Tariff Backlash Could Cost Republicans the Senate

The math for Democrats to win the Senate looks extremely daunting. However, I see more than a reasonable shot for them.

Heading into the mid-term elections the Real Clear Politics Battle for the Senate map suggests it it is extremely unlikely for Democrats to take control of the Senate.

The Republicans have 46 safe or not up seats, and two more likely. To take control of the Senate, Democrats would have to win all nine likely or leans, plus six of seven tossups.

The math is not as daunting as it looks. Democrats are leading in Florida, Tennessee, and Nevada. I expect those leads to hold. That Republicans were only up by 1 percentage point in Indiana looks problematic for Republicans to say the least. For the sake of argument, put that in the Democrat column.

That just gets things to 49 where things stand right now.

Base Projection

My base projection for the Democrats right now is 49-50.

Every time I make a projection like this I get accused of being a Democrat lover or worse. Here's the deal: I voted for Trump and would do so again vs Hillary.

I make my projection on the reality that Trump's trade policy totally sucks. I expect his policy will backfire sooner rather than later.

My complete rationale follows.

Trump Threatens to Place Tariffs on All $500B China Imports, Blasts Fed Again

On Friday, I reported Trump Threatens to Place Tariffs on All $500B China Imports, Blasts Fed Again.

Independents are likely sick of Trump already and Trump attacking the Fed will make a lot of people nervous. The man does not know how to shut up.

Housing Weakening

Housing is already weakening due to rising interest rates coupled with affordability issues. On July 18, I commented Housing Starts Unexpectedly Plunge 12.3% in June, Permits Down 2.2%.

On July 23 I wrote Existing Home Sales Decline Third Month Despite Rising Inventory.

Trump's tariffs on steel and lumber are not helping one bit.

Finally please note that Whirlpool, a Tariff Supporter, is Now a Tariff Victim.

Hardest Hit States

CNBC has a nice chart on States Hardest Hit In Widening Trade War.

States Exposed to Steel Tariffs

Inquiring minds may also wish to consider How Trump’s Steel and Aluminum Tariffs Could Affect State Economies

Tariffs Impact US Jobs

Even before the threat of an additional $500 billion in tariffs, Missouri, Indiana, North Dakota, and Tennessee are all in the trade limelight.

The Washington Post reports How Trump’s Tariffs on Mexico are Taking Jobs from U.S. Workers.

The article covers numerous states but let's put a spotlight on Missouri and Mid Continent , the US's largest nail manufacturer, about to go out of business due to Trump tariffs.

Sen. Claire McCaskill (D-Mo.), facing a tough reelection race in a state Trump won by 19 percentage points in 2016, seized on the company’s predicament, interrogating Commerce Secretary Wilbur Ross in a hearing on Capitol Hill last month. The next week, she was trailed by media outlets as she toured the company’s facilities despite blistering heat.

A spokeswoman for McCaskill’s GOP opponent, Josh Hawley, the state attorney general, said in a statement that Hawley “supports the president’s goal to get better trade deals and stop trade cheaters, like China,” but that Mid Continent “makes a good case for an exemption and we have spoken to the White House about it.”

“The result is the largest U.S. nail manufacturer with — before June 1, anyway — more than 500 employees, nearly double the workforce of five years ago. These workers are Americans. They have American families. If they lose their jobs, those jobs will be American jobs.”

Mid Continent is Mexican owned. But it is located in the US and employs 500 people here. Thanks to Trump Tariffs, it is about to go out of business.

The Republican and the Democrat candidate both complained to Trump. The Democrat, McCaskill, is making a huge campaign issue out of it.

The Republican, Hawley, leads by two percentage points. Will that last?

Prices

If Trump follows through with his threats on all Chinese products, $500 billion in total, those tariffs will temporarily hike prices in addition to doing further damage to US jobs.

I envision a headline like "Prices Rise on 10,000 Walmart Items Due to Trump Tariffs".

This economy is far sicker than it looks. People are falling further and further behind on wages, and they tend to take it out on the party in power.

