However, the most dramatic impact will be on the US economy and it’s global status itself leading to job cuts, billions lost in lower exports, several bankruptcies, slowdown in investing in projects, slow down in bank lending & incomes and overall slowdown in the real economy.
Trump’s eccentric tariff tantrums will hurt economies far and wide and cost millions of jobs of simple folks who have no clue on what’s happening.
It would be wise for Trump supporters to read this article in order to understand how he is hurting the American free trade led capitalism model that helped the world rise over the past 50 years and the major loser will be Americans themselves.
It would be wise for Trump supporters to read this article in order to understand how he is hurting the American free trade led capitalism model that helped the world rise over the past 50 years and the major loser will be Americans themselves.
Here is our previous forecast.
Prominent economist Stephen Roach was the first to endorse our views on 12 July 2018.
An American Nobel Prize winner, Economist Thomas Sargent, agreed with our views on 20 Sept 2018.
Alibaba Group Chairman, Jack Ma, agreed with our views on 20 Sept 2018 as well and threw a solid upper cut on the US economy’s chin by withdrawing his promise to Trump of creating 1 million jobs in the US.
Now it’s become a cavalcade of negative forecasts for the global economy following our original thoughts on 25 June 2018.
Another esteemed economist and a writer in global publications said exactly what we said that US will lose the trade war.
Assuming that well-informed Chinese businesses know this, they will not cut their export prices to absorb the cost of US tariffs. That will leave US importers to pay the tariffs and pass on the cost to US consumers (further fueling inflation) or to US shareholders through lower profits. Thus, the tariffs will not be “punitive” for China, as Trump seems to believe. Instead, the main effect will be to hurt US consumers and businesses, just like an increase in sales tax.
Trump’s surprisingly successful rhetorical technique of “shout loudly and carry a white flag” helps to explain the consistent inconsistency of his foreign policy. The US-China trade war is likely to provide the next example.
Fitch ratings agency joined our original forecast of a global slowdown on 21 Sept 2018.
However, billionaire buddies of billionaire Trump will do very well and have nothing to complain due to billions flowing from tax havens abroad due to Trump’s extended favors to them of a one time tax benefit and the consequent share buy backs and tax savings going into their pockets.
Trump keeps helping his crony billionaire buddies while hurting the most vulnerable businesses, poor workers and small to medium sized businesses who have no outreach to Trump.
But if you are a billionaire, you can have a secret closed door meeting with Trump and get a favor.
He puts the interest of crony billionaire buddies above the interest of the nation which is truly sad.
After a secret meeting with Trump, billionaire Tim Cook got a free pass on his Apple products which won’t be included in any tariffs from China.
We expect that global trade that has been declining since it’s peak around 2014 at USD 19 trillion is already slowing. It dropped to USD 16 trillion 2015 and USD 16.03 trillion in 2016 but rose to USD 17.2 trillion in 2017.
Global trade is down by a solid USD 2 trillion since it’s peak in 2014 while the global population continues to rise exponentially over the last decade and is already an alarming indicator for the health of the global economy.
All growth of trade has come from Asia or other EM but not from EU or US or UK who continue to stagnate or decline in merchandise export values and volumes.
To add to this mess, Trump’s trade tantrums are putting all the countries (except China, which is insulated) at jeopardy for no reason whatsoever.
America has been a signatory to this rules based world trade order for several years.
To break from global agreements ratified by US Congress and various Governments around the world sends a clear signal to all the countries that US is not a reliable partner any longer.
The damage is being felt in Michigan:
It’s hurting Americans in Alabama:
It’s hurting American corporations in China.
The damage from the trade war to US businesses in China includes lost profits, higher manufacturing costs and lower demand for their products, according to the survey of more than 430 companies in industries ranging from technology to health care.
It’s hurting Americans in New England.
It’s hurting people in Wisconsin.
It’s hurting all seafood makers in America.
Some seafood makers will be devastated after decades of growth.
Trade war is hurting all American cherry makers too:
As one example, companies in UK are getting hurt badly
Hundreds of jobs across Europe shall be lost due to Trump.
Even Germany is expected to get hurt according to top trade officials in Germany.
Australia is also hurt badly. Their currency against the USD has dropped from 0.81 at the beginning of 2018 to 0.71 level this week, a drop of more than 12%.
Trump threatened Canada that he will “ruin” Canada. This will lead to job cuts on both sides of the border, according to Trudeau, should tariffs on cars be placed by Trump.
