Tag Archives: Trade War

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

There Never Was Any Plan: The Story of the entire Orange Blossom Administration

Return with us now to those days of yesterday, if not exactly yesterday, when the Trump declared his health care plan would be wonderful — “No one will lose coverage. There will be insurance for everybody. Healthcare will be a “lot less expensive” for everyone — the government, consumers, providers.”  [Politico]  That was March 13 2017.  Well now, some people have lost coverage, it isn’t going to be any less expensive to get health insurance. In fact, health insurance premiums are expected to increase in California, Connecticut, and Pennsylvania, and it is just as bad elsewhere:

Rate filings to date show that many insurers are requesting large premium increases for 2019. The average requested rate increase was 30.2 percent in Maryland and 24 percent in New York state. Most insurers have specifically cited the repeal of the individual mandate in their actuarial memorandums. In New York, insurers attributed about half their large requested increases to mandate repeal. Even in states with small rate increases or overall decreases, insurer filings state that premiums next year would be significantly lower in the absence of federal sabotage. For example, BlueCross BlueShield of Vermontrequested a relatively small 7.5 percent increase for 2019 but said that its request would have been 2.2 percentage points lower if not for mandate repeal. Peter V. Lee, the director of Covered California, said that his state’s average rate increase of 9 percent “could—and should—have been much lower.” [CAP]

Let’s be serious here. There wasn’t a health care plan, not one with any specifics. There was a ton of “repeal and replace” rhetoric.  Trumpian campaign slogans never translated into much more than the continual erosion of Affordable Care Act provisions in favor of the insurance industry.  There never was a comprehensive plan to deal with market problems, industry sector issues, and the health care needs of some 330 million people in this country.  This administration doesn’t PLAN.

But wait, wasn’t there an “infrastructure plan?”  It would seem there should be since we keep having infrastructure weeks?   On February 11, 2018 the administration rolled out its grand infrastructure proposal [CNN] albeit without any suggestion about how this would be paid for;

“At the Conference of Mayors in January, Gribbin explained that the Trump administration would not be proposing a specific funding mechanism for the infrastructure plan, saying that will be a conversation with Congress. But that discussion just got a lot harder following the passage of a tax plan that is expected to expand the deficit by over a trillion dollars over ten years.” [MoneyCnn]

So, we got “conversations with Congress” about how to implement the “infrastructure plan,” but no infrastructure plan with much of anything except sops to for profit job training centers, lowered work rule and environmental permitting standards, and precious little else.  There never was a real, a comprehensive, plan in place such that the negotiations (or conversations) with Congress would ever be on a firm foundation. Surprised? We shouldn’t be.

Perhaps we should have been impressed with the trade plan?  After all, isn’t this supposed to put America First?  However, our friends and trading partners have been reduced to using color coded cue cards to explain high school level trade concepts to an American president [Marketwatch] and he doesn’t give any appearance he understands  fundamental concepts.  Reason sums up one area of dissonance:

“As Veronique de Rugy noted here a couple of weeks ago, “This is one policy area where he’s been remarkably consistent over the years.” Even when Trump pays lip service to free markets, she observed, it’s with the aim of increasing exports and reducing imports so as to bring down the number he thinks crystallizes our failure and lack of resolve. Trump is not talking like a mercantilist in service of free trade; he is talking like a free trader in service of mercantilism.” [Reason]

Let’s just operate on the simpler assumption — he doesn’t understand the subject; he doesn’t really have a plan; and, all the “motion” that passes for “action” in this administration’s trade policy is tantamount to economic and monetary plate juggling.  As long as he can make grand announcements about vague promises to eventually do something, and none of the plates fall, he’s all good.  Witness the EU deal:  “In reality, the Europeans gave up little except their prior refusal to negotiate under threat. Juncker’s pledge that the E.U. would import more U.S.-grown soybeans, for instance, formalized something that was likely to happen anyway.” [NewYorker]  Always assume: There is NO Plan.

