Tag Archives: Tariffs

Hanging Hats on Thin Reeds: Trump and his Nevada Allies

I have to wonder: Do Laxalt, Heller, and Duncan really want to hang their hats on the thin reeds comprising the current GOP position in regard to Trump and his appointees?  Really?  Does a candidate for any office, a governorship, a Senate seat, a position as State Attorney General, want to stand side by side with:

A party leader who had no compunction about railing against a Gold Star family? Please, save the dignity and worthiness of your military service and question whether it’s appropriate to fund raise with, or welcome the endorsement of, a person who disparages a Gold Star family.  Save your rhetoric about serving veterans, about supporting our troops, about believing in the strength and character of our military until such time as it’s possible to square the criticism of a Gold Star family with those words and phrases. Actions speak louder than words, but words do matter.  The words from the standard bearer of the GOP have not aligned with true support for the members of the military, their families, and our veterans.

A party leader who disparages women who voice objections to sexual assault as “inebriated” and “all messed up.”  That, sir, is exactly when it is not appropriate for any young man to take advantage.  Real men don’t press themselves upon an unwilling woman when she is vulnerable; a real man takes her home safely.  Infantile, self-centered, and belligerent men take advantage; real men take care and caution.

A party leader who never seems to have a plan in mind.  “We’ll see what happens,” is not a strategy.  For anything.  We’ll see what happens when we slap high tariffs on Chinese goods? Ask the soy bean farmers…the almond growers…the car manufacturers?  Ask the South Koreans who now look to China and Japan for guidance with their relations with North Korea rather than the United States?  We’ll see what happens when we take ourselves out of the Paris Climate Accords, which were drafted with US demands specifically in mind.  We’ll see what happens when we unilaterally try to disengage from diplomacy with Iran.  Enter the Russians, the Germans, the French, the British. When does the American Century end and we become irrelevant? Did it happen during the UN General Assembly speech when attendees laughed at a point in the address not intended to be a punch line?

A party leader who will not divulge his tax returns nor provide specific information about his business dealings.  A party leader whose airline went broke, who managed to bankrupt his casino business? Who has been through multiple bankruptcies, each shaving his creditors to the core?  Who borrowed money from highly questionable sources when legitimate banks and banking institutions wanted to see the back of him? Who is indebted to heaven knows who for heaven only knows what amounts, under heaven only knows what conditions?  Is this the standard bearer for the party of fiscal responsibility?

A party leader whose high level officials are almost routinely under investigation for misappropriating taxpayer funds for office adornments, upscale travel, personal benefit, and family expenses?  The revolving door in this administration is wafting taxpayer funds around like so much litter on a windswept city street.

A party leader whose thoughts on immigrants and immigration are racist.  Who else would even remotely consider separating children from their parents as an act of “deterrence” to prevent others from believing America to be the City on the Hill? Who else would think no one would care if babies and toddlers were kept in cages? Who else would think it was up to the ACLU to find ways to reunite parents and children? Who else would plunder funds from the Coast Guard, from Cancer Research, and from FEMA to build detention camps reminiscent of Manzanar? Who else would say there were some “very fine people on both sides,” when one side was composed of Neo-Nazis?

Who else would fly the banner suggesting that adolescent boys of color should be perceived and treated as it they were adults (and shot accordingly) while white adolescent boys are to be forgiven their trespasses (and sexual assaults) because boys will be boys?  Who else would find it easy to insult and defame African American women who dare criticize him?

Thus, it’s appropriate to ask Senator Heller, Adam Laxalt, and AG hopeful Duncan– WHY are you standing by, standing with, and standing in silence, as your party leader leads you into the morass of short term gains (his own) and long term losses (ours)?  Why?

Are your tax cuts really worth all that much to you?

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Filed under Nevada politics, Politics

Get Grampy Out Of The TV Room, or at least don’t give him the remote!

Some wise wiseacre on Twitter the other day commented that if someone’s seanathair (grandfather) were behaving like Dolt 45 it would be high time to get him out of the assisted living facility TV room.  I couldn’t agree more.

I am tired of getting my news from a fire hose of misinformation, disinformation, and downright lies. Grampy is up to about 7.5 lies per day. [WaPo] That’s closer to 7.6 if we want to be more precise, but at this level who cares?  It’s embarrassing.   It’s Grampy telling a story about how he met Grammy at Cambridge — that would be Cambridge, Idaho.  Or, Grampy chattering on about his exploits during his motorcycle riding days. No, he didn’t own a Harley, it was more like a Honda Super Cub. Only when it’s the president of the United States it matters.