Polls

Curiously, support for Trump hit an all time high of 45%. The starts are misleading. First, 45% is not an inspiring number. Second, it reflects increasing support from the base.

Appealing to the base is an idiotic tactic actually. Where are is the base going? It's the moderates and independents that matter.

Conclusion

Trump is doing everything he can to negate the tax cuts and turn what could have been a Republican blowout into a genuine horse race.

It is far too early to predict a Democrat win. But things look far better for the Democrats than most believe.

As I have noted, this is not a desire. Rather, this is an estimation as to what is happening now.

Millennials sat out the the last presidential election. The independents and Libertarians, including me, voted for Trump.

If the economy weakens substantially or the stock market dives, both of which may happen given Trump's tariff policy and Fed rate hikes, it is not inconceivable for Democrats to take the Senate.

Mike "Mish" Shedlock

Comments (26)
No. 1-26
RonJ
RonJ

"Independents are likely sick of Trump already and Trump attacking the Fed will make a lot of people nervous. The man does not know how to shut up. "

The man does know how to stop people from shutting him down. Russia Russia Russia has been trying to shut him down since before day one. He is still standing.

When Trump was a real estate mogul, then TV personality, i never cared for him. The escalator ride didn't impress me either. Didn't watch any of the debates, but when i heard what he said in the first debate- that's the guy i am voting for, if he gets the nomination. I don't want Trump to shut up.

Carlos_
Carlos_

@Mish "Here's the deal: I voted for Trump and would do so again vs Hillary." You will be better off applying buyers remorse to your choice than confirmation bias. The main reason to chose Trump over Hillary was his "no war" stance (at least on paper). So lets do a little summary of what Trump has achieve:

  1. Increase the national debts (+expending + tax cuts)
  2. Trade war
  3. Subsidies to aggro businesses affected by his tariff (he just proposed that)
  4. Iran will not back down I suspect he will get into an Iran-US war
  5. The wall not built (and no it wont be paid by Mexico)
  6. Command and control economic policies (telling Harley where to build)
  7. Profiting from the office (most other presidents wait until they are out...)
  8. ...

So I fail to see how Hillary would've done any worst but who knows

RonJ
RonJ

"Finally please note that Whirlpool, a Tariff Supporter, is Now a Tariff Victim."

I note that some 60,000 U.S. factories have shut down, with untold American jobs and skills becoming victim. Under Cover Boss did a show on Peavny (sp). One worker was going to leave and was talked into staying. After the story, the company shut down the factory, costing workers their jobs.

At some point comes the straw that breaks the camel's back- an inflection point.

pi314
pi314

Your claim of job losses is not supported by the employment stat. I am seeing hiring signs everywhere I go.

Carlos_
Carlos_

"I note that some 60,000 U.S. factories have shut down" Doesn't mean much unless you specify: Time period, type of factory and finally the reason. For instance, with the advent of the car all most carriage factories shut down (I'm %100 sure it was bad for the workers). So what I'm trying to say is that information that you provided

shamrock
shamrock

I've wondered how the Puerto Ricans would affect Florida statewide elections. I think around 75,000 have move to Florida since the hurricane. In a state that is always a toss up that should be enough to push it solidly blue. Thanks Trump.

Sechel
Sechel

White House is planing $12bn in emergency aid to farmers. So now the plan is to pay farmers for food nobody is buying?

oudaveguy98
oudaveguy98

Latest polls on Tester and Manchin? I believe both are considered vulnerable; I would expect Trump rallies in both states close to the election; is the rally schedule published/open to the public?

yooj
yooj

Libertarians voted for Trump? Not this one. Not the ones I know. He is antithetical to a government that. Respects freedom — economic and social. HRC was the better choice for a libertarian, and every day of Trump has made me more comfortable with my vote for her.

JLS
JLS

IF Trump's ploy works (and I'll stay neutral until there's actual data either way), there will be fewer tariffs worldwide. The deal he's offering to protectionist areas like the EU and China is: if you don't lower your tariffs, I'll offset the advantage you're currently enjoying by matching your tariffs here. Since speaking softly to these miscreants and not carrying a big stick has been a total failure, I'm willing to go along with the current policy until there's a result or somewhat comes up with a better solution.

