Soybeans, Cars, Planes, and "To Hell With Wall Street"

Mike Mish Shedlock

In the tit-for-tat trade war, China struck back with tariffs on Soybeans and other items.

Trump imposed another $50 billion tariffs on China, as noted yesterday.

Today, Beijing Hit Back at the U.S. with tariffs on an equivalent $50 billion of goods.

While the Trump list would affect 1,300 categories of goods, China critically is targeting a narrower range of 106 types of U.S. goods, many of them high-profile. Soybeans and smaller commercial passenger planes, mostly made by Boeing Co. , are the most valuable U.S. exports to China, worth nearly $23 billion last year.

Also prominent in China’s retaliation are sport-utility vehicles and other agricultural products, from beef to sorghum—goods that were chosen to hit U.S. states that supported President Donald Trump, according to people familiar with Beijing’s plans.

Not a Trade War

Mercy me. Don't call this a trade war. It's really a peanut butter sandwich.

Trade Dispute Will Hit Automakers

Reuters reports U.S.-China Trade War Could Hit German Automakers, Plus Tesla, Ford

If a tit-for-tat tariff dispute between the two countries erupts into a full-blown trade war, auto production in both will be affected, but U.S. factories would feel the strongest effect because China imports nearly 270,000 U.S. vehicles, worth $11 billion, and sends relatively few back.

Tesla’s California plant, which ships an estimated 15,000 cars a year to China, as well as BMW’s South Carolina facility and Daimler AG’s Alabama factory, could lose hundreds of millions of dollars’ worth of production if China goes ahead with its threat to double import tariffs. All three export high-margin luxury models, many of them sport utility vehicles, to China.

Ford’s problem is twofold, involving both imports of premium Lincoln vehicles to China and a plan to export low-cost Focus compacts from China to the United States.

Barclays auto analyst Brian Johnson, in an investor note on Wednesday, predicted that Tesla “would bear the brunt of any increased auto tariff on a relative basis,” with China accounting for 17 percent of the company’s revenue.

To Hell With Wall Street

Steve Bannon chimed in with a "brilliant" comment: "To hell with Wall Street".

“Ask the working people in Ohio, Pennsylvania and Michigan about Wall Street. Wall Street supported and cheered on the export of their jobs. To hell with Wall Street if they don’t like it. It’s time somebody stood up to them and Donald Trump is the perfect guy. Wall Street is always short term. Trump is trying to protect the beating heart of American capitalism - our innovation.”

Brilliant. Let's shoot ourselves in the foot.

We will not label that a peanut butter sandwich. Instead, we call that "winning".

Mike "Mish" Shedlock

Comments (47)
No. 1-47
shamrock
shamrock

It seems China will run out of bullets first. Our $50B tariffs represent only 10% of what we import from them but their $50B in tariffs is damn near half of what they import from us.

thimk
thimk

Cut back on massive federal debt and watch the trade imbalance shrink. Trump has deflated the stock market more so than the feds starting QT.

Curious-Cat
Curious-Cat

Don't forget that China is the US' primary source of rare earth metals that are essential for pretty much all advanced technology. Talk about a critical defense weakness.

MntGoat
MntGoat

James Rickards seems to be in favor of the tariffs

Realist
Realist

Completely agree with Mish on this topic. My fear is that Trump will start a trade war, in which case all sides lose; especially American workers and consumers. My hope, is that cooler heads will prevail, and negotiate a reasonable trade agreement. If a trade war is prevented, I continue to expect 2% growth in the US for several more years.

Kinuachdrach
Kinuachdrach

When the trade deficit with China is running at $500,000,000,000 per year, it seems a little naïve to talk about President Trump "starting" a trade-war. The President is right -- mercantilist China has been waging a trade war against the US for many years, and we have been losing badly.

Seems the hypothesis that unilateral "Free" trade yields benefits has been tested -- and found wanting. Unilateral "Free" trade may bring short term benefits to certain consumers, but it also brings massive long-term costs.

Instead of just whining, the "Free" trade purists should come up with a coherent plan for how to get to sustainable trade with a mercantilist competitor. Come on! Let's hear the suggestions!

AWC
AWC

750 point turnaround today, ending green. The "Street" has spoken?

Realist
Realist

Sorry Kin. Your President is not right. Be careful what you wish for. A trade war will hurt a lot of Americans. Especially if it keeps escalating.

stillCJ
stillCJ

Editor

I predict that this is just The Donald's penchant for hard core negotiating. He wants to get China to the negotiating table to do some serious trade negotiation, which has not happened previously. I think it's funny that so many people think Trump is a loose cannon, because that's exactly what he wants the "other side" to think.

tedr01
tedr01

A trade war will destroy China more than the U.S. Trump knows this and he will win. Trust me. My company exports coal to China and I am not the least bit worried. So how many of you people that have commented on these posts actually do business in China?? I am betting none of you. That makes you observers, not players. Put your money where your mouth is. It is called bluffing. China and the U.S. will eventually come to some sort of compromise because there is too much money, and jobs, at stake.

tedr01
tedr01

That and hedge funds that are bleeding money are also deflating the stock market. Most hedge funds are in a world of hurt right now.