I make no pretense of being the most original thinker in the flock, but I can recognize when someone is being led — by the nose if not by some other body part — toward policy positions which make absolutely NO sense whatsoever unless someone else is calling the shots.  Why else would we have tariffs on aluminum products from our friends but refuse to impose such import taxation on the Russian firm Rusal? [NYT]  Why are we imposing tariffs on the Chinese such that they’ve moved their purchasing of agricultural products like soybeans from American farmers to the Russians and Brazilians?  Why? It’s not like we’ve  spent years developing markets for American agricultural products and then want to see those same markets frivolously dribbled away in a ridiculous trade war.

It’s not like we welcome divisive rhetoric of the kind on full display as Dolt 45 fulminates against yet another African American, offering yet one more example of his proclivity to call African Americans “low IQ,” or “stupid.”  There’s a pattern here.  [LATimes]  African Americans and women are the usual subject of Dolt 45’s derision, and to be both African American and a woman will get a person the treatment he reserves for Congresswoman Maxine Waters.  He might want to give this another “think.” A quick click into the Google-verse shows 11,700,000 results in less than one second for t-shirts and other stuff imprinted with “Don’t Test The Waters.”

Grampy seems pleased to continue his performance for a steadily contracting audience of hangers-on and sycophants.  Analogous to seeing the little elder ladies thin out to go play another hand of canasta in a quieter location, and some of the men retire to a quiet session counting golf tees.  Pretty soon Grampy is down to the nodding few whose addled pates (complete with male pattern baldness) aren’t really registering what he’s saying, just parroting his rants and encouraging his repetitions for their entertainment value.  The problem is that he’s attracting and thereby promoting the fringe.  These aren’t the people who can still recite their own grandparents’ recipes for marmalade and barbecue sauce; instead they’re the ones who maintain the moon landing was a hoax, UFOs are real, and chocolate milk comes from brown cows.

Thus we have former Bush Administration ethics lawyer, Richard Painter, twittering away, sounding like the kid in the back seat of the family wagon: “Are we there yet?” Only Painter is talking about the 25th Amendment.   This isn’t normal.  None of this is normal.

Most of the reporting on the subject of Grampy’s wildly varying, disassociation laden, rants seems to be on target — it’s usually the headline writing that misses the point.  The Dolt 45 is “not forthright.”  Or, “not accurate.”  Or, “not informed,” Or, “at odds with other administration sources.”  Gee, we can’t say he’s lying because we can’t determine his motive ?  OK, then go ahead and say he’s being untruthful.  The motive may not matter so much, especially as it becomes ever more situational; and what comes out in the end is simply a good old fashioned bit of the southbound product of a northbound bull.  There are enough fact-checkers on the case to set most records straight. What Grampy seems to want on the record is his version of his story — his courtship of Grammy, his motorcycle, his feats on the barbecue grill, his conquests in business, his “whatever” — out there in the TV room for his audience to applaud.  The story changes.  Cambridge becomes Oxford (Oxford, Mississippi) and the cycle becomes a vintage ’57 Harley Sportster, and he started out with even less money from his father to start his business than he said two months ago.  We can call it cognitive decline. We can call it situational obfuscation. We can call it anything, any euphemism we’d like. We just can’t call it normal.

Nor can we allow Grampy the luxury of pontificating in the TV room to his ever declining audience, about his ever expanding range of complaints and grievances, while we try to rationalize the irrational.  At least someone needs to retake control of the Remote.

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Dear Orange Blossom, Perhaps if you understand titties you can comprehend why we don’t tick off our milk and cheese buying partners?

