US Trade Wars (15 June 2018 – present)

[Bernie Sanders]

In 1971, President Nixon imposed national price controls and took the United States off the gold standard, an extreme measure intended to end an ongoing currency war that had destroyed faith in the U.S. dollar. Today we are engaged in a new currency war, and this time the consequences will be far worse than those that confronted Nixon.


Currency wars are one of the most destructive and feared outcomes in international economics. At best, they offer the sorry spectacle of countries' stealing growth from their trading partners. At worst, they degenerate into sequential bouts of inflation, recession, retaliation, and sometimes actual violence. Left unchecked, the next currency war could lead to a crisis worse than the panic of 2008.

Currency wars have happened before-twice in the last century alone-and they always end badly. Time and again, paper currencies have collapsed, assets have been frozen, gold has been confiscated, and capital controls have been imposed. And the next crash is overdue. Recent headlines about the debasement of the dollar, bailouts in Greece and Ireland, and Chinese currency manipulation are all indicators of the growing conflict.

As James Rickards argues in Currency Wars, this is more than just a concern for economists and investors. The United States is facing serious threats to its national security, from clandestine gold purchases by China to the hidden agendas of sovereign wealth funds. Greater than any single threat is the very real danger of the collapse of the dollar itself.

Rickards wrote the book in 2012, from currency wars we move to trade wars, from trade wars to shooting wars.

Nixon imposed price controls to control inflation....Did not work.

We do not have issues with inflation for the last couple of decades. Deflation would be worse for the working class.

Gold is just a commodity that has some type of mysterious hold on conspiracy types.

Once the Democrats win in 2018 and Trump is abandon by Republicans in 2019, things will look rosy again.

[armati]

Glanced at your comments Bernie.

You got the "Nixon.....didnt work" right.
Maybe the dems win .....?

[waauw]

Germany will be hit very hard with this trade war.
EU Vows to Respond to 'Unjustified' US Metal Tariffs, Launch WTO Dispute

Trump needs a reality check.

It is also misguided since the EU at least does not earn any more income in the USA than the USA does in Europe. This impression can only arise by focusing exclusively on trade with goods and services.

Revenues, however, are also generated by US companies via profits of their subsidiaries in Europe. The current account between the US and the EU, which includes not only trade in goods and services, but also the profits generated in a specific foreign market, is actually balanced.

Believe it or not, there is no US deficit.

In trade in goods with the USA the EU ran a surplus of $153bn in 2017. In services, by contrast, the USA posted a surplus of $51bn, and in so-called primary income, which mainly consists of corporate profits, the US surplus was as high as $106bn.

...US companies tend to pool their profits generated across the entire EU in The Netherlands for tax reasons. That is why the US deficit against Germany in trade in goods gives an incomplete picture of economic relations.

https://euobserver.com/opinion/141945

The funny thing is when this whole thing started, Trump 'claimed' he wanted to protect america's national security. But now he's only imposing sanctions on allies. It's clear he has no idea what he's doing.

[mrswdk]

Isn't his argument that steel/aluminium imports from all those countries undermine American steel/aluminium producers, and that's an industry that is vital to (among other things) producing weaponry?

You could argue with how valid that line is, but I didn't think he's been talking about a trade deficit with Europe.

[waauw]

Isn't his argument that steel/aluminium imports from all those countries undermine American steel/aluminium producers, and that's an industry that is vital to (among other things) producing weaponry?

You could argue with how valid that line is, but I didn't think he's been talking about a trade deficit with Europe.

He's been talking about trade deficits ever since his election campaign. For europe he's been especially targeting Germany.

We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change

https://twitter.com/realDonaldTrump/status/869503804307275776

What is Trump’s problem with the EU’s trade policy?[b][/b]

US President Donald Trump has hinted at possible retaliatory moves against the European Union over its “very unfair” trade policies.

“I’ve had a lot of problems with the European Union, and it may morph into something very big from that standpoint, from a trade standpoint,” he said in an interview with British broadcaster ITV aired on Sunday.

