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Thread: Trump’s trade war hurting US economy

  1. #1
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    Default Trump’s trade war hurting US economy

    1. Winter Nie is the regional director of Southeast Asia and Oceania for IMD Business School. He opined that the result of a US-Sino trade war would be "an economic war of attrition that China is infinitely better positioned to win". The following are excerpts from Winter Nie's December 22, 2016 article headlined "Why America Would Lose a Trade War With China" at http://fortune.com/2016/12/22/donald...ina-trade-war/

    (Begin excerpts)
    ...If Trump were to impose the 35% to 45% tariffs that he talked about in his campaign, the situation could evolve quickly into a total rupture. But there are a number of intermediate stages that might be painful to both the Chinese and to American companies, but would still leave open trade in certain areas that both sides consider critical. What is certain is that a complete rupture would hurt American companies and China as well, though America will likely be the bigger loser.

    ....Trump is entering uncharted waters. The danger is in thinking that talking tough to China will produce positive results. It won’t. From Beijing’s perspective, international trade takes a second seat to internal politics. Chinese President Xi Jinping’s top priority is to maintain political stability. He cannot lose face in his relations with a new administration in Washington and hope to retain power at home. He especially cannot deal with an American president who the Chinese feel fails to show proper respect for China itself. And, now that China has emerged as the world’s second most powerful economy, he really doesn’t have to.

    A trade war would be problematic, but it would not be a disaster for China, mainly because the U.S. needs China more than vice versa. Twenty years ago, the situation might have been different. China was dramatically underdeveloped, and it wanted access to Western technology and manufacturing techniques. China has most of what it needs now, and what it doesn’t have it can easily obtain from vendors outside the U.S. While the American market looked enticing a few decades ago, it is relatively mature, and today the newer emerging market countries have become much more interesting to Beijing.

    Although a good deal of American high tech equipment is manufactured in China, the lion’s share of the profits go to the American companies that designed the equipment. If that were to stop, American companies would be hurt more than Chinese manufacturers.

    The fastest growing markets for the best items China produces, like laptop computers and cell phones, are in developing regions such as India, Latin America, and Africa. In contrast, China itself is a market that the U.S. can hardly ignore. By the end of 2015, Chinese consumers bought 131 million iPhones. The total sales to U.S. customers during the same period stood at only 110 million. And iPhones are only a small part of U.S. exports. Boeing, which employs 150,000 workers in the U.S., estimates that China will buy some 6,810 airplanes over the next 20 years, and that market alone will be worth more than $1 trillion.

    Were Trump to start a trade war, the most immediate effects would probably be felt by companies like Walmart, which import billions of dollars of cheap goods. The prices on almost all of these items would quickly skyrocket beyond the reach of the lower economic brackets—not because of manufacturing costs, but because of the tariffs. The result would be an economic war of attrition that China is infinitely better positioned to win.

    China’s foreign currency reserves now stand at more than $3 trillion. In contrast, the U.S. has foreign exchange reserves that hover at around $120 billion. Trump’s tariffs would automatically trigger penalties against the U.S. in the World Trade Organization (WTO), and might even lead to the WTO’s collapse, which would lead to higher tariffs against U.S. exports. While it might take a while for that to happen, the turmoil would be catastrophic for American business and employment. China, on the other hand, would emerge relatively unscathed.

    In fact, the importance of the U.S.-China relationship is already being challenged by other players. Apple’s iPhone sales in China are running into competition from local Chinese manufacturers, and Samsung is more than happy to fill any void that the Chinese can’t deal with. Likewise, the Chinese would happily shift their trillion dollars in future aircraft purchases to Airbus a European firm that is already building a plant in China to finish assembly of large, twin-aisle jets. As for automobiles, most Chinese would just as soon drive a Mercedes, BMW, or Lexus as a Ford.

