Trump V the World

Deadlock

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Readers will be familiar with the fact that one of the electoral promises to the US electorate made by Donald Trump in the area of trade would aim to redress the imbalances of trade between the US and it's major trading partners. Prior to the US election Trump called North American Free Trade Association (NAFTA) "a disaster" warning the Trans Pacific Partnership (TPP) "is going to be worse, so we will stop it."

Subsequently, Trump withdrew from the Trans Pacific Partnership (TPP) and is in the throes renegotiating NAFTA with the White House has said that Canada and the US have agreed to talks to that end.

Trump appears to now widen the scope of his attention beyond regional trade groups. In a cabinet meeting today he appears to be taking aim globally. Under plans presented there promoted by Secretary of Commerce Wilbur Ross, a tax of 20% will be levied on steel and other goods. Interestingly the measure was opposed by the overwhelming majority of the Cabinet, but backed by Trump.

"The tax on imported goods could be about 20%, according to Axios, and may be expanded to goods like paper, semiconductors, aluminum, and large household appliances. While the intent is to penalize China, a goal of Trump’s dating back to the campaign, officials informed Trump that the tariff would most likely affect other major allies of the US including Canada, Germany, Japan, Mexico, and the UK. The plan is backed by what Axios described as the "America First" wing of the White House including chief strategist Steve Bannon, Commerce Secretary Wilbur Ross, trade adviser Peter Navarro, and senior policy adviser Stephen Miller."

...

"Most economists agree that tariffs of the type Trump is considering would set off a major trade war and have devastating economic consequences. There is also a good chance that the move would result in a US recession."

Will this measure ultimately be good for US Trade and employment, as Trump would appear to hope ? Or is this the logical endpoint of populism - cutting off a nations nose to spite its face?

https://en.wikipedia.org/wiki/Wilbur_Ross
Trump steel tariff, trade war with China, Germany, Canada - Business Insider
https://www.axios.com/exclusive-trump-plots-trade-wars-2450764900.html
Trump "Overrules" Cabinet, Prepares To Unleash Global Trade War | Zero Hedge
 
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Marcos the black

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Protectiveism has never worked. Anywhere.
 

Dame_Enda

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Protectiveism has never worked. Anywhere.
It worked in the Roaring 20s. The Great Depression came during an unwise experiment with freer trade under President Hoover.
 

Dame_Enda

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So... It didn't work?
Hoover cut tariffs on industrial goods in 1929 and the economy collapsed. This was a partial reversal of the 1922 Fordney-McCumber Act which increased tarriffs leading to a sustained economic boom in the 20s.

wikipedia said:
......In 1922, Congress passed the Fordney–McCumber Tariff act which increased tariffs on imports.

The League of Nations' World Economic Conference met at Geneva in 1927, concluding in its final report: "the time has come to put an end to tariffs, and to move in the opposite direction." Vast debts and reparations could only be repaid through gold, services or goods; but the only items available on that scale were goods. However, many of the delegates' governments did the opposite, starting in 1928 when France passed a new tariff law and quota system.[6]

By the late 1920s the economy of the United States had made exceptional gains in productivity due to electrification, which was a critical factor in mass production. Horses and mules had been replaced by motorcars, trucks and tractors. One-sixth to one-quarter of farmland previously devoted to feeding horses and mules was freed up, contributing to a surplus in farm produce. Although nominal and real wages had increased, they did not keep up with the productivity gains. As a result the ability to produce exceeded market demand, a condition that was variously termed overproduction and underconsumption. Senator Smoot contended that raising the tariff on imports would alleviate the overproduction problem; however, the US had actually been running a trade account surplus, and although manufactured goods imports were rising, manufactured exports were rising even faster. Food exports had been falling and were in trade account deficit; however the value of food imports were a little over half that of manufactured imports.[7]

As the global economy entered the first stages of the Great Depression in late 1929, the US's main goal emerged to protect American jobs and farmers from foreign competition. Reed Smoot championed another tariff increase within the US in 1929, which became the Smoot-Hawley Tariff Bill. In his memoirs, Smoot made it abundantly clear:

The world is paying for its ruthless destruction of life and property in the World War and for its failure to adjust purchasing power to productive capacity during the industrial revolution of the decade following the war.[8]

Smoot was a Republican from Utah and chairman of the Senate Finance Committee. Willis C. Hawley, a Republican from Oregon, was chairman of the House Ways and Means Committee.

When campaigning for president during 1928, one of Herbert Hoover's promises to help beleaguered farmers had been to increase tariffs of agricultural products. Hoover won, and Republicans maintained comfortable majorities in the House and the Senate during 1928. Hoover then asked Congress for an increase of tariff rates for agricultural goods and a decrease of rates for industrial goods.

The House passed a version of the act in May 1929, increasing tariffs on agricultural and industrial goods alike. The House bill passed on a vote of 264 to 147, with 244 Republicans and 20 Democrats voting in favor of the bill.[9] The Senate debated its bill until March 1930, with many Senators trading votes based on their states' industries. The Senate bill passed on a vote of 44 to 42, with 39 Republicans and 5 Democrats voting in favor of the bill.[9] The conference committee then aligned the two versions, largely by moving to the greater House tariffs.[10] The House passed the conference bill on a vote of 222 to 153, with the support of 208 Republicans and 14 Democrats.[9]..
 