To believe that China is hurting or will buckle down means such people have no clue how China operates.
In fact, China is thriving and has been waiting for such threats from America for several years.
The trade of China is roaring, according to the most recent data of end Aug 2018.
So guess who is the loser since start of the year with trade tariffs? Just America and it’s closest allies in Europe, Australia, UK and Canada.
Trade of Emerging Markets has been rising since 2007 levels whereas for G7 economies has been stagnant or declining since 2008. While China continues it's march ahead and has doubled it's trade since 2007 peak.
Despite all the biased anti China headlines, China is still sending delegations to keep the discussions on.
The delegation said the US government's tariffs on Chinese goods will be counterproductive and pointless in resolving the trade dispute, and will weaken the rules-based multilateral trading system.
China is not the one to take it lying down, so their retaliation is swift and equally firm. Chinese retaliation will hurt every single sector across America.
They already stopped buying garbage from America and have put tariffs of 25% on key sectors like energy, almost all food items and agriculture products from America. Plus, will not only stop investing in the US but start withdrawing thus creating a double whammy.
This is hurtful to entire America since Americans need to pay higher prices for basic items while losing their jobs and incomes. While companies will have lower profitability going forward.
Trump is hurting and it shows in his statements.
Democrats say that Russia colluded with Trump to make him win the Presidency (on which Mueller is investigating and has charged 7 aides of Trump) while Trump is now saying that China is interfering in US elections.
It shows Trump will say anything to deflect attention away from him even it is the most silly thing to say. This indicates that he is really on the defensive.
Perhaps he will accuse Fiji or Tonga next for meddling in US elections.
The world’s largest retailer - Walmart - also warned Trump that they will need to increase the prices of everything and that tariffs will hurt the American consumers which is ALL of America.
The President of Americans for Prosperity, Tim Phillips, also agreed with us on TV last night that tariffs are bad for all of Americans.
One of the world’s largest retailer – Target – also says that they are suffering and prices of everything will rise. This will lead to lower sales and lower margins across all businesses in America.
If a retailer says that, it means that anyone who eats food or buys basic things which is pretty much every human being including in America, will pay a higher price of 25% equivalent to Trump’s tariffs and similar 25% by China. Effectively, prices could rise by 40%-50% of several items unless replacements can be found from other countries.
But to replace the products from China which is the lowest cost producing country supplying bulk of global exports is not so simple. The volumes and the cost at which they are produced in China are unbeatable.
Since Trump has created animosity with other nations, they are not exactly willing partners to replace China so prices will rise from other countries as well.
Hence, Trump is putting taxes on his own citizens by placing tariffs every month, that is Economics 101, which Trump is unable to comprehend which is astonishing.
“An anonymous American Chamber tariff survey taken from Aug. 29 to Sept. 5 found three-quarters of 430 responding companies expecting “strong negative impact”from the tariffs on $250 billion worth of Chinese imports that Trump has now put in place.”
While US gets excluded from global trade, as we had warned previously, entire world will fill the vacuum created by Trump tantrums to act as supplier to China and it’s happening at a super fast speed.
India is getting a pleasant surprise.
Soybeans markets has completely shifted from US and prices have plunged. Demand from China is so high that Brazil has run out of production so focus is now on Argentina. Both nations will benefit in the months ahead in the soybeans business along with the ports and brokers where more jobs will be created.
America estimates that for every USD 1 billion of trade, port cities create about 15,000 jobs. Now these jobs will be created rapidly in other countries instead of America where hundreds of thousands of jobs will be lost.
Russia is getting business in oil, gas, soybeans, military, railways, currency exchange and whatever else one can imagine from China, bringing both countries even more closer, thanks to Trump tantrums.
This will create a more formidable force AGAINST America in the years and decades ahead.
Bringing two of American greatest geo-political foes together while significantly damaging the American economy from within is not the best idea, President Trump.
We implore you to reverse course on tariffs completely and get on to diplomatic talks with China as well as with all the allies of USA for the sake of not damaging the American economy, American super status and hurting American business and workers any more and ensure that America can be a reliable partner to all nations in the world.
This will help keep the global trade remain in balance and not change trade flows from America and move them off to other countries.
An uncertain and unstable world is in no one's interest.
An uncertain and unstable world is in no one's interest.
Thank you so much. Appreciate your comments. Glad you enjoyed the detailed post.
ReplyDelete