Hooray! Another Month of "Trade Deal Around the Corner" Discussion

-edited

The stock market continued its rally today mostly on news of a trade deal.

Trade War History

  • In January 2018, Trump imposed tariffs on solar panels and washing machines of 30 to 50 percent.
  • In March 2018 he imposed tariffs on steel (25%) and aluminum (10%) from most countries, which, according to Morgan Stanley, covered an estimated 4.1 percent of U.S. imports.[
  • On June 1, 2018, this was extended to the European Union, Canada, and Mexico.

There are too many retaliations and US escalations to report, but it all started in January of 2018 according to Wikipedia.

Legality

  • Article 1, Section 8 of the Constitution: "Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises." But Congress has repeatedly shifted its powers regarding tariffs to the president.
  • Beginning in 1917 with the Trading with the Enemy Act of 1917 the president can impose any tariff while the nation is at war. The affected trade does not have to be connected to the ongoing war.
  • Since 1974 the Trade Act of 1974 allows the president to impose a 15% tariff for 150 days if there is “an adverse impact on national security from imports.” After 150 days the tariff expires unless extended by Congress.
  • In 1977 the International Emergency Economic Powers Act shifted powers even more towards the White House. The Trump administration claims that it gives the President the authority to raise tariffs without any limits during a national emergency of any kind*. Legal scholars disagree because the IEEPA does not mention tariffs at all and transfers no authority of tariffs towards the President*.
  • Scholars warned that the Trump administration's use of "national security" rationales for the tariffs could undermine the international trading order, as other states could use the same rationales for their own tariffs. The WTO allows states to take actions necessary to ensure their national security, but this provision has been sparsely used, given that it could be abused. Whereas national security reasons were cited for the tariffs, it has been noted that tariffs primarily harm American allies, not enemies; the United States imports very little steel and aluminum from China directly. Trade experts furthermore noted that the United States already produces more than two-thirds of its own steel.

"Trade Wars are Good and Easy to Win"

On March 2, 2018, Trump Tweeted "Trade Wars are Good and Easy to Win"

For nearly 18 months we've had repetitive escalations of such nonsense with no end in sight.

Understanding Trump's Trade War Tactics in One Picture

The above image is the key to Understanding Trump's Trade War Tactics.

How Long Can This Go On?

Given the charade has already lasted 18 months, inquiring minds have a question.

Q: How Long Can This Go On?

A: Until Trump seriously breaks global supply chains.

The latter may have started as per my post Major Supply Chain Disruptions Coming: Thank Trump

Any Trump Successes?

None. The latest trade report shows No China Progress, Deficit With EU, Canada, Mexico, Japan Rising

Q: Will Trump ever learn?

A: No

He rally believes "Trade Wars are Good and Easy to Win".

But hey, enjoy the circular rallies.

Mike "Mish" Shedlock

Comments (18)
No. 1-10
justaned
justaned

Here we see one facet of the growth of the Imperial Presidency via the willful abdication of Congressional prerogatives.

Casual_Observer
Casual_Observer

ADP jobs numbers are back to what they were in Obama administration with most new jobs in healthcare and services. The Trump manufacturing boom is over. It was really a mirage anyway. The economic growth generated by the tax cut has been offset by the tariff war and slowdown in manufacturing. Expect higher deficits, more debt and slow growth for a decade. I'm calling it in the 1/1/1 decade. 1% growth, 1% interest rate and 1% inflation (though likely inflation will be closer to 2% and offset any growth).

Bam_Man
Bam_Man

US Stock market up all of around 1% in the past 52 weeks. Hooray!!

2banana
2banana

An excellent and balanced article. Full of data and history of how we got here.

And how big a task it is to fix this problem.

Realist
Realist

How long can Trumps trade wars go on? They will continue until he is no longer President.

What will he accomplish? Nothing good. He may cause disarray in global supply chains, while increasing costs for businesses and consumers.

Will there be any significant trade agreements signed? Nothing significant. Countries like China have already realized it is futile to sign any significant agreement with Trump, because he will not honour it anyway. He has repeatedly demonstrated that he can't be trusted to keep his word. So everyone is now using the strategy of going through the motions with Trump, while waiting for his Presidency to finish, whether its 4 years or 8.

lol
lol

China will seize the oilfields in Venezuela causing prices to soar over 180 dollars a barrel!Maduro owes Beijeng billions they can't pay back and at 5-6 a gallon gas,Trump will kiss Xi ass to get any deal.

Mish
Mish

Editor

"China seizing the oil fields in Venezuela and getting them to work/function again would actually lead to a crashing of oil prices and a glut of oil on the world market."

side with banana on this

Escierto
Escierto

Gold got taken to the woodshed. Talk about a beat down. Now that’s gonna leave a mark.

Sechel
Sechel

It's still not clear to me what the American position is? Are we looking to see all tariffs dropped on both sides? I doubt it. Has the White House even put out a statement on what the American position is? How can you negotiate if you don't list your demands. Last I heard Trump wanted to keep some tariffs in place and simply wants China to agree to purchase X of this?

FromBrussels
FromBrussels

Trump says this, Trump says that, is all I ever hear these days....excuse me but I am probably not deluded enough to believe that Potus can take all those decisions and measures on his fckn own without full consent of some party members, or from his wife for that matter. That being said, what will happen when a deal with China IS reached ? Business as usual, rates up dramatically, kicking the cans down dead end Debt Road again, heading for the cliffs anyway... or do fairy tales really exist ?