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03 March 2018

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outthere

There is an excellent analysis in LATimes of steel situation there. A big modern employee owned company fabricates many products, and is facing increased costs of steel because of the new tariffs.
Basic steel slabs are 35 ft long. It is far cheaper to ship steel by ship from China to California than it is to ship by rail from Alabama (or anywhere in midwest USA) to California. So the result of the new tariffs is that Alabama (and all midwest USA) is raising prices, and consumers will pay more for fabricated products.
Will there be more jobs in USA? Doubtful. Probably net fewer jobs as western fabricators lose business.

divadab

The overlooked worst part of Trump's proposed tariffs on Steel and aluminum is that it's a CHEAT: the Trump regime has used "national security" to justify the tariffs. WHat possible national security threats are our free trade partners Canada and Mexico? These are our friends and allies, totally integrated into our supply chains.

How does this cheating to promote punitive tariffs against our friends and allies and free trade partners going to benefit the USA? WHo will ever trust the USA to honor its commitments when it cheats its friends and beggars its neighbors in actions of dubious use for purely domestic political purpose?

What are we to conclude but that the USA is led by people who lie and cheat as a matter of habit? They think its normal to cheat their friends. How did this Republic descend so low as to be led by these scum?

Seamus Padraig

In order to know whether or not Trump's tariff would be justified, we need to know more about the European steel situation. As some commenters above have noted, the steel market is notoriously susceptible to 'dumping' -- i.e., selling steel below cost in order to win market share and drive competitors out of business. The Chinese, for example, are known for this. When dumping is proven to have occurred, then tariffs or other protectionist measures are fully justifiable. Even the WTO authorizes them in such cases.

Another issue involves countries where governments give their steel industries cleverly disguised subsidies, or enact protectionist measures of their own--sometimes claiming they are for 'consumer safety' or 'environmental sustainability'. Of course, there are times when such measures may be legitimate; but again, we would have to know more about the situation before saying, definitively, yes or no to tariffs.

Publius Tacitus

Here is where you are wrong. There is a major aluminum manufacturer in China who was sanctioned by the US. That company then started shipping its product to Mexico, where it set up a front company and partnered with one of the Mexican drug cartels. The aluminum is being re-stamped as "Made in Mexico" and shipped to the US under the terms of NAFTA. You okay with that? I'm not.

ISL

outthere,

You really miss Trump's point and method. He creates uncertainty (and trump derangement syndrome in some). If the dem's do poorly in the mid terms, companies will start thinking about six more years with random tariffs popping up like tweets in the night, and will proof their future profits against this uncertainty. I would argue that it is not costs that really drives businesses to relocate (costs can be priced in or strategized against, etc.) its uncertainty (and I will add a highly educated workforce).

That said, I would be more convinced if Trump had not surrounded himself by G-Sachs execs, who have profited the most from offshoring.

Eric Newhill

Seamus #28

Exactly right.

Too many Chicken Littles here acting like econometric modeling is a univariant exercise. Tariffs increase the price of steel from China so prices go up. Done! Analysis complete! Of course real world economies aren't so simple.

I will say again that any analysis must include the cost (to consumers) reducing effect of a) the Trump tax cuts b) the Trump regulation reductions on the price of US production.

There are many other variables involved in the econometric equation and those variables, if kept internal to the US, can be tweaked so as to result in a net gain to the USA.

I suspect that the leaders of the Chicken Littles are those with a vested interest in the foreign produced products. Then all those suffering from TDS jump on the sky-is-falling train.

The Twisted Genius

If Trump's target is China, he's shooting at the wrong target. Canada is the largest exporter of both steel and aluminum to the US. Russia is up there, too, especially in aluminum. I'm waiting to see what his next step would be.

Perhaps what Trump really wants is a recreation of the Tokugawa policies of sakoku in Japan. America for Americans. American goods and only American goods for Americans. The rest of the world be damned. That would be a very different economy and very different way of life.

Nancy K

Do you really believe that people who don't agree with you aren't American and should leave. I'm here to tell you I disagree with everything you have just written, and I am not moving anywhere. There are more people in this country that think like me and the younger generations will just add to that number. If you don't like it you can always move.

Mark Logan

This is one of the few things Trump has done which I support, every nation during our reign as the world's titan protected their nascent start-up industries with tariffs, and at the expense of their own consumers. That is the necessary price for long term security sometimes.

I am not convinced free trade can't work, btw. The Chinese have for quite some time now have demonstrated they must build their own domestic market, in time the guys who are eating our lunch will have much more expensive labor themselves. The free traders may not be wrong.

That said Trump did this with the skill of a cub scout with a dull ax. It is possible to get this sort of change without busting the other guy's balls and thereby igniting widespread outrage, which all but compels other leaders to fight and fight hard. He us stuck in NYC real estate mode. If I were a cynic I might chalk this up to another red herring for the press to get them to talk about something other than his chaotic administration, but for now I will give him the benefit of the doubt.