Stuki
Stuki

So Bannon’s way of saying “to hell with Wall Street,” is to make things more expensive for workers in Ohio….. In order to protect uncompetitive Wall Street owned companies from competition. Another flash of brilliance, Idiotopia style, no doubt…

Just stop stealing Main Street’s money by debasing them and handing the loot to Wall Street via “asset appreciation.” Then stop taxing those who work, while instead focusing on getting revenue from those who idly “own.” That’s how you say “To Hell With Wall Street.” Not by making American workers less competitive, just to shield some standard issue useless, incompetent, zerobrain Wall Streeter’s steel stocks from falling a few points.

Then ensure everyone has “equal representation.” Meaning equal access to politicians and regulators. As in, the probability of being called in to the White House to influence “economic policy,” is exactly equal for the CEO of Goldman, Warren Buffet, a college kid, or or a strung out bum under a bridge somewhere. Considering how economically illiterate is the exact equal to economically illiterate, there is zero chance that doing so can render things any more idiotic than they already are. And maybe, just maybe, that college kid has been woodshedding his Rothbard on the side….

Sechel
Sechel

And after the market threw a kanipshin the administration did their usual walk back saying this is only a first step. So this could wind up being the non tariff tariff that we had with steel and aluminum before every country that trades with us got an exemption. i know this administration has its fans but these guys are nuts. they never seem to have a plan, or at least the plan falls apart the moment they get punched in the face.

Realist
Realist

Tedr01. You sound like Trump. You believe winning a war means your side has fewer casualties than the other side. Yet both sides still suffer many casualties. Why would you wish for that? It’s insane.

whirlaway
whirlaway

You only call it a trade war when we fight back. Not all these years, when it was being waged on us.

whirlaway
whirlaway

We have already suffered millions of casualties. Just take a look at the opioid deaths happening in middle America. Read, or listen to an interview with the author of, "Glass Houses" and the story of Lancaster, OH over the last 30+ years...

whirlaway
whirlaway

"Brilliant. Let's shoot ourselves in the foot."

Stupid. You guys have already shot America - in the heart.

Tezza
Tezza

Last time America seriously implemented tariffs it lead to ww2. Perhaps now we are heading to ww3.

2banana
2banana

God Bless DJT for standing up for America. Finally, a president looking out for the average American citizen and NOT Wall Street.

$400 billion trade deficits with China PER YEAR. They require IP from American companies to do business there. They require joint ventures to sell anything there. Very difficult to take profits out. Etc. Etc. Etc.

Now China is going to put tariffs on imported food. Go right ahead. Food riots in about 3 months. China is NOT self sufficient in FOOD or ENERGY.

The fact is China has everything to lose. China needs American trade and products to SURVIVE. America doesn't need China. Yeah, OK - my HDTV will be $10 more expensive. We will get through it. And then import cheap electronics from other nations or, maybe, even start to make things again in America.

Tick - Tock China. You are about to get schlonged.

RonJ
RonJ

"Last time America seriously implemented tariffs it lead to ww2. Perhaps now we are heading to ww3." Symptoms of a debt bubble.

2banana
2banana

"“Sixty-five percent of the world’s food-insecure people live in seven countries: India, China, the Democratic Republic of Congo (DRC), Bangladesh, Indonesia, Pakistan, and Ethiopia, of which all but China have experienced civil conflict in the past decade, with DRC, Ethiopia, India, and Pakistan currently embroiled in civil conflicts.”

And China, it should be pointed out, hasn’t been all that quiet. With about 180,000 protests per year, the government now spends about $125 billion annually on riot control."

http://www.slate.com/articles/health_and_science/feed_the_world/2014/04/food_riots_and_revolution_grain_prices_predict_political_instability.html

Liberaldisdain
Liberaldisdain

We have been listening to so called free traders for decades now and what has it gotten us? Cheap goods at the cost of decent paying jobs, declining real wages and almost all households now with two wage earners.

I am willing to let Trump bust it up a bit, see what happens. And declining commodity prices may hurt farmers, most of whom are Big Agra with huge subsidies, but it is already forcing futures down. Who is against lower food prices at home?

If Trump fails miserably so be it. If not, well then, like many other suppositions I have read about the economy over the last decade and his administration since the election, they will all be wrong, once again.

whirlaway
whirlaway

"The trade wars will not have much effect on the US upper 20% income earners, they will for the most part be OK. The lower 50% earners will suffer the most. Lost jobs and more costly living expenses."

I agree. The trade war that is ALREADY being waged on America for the last 30+ YEARS has enriched the top 10% or so. The lower 50% earners are the ones who have suffered. I fully agree - except that it is in the past and the present, not merely in the future as you seem to think.

jiminy
jiminy

Trump wants tariffs. If the Chinese government is so unfair, why not go to the WTO and adjudicate the matter? Intellectual property theft is not being done by China's government, although we create that impression. This will not end well.

