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
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.

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.

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

"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.