Tariffs

Trump's Trade War Is a Loser for America

The president’s economic agenda is harming U.S. businesses and consumers.

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On the campaign trail, candidate Donald Trump said that, if elected, "We're going to win so much. You're going to get tired of winning. You're going to say, 'Please Mr. President, I have a headache. Please, don't win so much.'" Unfortunately, Trump's definition of winning seems to mean flexing his presidential muscles, beating his chest, and changing his mind without hesitation—all with an utter disregard for the actual impact of his policies on the economy and American workers.

The president's profound misunderstanding of what victory looks like is particularly visible in his multi-front attack on trade and globalization. All in the name of putting America first, he withdrew from the Trans-Pacific Partnership, treated our trade partners like enemies, forced a renegotiation of NAFTA with no clear idea of whether the new deal (the United States-Mexico-Canada Agreement) could ever be ratified, implemented tariffs to fight imaginary national security menaces, and started a trade war with China without any clearer strategy than his willingness to jack up tariffs at all costs.

Unfortunately, the impact of Trump's behavior and policies leaves most of us Americans with more than a headache. After two great years in which American factories added 170,000 jobs annually, they are now entering a somber phase. The continued uncertainty driven by the Trump trade war is working to undo the productive impact of the 2017 tax reform. Capital expenditures are falling and, with them, the hope of further increases in worker productivity and wages. Higher production costs for the industries downstream of the numerous tariffs make it harder for factories to hire—or, in some cases, keep—their workers. So in 2019, manufacturing jobs increased by only 44,000—a 75 percent reduction in the rate of growth.

Bloomberg senior writer Shawn Donnan notes, "Nationally, the U.S. has not yet seen a collapse in factory jobs," but Pennsylvania has lost 8,300 manufacturing jobs this year, and Wisconsin has lost 4,000—which could cost the president a lot of votes in November of next year. U.S. and foreign tariffs are also contributing to a slowdown in export markets, and, coupled with the many stock market nosedives over the past year and a half, it's no surprise that we just had a contraction in manufacturing output.

Yet Trump is undeterred and shows no signs that he'll consider adopting a new strategy. He even claims that all is good under the glare of his trade war, since Uncle Sam collects vast sums of tariff revenues and the economy is growing. Even when he admits that his trade policy is taking a toll on Americans, he argues that this cost is worth it because to him, "this is much more important than the economy."

Tell that to the firms that are now trying to compete with Chinese rivals. For instance, Johan Eliasch, the chairman and CEO of Head Penn Sports Group explains how the Trump tariffs on Chinese-made tennis balls are propping up the now-Chinese-owned Wilson and hurting its American competitor, Penn. As Eliasch's commentary in The Wall Street Journal explains, Penn produces its balls in China while Wilson produces its balls in Thailand. By penalizing Chinese imports, Trump is giving a leg up to the competition.

"Come back to the United States," Trump might respond. The reality, however, is that shifting supply out of China isn't easy for companies who are also supplying the Asia market from there. Eliasch notes that it would take "five years to shift its manufacturing out of China. If meanwhile we try to charge our U.S. customers more to compensate for the tariffs, we're bound to lose market share to Wilson and its Chinese owners."

Many U.S. companies in China share this experience. A recent survey by the American Chamber of Commerce in China shows that 41 percent of the respondents considered relocating or had relocated manufacturing facilities outside of China, but only 6 percent were considering moving back to the United States. Southeast Asia was the top destination.

For months now, farmers have faced higher farm equipment prices, the loss of foreign markets, and higher loan delinquency because of the trade war. Total tariff revenues collected from American consumers have increased by 73 percent year on year in the first half of 2019. Farmers and taxpayers have Trump's "winning" to thank for that. So, yeah, Mr. President, "Please, don't win so much."

COPYRIGHT 2019 CREATORS.COM

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  1. TLDR: you’ve probably already read this article.