Dear Pootus, I am taking a page from the good people at the EU who decided that the way to explain trade policy to you was to provide colorful cue cards.  I will not burden you with graphs (and those tricky x and y axes), nor will I encumber you with charts, which you might have to interpret in light of some very common tricks producing “Gee Whiz Graphs” and other illusions.  Let’s just keep this simple.  If you understand the concept of titties, then you should be able to comprehend the idea of international commodity trading — like milk and milk products.

milk cow 1  Step One: COW 

Notes for your experts who can explain more if you feel the need.  The milk comes from the COW, more specifically from the FEMALE.  This happens BEFORE the milk is in the carton in your refrigerator, or the cheese (made from milk) is inside the fridge too!

milk cow 2 Step Two: Female Cow

The titties portion of the female cow is where the milk comes from.  It is called the udder.  There are many cows, and therefore many udders.  Many udders make lots of milk.  Notes for your experts who can explain more if you feel the need.  There are approximately 8.75 million milk cows in the United States.  Female cows — the ones with the udders — produced about 17.2 billion pounds of milk in June 2018.  This is the highest productivity rate since 2003.  You might wish to take credit for all the milk being produced from all those udders — more than under any other President EVER!  Not that your presidency has anything in the world to do with cow productivity, but since you delight in taking credit for everything else that happens — even if it doesn’t — on your watch, why not take credit for milk production?

milk cow 3 Step Three:  Milk Comes From Cows

There is a surplus of milk on the market.  As of last May dairy farms were getting hammered by low prices for milk because there was too much of it on the market.  Therefore, you might want to be very careful about crowing about those production numbers?  Notes for your experts who can explain more if you feel the need.   There were things dairy farmers wanted your administration to do. For example, they suggested putting a floor on milk prices at $20 per hundred pounds.  They suggested stabilizing volatile markets.  They suggested government purchases of milk for public food pantries.  (That’s NOT panties for the udders, that’s pantries for people who need food assistance.) [USAT]

milk cow 4 cheese Step Four: Cheese and other products come from milk.

In order for the dairy farmers to stay in business someone needs to buy the milk produced by their cows.  Some of the milk is purchased for domestic consumption. That means “here at home.” Some of the milk is purchased by our trading partners.  Notice that one of our major trading partners for exported cheese is Mexico. In fact, US Export Data shows Mexico as the Numero Uno buyer for cheese exported from the United States.

Am I getting the message across to you yet?  When all those titties (udders) produce all that milk, the milk must be sold for the dairy farmers to make a profit.  Cheese is made from milk, and Mexico, South Korea, Japan, Middle East/North Africa, Australia, Central America, SE Asia, Canada, and China are our biggest buyers for cheese products.

Have you suggested setting a floor on milk prices?  No?  Or, stabilizing volatile markets (including the international ones)? No? Or creating new markets for American milk and cheese products? No?  Or, supporting the USDA food assistance programs like public food pantries? No?  So, what have you been doing?  Oh, that’s right — slapping tariffs on our trading partners…

“In the past few months, Trump’s administration has proposed steel and aluminum tariffs, and increased tensions with trade allies in Europe, Asia, and North America. This week, reports of a White House proposal that would call on the United States to disregard World Trade Organization rules are making lawmakers on both sides of the aisle fret that the United States could be staring down a trade war — one that is likely to hit the agricultural industry the hardest. On Thursday, Mexico announced 15 to 25 percent retaliatory tariffs on dozens of US goods, mostly on agricultural products — including cheese.”  [Vox 7.5.18] (emphasis added)

One more time: Milk comes from cows; cows have udders; too many udders are producing too much milk; too much milk is being stored as cheese (because it doesn’t spoil like fresh milk); there are not enough buyers for our cheese; and, therefore, the price of milk and cheese decline.  When the prices decline below the break even point the dairy farmer is out of business.   When the farmer is out of business he can no longer buy the Red Hats you had manufactured in China.  NOW, are you getting the point?

I cannot, for the life of me, figure out a way to make this any simpler for you.  I will now return to writing posts for the adults in the room.  Thank you for your limited attention.

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Filed under Economy, Farm Subsidies, trade deficit

Our Weekly Fresh Horrors

Gee, what fresh horror would make for a nice blog post today?

#1. We could start with this analysis of Orange Blossom’s perfectly inane trade policy, as expounded by conservative economist Walter Block in the not-so-failing New York Times:

“The negative consequences of a trade war will soon be felt, if they aren’t already. Even if the United States avoids trade conflict with Europe, tariffs on steel and aluminum from China, Mexico and Canada will raise domestic prices, hurting consumers. And the administration is likely to find itself subsidizing voters who purchase these items or who are hurt when other countries slap tariffs on American goods in retaliation — mainly farmers, manufacturers and builders.”