    Trump’s abandonment of existing U.S. trade agreements would accelerate China’s displacement of America as the world’s leading economic power. Both China leading economic experts hope that won’t happen quite yet, but almost anything is possible. (End excerpts)
    Donald Trump's infamous Hitler-style rabble-rousing chants: "Lock her up! Lock her up!"

    "What happens when you're confronted with a politician (Trump) who is utterly without shame? You can reveal where he's lied, explain all the facts, and try as hard as you can to inoculate the public against his falsehoods. But by the time you've done that, he has already told 10 more lies." -- Paul Waldman

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    Default Re: Trump’s trade war hurting US economy

    2. Minnesota is the third largest producer of soybeans in the US. The crop accounts for 30 percent of the state's agricultural exports. The state shipped more than $2 billion worth of soybeans abroad in 2016. More than half went to China.

    The following are excerpts from the April 5, 2018 article, by Star Tribune staff writers Jim Spencer and Tom Meersman, under the headline "Minnesota has millions at stake as China targets soybeans" at http://www.startribune.com/minnesota...ans/478803513/

    (Begin excerpts)
    WASHINGTON – Minnesota’s 2018 soybean crop lost $152 million in value in the commodities futures market hours after China threatened Wednesday to place a 25 percent tariff on soybeans imported from the United States.

    Commodity futures are in constant flux, the state’s soybean farmers know. But they also see a serious threat should actions ever replace words.

    “If the futures price drops 40 cents a bushel on talk, what’s it going to do if this really happens?” asked Bill Gordon, who grows 1,000 acres of soybeans a year on his farm near Worthington.

    As the U.S. and China move closer to a trade war, no one involved with Minnesota’s leading agricultural export wants to find out.

    “Soybeans are the big dog in the room,” University of Minnesota grain market economist Ed Usset explained. “China will import more soybeans this year than our entire country produced four years ago.”

    Minnesota is the nation’s third largest producer of soybeans. The crop accounts for 30 percent of the state’s agricultural exports. The state shipped more than $2 billion worth of soybeans abroad in 2016. More than half went to China.

    There are other Minnesota-made products on China’s newly announced list of U.S. products that face 25 percent tariffs in retaliation for President Donald Trump’s plan to place punitive taxes on 1,300 kinds of Chinese imports to America. But none put the state’s economy at more risk than a punitive levy on a little yellow protein-rich bean....

    But the Minnesota Soybean Growers Association is so upset that it issued a statement Wednesday “calling on the White House to reconsider the tariffs that led to this retaliation.”

    Minnesota-based Cargill urged both countries to “get to the negotiating table to constructively address their concerns with each other in a time-bound manner.”

    The impact of trade conflict between the world’s two largest economies could lead to a destructive trade war with serious consequences for economic growth and job creation,” Cargill said.

    Four state legislators — Sen. Torrey Westrom, R-Elbow Lake; Rep. Rod Hamilton, R-Mountain Lake; Sen. Bill Weber, R-Luverne; and Rep. Paul Anderson, R-Starbuck — who lead the agriculture committees in St. Paul issued a joint statement, warning that “foreign tariffs on products like soybeans and pork could be devastating to farmers already struggling with low commodity prices, and threaten Minnesota families, jobs, exports, and our economy.”....

    Bob Worth, a 65-year-old soybean farmer in Lake Benton, lived through a trade battle that became more than a war of words when President Jimmy Carter took on the Russians in the late 1970s. “That hurt us significantly,” Worth said. “We lost exports and the value of commodities fell.”

    It took years for Worth’s farm to recover....

    If the threats turn into actual tariffs, Naeve* said “crazy things” will begin to happen.

    “The beans will end up going somewhere,” Naeve added, “but the more we have to shuffle around and swap and do more logistics and transloading and shipping, every one of those things just bites into the price and nibbles away 5 and 10 and 20 and 50 cents a bushel here and there.”

    For people such as Mike Petefish, dragging agricultural commodities — especially soybeans — into a trade war makes no sense. The 33-year-old president of the Minnesota Soybean Growers Association farms 5,000 acres of soybeans and corn with his father and his wife.