    1. It does seem to just be a rehash of the VDR article from last month.

      https://reason.com/2019/08/15/trumps-trade-policy-makes-no-sense/

  2. Today the latest AG market report was released. Beef, soybean, corn and wheat exports were all up mainly thanks to new markets in South Korea. Beef exports are also expected to rise when the new trade agreement with Japan goes into effect. While exports are down from last year, they remain at near record high. Exports to China have only dropped off slightly. Commodity prices though appear to be depressed more based upon speculation then upon any underlying factors. For example live cattle prices for September are $98 a hundred weight but boxes beef prices are over $300 a hundred weight. Boxed beef prices are near the same price as what they were in 2016, when live cattle prices were at record highs and corn prices were near record lows. A large percentage of the corn acres and soybean acres that are being counted by crop projections are actually prevent plant acres, and not expected to actually result in any significant yield. Additionally, here on the Northern plains we have had extremely wet and cold weather which has significantly decreased harvest progression, to the point that high yields are now being destroyed by head breakage, flooding and lodging. In an average year harvest in my county would be nearing 95% complete but we are only pushing 50%. Many farmers will have to abandon wheat harvest to focus on sugar beer harvest in the next couple of weeks, further delaying wheat harvest (sugar beer harvest is much more time sensitive, you harvest when the sugar beer factory is ready for delivery). Commodity prices have been decreasing, especially livestock, since the latter half of 2016. Additionally, China is still importing fairly large amounts of US agricultural goods, despite the trade war (China simply can’t feed itself). Soybean and corn yields in Brazil are down slightly from last year and Argentina appears to be headed into another period of political upheaval, making any reliance on their exportable markets uncertain. The at commodity markets have a ten year cycle. Corn peaked in 2012, beef in 2016 (the two are generally inversely related). Corn also seems to drive other grain prices. As corn prices increase, wheat (with a slight lag) also increases. Soybeans also follow corn. We’ll see what happens in a couple of months. It is difficult to predict.

    1. The author states for months farmers have dealt with factors such as high equipment prices and low commodity prices, this is false it’s been years as I stated above. This is pure dishonesty by the author. And exports aren’t as depressed as the media leads you to believe.

      1. Considering you started out insulting me and continue to do so, you accuse me of being incapable of rationale debate?
        The 2.35 increase is based upon October delivery, it’s a futures price not market price. According to the USDA summary dated yesterday, the average sale price for live steers was $97.07. The USDA weekly report released on Monday showed for the week ending on the 6th, weekly average sales price was $101.73 direct sales. By my math, direct sales were of $4.69 from last week’s average. So your facts are based upon futures, i.e. speculation, mine are based upon USDA direct market reports. I may have been off on the dollar increase (it was hyperbolic to a degree) and when I referenced the actual numbers, it was actually far worse then my snarky reply.

    2. “For example live cattle prices for September are $98 a hundred weight but boxes beef prices are over $300 a hundred weight.”

      I trade live cattle for a living. A few Fridays ago, a large processing plant burned down that held about 10% of us beef processing capacity. That sent live cake prices much lower and boxed beef higher. This makes sense. There are too many cows to process now so feed lots must compete for processing by dropping the price, or they have to keep them on feed which wastes money. In the other side of it, the supply of beef coming out in boxes is now lower, while consumer demand remains steady, so you see the price at the store go up. Packers are absolutely killing it right now, but that’s the market sending the signal it should : “we need more packers! Someone expand capacity and take down this profit!”

      Anyone who writes “Commodity prices though appear to be depressed more based upon speculation then upon any underlying factors” simply doesn’t understand the factors, and thus blames speculation instead of their own ignorance.

      1. Prices have been depressed for weeks. But what would I know,I only work as an extension Agent in a ranch county,operate my own ranch and have a masters degree in animal science.

        1. The prices in other words have been depressed much longer then one would have expected based upon data available within two weeks of the fire. But I am just ignorant I guess.