“The European Union has been very, very unfair to the United States. And I think it will turn out to be very much to their detriment,” he warned.

...Experts told Euronews they believed trade deficits could be the cause of Trump’s gripe with EU policy.

“We know President Trump seems to associate a trade deficit with being taken advantage of,” said Maria Garcia, a senior lecturer at the University of Bath’s Department of Politics, Languages & International Studies, specialising in EU trade policy.

In recent years, the EU has had a small trade in services surplus with the US and had a surplus of around €115.3 billion in trade in goods in 2016, she explained.

Simon Evenett, professor of international trade and economic development at the University of St Gallen in Switzerland, agreed that deficits could be the cause of Trump’s complaints.

“He sees Germany selling more cars in the US as imbalanced and reckons there must be some dastardly German policy behind it. The fact that some Americans prefer high quality German cars eludes him.”

Evenett said there was “no golden rule in economics or in business that says the trade in each product between each pair of nations must be balanced,” and argued that deficits were being “used as a pretext for putting in place the protectionism that Trump Administration and its allies want to impose anyway.”

http://www.euronews.com/2018/01/29/what-is-trump-s-problem-with-the-eu-s-trade-policy-

[mrswdk]

But his tariffs are not on cars or professional services, they are on steel and aluminium. He has specifically said he is doing this to protect US steel makers.

He's used the threat of tariffs to get countries like South Korea and Brazil to agree to put quotas on how much steel they export to the US. He doesn't seem to be trying to leverage the threat of these tariffs to achieve anything else.

The country he is trying and failing to blackmail in this way is China.

[waauw]

But his tariffs are not on cars or professional services, they are on steel and aluminium. He has specifically said he is doing this to protect US steel makers.

He's used the threat of tariffs to get countries like South Korea and Brazil to agree to put quotas on how much steel they export to the US. He doesn't seem to be trying to leverage the threat of these tariffs to achieve anything else.

The country he is trying and failing to blackmail in this way is China.

Well seems his tariffs are failing on Mexico, Canada and the EU as well. All three are going to take a hit at republican states.

[Bernie Sanders]

But his tariffs are not on cars or professional services, they are on steel and aluminium. He has specifically said he is doing this to protect US steel makers.

He's used the threat of tariffs to get countries like South Korea and Brazil to agree to put quotas on how much steel they export to the US. He doesn't seem to be trying to leverage the threat of these tariffs to achieve anything else.

The country he is trying and failing to blackmail in this way is China.

Trump is only worried about Trump.

https://www.nationalreview.com/news/china-contributing-500-million-trump-linked-project-indonesia/

China also gave Ivanka some presents too.

Republican Party no longer exists, it's now the Trump Party.

[mrswdk]

Is giving someone a loan now considered to be giving them a gift?

I guess all those members of Congress with mortgages should be thrown out for their improper relationships with whichever banks gave them the loan. It is wrong for American people's representatives to be taking such generous gifts from Big Money!!!!!

[Dukasaur]

Is giving someone a loan now considered to be giving them a gift?

It can be, if there aren't good business reasons for extending the loan.

Especially if it's someone like Trump, who has a long history of defaulting on loans, and of backdooring assets while leaving his co-investors with an empty bag, I would very much doubt if there's any valid business reasons for anyone to lend him money. Of course we won't know for sure until years have gone by, but I suspect one day we'll be reading the usual reports of the magical theme park going bankrupt, investors, employees, and contractors going unpaid, while Trump pays himself a 100-mil "consultancy" fee and walks away looking like the cat that swallowed the canary.

[saxitoxin]

But his tariffs are not on cars or professional services, they are on steel and aluminium. He has specifically said he is doing this to protect US steel makers.

He's used the threat of tariffs to get countries like South Korea and Brazil to agree to put quotas on how much steel they export to the US. He doesn't seem to be trying to leverage the threat of these tariffs to achieve anything else.

The country he is trying and failing to blackmail in this way is China.

Well seems his tariffs are failing on Mexico, Canada and the EU as well. All three are going to take a hit at republican states.