    Ag is one of the few areas where we have a trade surplus,” Petefish said. “Exporting more soybeans would seem to be an answer.”

    Instead, the president’s trade policy has put at risk the very voters who delivered him to the White House.

    “Trump,” said Petefish, “has to know that most of his base lies in rural America.” (End excerpts)

    * Seth Naeve is a University of Minnesota Extension soybean agronomist.
    Donald Trump's infamous Hitler-style rabble-rousing chants: "Lock her up! Lock her up!"

    "What happens when you're confronted with a politician (Trump) who is utterly without shame? You can reveal where he's lied, explain all the facts, and try as hard as you can to inoculate the public against his falsehoods. But by the time you've done that, he has already told 10 more lies." -- Paul Waldman

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    Default Re: Trump’s trade war hurting US economy

    3. The adverse impact of Trump's tariffs could be felt in the rising prices of washing machines and the scrapping of solar projects in the US. Similarly, thanks to Trump's disastrous trade war with China, Latin American countries like Brazil are selling abundance of soybeans to China at US expense. As a result, Trump had to hastily call a so-called "truce" in his trade war with the EU, lying to US farmers that he had opened up the European market to US agriculture, and pleading with them: "You’re not going to be too angry with Trump, I can tell you."

    The following are excerpts from Justin Worland's June 19, 2018 article, headlined "Why Trump's Trade War With China Is So Risky" at http://time.com/5314894/donald-trump-china-trade-war/

    (Begin excerpts)
    ....For Trump, who has declared trade wars “easy to win,” the escalating tariffs represent the fulfillment of a campaign promise to crack down on China and reduce the U.S. trade deficit to support U.S. jobs. But most economists, business leaders and trade experts on both sides of the aisle have cried foul, arguing that trade wars are a dangerous game that could hurt the economy at home and around the world.

    The prospect of a trade war is particularly dangerous when it comes to China, the U.S.’ largest goods trading partner. Products from the country are integrated into global supply chains, and the U.S. sends the country billions of dollars worth agricultural products, vehicles and machinery each year.

    That position — along with the authoritarian nature of its political system — gives China significant leverage to stay the course in any trade war. The country’s tariffs on $34 billion in goods announced on June 15 targeted industries in politically sensitive places: soybean farmers in Iowa, U.S. automakers in the Rust Belt and orange juice in Florida.

    People in those swing states are taking notice. “If we lose trade to China, our neighbors to the south will be glad to take up that trade,” says John Heisdorffer, a soybean producer from Iowa and president of the American Soybean Association.

    ...most economists generally say that tariffs are the wrong way to tackle the issue. The rollout of this latest set of actions was quick and decisive, leaving little opportunity for negotiation. On June 15, Trump announced tariffs on $50 billion worth of Chinese imports. Within minutes China responded in kind, targeting a range of goods from soy beans to electric vehicles, and prompting Trump three days later to order his trade office to find another $200 billion worth of Chinese goods to target. Preemptively, Trump said he would be willing to bring the total value of Chinese goods targeted with tariffs to $450 billion....

    You may not have felt the pinch of the trade war yet, but experts say that barring big shift in direction large swathes of Americans will get hit. To understand the effects of tariffs, look no further than washing machines and solar panels. The price of laundry equipment has spiked 17% in the last three months after years of decline, according to Bureau of Labor Statistics data. And more than $2.5 billion in U.S. solar projects have been scrapped thanks to the tariffs, according to a Reuters analysis.

    Meanwhile, markets have responded poorly to Trump’s tariffs play, dipping repeatedly with each new tariff announcement. Even an internal report from the White House Council of Economic Advisers reported by the New York Times found that Trump’s trade agenda would hurt the U.S. economy. At the same, Trump’s tax cuts and higher spending have actually exacerbated the trade deficit, which he ostensibly hopes to reduce with his trade agenda. “Look, I have always said a trade deficit doesn’t matter,” former Trump advisor Gary Cohn said at a Washington Post event last week. “In many respects, it’s helpful to our economy.”