Perhaps the color coded cue cards were insufficient to explain BASIC economics to our special Orange Blossom during his meetings with EU officials.  Is there an emoji for putting both of one’s hands palm forward into one’s face? I could use one right now.

#2.  Also from the New York Times — the Feds announce they’ve met the deadline for reuniting children with their migrant parents. However, there’s this little Oops paragraph in the article:

“But in a day that saw government officials and community volunteers scrambling to bring families together, multiple reports of failed reunifications raised questions about whether the deadline had in fact been met. Further confusing the issue was a change in the way the government tallied its progress, with the latest report counting children rather than parents, a reversal from prior reports.”

So, if they can’t reunify families, then they simply reclassify the children and/or parents to say they aren’t eligible for reunification!  Whee. How convenient.   Yes Sir, I could say I really stuck to my pledge to make healthier eating choices — IF we don’t count the two chocolate chip cookies, the can of Pepsi, the chips, the cheeseburger, the … you get the idea. There are still some 700 children not reunited with family.  And when the ADL is putting out warnings about what happens to children separated from parents, as in what happened during the Holocaust, maybe we should be paying attention.  I really do need that double face-palm emoji thing.

#3.  The Ruskies are still here. As in still attacking our American electoral system; as in attacking the McCaskill Senate campaign in Missouri.  They also appear to have attacked two other campaigns. This isn’t “history,” this is current events.  There’s more at “The Hacking of America,” on Slate.   The article isn’t exactly pleasant reading, but it’s recommended as a reminder that God helps those who help themselves, and DHS is talking about new initiatives with 90 day timelines.   90 days?  What happened to getting a start on this, say some 1 year, 188 days, and 2 minutes (as of now) ago?

#4.  Special concern for the people in the Redding, California area.  The news on that fire front is horrible. Up here in cheat grass country we lucked out during the Holloway Complex Fire in 2014.  There’s nothing quite so chilling as the sound of a local deputy on a bull horn announcing a preliminary notice of an evacuation order.  I don’t wish it on anyone.  Please, California neighbors, stay safe!

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Filed under Economy, elections, Immigration, Politics

Meanwhile Back With My Soy Beans and an Orange Blossom Who Can’t Shoot Straight

So, here’s from the Farm Report:

Soybeans are lower, breaking the support line from their three-day rally overnight. Traders will continue to scour today’s export data for clue on how foreign buyers are responding to the bargains created by Chinese tariffs. Sales are expected to rise after disappointing results last week. Vegetable oil markets in Asia were lower today, losing around a fifth of a cent per pound.  September soybean oil futures in China fell to 36.844 cents and September palm oil futures in Malaysia were at 24.473 cents.

and on soy beans in particular

If production doesn’t swell too much, November futures may try to hold the $8 level into the August report. USDA put the bottom of its average cash price for the 2018 crop at $8, a level already reached in many local markets around the country. It’s still a $2 climb back to profitability. But most growers appear to have priced a good chunk of their expected production when offered a good price this winter and spring.

Hold this thought — $8.00 per for soy bean farmers or — it’s a really bad year down on the farm. “USDA’s July 12 monthly report put a number on the lost revenue farmers face: $325 million in new crop sales. That number is based on the amount the agency lowered its price range for crop, 75 cents a bushel.” [WSR]  Soy bean prices are about $8.55, nearly a ten year low. [CNN money]

All right, it’s not that I am in the soy bean business. It’s not that I expect ANY reader of this blog to have any more connection to soy beans than the occasional purchase of soy milk.  It’s that the little beans are a metaphor, an anchor, a data point, to watch the inexplicable economic idiocy of the current administration ensconced in the Oval Office.

Those slap dash, ham-fisted, wild west, off the cuff, distributive bargaining ploy, grandiose threats and counter threats being on offer from the mis-administration in lieu of any real coordinated trade strategy and policy have real world consequences for real world people — people like Iowa soy bean farmers who can’t take the hit if soy bean prices drop below $6.00.  Did we notice all those “ifs” and assumptions in the USDA pricing report?  Like automobile manufacturers in South Carolina who don’t have to take a hit if moving export production to friendlier climes will put money back into their bottom lines.  Like household appliance manufacturers who thought tariffs were such a lovely idea when they were on Samsung and LG, but on steel and aluminum not so much.