Dimples 77

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Trump is an economic anti-Christ.

He wants an economic world war.
 

mossyman

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It worked in the Roaring 20s. The Great Depression came during an unwise experiment with freer trade under President Hoover.
Reimposing protectionism now won't bring jobs back, just cause a sharp economic shock, major uncertainty, lack on investment, etc.
 

Deadlock

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Hoover cut tariffs on industrial goods in 1929 and the economy collapsed. This was a partial reversal of the 1922 Fordney-McCumber Act which increased tarriffs leading to a sustained economic boom in the 20s.
Quoting from your contribution Dame_Enda "By the late 1920s the economy of the United States had made exceptional gains in productivity due to electrification, which was a critical factor in mass production. Horses and mules had been replaced by motorcars, trucks and tractors. One-sixth to one-quarter of farmland previously devoted to feeding horses and mules was freed up, contributing to a surplus in farm produce. Although nominal and real wages had increased, they did not keep up with the productivity gains. As a result the ability to produce exceeded market demand, a condition that was variously termed overproduction and underconsumption. Senator Smoot contended that raising the tariff on imports would alleviate the overproduction problem; however, the US had actually been running a trade account surplus, and although manufactured goods imports were rising, manufactured exports were rising even faster. Food exports had been falling and were in trade account deficit; however the value of food imports were a little over half that of manufactured imports."

Is there evidence that the import tariffs were the motor for growth, or was it due to urbanisation coupled with technological change?
 

Congalltee

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How much damage will he do before he is impeached? Will his accelerate his madness if he faces impeachment? Who will do the decent thing?
 

Deadlock

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How much damage will he do before he is impeached? Will his accelerate his madness if he faces impeachment? Who will do the decent thing?
It is very interesting to note that apparently neither Jared Kushner nor Mike Pence spoke at all ...
 

Dimples 77

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Reimposing protectionism now won't bring jobs back, just cause a sharp economic shock, major uncertainty, lack on investment, etc.
Get ready for a return to the good old days of a lack of competition for industries like the US car sector.

Yanks can look forward to paying higher prices for crap cars again, just as they did in the 70s.

If the US car manufacturers don't have to maintain standards to compete they won't. Quality will go to hell.
 

Dame_Enda

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The destruction of the steel industry in Europe can be laid at the feet of cheap Chinese imports. The EU should impose higher tariffs.

Millions of US steel jobs were also lost because of this. Trump is doing the right thing for the midwest. Steel is coming back to life. Trump understands the danger of allowing rival powers to control a vital US raw material for war production.
 

Dimples 77

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How much damage will he do before he is impeached? Will his accelerate his madness if he faces impeachment? Who will do the decent thing?
Nobody - as you can see the sensible Republicans just keep their mouths shut while the "America First" wing of the White House burns something else down - in this case the economy.
 

Dimples 77

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The destruction of the steel industry in Europe can be laid at the feet of cheap Chinese imports. The EU should impose higher tariffs.

Millions of US steel jobs were also lost because of this. Trump is doing the right thing for the midwest. Steel is coming back to life. Trump understands the danger of allowing rival powers to control a vital US raw material for war production.

I understood that the "America First" wing of the White House was against US foreign military adventures. Where's all of this "war" going to be? Inside the US itself?
 

mossyman

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Get ready for a return to the good old days of a lack of competition for industries like the US car sector.

Yanks can look forward to paying higher prices for crap cars again, just as they did in the 70s.

If the US car manufacturers don't have to maintain standards to compete they won't. Quality will go to hell.
I don't believe Trump has the political capital to put something like this through, no on wants it, not industry, not consumers, most of the political establishment would be against it, it would severely damage international relations, etc. He will be removed before he gets to do any real economic damage.
 

Dame_Enda

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I understood that the "America First" wing of the White House was against US foreign military adventures. Where's all of this "war" going to be? Inside the US itself?
But America First also supports a strong military just in case there is a war in future. As Vegetius said "If you want peace prepare for war".
 

mossyman

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But America First also supports a strong military just in case there is a war in future. As Vegetius said "If you want peace prepare for war".
Trump is going to seriously weaken the US on the world stage, giving China a golden opportunity to expand its power and influence across Eurasia and the South China Sea, creating opportunities for Russia in the Ukraine and the Middle East, and possibly leading Europe to further develop its own military.

That is the reality of it.
 

Dame_Enda

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Trump is going to seriously weaken the US on the world stage, giving China a golden opportunity to expand its power and influence across Eurasia and the South China Sea, creating opportunities for Russia in the Ukraine and the Middle East, and possibly leading Europe to further develop its own military.

That is the reality of it.
Trump admin has agreed to $1.4 bn in military aid to Taiwan a few days ago.
 

Deadlock

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But America First also supports a strong military just in case there is a war in future. As Vegetius said "If you want peace prepare for war".
What American interests would a future war serve to protect with America looking inwards? Is he expecting a war on US soil?
 

mossyman

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Trump admin has agreed to $1.4 bn in military aid to Taiwan a few days ago.
So what? Is this increase on what was paid previously? Over what time frame? How will China respond?

Trump hasn't a fraction of the political capital or credibility on the world stage that Obama had. The Chinese will use this opportunity to incremementally expand their power regionally and globally.
 


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