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Trump's Bullshit Trade Tantrums

Why doesn't Wilbur Ross tell us how much more pipelines will cost? How many millions more for a Boeing plane? How much more for the new Air Force One fleet? How many orders for US planes will China cancel in retaliation?
 
God I would love a reporter to ask our president to explain what a trade deficit is
 
There's no way Trump would ever understand that some trade deficits are good and most are inevitable.
 
He clearly doesn’t understand we like buying shit, specifically cheap shit, I.e. see rubes at Walmart
 
Trade War, What Is It Good For? Absolutely Nothing

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We’ve known all along that Donald Trump is belligerently ignorant about economics (and many other things). But up to this point that hasn’t mattered much. He took office amid a sustained recovery that began under his predecessor, and that recovery had already lifted the U.S. economy to the point where “normal” policy rules apply: interest rates are above zero, monetary policy is effective again, so short-term economic management is in the fairly reliable hands of the Federal Reserve, not the chaotic Trump White House. What the president didn’t know couldn’t hurt us.

But there was always reason to be concerned about the possibility of crisis — either a crisis created by outside forces, like some kind of financial collapse, or one created by the administration itself. In that case the Fed’s rationality wouldn’t be enough. And it’s starting to look like we have a trade policy crisis on our hands.

Trump has always had a thing about trade, which he sees the way he sees everything: as a test of power and masculinity. It’s all about who sells more: if we run a trade surplus we win, if we run a trade deficit, we lose:

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This is, of course, nonsense. Trade isn’t a zero-sum game: it raises the productivity and wealth of the world economy. To take a not at all random example, it makes a lot of sense to produce aluminum, a process that uses vast amounts of electricity, in countries like Canada, which have abundant hydropower. So the U.S. gains from importing Canadian aluminum, whether or not we run a trade deficit with Canada. (As it happens, we don’t, but that’s pretty much beside the point.)

It’s true that trade deficits can be a problem when the economy is depressed, and unemployment is high. That’s why I, like many other economists, wanted us to take a tougher stance on Chinese currency policy back in 2010, when we had around 9 percent unemployment. But the case for worrying about trade deficits, like the case for running budget deficits, has largely evaporated now that unemployment is back to 4 percent.

So we can’t “win” a trade war. What we can do is start a cycle of tit-for-tat, and when it comes to trade, America — which accounts for 9 percent of world exports and 14 percent of world imports — is by no means a dominant superpower.

A cycle of retaliation would shrink overall world trade, making the world as a whole, America very much included, poorer. Perhaps even more important in the near term, it would be highly disruptive. We live in an era of global supply chains: just about everything produced in America (and everywhere else) uses inputs produced in other countries. Your new car may well have a chassis assembled in the U.S., an engine and wiring system made in Mexico, electronics from Korea and China, and, of course, steel and aluminum from Canada.

Could we produce cars without all those imported components? Yes, given time. But getting from here to there would be a huge mess: hundreds if not thousands of factories would have to close or convert over to other uses. Never mind the net loss of jobs from a full-scale trade war, which would in the end probably be a relatively small number. The point instead is that the gross job losses would be huge, as millions of workers would be forced to change jobs, move to new places, and more. And many of them would suffer losses on the way that they would never get back.

Oh, and companies on the losing end would lose trillions in stock value.

So the idea that a trade war would be “good” and “easy to win” is surpassingly stupid. And the way Trump seems to be starting his war is also remarkably stupid: start by protecting goods that are inputs to industries that employ far more people than those being protected? Do so in the name of national security — a justification that is, for good reason, almost never invoked — when the biggest source of those inputs is that hostile foreign power Canada?

In themselves, these tariffs aren’t that big a deal. But if they’re a sign of what future policy is going to look like, they’re really, really bad.
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Scott Walker is a pussy.

He can now join the proud, ever-growing list of pussies on the American Right that includes Mitt Romney, Mitch McConnell, Paul Ryan, Lindsey Graham, Marco Rubio, Ted Cruz, and on and on. Not to mention right-wing journalists like Hugh Hewitt and Rich Lowry. All of these guys criticized Trump in the 2016 primaries and campaign, and a few still lob some verbal critiques in Trump's direction from time to time, yet they all collapse like a house of cards when it comes time to make a stand, show some backbone, and do something meaningful about stopping him. Walker is just the latest. It reminds me of Theodore Roosevelt's description of William McKinley as having "no more backbone than a chocolate eclair."
 