We have a *President who can’t get to “yes.”  He couldn’t get to “yes,” on a health care bill and ended up with a bill he didn’t want.  He couldn’t get to “yes” on a DACA bill, and no one’s ended up with anything at all.  He couldn’t get to “yes” on immigration policy, and ended up with a court order to reunite families in which he, in all likelihood, cannot make yet another deadline.  He can’t get to “yes” on NAFTA terms with Mexico and Canada.  He can’t get to “yes” with Asian regional trade and commerce agreements.  He just can’t get to “yes.”

My way or the highway distributive bargaining works when I want to purchase a vehicle and there are 15 dealerships in a 50 mile radius.  As noted before, the bottom line is the “walk away” point. However, there is no other China, no other Mexico, no other Canada, no other European Union, no other United Kingdom, no other Germany, no other Japan, no other France, no other Brazil.  There is no Walking Away point because there is no other place to walk to.

The price of soy beans (or cars, refrigerators, beer cans, or washing machines) cannot be determined by simply yelling at the dealer, threatening to bludgeon him with penalties,  loudly pronouncing another salvo of letters to the editor about their poor service, and later threatening to sue for ‘false’ something or another.  We have a global economy based on supply and demand principles which Orange Blossom pretends to understand, but which he provides scant evidence thereof.

And NOW he wants to weigh in (at over 239 pounds) on what the Federal Reserve should be doing with interest rates!  [CNBC]

Will someone, anyone, please take him down to that portion of the White House where the last evidence of the fire set by British troops on August 24, 1814 remains, lock him there, quietly close whatever doors are behind him — or at least make him SHUT THE H___ UP?

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Filed under Economy, Politics

Soy Beans: Wherein DB goes off again on her soy beans while readers roll their eyes.

soy beans

A note to patient and loving readers: These are soy beans.  I know, I’ve regaled you with soy beans before.  However, please allow me some latitude to discuss them once again.  The blessed little beans are illustrative of many issues related to the mis-administration of the Angry Man Baby occupying the White House and his minions.  

Let’s begin with what we do with soy beans, and please let’s get past the soy sauce and soy milk bit.  A sixty pound bushel of soy beans will yield about 11 pounds of crude soy bean oil and 47 pounds of soy bean meal.  The beans are about 18% oil and 38% protein.  Trust me, this is good — and it’s especially good for animal feed.  [NCsoy] Thus, most of the commercial use of soy beans goes for animal feed and a smaller amount goes for human consumption wherein we get back to the soy sauce, soy milk, soy flour, and our tofu.  But wait! There are other commercial and industrial uses for soy by-products as well and here’s a partial list:  Biodiesel fuel; biocomposites creating everything from countertops  to furniture to flooring to particle board and even to recycled newspaper. A person could sit at a kitchen counter containing soy while reading a newspaper containing soy, printed with soy ink, while the toddler marks the kitchen wall with a soy based crayon.  A person could escape all this because there are hydraulic fluids and lubricants which are soy based, and even automobile upholstery can be manufactured with soy containing elements.  In short, DB rants about soy beans because they can be environmentally friendly little Glycine Max’s which don’t have just a market, but have several markets — agricultural, commercial, and industrial.

Who grows these things?  We do. The United States of America leads the world in soy bean production with about 108 million metric tons per year.  Brazil produces about 86.8 million metric tons annually.  Argentina grows approximately 53.4 metric tons per year, and China adds another 12.2 million metric tons annually.  India comes in around 5th place in world production with 10.5 million metric tons, then Paraguay chips in another 10 million.  Canada produces approximately 6 million metric tons, Ukraine adds another 3.9 million, and Bolivia grows 3.3 million metric tons.  Last but not least Uruguay comes in with annual production of 3.2 million metric tons.  [WorldAtlas] Notice something about the names of the countries on this list?

One thing that pops out is that one country, China, has been singled out as a competitor, while the others are traditional American allies in diplomatic terms.  Remember that thing about integrated and distributive bargaining?  Recall that integrated bargaining requires negotiators (on trade and other matters) to consider their mutual interests along with the issues upon which they have issues to resolve.  Hold this thought.

Now consider Farmer Jones in eastern Nebraska who grows soy beans and sells his 60 pound bushels to a grain dealer — in dollars.  The financial markets kick in, as with every other commodity there is “future trading.”  At the moment, China, the largest soy bean importer has reduced its purchases of US soy beans, the price of soy beans got so cheap that other countries started to increase their orders from American dealers.  [Bloomberg] Sounds good so far, but caveat emptor.  This puts soy bean values at “fire sale” levels for our allies in Brazil, Argentina, India, Paraguay, Canada, Ukraine, Bolivia, and Uruguay.  So, let’s talk about Brazil for a second or two.