        2. So you got caught underhedged and want to blame speculators?

          The real reason you think prices are too low is cause you run a ranch. I have never met a rancher that wasn’t certain that prices were always being depressed by some magical evil hand.

          1. Maybe just give this one up, Murray.
            In the face of soldiermedic’s robust argument, your bare assertions look a bit embarrassing

          2. I raise premium Wagyu and direct sell, I only sell culls to the market. So your hypothesis as to why I blame speculators is not founded in reality.

      2. The Tyson fire only removed 6% of slaughter capacity overall slaughter numbers dropped by about a 1000. Gross margins though are at historical levels. The USDA has begun monitoring for price collusion, among other things in the packing houses. Additionally, September generally sees a decreased in demand for beef, especially after labor day. This year all indications are that that trend will remain the same. Slaughter actually increased after the fire as other packing houses put on weekend shifts to compensate for the loss of the Holcomb plant. So, in the short run the pricing made sense, but now a month later we are seeing more solid data (which was actually available within 2 weeks) and the price difference is not warranted. The price difference was driven by speculation, future traders were betting the fire would decrease slaughter much more then it did. Overall, the impact of the fire was much smaller then originally thought. Here is an article that covers it much more in depth.
        https://www.fb.org/market-intel/impacts-of-the-packing-plant-fire-in-kansas

        1. There was clearly a big rebound in live yesterday as the market regains its footing and sea the real effects.

          Your continued blame off speculators is fascinating though. You should realize how underhedged the cake industry has been recently. A lot of that panic was them actually finally hedging their price risk. The “speculators” you hate so much were the only people around to buy during that panic and put a stop to it. Thank them sometimes. They are on your side as often as not.

          1. A dollar a hundred weight from the day before I guess you could call a rebound. An extra $12.50 on a 1250 lbs steer.
            It was speculation, i.e. they speculated capacity would be hurt worse then it was. They also continued that speculation after data began becoming available that it wasn’t hurt as bad as predicted. It was this fact that lead the USDA to begin investigations. Suddenly prices began to miraculously climb.

            1. live cattle rallied 2.35 yesterday. and 1.95 on tuesday.

              it’s hard to maintain a rational conversation with such wildly different facts.

              1. Considering you started out insulting me and continue to do so, you accuse me of being incapable of rationale debate?
                The 2.35 increase is based upon October delivery, it’s a futures price not market price. According to the USDA summary dated yesterday, the average sale price for live steers was $97.07. The USDA weekly report released on Monday showed for the week ending on the 6th, weekly average sales price was $101.73 direct sales. By my math, direct sales were of $4.69 from last week’s average. So your facts are based upon futures, i.e. speculation, mine are based upon USDA direct market reports. I may have been off on the dollar increase (it was hyperbolic to a degree) and when I referenced the actual numbers, it was actually far worse then my snarky reply. However, I did mention speculation, which would imply your reference to futures would be more in line with my original assertion. And you are correct prices have rallied from last Friday’s ridiculous lows (it was apparent last week that the impact of the fire was not nearly as severe as forecasted. Markets are rallying this week based upon speculation that China will buy more agricultural goods (which they have announced they will) but US market Dynamics remain the same. Demand for live cattle are not as high during the winter domestically. It is speculation that doesn’t appear to be tied to actual market forces or historical trends. It was also speculation that demand for boxed beef would significantly surpass supply of live beef. But this didn’t happen, therefore speculation was the cause of the historic gap boxed beef to live cattle prices. Traders got bearish in the future market. Buyers followed suit. The ranchers ended up paying. No matter how you cut it the market overreacted and should have seen that as soon as the weekly slaughter reports came out. Yes slaughter was down slightly, but not nearly as depressed as the markets were indicating. You want to know why ranchers and farmers hate traders it’s because of you calling us ignorant of market forces and then trying to talk over our heads. We’ll see what the summary is for direct sales on Friday.