Even his few good ideas will be worse for the wear of his advocacy.

Kooshy

US, created the liberal global no border economy. Now wants to walk away from it, do without it. If so, without the third world cheap labor how could the current US wages afford to participate in this liberal capitalist economy. There is an Iranian proverb that fits this new typical Trumpish American bluff, “first you need to dig a well than to go steel the minaret”

outthere

The historic progression is from currency wars to trade wars to shooting wars. We are now at stage 2.
James Rickards explains
https://dailyreckoning.com/now-trade-war-shooting-war-next-2/
Rickards wrote the book about currency wars, he knows what he is talking about.

Kooshy

I also thought US’ liberal open market trade policy, was another incentive to keep the status of US dollar as world’ main fiat trade currency, if we close or make export to US expensive on foreign countries, who would need, or, what would be the reason to keep as much US dollars in reserve currency or invest in US bonds? Would that effect value of US dollars ?

Alves

The target is not China. China is just collateral damage in this round of trade wars.

Laura

Again, I must reiterate....Trump is not a businessman. Trump is a real estate investor. These two things are NOT the same. Also, it is interesting how many times "childish" has come up on this blog vis a vis our President. Has anyone else noticed?

Babak Makkinejad

Once again, there is Global Warming but it is not caused by man.

Babak Makkinejad

Yup, keep the popukation rural - to eke out a marginal existence on back-breaking work that kills the body and soul; and watch the loved ones die of avoidable causes. You might like to look at Brazil or India for a reality check.

Babak Makkinejad

There is no other way, USA can no longer be the Global Buyer of Last Resort. Is Oakland any better, in infrastructure than Naples? Or Tunis?

steve

Trump trade spokesperson this morning said this is not about China. This is pure protectionism for the steel and aluminum business.

Steve

outthere


I am not here to argue with you about whatever Trump's "point" is/was.
I believe the world should use the most economic resources and not waste them, i.e., should NOT waste money on uneconomic shipping costs.
I do NOT believe these new tariffs will result in either greater efficiency or more employment in USA.
I do believe these new tariffs will result in higher costs for USA consumers, and also for USA fabricators.
So the net result may very well be LESS employment in USA.
Read the article for yourself.
http://www.latimes.com/local/lanow/la-fi-trump-tariffs-california-20180302-story.html

Jack

For some perspective. Steel production numbers:

China: 830 million tons
Japan: 104 million tons
India: 101 million tons
US: 82 million tons
Russia: 71 million tons
S. Korea: 71 million tons
Germany: 44 million tons

catherine

''My main observation, based on a lifetime of experience with manufacturers facing international competition, is that tariffs are an addictive drug for lazy and incompetent business management, featherbedding unionists and bad government''


Well I am dumbfounded. What exactly is your experience with manufacturers? Also how old are you? Do you own a manufacturing plant or work for one?

I could give you a tour of my state's dozens of shuttered plants from textiles to small equipment that went out of business due to cheap imports that were cheaper because they benefited from cheap labor, less taxation, no safety regulations and no employee benefits such as insurance, Manufacturing loss occurred because of free trade and outsourcing, period.

Did you miss this clue? .....''General Motors Corporation announced plans to cut 30,000 jobs and close nine manufacturing plants across North America. According to its ceo, the decision represented an attempt to “get its costs in line with major global competitors” and “return North American operations to profitability as soon as possible” (AP Nov. 21, 2005).

Or these?....In 2003, industrial giant Bethlehem Steel folded, causing thousands of employees and retirees to lose their pensions.
In 2004, Levi Strauss closed the last of its more than 60 American factories.

How about Boeing? ..... (Newsweek, Dec. 2, 2005). “70 percent of the airframe of the company’s next-generation 787 Dreamliner will be made overseas, including key parts such as the fuselage and wings.” If you think that is because of US 'failure to inovate ' and not about cheaper cost I have some time share in Syria to sell you.

It has nothng to do with 'lazy and incompetent ' and every time an American manufacturer closes and then reopens elsewhere, the foreign country gains American technology.

In addition there is a vast difference between management circa the 50's 60's and business management today by musical chairs CEOs of inter corps who had nothing to do with creating or building the company and manage for the self benefit of bonuses according to their stock price on WS.

So I hope you want to avoid being lazy and incompetent yourself and want to understand how all of this came which you can do by starting with GATT and following the tariff and trade bread crumb trail to today's US problem.

Babak Makkinejad

In regards to Boeing - that was the result of industrial extortion by foreign governments, "use local sources or no deal".

turcopolier

Laura

In what sense is a "real estate investor" not a species of business man? pl

Babak Makkinejad

I think you mean he is not an industrialist; that he is unlike Carnegie, Ford, Durand etc.

Eakens

What exactly is your definition of a businessman? Somebody who is not trump?

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