Let's talk Tariffs...

[Aquapod770]

Bad Trump. Free trade is the best trade.

From https://economics.bmocapitalmarkets.com/economics/focus/recent/190510doc.pdf

• Just when the clouds were parting for the U.S. economy in light of perkier productivity and equity markets, the threat of rising trade protectionism struck like a lightning bolt this week. After months of what seemed like constructive talks, the President said China “broke the deal”. Although talks continue, hopes of a quick settlement were dashed, and new 25% tariffs kicked in. So, after an eight-month ceasefire, it’s time to sharpen our pencils again and tally the economic casualties from the trade war.
• We focus on three channels: the loss of purchasing power from higherpriced imports (with companies running at full tilt, imports will need to come from other countries or still from China, in both cases at higher cost); China’s retaliatory actions to punish U.S. exporters; and, an assumed adverse effect on business confidence and supply chains that dampens investment.
• With that understood, the previous tariffs are estimated to reduce U.S. GDP by about 0.2% over roughly a year. Friday’s ratcheting of the latter duty to 25% and expected counter measures by China could hive off another 0.1%. And, if the President carries through with a repeated threat to impose a 25% duty on all other goods imports from China, then another 0.3% will be added to the roster
• So, the total cost to the U.S. economy of the current trade tiff and threatened escalation with China could amount to 0.6%. Adding earlier tariffs on global imports of metals, solar panels and washing machines slices another 0.1%, while the looming threat of a duty on automobiles (excluding Canada and Mexico) could reduce activity by an additional 0.3% (we’ll know next week as the President is expected to make an announcement by May 18).This implies around 1.0% of lost U.S. output (or 1½ million jobs) due to past and threatened protectionist actions. No small potatoes.
• Apart from some firms in protected industries, there are few winners when countries start unfurling the protectionist banner. While the U.S. may extract concessions from China that eventually support its trade balance and economy, the casualties on the ground are starting to mount. It’s a high-stakes game for both nations, which is at least one reason to believe that either side will fold and call a truce.
• China will suffer more than the U.S. While U.S. sales to China account for less than 1% of U.S. GDP, China’s shipments to the U.S. make up over 3% of its economy.
  
  

Proponents say because this hurts China more they'll fold first. That has yet to be seen. I hope that's true, but my hopes aren't high. I think the Trump admin has been a net good for the economy so far, but it's so frustrating that he is so in love with this trade war. My true hope is that the lefts new found love of free trade will remain once their guy is in office.