  3. It’s a war sacrifices have to be made.

  4. OH NO TRUMPS MAKING THE COST OF OUR CHEAP CHINEESE SLAVE LABOR GO UP!!!!!

    Maybe we could all stop being complicit with the enslavement of our fellow man and stop doing business with the entire country altogether……

  5. It is another day, and Ms. de Rugy (oh yeah, it is Doctor de Rugy since I forgot to mention, she prominently features that PhD! Because that somehow grants her special powers, I guess) shows once again that she has contracted, and is suffering the throes of acute tDS (acute trade Derangement Syndrome).

    @Doctor de Rugy: I challenge you to state a viable alternative to tariffs that will change Red Chinese behavior: Serial lying, serial cheating, and serial theft of American IP. We all pretty much agree that this is the problem. I challenge you to come up with an alternative solution to change behavior. I personally do not think you have the stones (ovaries) to do it.

    Only in America can we have sustained and elevated growth for over two years and cry ‘Wolf’. I mean, this is really something.

    Doctor de Rugy’s arguments on trade are just intellectually vapid, to be charitable. The data is there for all to see. If this is so terrible, as the good doctor argues, why doesn’t the market reflect that? The market is the ultimate barometer of the economic health of the United States.

    There is arguing the interpretation of data, and then there is just blindly arguing….whatever. Doctor de Rugy falls in the latter case, IMO. Her argument is disconnected from the objective reality. Her premises are just flat out wrong.

  6. it was predicted. you need a great planning for this.
    ugcnet

  7. Hey Boehm, the DOW Jones is back up: 27,137.04 as of Sep 11, 2019 at 1700.

    July 15, 2019 high of: 27,359.16

    MARKETS IMPLODING!

    1. Charles Koch’s net worth is still stagnating below $60 billion. The economy sucks.

      #DrumpfRecession
      #VoteDemocratToHelpCharlesKoch

  8. If Trump had started the ‘Trade War’ this author might have a point. In cold fact, the trade war was being waged against us long before Trump was elected. Hell, before I had even HEARD of Trump.

    Now, maybe Trump’s methods of waging war BACK are sub-optimal. But pretending he started it is disingenuous at best.

  9. All wars, both trade and the bloody kind, are losers. If the US had settled with Hitler and the Japanese in the 1940s hundreds of thousands American lives and billions of dollars would have been saved. If Britain decide to surrender to Brussels to save the monetary costs of a no deal Brexit, money will be saved, although at the cost of sovereignty.
    What nations sometimes decide is that it war is worth the cost. Any change to the trade relationship between the US and China will only come about if the Chinese believe the change is better than the conditions being established by the trade war. No suffering, no change.

  10. Sanctions & Tariffs

    These United States of America currently impose economic sanctions upon 28 other nations. Good domestic politics? Maybe. Bad foreign policy? Usually. Bad domestic economics? Definitely!

    Yes, sanctions and tariffs cause pain for the recipient, but they also cause pain for perpetrator via unintended consequences. Moreover, they often benefit our economic adversaries.

    Excerpt from the novel, Retribution Fever:

    This nation will apply the same restrictions to imports from any other country that that country applies to our exports to it whether direct such as tariffs on our imports or indirect such as relief from a domestic so-called Value Added Tax (VAT) on their exports. Levying low or no tariffs on imports from other countries that impose punitive regulations on our exports is indefensible; causing a justifiable outcry from our domestic producers, especially from Small Business. As with foreign subsidies, our levying low tariffs might benefit American consumers short-term but at the cost of losing their jobs long-term.

  11. I think Trump’s trade policies with a lot of countries don’t make much sense. However, it’s clear China needs to be confronted on a variety of fronts, and frankly, a trade war seems to me to be the least damaging type of war we could have with them.

  12. I don’t know if it really works this way, but it seems to me you can have tariffs or you can have an IRS. You can’t have both. I’d prefer the former if the latter was eliminated.

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