Concerns Rise of Trade War

[admin]

Here’s a reminder from your Econ 101 textbooks: institute 25% tariffs on steel imports and 10% on aluminum and you can expect international backlash. Especially when the decision is based on a Cold War-era statute that can be invoked when foreign imports pose a risk to national security. 

Because threat or no, that type of declaration is bound to put the U.S.Â’ relationships with other countries on shaky ground.

And it didÂ…

Some context: The U.S. is the world’s largest steel importer (26.9 million metric tons in 2017). 

Here’s what some of our suppliers had to say: 

Canada: “It will take responsive measures to defend its trade interests and workers.” 

Brazil expressed “enormous concern” and might take “multilateral or bilateral” protective measures. 

European Union: “We will react swiftly, firmly and proportionally.”

ItÂ’s the classic Settlers of Catan conundrum: If you screw over Bethany when you trade for ore, you better believe sheÂ’s gonna lowball when you trade back for sheep.

But the administration is standing strong

President Trump (tweeting in response): “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.” 

His thought process? (1) The U.S. has been bleeding blue collar steel jobs, and these tariffs will bring them back. (2) China’s monopoly on steel production has led to unfair competition in the market. 

But many fear these tariffs could raise costs in other industries that rely on imported steel (i.e. car manufacturing). Not to mention, China is only the U.S.’ 11th biggest source of imported steel.

What it means for you: If a trade war breaks out, look out for higher consumer prices and a depressed stock market.

http://morningbrew.cmail19.com/t/j-l-bjyyult-yhyuhjkhdk-k/

[James Thomas Rook Jr.]

Remember ... it was Tariffs that caused the American Great Depression, and money stopped flowing.

[admin]

@James Thomas Rook Jr. ... your comment made me google this... and sure enough an article from yesterday is out there:

"...Smoot-Hawley, Reynolds points out, passed the House in May 1929, and stocks were battered every time the act moved through the legislative process. On Oct. 23 of that year, a Wednesday, it became clear the tariffs would be much broader than first believed.

The very next day, of course, was Black Thursday. Markets dropped 9% in a day and kicked off a yearslong stock meltdown.

As Reynolds sums up, “market participants do not wait for a major law to pass” before retrenching their positions. In 1929, they were right to sell. Smoot-Hawley ultimately raised tariffs on tens of thousands of products, and trade policy analyst Bill Krist points out that by the end of 1934, global trade had tanked by 66% from 1929 levels.

The parallels to the current moment are distressing. The Trump tariffs are not in effect yet, and so far they are officially limited to steel and aluminum. But in coming days, stock traders will be acting on their beliefs about what the future will bring. There are signals, just as there were in 1929, that tariffs could expand from their modest start — U.S. trade partners have already said they will retaliate if tariffs go into effect, while President Trump posits that “trade wars are good.”

Even if we accept arguments like Reynolds’, tariffs were just one factor in the Depression, and most of the others aren’t substantial now. But history has provided us with a strong cautionary lesson about the real impact of tariffs, and the stock market is "

http://fortune.com/2018/03/04/did-tariffs-cause-the-great-depression/

[Guest]

@admin so we COULD be experiencing the very beginning of a "years long stock meltdown".....

I guess the market just needs to get the message that this is not JUST a very small tariff and that a true "trade war' has started.

For now maybe the entire market is still in disbelief?

[James Thomas Rook Jr.]

The only justification for a trade war ... is IF YOU WIN.

The "Law of Unintended Consequences" controls all decisions.

... soon enough ....  we will all know.

Just like in the American Civil War, there were massive casualties on BOTH sides to determine on the battlefield whose agenda would prevail.