Unilateral anything, including free trade, is for fools and children. It's been about time the US had a leader who understood business.

Carlos_
Carlos_

Well you have to remember that the bulk of Trump voters belong to the vertical whose philosophy is "Cutting off the nose to spite the face". Now I wonder what Mish (the libertarian) has to say about the government handing out $12B to aggro-business because of the tariffs (LoL). I have said from the start that Trump is a populist not from the right, the left or libertarian. If you want to see Trump the populist in Spanish just watch Chavez (Venezuela) and you will get an idea

Mike Mish Shedlock
Mike Mish Shedlock

Editor

I voted for Trump because the alternative was Hillary. Anyone who does not understand such logic can't think. In general, I vote for the least warmonger who can win. That does not mean I like Trump. I never claimed Trump was a Libertarian. His Tariffs prove it.

Blacklisted
Blacklisted

Luckily, the Democrats and the rest of the establishment are more ignorant and desperate than Trump, which means they will continue their absurd attacks on him, even if tariffs and a stock pullback work against him. What the Left, and possibly you, have still not figured out is it’s the anti-establishment versus the establishment, and American’s love an underdog. The more these nut jobs go after Trump, the more they make Trump the underdog. Besides, the increased taxes, filling the swamp, and continued distractive witch hunt offered by Dem’s is a losing message. I also think stocks will continue higher, because of rate hikes. It’s foreign capital flows that have been fueling the market, and rising rates and a higher dollar hurts foreign govt’s more than the US, which means the flows should pick up. Global investment is over $80 TRILLION, which swamps trade.

ML1
ML1

Trump was right to criticise Fed because the interest rate raises are stupid in this situation where Real Estate construction is slowing already (and as a consequence less need for nails) and stock market is teetering already (without FANG stocks the market would be negative). . The Mid Continent company problems are specifically caused by NOT enough tariffs because Trump only put tariffs on steel and aluminium and NOT finished products made out of steel and aluminium so when Mid Continent tried to raise their prices how much the tariffs had increased the cost of steel many of their customers decided to instead use imported nails which are cheaper. . Trump should fix this problem immediately by also putting tariffs on finished products made from steel and aluminium that are brought to USA. Problem solved. If someone has not already proposed this solution to Trump from his staff then they are incompetent. . When it comes to tariffs I think that they are correct solution to situations where an economic competitor uses mercantilist tactics to win business for itself and intentionally controls the value of their currency to devalue it lower to have more profits for their export industry. On top of that China also abuses Chinese workers by paying them much less even in comparison to lower living costs than USA does and China keeps working them longer hours per day and 6-7 days a week which are much more than what USA can do and on top of that China allows pollution of actual toxins to air, water and land as competitive edge. . In just economics way tariffs are bad because having cheaper products is good but in the case of USA the consumption of those cheaper products in USA and the continued high profits of Multinational companies have come from debt consumerism and all the time increasing levels of debt while the actual carrying capacity and debt-servicing capacity of US economy has been destroyed by hollowing out the middle class and decimating the working class through offshoring of production to China and elsewhere and importing millions of illegal immigrant low wage workers from Mexico, Guatemala, Honduras, Nicaragua, El Salvador etc. to lower wages in USA. . It is bad for USA to lose well paying jobs by offshoring production to China and it is bad for USA to lose well paying jobs by importing millions of illegal immigrants to USA which lower the wages, take away the jobs and still are net-beneficiaries of US government benefits like SNAP-EBT food stamps, Earned Income tax credits paid in cash, state welfare programs and free healthcare through the emergency rooms courtesy of EMTALA while causing huge costs to school districts which lead to higher and higher real estate property taxes to fund education for their kids who got birthright citizenship on their birth and are therefore US citizens. . Trump's problem is that he is mostly talk and forgets in following through his promises and when he follows up with a promise like putting steel tariffs he does it half-heartedly without followup which leads to cases like Mid Continent workers losing 100 jobs because their customers decided to use imported nails since there is no tariffs on them.