The states they're targeting are safe. Florida's congressional districts are so heavily gerrymandered it will take more than 5 cents on a litre of orange juice to flip even a single seat in 2018. And by 2020 this will all be over. The US is not an exporting country. It can only be brushed by Germany. Germany, on the other hand, can be crippled into surrender by the US in short order.

If Trump moves forward with his blanket ban on German autos, coupled with the Russian gas embargo on Germany, and the ongoing chaos of Italy and Spain ... the Weimar Republic will start to be a pleasant memory.

[saxitoxin]

President Trump wants to impose a total ban on the imports of German luxury cars, according to a new report from CNBC and German magazine WirtschaftsWoche.

Several U.S. and European diplomats told the news outlets that Trump told French President Emmanuel Macron about his plans last month during a state visit.

Trump reportedly told Macron that he would maintain the ban until no Mercedes-Benz cars are seen on Fifth Avenue in New York.

Shares of Daimler, Porsche and Volkswagen were lower on Thursday, shortly after the weekly German business magazine published the report.

https://www.google.com/amp/thehill.com/ ... port%3famp

The US is the #1 export destination for German cars. Merkel will be seeking asylum in Ecuador within 30 days of the ban as the newly unemployed storm her boudoir.

Big Dog does what Big Dog wants. Big Dog is equally unmoved by threats or tears.

[mrswdk]

Is giving someone a loan now considered to be giving them a gift?

It can be, if there aren't good business reasons for extending the loan.

Especially if it's someone like Trump, who has a long history of defaulting on loans

a) the loan is not to Trump or to any of Trump's businesses

b) the terms of the loan probably contain some clause about the Chinese company being allowed to take over the property built with the loan if the developers default, meaning they'd get a big piece of real estate for relatively cheap

[waauw]

Saxi talking out of his ass as usual.

[waauw]

Nothing is going to save the american automobile industry. Asia and europe invested in green tech, the USA did not and is now paying the price for that. Nothing Trump does is going to push the rest of the world to rush to buy american cars again.

PS: a while back I saw a little book published by the russian state on its vision for europe. Basically Moscow thinks germans and frenchmen are reasonable nations, with a healthy scepticism for NATO. It's the USA and the UK they hate.

[saxitoxin]

Nothing is going to save the american automobile industry. Asia and europe invested in green tech, the USA did not and is now paying the price for that.

Yes, Europe's famous green car tech ...

http://www.bbc.com/news/business-42256870

Anyway, this isn't about marketing American auto manufacturers; the auto industry is not a major factor in the US economy. If that was the goal, Trump would target Japan or Korea. It's about making sure countries for whom the auto industry is a major factor remain submissive. That's how Big Dogs play.

Nothing Trump does is going to push the rest of the world to rush to buy american cars again.

Didn't you read what I said about Big Dog?

WOOF!

[saxitoxin]

US Imposes Tariffs on EU: €6.8 billion
EU Imposes Tariffs on US: €2.8 billion

US Percent of GDP made-up of exports: 11.9%
EU Percent of GDP made-up of exports: 46.1%

In other words, even with retaliatory tariffs, the US is landing eight times the number of punches on the EU as every one it's taking. This match is gonna be a ...



Canada is even weaker; 20% percent of the Canadian economy is dependent on exporting to the U.S., while only 2% of the US economy depends on exporting to Canada. Trudeau will make a big show of putting on some minor, inconsequential retaliatory tariffs but they won't mean much. He knows that if he got serious, Trump would re-retaliate and - in a tit for tat - the US can outlast Canada. Or, maybe Trump will suddenly become concerned about the environment and ban Keystone from continuing building their pipeline, Obama-style. The Canadian economy will collapse years before the US reaches breaking point.

[Symmetry]

Lol- the question isn't whether Canada can outlast the US- it's whether Trump can outlast Canada.

[saxitoxin]

Lol- the question isn't whether Canada can outlast the US- it's whether Trump can outlast Canada.

Trudeau is going into an election next year and currently has a 35% approval rating (https://www.thepostmillennial.com/justi ... countries/) so the answer is, yes. Big Dog can last until the Ginger Binger takes over the PM's office in Ottawa from mrswdk's BF.

