“It takes 20
years to build a reputation and five minutes to ruin it. If you think about
that, you’ll do things differently.”
Warren
Buffett.
Weekend one of the Great
Global Trump Trade War on NATO, Canada. China and Mexico. America’s tariffs on
steel and aluminium took effect yesterday, the EU’s retaliatory tariffs start
on June 20, Canada, China and Mexico’s retaliatory measures kick in almost
immediately.
For now, NATO,
Canada, China and Mexico, aren’t playing hardball back to Donald Trump’s America,
retaliating instead against products produced in states that voted for President
Trump. The general idea is to punish his voter base and presumably influence, “Russia
style,” the US November mid term elections. A very gentlemanly trade war response.
But don’t be fooled. Once layoffs start to occur and unemployment rises, the gloves on both sides will come off. With populist governments now taking power in Italy and Spain, and outrage rising in France and Germany, Europe is unlikely to play by gentlemen’s rules for long.
China, and Mexico,
aren’t likely to play by gentlemen’s rules at all. Canada, America’s unofficial
51st state, is caught up in the worst of all worlds. Its economy is so entwined
with the USA’s any meaningful retaliation quickly blows back into Canada’s economy.
So for the first few weeks of summer, unless President Trump escalates, we will likely see a very moderate kind of trade war, with only a modest rise in unemployment. But like the RMS Titanic the damage has already been done. President Trump has made the USA into an unreliable and untrustworthy trade partner. Why buy US made products, if ZTE style you can be put out of business on a presidential whim.
President Trump is
remaking the world but not to America’s advantage. Despite Brexit and the
likely breakup of the EUSSR as we know it, EurAsia is now the new reality in
the decades ahead.
“Honesty is
a very expensive gift. Don’t expect it from cheap people.”
Warren
Buffett.
So much winning: all the latest signs of the bubble that will crush this economic expansion
By Tim
Mullaney Published: June 1, 2018 2:53 p.m. ET
Friday’s well-received jobs report aside, this hasn’t been a good week for
the economy. After 107 months, we are beginning to see the imbalance — in
popular-speak, the bubble — that will eventually end this expansion. And its
name is Donald J. Trump.You see it in Wednesday’s report on gross domestic product that showed first-quarter pretax corporate profits declining, even as Trump’s tax cuts papered over the erosion.
You can see it in the weak consumer-spending growth in the first quarter, also reported Wednesday, and the not-great housing news (lower pending sales, and big price gains even amid weak volumes, because sellers are simply sitting out trade-up moves, forcing buyers to bid up scarce inventory) that came out Tuesday and Thursday.
You see it in market wobbles early in the week prompted by worries about Italy maybe trying to wriggle out of its unmanageable debt load — a reminder that if a financial crisis comes out of Europe, just as one came from Asia in 1998 and from the U.S. housing market a decade ago, the U.S. president and his team haven’t shown even basic competence, let alone the ability to deal anything like a global response to a global problem.
Or in the fact that, if you look, this report delivered fewer jobs than 25 of the 48 issued in Barack Obama’s second term. Yet, predictable as Seattle rain, Trump took to Twitter and declared “RECORD JOBS DAY!...America is WINNING BIG under President Trump!”
And you see it in the president himself — more every day.
In the past week, Trump has decided to play trade warrior, slapping tariffs on steel and aluminum made by allies in Europe and Canada — all taken vainly in the name of national security. (What, was Justin Trudeau going to drop ingots on Trump’s head, Road Runner-style?). Forget for a moment that steel imports in general are way below 2014 levels, though they rose in the first year of Trump’s term, or that total steel imports were only $29 billion for all of last year, while exports rose 15% in the first nine months of 2017 to $10.1 billion.
Putting it charitably, Trump is ticking off allies — Trudeau’s contempt was palpable as he pointed out the U.S. has a trade surplus in steel with Canada and said the move lacked “common sense,” while French President Emmanuel Macron warned Trump that “economic nationalism leads to war” — over tariffs on about $20 billion, or one-tenth of 1% of the U.S. economy.
Read: Angry allies plan to retaliate over U.S. trade tariffs
Trade was always the heart of economists’ case that Trump would cause a recession after the effects of his tax cuts wore off.