Back in 2011 the US and Brazil signed an Agreement on Trade and Economic Development.  Here comes that integrated bargaining component again, because the framework isn’t just about who sells what individual products to whom, but how the two nations can expand direct trade and investment relationships, incorporating reducing trade barriers and sharing innovations.  It appears to be working, at least if we note the report from the US Trade Representative: “U.S. goods and services trade with Brazil totaled an estimated $88.2 billion in 2016. Exports were $55.2 billion; imports were $33.0 billion. The U.S. goods and services trade surplus with Brazil was $22.3 billion in 2016.”   And, there’s some other nice bits:

The top export categories (2-digit HS) in 2016 were: mineral fuels ($5.0 billion), aircraft ($4.8 billion), machinery ($3.6 billion), electrical machinery ($3.1 billion), and optical and medical instruments ($1.7 billion).

U.S. total exports of agricultural products to Brazil totaled $899 million in 2016. Leading domestic export categories include: wheat ($316 million), prepared food ($54 million), dairy products ($47 million), cotton ($47 million), and feeds & fodders nesoi ($42 million).

U.S. exports of services to Brazil were an estimated $24.9 billion in 2016, 11.4% ($3.2 billion) less than 2015, but 235% greater than 2006 levels.  Leading services exports from the U.S. to Brazil, in 2015, were in the travel, transport, and telecommunications, computer, and information services sectors. [USTR]

Thus, the Brazilians are exchanging their Brazilian reals (current exchange rate 0.26/dollar) to buy US mineral fuels, electrical machinery, processed food, medical equipment, telecommunications systems, computer gear, and IT services from us, among other trade goods and services.  Now, ask the question: Do we really want their soy beans on the market at fire sale prices earning fewer “reals” when we want them to exchange those “reals” into US dollars to buy travel, computer, and IT services?  Fuel? Medical equipment? Aircraft? Our agricultural products? At what point does our “winning” come back to haunt us?

Or, consider this from our competitor’s side of the frame. China.  Again, with our little soy beans:

While the Asian nation is targeting a slew of American farm goods in this round of taxes, soybeans are the top agricultural commodity the country imports from the U.S. by far. The oilseed, used to make cooking oil and animal feed, accounts for about 60 percent of the U.S.’s $20 billion of agricultural exports to China. Before the tariffs were announced, a study by the University of Tennessee forecast that a 25 percent duty would spark a drop in American shipments of at least $4.5 billion. Brazil, already the world’s biggest soybean shipper, is set to be the biggest winner, filling the gap left by the U. [Bloomberg]

Wow, there comes Brazil again! Now the Chinese are exchanging their yuan (current exchange rate 0.15/US dollar) for Brazilian reals in order to buy their Brazilian soy beans.  And those grain deals? — they aren’t being made with US grain dealers in dollars, they are being made using yuan/reals.  Lower demand for the US dollar? There’s a delicate balancing act playing out in international currency markets every day. In our integrated system of international trade the old distributive system of winners and losers doesn’t serve very well. The agricultural market is connected to the futures market, the futures market is connected to the commodities market, the commodities markets are connected to the financial markets, the financial markets are connected to the currency markets… “foot bone connected to ankle bone, ankle to leg, leg to hip, hip to back bone,” right up the economic body with the old song as metaphor for the global economy.

And, we haven’t even talked about whether or not we want China to pick up more of our national treasuries to keep financial markets steady?  So, this is why DB gets excited about her soy beans, and other components of US trade and economic development.  It’s not that I am fascinated with soy sauce on my chow mein, or even on my potstickers, but because the little beans are illustrative of wider, larger, economic issues which seem much more important than whether my soy sauce is embellished with hot peppers.