ML1
ML1

In the 1990´s workers putting up drywall in Texas were paid 20-25 dollars an hour. Now workers putting up drywall in Texas are paid 10-12 dollars an hour so their wages have dropped -50% compared to 1990's while at the same time the purchasing power of dollars has been inflated away to the tune of about -20% so in real dollars their wages have dropped ABOUT 70% . Does anybody see the problem caused by immigration of millions of illegal immigrants?

When it comes to manufacturing those jobs have just been taken away with GWB's stupid decision to allow China equal playing field with USA on trade in 2001 by welcoming it as WTO full member despite them protecting their internal markets while trying to get upper hand in exports through Mercantilism, wage arbitrage and environmental arbitrage (slave wages, free to pollute, lowering value of currency). . The huge real estate bubble and ponzi financing and debt bubble 2002-2008 hid the effects of Bush's stupid China decision from Americans until 2008.

Carlos_
Carlos_

No one is criticizing you voting for Trump over Hillary (many did). What is incredible is that you are willing to double down now that you have seen his policies. Like I said with Hilary we may have gone into war. With Trump I get the feeling that we will (Iran) too. So again why would you double down?

MntGoat
MntGoat

Actually, Carlos you sound like the real drinker of the corporate mainstream media kool aid. Everything you spout sounds like it comes directly from the mouth of a CNN or MSNBC host.

Blacklisted
Blacklisted

By your definition, every successful businessman is part of the establishment. They may try to influence someone in the establishment, but most would never want to be in the establishment, as most favor small govt. Besides, what did Trump run on, and what has he done as President? If you don't know the answer, your clue comes from how the establishment has reacted to everything Trump has done.

Establishment / career politicians are fighting Trump. The establishment media is constantly attacking Trump, and everyone that depends on the establishment is after Trump. If Trump is not trying to end the rigged games of the establishment, why are they so desperate to take him out?

Casual_Observer
Casual_Observer

I dont know how or how long but I know disaster is lurking around the bend for a long time once the next recession hits. And I don't even know when but likely by 2020 and the probability is rising for 2019 and even this fall. Trump had a chance to live with 4% GDP and Dow at 30k if he did nothing but that isnt his nature. The debt crisis of a generation will happen in the next few years and it will bring the end of life as we know it.

Stuki
Stuki

"IF Trump's ploy works (and I'll stay neutral until there's actual data either way), there will be fewer tariffs worldwide."

Only in the Newspeakian meaning of redefining what "tariffs" mean. The hacks and lobbyists pushing to have government rob others on their behalf by way of arbitrary tariff imposition; won't magically decide to stop doing so as a result of seeing their strategy work.

If "I lowered worldwide tariffs" looks to be a vote getter in the US; no doubt whomever is in power will have lowered worldwide tariffs. That's how Newspeak is supposed to work. Obama got the peace price, after all.

But, in practice, all this means, is that those who used to have "tariffs", "non tariff barriers", and whatever other childish names the less advanced amongst the sandbox children fancy calling each other, will now be "currency manipulators", or some such.

As if renaming pet hobgoblins, somehow makes them less imaginary.

Stuki
Stuki

+1

And furthermore, EVERY single Dear Leader who, in any way, shape or form; claims "this time it's different," and that his government therefore, this time, have a better justification for their intervention than what Mao, Lenin, Chavez, Pinochet, Hitler, Peron, Pol Pot and the rest of that motley crew had; is in no meaningful way whatsoever different from Chavez.