----“If all of the announced tariffs are actually implemented, it will [cut] 0.2% from real GDP growth. If that’s all it is, it won’t cause much of a slowdown,” Moody’s Analytics chief economist Mark Zandi said. “However, if the trade war is back on, and the Trump Administration slaps 25% tariffs on all Chinese and Mexican exports to the U.S., as [Trump] promised during the campaign, then yes, it would do serious economic damage. NAFTA would likely fall apart, and financial markets would begin discounting much worse. A recession would be a real possibility.”
More
Tariffs Can Work—but Not Stupid Ones
Trump’s new steel and aluminum tariffs
mistake the means for the ends.
Tariffs and interventionist trade policy have had their place in the
building of the American economy. You can look it up! But
to say that they have paid off in particular times and places is different from
saying that they’re generally a good idea. Like other inherently damaging
steps, from invasive surgery to blowing up decrepit buildings, they are
justified only when the alternative is worse.Tariffs are good or bad, useful or pointless, depending on the balance of disruption they cause versus benefits they bring. By that standard, Donald Trump’s new steel and aluminum tariffs against Mexico, Canada, and the European Union are both pointless and bad.
----The more frequent case for tariffs is that it is a tool for getting attention and changing behavior. Country X is doing something you don’t like: Either it’s making it too hard for your own companies to sell to Country X’s customers, or it’s making it too easy for Country X’s own companies to undercut yours in competition around the world. You apply a tariff to offset what you consider an unfair advantage. And these days, you also get ready to convince an adjudicator at the World Trade Organization that you’ve got a legitimate grievance, because Country X is sure to complain about your tariff to the WTO.
Your real
goal is not to keep the tariff but instead to change the other country’s
behavior—to make its subsidies or unfair practices painful enough that
eventually it drops them, and you can get rid of your tariffs as well. Tariffs
in this sense are like other resorts-to-force: a means toward altering behavior,
never an end in themselves. The best tariffs are the ones you can drop most
quickly because they’ve done the job of changing the other side’s mind.
----For a tariff to do any good, let alone to seem justified, it must have two elements: a reason for starting, and a reason for ending.
The reason
for starting, the cause for applying the tariff in the first place, is whatever
the other country has done that you find objectionable. The reason for ending
is that the other country has halted or changed that practice. The whole object
in applying the tariff is to get back to the position where you can remove it,
because the other country has stopped doing what you considered wrong.
By these
standards, how do the new steel and aluminum tariffs measure up?
Based on all
the evidence now available, they fail on both counts. Badly.
The countries
being punished—Canada, Mexico, those of the European Union, and others—aren’t
doing anything about steel or aluminum that the United States could plausibly
call wrong or unfair. They sell a lot of steel to the U.S. Canada is the
largest supplier of imported steel to the U.S.; it’s also by far the biggest
customer of U.S.-made steel. (Both patterns are because so many industries in
the U.S. and Canada are so tightly integrated, with so many components and
subassemblies moving back and forth across the border.) But that’s no more a
proof of “unfair” practices than the fact that the U.S. sells a lot of soybeans
to Japan and a lot of Boeing airliners to China.
More
America’s Allies Lose It Over Trump’s Tariffs
By Anthony Halpin
1 June 2018, 11:03 GMT+1
For U.S. allies frustrated with President Donald Trump’s “America
First” policy, his decision
to slap tariffs on imported metals from Europe, Canada and Mexico on national
security grounds may have been the final straw.Canada's normally affable premier, Justin Trudeau, said the measures were “totally unacceptable” and retaliated with tariffs on $12.8 billion of U.S. goods. “We have to believe that at some point their common sense will prevail,” he lamented.
Amid fears of a transatlantic trade war, the European Union also plans to strike back by imposing tariffs on U.S. imports including Harley-Davidson motorcycles and bourbon.
German Finance Minister Olaf Scholz called the U.S. decision “illegal” and the security justification “spurious,” while European Commission chief Jean-Claude Junker said yesterday: “Whenever I’m thinking about Trump, I'm lost.”
The confrontation has overshadowed a meeting of Group of Seven finance ministers and central bankers in a Canadian ski resort, and will likely dominate a G-7 leaders' summit hosted by Trudeau next week.
The
biggest risk now is that Trump has touched off a spiral of tit-for-tat
sanctions with America's closest allies that will further alienate them and
possibly strengthen China's hand.
June 1, 2018 / 1:54 PM
And the kitchen sink - EU to hit back at U.S. tariffs
BRUSSELS (Reuters) - The European Union’s plans to hit back
at new U.S. tariffs on EU steel and aluminium exports include hiking duties on
a range of imports from the United States, from blue jeans and rice to the
proverbial kitchen sink.