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This is how reality TV works. Gotta inject some jarring surprises and plot twists to hold attention on the talentless and uninteresting cast.
 
The Macroeconomics of [the proposed tariffs and likely ensuing] Trade War

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Will Trump back down from his urge to start a trade war? Nobody knows; the thing is, he’s been an ignorant trade hawk for decades, he’s feeling beleaguered on many fronts, and word is that his doctor has told him to eat fewer burgers. So there’s surely a lot of pent-up rage that he’s all too likely to take out on the world trading system, especially when he tweets stuff like this:

The United States has an $800 Billion Dollar Yearly Trade Deficit because of our “very stupid” trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!

So it’s worth asking what would happen if Trump really did try to close the trade gap – it’s actually $500 billion, not $800 billion, but who’s counting – by imposing tariffs.

The trade gap is currently running a bit shy of 3 percent of GDP, while imports are 15 percent of GDP:

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If the price elasticity of import demand is around 1, which is a typical estimate for the short-to-medium run, a 20 percent across the board tariff might, other things equal, be enough to close the gap. But other things would very much not be equal.

Leave aside the issue of foreign retaliation/emulation, although that would be a very big deal in practice. Assume instead that the U.S. gets away with it, with no foreign response. Even so, this wouldn’t work out the way Trump imagines.

You see, diverting demand equal to 3 percent of GDP from foreign to domestic products would not increase US output by 3 percent relative to what it would have been otherwise, let alone the 4.5 percent you’d expect if there’s a multiplier effect. Why? Because the US is close to full employment. Maybe – maybe – we have another half-point of unemployment to go. But a 3 percent rise in output relative to trend would reduce unemployment about 3 times that much, 1.5 percentage points. And that just isn’t going to happen.

What would happen instead is that the Fed would raise rates sharply to head off inflationary pressures (especially because a 20 percent tariff would directly raise prices by something like 3 percent.) The rise in interest rates would have two big effects. First, it would squeeze interest-sensitive sectors: Trump’s friends in real estate would become very, very unhappy, as would anyone who is highly leveraged (hello, Jared.)

Second, it would drive up the dollar, inflicting severe harm on U.S. export sectors. Greetings, farmers of Iowa!


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So protectionism wouldn’t do very much to reduce the trade deficit, even if other countries didn’t retaliate, and would inflict a lot of pain across the economy. And that’s without getting into the dislocations caused by disruption of supply chains.

Add in the fact that other countries would retaliate – they’re already drawing up their target lists – and the fact that we’d be alienating key allies, and you have a truly terrible, dumb policy idea. Which makes it quite likely, as I see it, that Trump will indeed follow through.
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Wilbur Ross needs to retire and play shuffleboard.
 
Seriously, Wilbur Ross needs to be put out to pasture. He's insane, can't answer a question, and has a terrible turkey gizzard.
 
Goodbye NAFTA. It was nice knowing you.

 
This fucking guy. China wants to lead the world in artificial intelligence and we are fucking talking about steel. Steel.


 
This fucking guy. China wants to lead the world in artificial intelligence and we are fucking talking about steel. Steel.



And when he talks about steel, he makes it clear that he doesn't know anything about it. "Our steel industry is dead." Steel production has been relatively stable for like 40 years. And it's not like that is a hard thing to look up. But hey, let's just add some knee jerk tariffs after watching an ad during Fox and Friends without talking to anyone that actually knows what they are talking about.
 
What a fricking moron Trump is. Other than the creation of the EU, NAFTA may be the greatest trade deal since WW2. Most of the manufacturing jobs that were "lost" since then didn't stop in Mexico. They went to China, Viet Nam, India and Bangladesh.

I've posted this before but let's look at the reality of the "trade deficit" with Mexico:

The trade deficit is about $60B out of a total of about $540B in total trade. This means out of ever $9 in trade, the US buys about $5 and Mexico buys about $4.

The US has about 340M people. Mexico has about 120M people. If everything else was equal, We should be buying about 2.8 times from them as much from them as much as they do from us.

Per capita income in Mexico is $17,740 vs. $58,030 in the US. Even ignoring things like not having equal population and having more disposable income, we should be buying more than 300% as much from them as they do from us.

There are very few people of American ancestry in Mexico versus 17.6% people of Hispanic ancestry in The Us. That's over 59M in the US who may have attachments to products from Mexico. This creates billions in sales of Mexican products in the US.

The moron in the WH needs to shut his ignorant fucking mouth before Mexico wakes up. We are kicking their asses in trade not getting screwed by it.
 
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