And, about that Immigration enforcement policy which was supposed to have a plan to reunite children with their parents?   As of June 22, 2018 the Trump Mis-administration had to admit it had NO PLAN to reunite all children with their parents. [NYMag]  Really?  Well, not really completely opaque since the policy was all about punishing people who had the temerity to appeal for asylum in the United States who happened to be people with slightly darker skin than their Caucasian cohorts.   Thus if the policy didn’t meet the needs of the children and their parents, then the children could be conveniently re-categorized as “ineligible”  meaning the mis-administration might side step any accountability for their plight. [MSNBC]

Pick a topic, any topic.  Speak of environmental protections, clean drinking water, the protection of wildlife, or the protection of consumers from banking institution predation.  Speak of plans to provide better housing for married members of the US Armed Forces? Speak of plans to offer better, more efficient educational, medical, or dental services to Veterans?  Speak of plans to insure more cities are not plagued with lead in their water supplies?  Speak of how to provide long term assistance to American ranchers and farmers, and to promote the global trade in the crops and animals they raise for sale? Speak of how to research, study, and restrain the levels of gun violence in this country so that we are a safer place for ourselves and our children?  Speak of how we address matters of election security? To address Russian infiltration and attacks on our political institutions?  Pick a topic. Any topic.  Then rest unassured, this administration HAS NO PLAN.

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Filed under Health Care, health insurance, Immigration, Infrastructure, Politics, trade deficit

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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Filed under Economy, Politics

Dear Mr. President: You Flunk (Sophomore General Business)

One can only imagine Mrs. Barnberner, imaginary teacher of high school sophomore level General Business grading the Oval Office Occupant’s essay — all 280 characters of it — on international trade.  “F.”

What’s worse is that he thinks he’s on to some great thing … a trade war… a war to rectify the “advantages” taken by foreign countries in our trading relations.  Dear Mr. President, you obviously don’t have a clue about what a trade deficit means, and that it can mean different things in different contexts.  Let me make this simple for you:

Example, after purchasing a small mending plate with screws from my local hardware store I have a $3.49 trade deficit with the enterprise.  I bought the little package, paid for it, and did not sell a single thing to them.  Therefore, I have a 100% trade deficit with them.  This is NOT a bad thing.  I do not wish to manufacture my own metal mending plates.  I do not wish to manufacture my own screws.  I wish to buy these from a reliable, legitimate, source.  I will pay them in coin of the realm and go home to my “wreck it and run” project.

Therefore, one cannot assert, with any level of economic competency, that trade deficits are a negative in all contexts.   That said, there are other reasons you, POTUS*, have flunked this exam.

When discussing sales it’s important to remember that we measure both Goods and Services.

“Trump said we have an $800 billion deficit. It sounds like he was actually alluding to how we bought “$810 billion more in foreign goods than other countries bought from the U.S.” as the AP cites from the Census Bureau. That leaves out our $244 billion trade surplus in services.” [jal]

Please recall, sir, commercial enterprises encompass both goods and services.  Goods are those things which are mined or harvested (primary industries) or things that are made from raw materials (secondary industries), AND there are tertiary (wait strike that, to keep it easy for you Mr. POTUS* let’s call them ‘thirdish’) industries and sectors –> financial, legal, transport, consultancy…etc.

Your automobile example is fraught with inconsistencies:

“TRUMP: “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!” — tweet Saturday.”

Where to begin?   Let’s start with the fact that Americans bought about 17.2 million motor vehicles last year.  The top selling item (15% of all sales) was the Ford F-series pickup truck line.  Europeans are not as enamored of gas guzzling V-8 engine, half and three-quarter ton pickups.   The price for a gallon of gas in Paris, France right now is about $5.54 per gallon.  [Money.cnn] A person can buy gasoline for $2.21 per gallon at the EZ Mart in Paris, Texas at last report. [Gasbuddy]  Getting the picture yet Sir?