Stuki
Stuki
ML1
ML1 said: Trump was right to criticise Fed because the interest rate raises are stupid in this situation where Real Estate construction is slowing already (and as a consequence less need for nails) and stock market is teetering already (without FANG stocks the market would be negative). . The Mid Continent company problems are specifically caused by NOT enough tariffs because Trump only put tariffs on steel and aluminium and NOT finished products made out of steel and aluminium so when Mid Continent tried to raise their prices how much the tariffs had increased the cost of steel many of their customers decided to instead use imported nails which are cheaper. . Trump should fix this problem immediately by also putting tariffs on finished products made from steel and aluminium that are brought to USA. Problem solved. If someone has not already proposed this solution to Trump from his staff then they are incompetent. . When it comes to tariffs I think that they are correct solution to situations where an economic competitor uses mercantilist tactics to win business for itself and intentionally controls the value of their currency to devalue it lower to have more profits for their export industry. On top of that China also abuses Chinese workers by paying them much less even in comparison to lower living costs than USA does and China keeps working them longer hours per day and 6-7 days a week which are much more than what USA can do and on top of that China allows pollution of actual toxins to air, water and land as competitive edge. . In just economics way tariffs are bad because having cheaper products is good but in the case of USA the consumption of those cheaper products in USA and the continued high profits of Multinational companies have come from debt consumerism and all the time increasing levels of debt while the actual carrying capacity and debt-servicing capacity of US economy has been destroyed by hollowing out the middle class and decimating the working class through offshoring of production to China and elsewhere and importing millions of illegal immigrant low wage workers from Mexico, Guatemala, Honduras, Nicaragua, El Salvador etc. to lower wages in USA. . It is bad for USA to lose well paying jobs by offshoring production to China and it is bad for USA to lose well paying jobs by importing millions of illegal immigrants to USA which lower the wages, take away the jobs and still are net-beneficiaries of US government benefits like SNAP-EBT food stamps, Earned Income tax credits paid in cash, state welfare programs and free healthcare through the emergency rooms courtesy of EMTALA while causing huge costs to school districts which lead to higher and higher real estate property taxes to fund education for their kids who got birthright citizenship on their birth and are therefore US citizens. . Trump's problem is that he is mostly talk and forgets in following through his promises and when he follows up with a promise like putting steel tariffs he does it half-heartedly without followup which leads to cases like Mid Continent workers losing 100 jobs because their customers decided to use imported nails since there is no tariffs on them.

"Trump was right to criticise Fed because the interest rate raises are stupid in this situation where Real Estate construction is slowing already (and as a consequence less need for nails) and stock market is teetering already (without FANG stocks the market would be negative)."

When rates are too low, raising them is a good thing. When housing is too expensive, it getting less so is a good thing. When stocks are too expensive, them getting less so is a good thing. Always. There are no exceptions.

Economies require accurate prices to work well. Not artificial, manipulated ones dictated by central committees in politburos and Central Banks.

Pre Fed, the price of Gold was $22/oz. While there's nothing magical about the arbitrary number $22, if one is to have a currency nominated in something other than just simple weight of specie, it's as good a number as any. AND, there is something magical, or at least 100% for all time past and future optimal, about the price of money being as stable as reliably achievable. Ergo, once $22/oz is chosen, $22/oz IS optimal, for all time thereafter. It doesn't matter if an idiot gaggle has somehow managed to forget that for an hour. Or a century. Or a few hundred millennia. Once chosen, the optimal will remain $22.

Once rates are high enough, for long enough, that Gold dips below that price, at least there may be some semblance of an argument that they may be to high. Until then, there is none.

Criticizing any possible Fed is always good. As no possible Fed has any business existing. But then, as a President in love with "national security" excuses for unilateralism, get rid of them. Yesterday. Damn the torpedoes.

America without a Fed was better than America with one. Get rid of it. People are flexible, hence perfectly able to wade through whatever short term chaos may result, to arrive at the inevitable comparative Utopia at the other end. Just like they somehow found a way to cross the much more treacherous Death Valley on the way to some decent beaches, before there was a Fed around to debase them to the point they couldn't afford neither a wagon train nor any water.

EndOFBabylon
EndOFBabylon

How a TRUE libertarian can vote for either Party is beyond me....MISH throws up on himself every other post...Corporate Libertarians (Mishites, et al) are truly dangerous...I can see MISH governing exactly like ANTI CHRIST TRUMP, minus the bluster, bravado and the Tariffs...Bannon, Miller, Sanders, and the whole dispised lot of White Nationalists in the White House differ from the MISHITES only by DEGREES.