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Filed under agriculture, Economy, Politics

Yes, He IS That Stupid? Economics for Ultra Dummies

It’s March 5th, 2018 and the occupant of the White House has just announced — by a tweet as usual — “He tweeted out Friday morning that for the United States, a trade war is “good” and “easy to win.” This is July 3rd, 2018 and evidently le crétin economique still believes this.  There are three very simple reasons why this belief borders on insanity:

First: Prices will go up.  Why? Because in order for prices to remain the same or decline the product must be manufactured in the “home country” at a level which would fill the gap between imported and domestic goods.  Buh, buh, buh but — then American manufacturing will increase to fill the gap! Hooray!!  Maybe eventually, and eventually is always the dearest vision of the economic theorist while the rest of us try to buy our beer in aluminum cans rather more immediately, and there’s another little sticky spot.  For some time now DB’s railed about “financialism” and the propensity of the financial markets to “manufacture” and sell “paper.”  DB’s howling notwithstanding, the US has been primarily a “service economy” for some decades (yes, that’s decades) now and while our manufacturing output and sales may be on the wane our “export” of service related products is definitely not.  As in last year we had a $243 billion services trade surplus. [CNN money]  Please don’t try to tell me Mr. “I went to U PA” just not the famous economics school therein… hasn’t at least grasp the nonsensical nature of starting a trade dispute with countries with whom we have service surpluses… oh, wait… he did already.

 The U.S. goods and services trade surplus with Canada was $8.4 billion in 2017. […] Trade in services with Canada (exports and imports) totaled an estimated $91.5 billion in 2017. Services exports were $58.7 billion; services imports were $32.8 billion. The U.S. services trade surplus with Canada was $25.9 billion in 2017. [USTR]

We could speak of regional trading hubs and re-exportation of goods at this point, but let’s not, it would only confuse him.

Secondly, interest rates could easily go up.  There’s already some pressure for increasing interest rates given the increases expected in the federal debt.  We know, that federal debt the GOP’s been screaming about for years? That debt.

“One thing keeping rates in check so far is the demand for US debt from overseas. America’s foreign trading partners, including China, are among the largest buyers of that debt. It added $127 billion to its holdings last year and now owns more than $1 trillion in U.S. debt, making it the largest foreign holder of our debt.

The trade deficit that President Trump decries is one of the reasons for those holdings. It gives foreign countries a powerful incentive to buy that debt, since they have to do something with the dollars they get back on those sales.”  [CNN money]

Shrink the trade gap = less incentive = significant increase in interest rates.

Third reason, American businesses will lose sales.   Much effort is expended reaching deals for the sale of everything from pharmaceuticals to auto parts.  Remember all those sales and marketing divisions? The ones in every major corporation in this country? The departments and divisions pitching products in every corner of the globe?  Let American products become less competitive because of trade restrictions, and then watch foreign buyers find new suppliers.  Business Rule #1: Losing customers is never a good idea.

So, what went on this week?

“Canada over the weekend imposed tariffs on $12.6 billion in U.S. goods in retaliation for U.S. levies on steel and aluminum. On Friday, China is set to slap levies on $34 billion in American goods like soybeans in response to a symmetrical imposition of tariffs by the United States on Chinese goods. Also last week, the European Union sent a letter to the Commerce Department threatening to implement tariffs on $290 billion in American goods if Trump follows through with his desire to crack down on foreign autos.”

Remember not so long ago when DB was bellowing about soybeans?  Yes, DB is back to bellowing about soy beans.

Threatening tariffs may be a negotiating tactic, but at some point the other party will reach a point at which they tire of the gamesmanship.  Reality sets in, deadlines come, and the skirmishes begin.  World Wars can with something as dramatic as the invasion of Poland or the bombing of Pearl Harbor; however, World War I began with an assassination in Sarajevo.  The US Civil War can be said to have begun with attacks and counterattacks in Kansas.  The problem with skirmishes is that unless they are carefully controlled they can spiral beyond retrieval, the results are usually not pretty.

There is also the poker element; eventually a bluff will be called.  We’re not far from the Canadians and Chinese calling our bluff, the EU as well for that matter.   Someone in a position of responsibility ought to have the wisdom to know when to (and not to) bluff; when to fold; when to up the ante.  In short, there has to be some adult supervision.  My way or the highway is almost never a strong negotiating position.  Bullies often have accomplices, but they rarely have wing-men.

Thus the Business Roundtable, the US Chamber of Commerce, and other organizations not generally perceived as bastions of liberal thought will decry the Administration’s tariff and trade policies, academics will refer to the Smoot Hawley Tariff Act of 1930, and citizens will watch the price of can of beer increase as the cost of the aluminum can increases.  And all because  le crétin economique thinks in bumper stickers.

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