    But Trump has remained determined to implement his trade agenda in contrast to his vacillations on other political issues. And he is counting on the getting tough on China play to deliver a win for his base and give Republicans a boost in the midterm elections. The question now is whether economic effects will be felt by then as well. (End excerpts)

    https://www.huffingtonpost.com/entry...b0de86f4974cd2
    Donald Trump's infamous Hitler-style rabble-rousing chants: "Lock her up! Lock her up!"

    "What happens when you're confronted with a politician (Trump) who is utterly without shame? You can reveal where he's lied, explain all the facts, and try as hard as you can to inoculate the public against his falsehoods. But by the time you've done that, he has already told 10 more lies." -- Paul Waldman

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    Default Re: Trump’s trade war hurting US economy

    4. The following are excerpts from an article, by Justin Worland and Philip Elliott on July 2, 2018, under the headline "Republican Allies Warn Trump on Trade".

    (Begin excerpts)
    Republicans are increasingly worried that President Trump’s burgeoning global trade war could cripple the U.S. economy and hand control of Congress to Democrats.

    A raft of traditional GOP allies are warning about the consequences. On Monday, the U.S. Chamber of Commerce released a report highlighting how international trade supports industries ranging from Texas pork to Oregon plywood. Last week, General Motors told the Department of Commerce that proposed tariffs would lead to reduced employment and lower wages at the company — a development that would have dire implications for suppliers already skittish about continuing to produce the parts used to build vehicles. And on June 26, leading industry trade groups from the American Petroleum Institute to the Alliance of Automobile Manufacturers signed a letter in support of a Congressional effort to impede Trump’s tariffs.

    We’re trying to improve trade, but the way it’s being done is backfiring on U.S. companies and will backfire on the U.S. economy,” said Carlos Gutierrez, U.S. Secretary of Commerce under George W. Bush and chair of the Albright Stonebridge Group.

    The list of fronts in Trump’s trade war is long and affects a host of politically sensitive industries
    . He has placed tariffs on steel and aluminum from across the globe, including allies like Canada and the European Union. He has targeted a wide variety of Chinese goods valued at $50 billion and told his team to identify $200 billion more. He’s even floated a 25% tariff on all auto imports, many of which come from allies like Germany and Japan.

    Congress has tried to raise the alarm about how all this could play out in November, when Republicans are defending majorities in the House and Senate. Trump’s protectionist inclinations run counter to what it has meant for years to be a Republican. But these aren’t just academic arguments. An economic downturn brought on by tariffs could help Democrats net the 23 seats they need to recapture the House majority. A trade war could destroy industries at the heart of local economies. Kentucky, for example, faces a $180 million hit in European tariffs on whiskey, $25 million from Canada, $10 million from Mexico and $2 million from China, according to the Chamber’s database of tariffs and targets.

    The split over trade is hardly the first time that Trump has drawn criticism from Republicans for breaking party orthodoxy. Just last month, for example, the Chamber demanded that Trump end his Administration’s zero-tolerance policy at the border that split parents from their children. The powerful collection of advocacy groups affiliated with billionaires Charles and David Koch have been outspoken critics of Trump’s views and policies on immigration, trade and tariffs. “Keep in mind, 55% of all votes cast in the Republican primaries went for someone not named Trump,” one Republican strategist who worked against the Trump campaign tells TIME. “We tried to stop this.”... (End excerpts)

    Source: http://time.com/5328475/donald-trump-trade-republicans/
    Donald Trump's infamous Hitler-style rabble-rousing chants: "Lock her up! Lock her up!"

    "What happens when you're confronted with a politician (Trump) who is utterly without shame? You can reveal where he's lied, explain all the facts, and try as hard as you can to inoculate the public against his falsehoods. But by the time you've done that, he has already told 10 more lies." -- Paul Waldman

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