at his rally. der hur der der harumph!
47   TwoScoopsOfWompWomp   ignore (2)   2018 Apr 5, 10:10am   ↑ like (1)   ↓ dislike (0)   quote        

Yeah. Let's review:

* South America is poor because while the US spent 1792-1970 with Industry-enabling protective tariffs, they were into Free Trade, happily trading agave and coffee and cotton for European Manufactured Goods. Germany and Britain both had super duper protective, mercantalist policies for most of the 19th Century and prior to. In fact Germany never gave up protectionism and became the 2nd or 3rd greatest industrial power, despite starting long after the UK.

So actually, Brazil is poorer than the US because it spent most of it's time in Free Trade.

* Steel, Aluminium, etc. are the basis of a modern economy. They are absolutely vital to national defense; the US has only one mill capable of producing Submarine hull-grade alloys.
* IP Theft is a major issue and that is really a problem since our economy is allegedly based on innovation.
48   Rin   ignore (4)   2018 Apr 5, 11:13am   ↑ like (1)   ↓ dislike (0)   quote        

MisterLefty says


FYI, Brazilian has legal brothels called Termas.
49   CovfefeButDeadly   ignore (4)   2018 Apr 5, 11:22am   ↑ like (1)   ↓ dislike (0)   quote        

Rin says
MisterLefty says


FYI, Brazilian has legal brothels called Termas.


I'm not even sure she is biologically female and Id hit it anyway.

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