Ambrose_Bierce
Ambrose_Bierce

During Bush2 conservative columnist Bob Novak personally advised the president to "ignore the LIBERAL STOCK PICKERS and build an economy that was friendly to business." Bush ignored him, although stock pickers had a rough eight years under B2, markets were up only 3% after he left, business fared a lot worse as income disparity widened. This GOP president has put the stock market in the firing line and the influx of foreign money makes deflating the bubble less painful, and gives him some cushion. People wondered how Bush could ever be reelected, and Trump? Americans seems to have taken self flagellation for their political guide, Beat Me, Hurt Me, Make me Write Bad Checks....

JonSellers
JonSellers

Putting tariffs on Chinese imports is so 1970. Manufacturers today can quickly pack up and move to some other hell hole. Unless you put tariffs on the entire world, this won't cause manufacturing to move back to the USA. This is clueless stuff.

Brother
Brother

I don't think anyone posting here knows anything about China's tariffs on US goods. It's not something that can be googled up in 10 seconds and ranted about.

2banana
2banana

@kram

Nah. America is self sufficient in food and is a massive exporter of food (with a great food distribution system). Even in the depths of the great depression there was no mass starvation (or even any starvation).

All the countries listed as "food-insecure" cannot feed their own people. They are highly dependent on food imports. Massive food imports. With fragile food distribution networks.

And, that is the thing. Countries like CHINA that need to import massive amounts of food to feed its citizens cannot just "turn on a dime" to change suppliers of food. Those relationships take years or decades. Farmers in Brazil, even if they could, are going to take a few seasons to even to START replacing America in food exports to China. However, food stocks runs out in a month.

So, in America, we are not talking shortages and empty grocery stores if the EBT cards stop working. The only thing we are talking is much and type of food people can buy.

Just a few short years ago (in college), I was able to get by on $20/week for food. Easy to eat cheap in America. It is WORK cooking from scratch with basic ingredients but no one is going to starve.

JonSellers
JonSellers

Interestingly, my grandfather, a very conservative man, voted Democrat his entire life. His reason, per him, was that he would have starved to death during the Great Depression if it hadn't been for the Civilian Conservation Corps, which gave him a job and allowed him to feed himself and my grandmother. He was always grateful to FDR.

kram
kram

I was not talking about sufficiency of food. India has a huge surplus of food stored in its storage, but inaccessible to people who cannot afford it. I was talking about the millions without jobs, incomes and homes, who can barely afford to eat and would starve if not for the billions being distributed by way of food stamps.

kram
kram

As per Wiki, "SNAP benefits cost $70.9 billion in fiscal year 2016 and supplied roughly 44.2 million Americans (14% of the population)[2] with an average of $125.51 for each person per month in food assistance." This average is 150% of the $20 per week (or $80 per month you had mentioned) and I suppose that, but for this assistance, many people would be close to starvation. What is your opinion on that?

2banana
2banana

@kram

We have record employment. Minimum wage is at about $10/hour (higher many other places). So taking into account taxes/fees that is 3 hours of work to feed yourself for a week.

What is your opinion that people can't work half a day to feed themselves for the entire week?

kram
kram

If you include the millions of discouraged workers (taken off the "seeking employment" list) who have been taken out of the calculation of unemployment, that record would be a little blemished, wouldn't it. That is called cooking the data to falsify the picture - photoshopping the employment picture for the techies. Given that around 94 million working age adults in America (in a population of around 326 million; roughly 29%) are not working at all (of course many of them have never worked), that is a large number of people depending on other sources for income and livelihood. While unemployment rate U-3 is 4.6%, U-6 is more like 9.2% and if you include the millions of discouraged people (participation rate has dropped dramatically), U-6++ would probably be over 10%. This is the level of obfuscation being carried out to make everyone believe that America is great again!

Tengen
Tengen

Kram is correct. Unemployment numbers, like many .gov stats, are nonsense. If EBT cards were suddenly deactivated, there would be food riots. Quite a few Americans are much closer to the brink than you seem to believe. If they weren't in trouble, why would they support something as dangerous as a trade war?

2banana
2banana

Hmmm...for eight years these SAME unemployment numbers were just great for obama and his liberal supporters to show how great the obama economy was doing. And now the are all fake. Amazing.

"Anyone claiming America’s economy is in decline peddling fiction"
-- obama, State of the Union address, January 2016

Tengen
Tengen

Wait, are you accusing kram or myself of being Obama supporters? What exactly are you basing this on? More likely, it seems this is your defense mechanism for being unable to win an argument without resorting to dopey American partisan politics. Not sure about kram, but I take pleasure in deriding the whole blue/red team paradigm, as would most thinking individuals.

Cocoa
Cocoa

The financial system needs a scapegoat for the next recession/crash/deflationary event. I guess Trump is happening to oblige

Cocoa
Cocoa

The point being, we won't starve. Even poor Americans are the most overweight in the world. It's the cheap plastic shit that will cost 10x that will affect the poor...but maybe we don't need most of it?

whirlaway
whirlaway

They have always been fake. Obama supporters are blind. Even if Trump is a con man, he is only the second biggest con man that America has seen this century. Obama is the biggest con man.

Ambrose_Bierce
Ambrose_Bierce

I'm buying into Trump, he's the greater fool

Nicholas7900
Nicholas7900

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