For someone who makes much noise about being an international business tycoon, you Sire, are demonstrating an alarming lack of cognizance of  the structure of retail markets.  Europeans are beginning to purchase items in the Ford Ranger series [MFool] because the smaller, lighter, vehicles are more practical in their home markets. Lesson?  If we are not manufacturing products people want to buy in their home countries, it doesn’t have to be about taxes and tariffs — it could just as easily be a function of retail market interests.  You cannot make a Chevy Silverado or Ford F-150 as popular in down town Paris, France as it is in Paris, TX, just because the tariffs are lower — because you cannot make some “rues” wider in Paris and the price of petrol cheaper.

Not only is the automobile argument risible, but the general idea that trade wars are fun things to play with is equally ludicrous.

The president’s argument, in essence, is that high tariffs will force other countries to relent quickly on what he sees as unfair trading practices, and that will wipe out the trade gap and create factory jobs. But the record shows that tariffs, while they may help certain domestic manufacturers, can come at a broad cost. They can raise prices for consumers and businesses because companies pass on at least some of the higher costs of imports and imported materials to their customers. A trade war is also bound to mean that other countries will erect higher barriers of their own against U.S. goods and services, thereby punishing American exporters. [YahFin]

Since the POTUS* is talking about manufacturing, let’s stay there for a moment.  The US exports approximately $533 billion in capital goods annually.  These include aircraft (think Boeing), $57 billion in industrial machinery, $48 billion in semi-conductors, $43 billion in electrical apparatus (think GE), and $38 billion in telecommunication equipment. [Bal]  Now, since by their very definition, trade “wars” involve retaliation, imagine the retaliation impact on GE and Boeing?

A far better, but obviously more complex, response would be for the US to develop a MANUFACTURING POLICY.  What a concept!

And, back to my soybeans again, not all American exports are manufacturing.  There’s no rule in a trade war that tit has to be for tat.  Or, that tariffs on cars and trucks are matched with tariffs on our cars and trucks; the reaction could just as easily be on major American agricultural exports. Download and take a gander at the USDA yoy and monthly export spreadsheet located here.  There are some major amounts which should be noted. Look at grains and feeds, soybeans, red meats and products, and animal feeds.  There’s NO rule that says an increased tariff on steel and aluminum can’t be matched by increased tariffs on sorghum, soybeans, and animal feeds. This is not a difficult concept. It is, however, a segment in the overall lesson that no, trade wars are not easy to win. There really are no winners.

And we haven’t even explored some of the more complex elements in international trade policy — just the basics. The basics someone who actually stayed awake for 50% of the time in sophomore General Business class should understand.

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Filed under Economy, Politics

Not One More Word About the GOP Is Good For Business

No, I don’t want to hear one more word about how Republicans are “good for business.”  Not after this week.  First, we got that Tax Scam, the benefits of which went to corporations and the top 1% of income earners.  That is only superficially good for business — it did precious little for consumers, the ones who actually make the US economy run.  Corporations (we learned in high school General Business classes) make a profit when people buy their products or use their services.  The Tax Scam benefited the Investors, not necessarily the “business” in totality.   A system in which we continually cut corporate taxes in order to protect corporate revenue/profits and put the burden on consumers is a recipe for disaster.

Then the occupant of the Oval Office throws a tantrum and announced he is about to put 25% tariffs on imported steel and 10% on aluminum.  If this is about a trade war with China, he’s got it exactly backwards — we get more aluminum from China than we do steel.  And, now he’s finding out his steely blast will hurt Canada, “The top supplier to the U.S. in 2017 was Canada, followed by Brazil, South Korea, Mexico and Russia. Other notables include Turkey, Japan and Taiwan.” [MrktWtch]   The reaction to the announcement is/was predictable:

“Trump has declared that the U.S. will impose steep tariffs on steel and aluminum imports, escalating tensions with China and other trading partners and raising the prospect of higher prices for American consumers and companies. With tensions rising over international trade, stocks closed sharply lower on Wall Street. China on Friday expressed “grave concern.” [WAPT]

While the tariffs may have an effect on aluminum importation, the damage will be downstream:

“But industries that use aluminum say there’s an ugly trade-off: Manufacturing jobs in the auto and aerospace industries might go away if the cost of aluminum rises too much. The aluminum smelting jobs that Trump wants to save account for 3 percent of the total aluminum industry jobs in the United States, according to the Aluminum Association. The other 97 percent of jobs (about 156,000) are in downstream industries that take the raw metal and make something new with it.” [WaPo]

When former President George W. Bush slapped tariffs on foreign steel (2002) we lost approximately 200,000 jobs.