[GoranZ]

But his tariffs are not on cars or professional services, they are on steel and aluminium. He has specifically said he is doing this to protect US steel makers.

He's used the threat of tariffs to get countries like South Korea and Brazil to agree to put quotas on how much steel they export to the US. He doesn't seem to be trying to leverage the threat of these tariffs to achieve anything else.

The country he is trying and failing to blackmail in this way is China.

China, EU, Canada, Mexico and even Russia are all heavily targeted. Initially Trump might have success but on just a few years EU, China and Russia will even the bills.
Tariffs on Harleys, bourbon & blue jeans – how Europe plans to retaliate against Trump

If Trump moves forward with his blanket ban on German autos, coupled with the Russian gas embargo on Germany, and the ongoing chaos of Italy and Spain ... the Weimar Republic will start to be a pleasant memory.

I'm not sure that anyone in the world(this includes US) is prepared to match Russo-German alliance. So pushing Russia to work with German against their common enemy is total madness.

[waauw]

Lol apparently BMW and Mercedes are america's biggest car exporters. Their subsidiaries export more than the american brands. If Trump implements a german car ban, that would be absolutely hilarious.

[GoranZ]

Lol apparently BMW and Mercedes are america's biggest car exporters. Their subsidiaries export more than the american brands. If Trump implements a german car ban, that would be absolutely hilarious.

The problem is different. Americans like to buy all German cars, If we exclude Ford, US cars are not present in the EU market. Same applies to gas, Germans like the Russian gas and they dont like the American LNG.
Unfortunately Trump fails to understand this and tries to change it by pure political means.

[saxitoxin]

Trump doesn't care if Europeans start driving Dodge. Realistically, that's about as likely to happen as Americans driving Opel or Peugeot.

Trump does care about Americans stop driving BMW and Mercedes.

Every fewer Mercedes S-Class an American buys is one more Cadillac ATS they buy.

Cadillac is built in Michigan. Domestic production Mercedes and BMWs are built in the states of Alabama and South Carolina; the imports are built in the state of Schleswig-Holstein.

Michigan is a swing state that Trump needs to win in 2020. Alabama and South Carolina are not swing states and Trump will win there regardless. Schleswig-Holstein has zero seats in the Electoral College so no one cares about them.

Big Dog doesn't eat Purina dry food when there's a nice, juicy steak in the other room.

[HitRed]

Trump doesn't care about tariffs. Doesn't want a trade war either. They are a means to an end. Wants deals.

[waauw]

First, while we export less than we import, we still export a lot; tit-for-tat trade retaliation will hurt a lot of American workers (and especially farmers), quite a few of whom voted for Trump and will now find themselves feeling betrayed.

Second, modern trade is complicated – it’s not just countries selling final goods to each other, it’s a matter of complex value chains, which the Trump trade war will disrupt. This will produce a lot of American losers, even if they aren’t directly employed producing exported goods.

Third, if it spirals further, a trade war will raise consumer prices. At a time when Trump is desperately trying to convince ordinary families that they got something from his tax cut, it wouldn’t take much to swamp whatever tiny gains they received.

Finally – and I think this is really important – we’re dealing with real countries here, mainly democracies. Real countries have real politics; they have pride; and their electorates really, really don’t like Trump. This means that even if their leaders might want to make concessions, their voters probably won’t allow it.

Consider the case of Canada, a small, mild-mannered neighbor that could be badly hurt by a trade war with its giant neighbor. You might think this would make the Canadians much more easily intimidated than the EU, which is just as much an economic superpower as we are. But even if the Trudeau government were inclined to give in (so far, top officials like Chrystia Freeland sound angrier than I’ve ever heard them), they’d face a huge backlash from Canadian voters for anything that looked like a surrender to the vile bully next door.

https://www.nytimes.com/2018/05/31/opinion/oh-what-a-stupid-trade-war-very-slightly-wonkish.html?rref=collection%2Fcolumn%2Fpaul-krugman