In eight closely typed pages of documentation lodged at the
World Trade Organization (WTO) in Geneva, the EU has set out 25-percent tariff increases
that are in part aimed at hurting the electoral districts of some of President
Donald Trump’s allies.
That explains “motorcycles ...
of a cylinder capacity above 800 cc”, which targets Harley-Davidson, built in
the home turf of House Speaker Paul Ryan, and “bourbon whiskey”, aimed at
Senate Majority Leader Mitch McConnell’s Kentucky electors.
There is a range, evidently,
of steel and aluminium in their various forms as well as intriguingly precise
targets such as “canoes” and “manicure or pedicure preparations”, “dried
shelled kidney beans” or “chewing tobacco and snuff”. “Playing cards”, too, are
hit - but only with an additional 10-percent duty.
A second EU list of a similar
length has also been published at the WTO, lining up new targets for later if
the trade dispute is not resolved. That will be bad news for U.S. manufacturers
of “statuettes and other ornamental articles of porcelain or china” or, indeed,
whoever makes “plasma cleaner machines that remove organic contaminants from
electron microscopy specimens”.
More
"To
be blunt, people would vote for me. They just would. Why? Maybe because
I'm so good looking."
Donald Trump. New York Times, 19/9/99
We close for the
weekend with the European’s and Democrat’s nightmare, Donald Trump’s
Republicans might not lose the House but win the Senate. News you won’t find on
the extreme left-wing BBC.
"I
think I am, actually humble. I think I'm much more humble than you would
understand.”
Donald
Trump, 60 Minutes interview, July 17, 2016
Lawrence Solomon: Trump might soon be unleashing his most radical economic ideas yet
If the Republicans get the 60 seats needed for a filibuster-proof Senate, Trump could really go to town, fulfilling the balance of his agenda
June 1, 2018 6:58 AM
EDT
A few months ago, Democrats in
the U.S. were rubbing their hands in glee in anticipation of a “blue wave” that
would give them control of Congress in the November mid-term elections and
allow them to impeach President Donald Trump. Today, they’re wringing their
hands in fear that the Republicans could defy the odds and keep the Congress —
historically, the party controlling the presidency loses seats in the House of
Representatives 90 per cent of the time.
Soon Democrats could be
raising their hands in horror at an increasingly plausible scenario: a “red
wave” that, far beyond denying them their much-expected impeachment, gives
Trump the supermajority he needs to pass virtually any legislation he wishes.
Until recently, the Democratic
strategy — demonize Trump as a racist, sexist, xenophobic incompetent through
an anti-Trump Resistance Movement that obstructs him at every turn — seemed to
many to be working. Trump’s popularity sank and the polls gave the Democrats a
commanding edge over the Republicans of as much as 16 percentage points.
But although the Democrats
blocked most of Trump’s agenda, “most” wasn’t good enough. Trump’s passage of
tax-cutting legislation and his conservative judicial appointments are among
the most consequential in recent history. Moreover, the Trump resistance
couldn’t stop his administration from slashing job-killing regulations
throughout the federal bureaucracy, they couldn’t stop him from spurring
investment through his pro-business rhetoric, they couldn’t stop him from
militarily wiping out ISIL and they couldn’t stop him from fulfilling literally
hundreds of his campaign promises. As the Heritage Foundation has noted, the Trump
administration has already implemented nearly two-thirds of the 334 “Mandate
for Leadership” agenda items he pledged to fulfill, including 81 major
achievements such as withdrawing from the Paris climate accord and repealing
net neutrality.
The country is upbeat.
Consumer confidence is at a 17-year high, according to the Conference Board.
According to Gallup, “Sixty-seven percent of Americans believe that now is a
good time to find a quality job in the U.S., the highest percentage in 17 years
of Gallup polling. Optimism about the availability of good jobs has grown by 25
percentage points since Donald Trump was elected president.” Before Trump, the
percentage had never reached even 50. Wages are rising for the first time in
decades. Unemployment rates for blacks and Hispanics are at record lows, and
for women are at 18-year lows.
More
"We
won with poorly educated. I love the poorly educated."
Donald
Trump. Nevada Caucus, Feb. 23, 2016
The monthly Coppock Indicators finished May.
DJIA: 24,416 +201 Down. NASDAQ:
7,442 +276 Down. SP500: 2,705 +180 Down.
All
three slow indicators moved down in March and April and continued down in May.
For some a new bear signal, for others a take profits and get back to cash
signal.
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