“A study funded by steel producers that supported the tariffs found that the tariffs brought back 16,000 steel jobs. A study funded by steel-consuming companies that opposed the tariff found that rising prices caused 200,000 job losses, concentrated in the metal manufacturing, machinery and transportation equipment sectors, though it noted that it was not clear how much of the price increases were caused by he tariffs.” [Star.com]

The job loss numbers are disputed, ranging from about 43,000 to 200,000, but no one appears to be arguing there won’t be some downstream (and midstream) damage from the imposition of tariffs.  Nor are major economic voices saying the Bush tariffs did all that much good.  The Bush tariffs were removed after 21 months.  And then there’s that “it’ll be easy” part.

Trade wars aren’t good for anyone.  One pithy summary asserts prices will go up, American businesses will lose sales, and American trading partners are also among our biggest lenders [CNN] and thus may be less willing to purchase our bonds — remember that budget busting tax scam passed by the GOP controlled Congress and signed by an enthusiastic executive?  Lovely, now that we’re racking up a mountain of indebtedness as a result of the Tax Scam, we’re ticking off our biggest lenders?  In what world does this make any sense?

So, we have a Tax Scam that benefits a small investor class and backhands 99% of American income earners, a tariff plan that could easily cost more jobs than it saves.  It’ll be jeans, bourbon, and motorcycles … more a signal to Congressional and Republican leadership I’d think… but I’ll cling to my opinion that the real damage will be to American agriculture.

“The tariffs announced by the administration will put the interests of other domestic industries over farmers,” American Soybean Association President John Heisdorffer, an Iowa soy grower, said in a news release.  “Prior to today’s (March 1) announcement, China has indicated that it may retaliate against U.S. soybean imports, which would be devastating to U.S. soy growers. Our competitors in Brazil and Argentina are all too happy to pick up supplying the Chinese market.” [Fence Post]

But wait, we’re not finished.  There’s S. 2155 coming up in the US Senate — a bill to roll back some of the reforms included in the Dodd Frank Act, enacted in the wake of the Housing Bubble Debacle.  That’s right — the current mis-administration wants to reopen the Wall Street Casino and let the “investors” play the banking games which caused the last economic collapse.

Considering these three examples of incompetency and ineptitude, please — oh please — spare me any more renditions of “Republicans are Good for Business.”

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Donald Trump Is About To Do Something Really Stupid: Soy Bean Edition

This is a recyclable headline.  However, we need to be aware of the following item from Reuters two days ago:

“WASHINGTON (Reuters) – The U.S. Commerce Department has recommended that President Donald Trump impose steep curbs on steel and aluminum imports from China and other countries ranging from global and country-specific tarifandfs to broad import quotas, according to proposals released on Friday.”

And, of course here comes the response:

“If the United States’ final decision affects China’s interests, we will take necessary measures to defend our rights,” said Wang Hejun, a senior official at China’s Commerce Ministry, according to a report Saturday by state-run news agency Xinhua.

The short article didn’t provide further details on how Beijing might respond. Ross’ recommendations came in the middle of China’s Lunar New Year holiday when government offices and businesses largely shut down for a week.”  [CNNmoney]

The ‘final decision’ is due in April, 2018.  There’s little to analyze at the moment because the proposal isn’t firm, but consists of options presented by the Department of Commerce.

“Ross suggested three options for Trump — impose across-the-board tariffs on steel and aluminum, target select countries with even higher tariffs, or limit the total steel and aluminum coming into the United States.” [CNNmoney]

The steel portion of the proposals advise (1) an across the board 24% tariff on steel from all countries; (2) “Tariffs of at least 53% on imports from 12 countries: Brazil, China, Costa Rica, Egypt, India, Malaysia, South Korea, Russia, South Africa, Thailand, Turkey and Vietnam. These countries would not be allowed to export more steel to the United States this year than they did last year.” [CNNmoney]  (3) decrease imports of steel into the US by 37% from all countries.   In short, there are three options, and from an economic growth standpoint they are all bad. [Report here]

What the administration appears to be gambling on is that the Chinese will not round off their New Year celebrations with the beginnings of a trade war.  The happy clappy analysis would predict China will not retaliate in the semi-conductor sector because too many jobs (Apple) would be lost; and, it will not retaliate against aircraft manufacturers like Boeing because that would give Airbus a monopoly, and thus higher prices and longer wait times for delivery.   So who could be caught up in the squabble?

China imports some $15 billion worth of soybeans from the US each year. $3.4 billion worth of cotton; $3 billion in copper materials; $3 billion in small engine passenger vehicles; $2.2 billion worth of large engine passenger vehicles; then there’s $1.3 billion worth of corn and $1.2 billion in coal. [CBR]

Someone might want to tell Senator Grassley (R-IA) about this Commerce Department proposal and the possible consequences for soy bean farmers because Iowa is the largest producer in the US, followed by Illinois.  Iowa and Illinois account for about 28% of US soy bean production.  Other producing states are: Minnesota, Nebraska, Minnesota, Indiana, Ohio, North Dakota, South Dakota, Missouri, and Arkansas. [B2Lv]  This isn’t the only crop in question.

The Chinese bought an increasing amount of corn last year from the US, but also found a new source of imports — Ukraine.  Ukraine will be the winner in any trade spat, and may be  the ultimate winner anyway.  Most US corn is genetically modified and permits are required in China for the processing of GMO corn; thus Chinese processors started buying more non-modified corn from Ukraine. [Reuters]  Add the GMO issue to a tariff tit-for-tat and Ukraine will be picking up business from — here we go again — Iowa, Illinois, Indiana, the eastern portions of South Dakota and Nebraska, western Kentucky and Ohio, and the northern section of Missouri. [B2lv]

It appears the easiest target for Chinese retaliation for tariffs/import limits would be agriculture, and then there are those large and small engine passenger vehicles.

One of the factors which makes targeting the Chinese a dubious tpoin is that China’s exports of steel have declined in the last few years (although some steel is exported in some form via other nations like Vietnam) and there’s this information on steel importation from the US Trade Representative (pdf)

 Between YTD 2016 and YTD 2017, imports increased from eight of the United States’ top 10 import source countries. Imports from India showed the largest volume increase in YTD 2017, up 209  percent, followed by Russia (up 64%), Taiwan (up 36%), and Mexico (up 23%). The two countries  which the United States had decreases in imports from are Japan (down 9%) and South Korea (down 2%).

Do we see China in this list? No, China is the 11th largest exporter of steel to the US. The top ten are Canada, Brazil, South Korea, Mexico, Turkey, Japan, Russia, Germany, Taiwan, and Vietnam. [USTR pdf]  Exactly how the 11th ranked export source of steel, of which 0.3% by weight is used for military purposes, makes Chinese steel a ‘national security’ issue requires a bit of a stretch, and we’ll probably find ourselves losing the argument with the WTO.  Going the Section 232 route is creative, but not really a very strong platform from which to launch a trade dispute.

Meanwhile it might be a good thing to decide if we want more Chinese assistance with the ever thorny problem of North Korea or we want to slap tariffs on Chinese steel?  Stump speeches which sound good to a crowd of Nucor employees about protecting their industry don’t necessarily make good practical policy when it comes to the point where decisions need to be made about overall economic policy, international trade relations, and diplomatic soft power.  Or, there’s a big difference between campaigning and governing — a not-so-subtle point the current occupant of the Oval Office appears not to grasp with both small hands.

Meanwhile we can only hope the Oval Office occupant doesn’t make a really stupid blunder next April.  Stay tuned, we’re only a little over a year into this E Ticket Ride.

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