Economists pan Trump trade policy as 'terrible,' risks ending economic expansion

[bostonangler]

U.S. President Donald Trump’s latest trade tariff proposals have some economists questioning whether the president and his team understand economics.

Trump doubled down Friday on his proposal to add a 25% tariff on steel imports and a 10% tariff on aluminum imported to the United States from other countries, a move that prompted a sell-off in U.S. equities and the dollar after it was announced on Thursday.

“This is a clear demonstration that the Trump administration does not understand trade economics,” said Bernard Baumohl, managing director and chief global economist at the Economic Outlook Group, in a phone interview. “These tariffs when they’ve been imposed in the past have done more harm than good. The problem is that politicians have an ahistorical memory that goes back sometimes to breakfast.”

The European Union, Canada and other nations have already declared they will retaliate if the tariffs become law. One EU official even called the proposals a “declaration of war.”

The proposal has generally been panned by economists and market analysts who see this latest endeavor as Trump playing politics rather than boost the economy.

 

A chart compiled by the Institute of International Finance shows what states are home to the most steel-producing and steel-intensive industry jobs.

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“I think it will be ineffective in the long run,” Thomas Simons, money market economist at Jefferies & Co. told Yahoo Finance. “Trump has a point about having smart trade relationships and not being put in extremely disadvantageous position but this is more of a blunt way of going about it than would be effective.”

Job losses could be much worse than job gains

Economists have also noted that in the United States there are substantially more industries and workers that rely on steel as an input than are actual manufacturers of the metal.

The Institute of International Finance points out that, as with many manufacturing industries, technology has been replacing human jobs in metal production for years. They estimate the steel and aluminum manufacturing sectors only account for about 150,000 jobs. On the other hand, there are nearly 2 million jobs across the country in steel-intensive industries where steel is at least 5% of input requirements, including the auto sector, construction, appliance and machinery manufacturing. Those will see input costs rise.

“Companies may be forced to maintain costs via job cuts, putting jobs located in Trump states at risk,” IIF Managing Director Kristen Silverberg and Senior Analyst, Political Risk Scott Farnham wrote in a policy note.

 

Tom Porcelli, chief U.S. economist at RBC Capital Markets, separately estimates that the steel industry employs more people – about 415,000 – in primary metal manufacturing and the metal ore mining businesses. However, he also estimates that consumers of steel, or companies that use and buy steel as a function of their business employ 16 times as many workers.

 

 

RBC estimates that metal consuming industries employ 16 times as many works as metal producing industries.

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While he notes that the negative impact from these tariffs on so-called downstream industries is difficult to predict, he says it is “rather obvious” that the ratio of winners to losers in a scenario where the price of steel and aluminum rise is extremely skewed to the downside for the broader economy.

“In plain language these tariffs are a terrible idea,” Porcelli said in a note to clients. “In fact it is such a terrible idea that there was talk amongst the GOP today about pulling some of the President’s unilateral trade authority.”

Worse than just hitting individual employees and select industries, Baumohl, the Economics Outlook Group economist, argues that it could jeopardize the economy as a whole.

“Ultimately,” Baumohl said, “what this policy does is put the entire economic expansion at risk.”

But maybe that’s exactly what the President and his administration want to do.

“If you want to rein in the third-longest economic expansion since the end of WWII, crimp profits at a time when stock market valuations have been called into question by rising interest rates, force consumers to withstand price increases and put millions of metals-reliant and other jobs at risk, the president’s stated intention of placing costly tarriffs on imported steel and aluminum is an effective way to start,” Bankrate economist Mark Hamrick said.

[coorslite21]

That is a real fine article.........but

 

I think the idea is no longer having any dependence on the rest of the world.......for much of anything....

 

Take oil/fuel/energy as an example.........the US has always had the ability to take care of ourselves.......instead we under produced.....I guess storing up for the future.....even though technology makes it easier all the time..........and then we sell our energy products cheap......and buy expensive.......

 

Next example might be Harley Davidson Bikes.........India had a 100% tariff/tax on bikes they imported........with Trump they did reduce it to 75%........then 50%.........and the US bringing products from India in........ZERO.....tariff/tax..

 

Then the trade agreements..........all unfavorable to the US......

 

So Trump wants to level the playing field with steel and aluminum.........why wouldn't he, or any American with some common sense want to do the same...???

 

And you start the negotiations with a big splash.......and work towards some common ground...........and of course the biased MSM crys the "sky is falling" all along.

 

Trade wars can be good, especially if you hold all the high cards........and that's what I think about that.......

 

(BTW........what was the news source for that article?).........bet I could guess it ........

 

Edited March 3, 2018 by coorslite21

[bostonangler]

9 hours ago, coorslite21 said:

I think the idea is no longer having any dependence on the rest of the world

 

I think the problem is American consumers want cheap stuff... American products were more expensive so people bought imported stuff. It is like shopping in your hometown. You can get something from a local store and pay 10 or 15 percent more or you can go to Wal-Mart and pay less... Most people will go for the lower price. I've had people say "gee, our downtown is like a ghost town, I don't understand it" Then they say "I'm headed to Wal-Mart." I try to avoid big box stores and try to shop local when I can. My business deals with local and regional businesses and without them I would not have a job. They hire me to help them with marketing. Wal-Mart is never going to hire me. So, for me it is in my best interest to support the local economy. 

 

If we put tariffs on imports the price goes up. Will that make Americans buy American products? I don't think they will see a savings, because tariffs on our products will go up across the globe and we will see the increase. I don't think any major company would survive without global trade. Ford will not survive only selling cars to Americans. So I think this becomes *** for tat and in the end we still get screwed and pay more.... I'm no expert, but it seems American consumers always lose...

 

B/A

[bostonangler]

9 hours ago, coorslite21 said:

what was the news source for that article?

 

It was a compilation of experts.... One of which I am not!!! LOL

 

Bankrate economist Mark Hamrick

Bumohl, the Economics Outlook Group

Tom Porcelli, chief U.S. economist at RBC Capital Markets

IIF Managing Director Kristen Silverberg and Senior Analyst, Political Risk Scott Farnham

Thomas Simons, money market economist at Jefferies & Co.

 

[coorslite21]

16 minutes ago, bostonangler said:

 

It was a compilation of experts.... One of which I am not!!! LOL

 

Bankrate economist Mark Hamrick

Bumohl, the Economics Outlook Group

Tom Porcelli, chief U.S. economist at RBC Capital Markets

IIF Managing Director Kristen Silverberg and Senior Analyst, Political Risk Scott Farnham

Thomas Simons, money market economist at Jefferies & Co.

 

 

Yes, and don't forget Yahoo.........word for word.....and the real author.....Dion Rabouin.....yahoo is rather left leaning on whatever they issue.....at least that is how I view them........

 

https://sg.finance.yahoo.com/news/economists-pan-trump-trade-policy-terrible-risks-ending-economic-expansion-162159427.html

 

Economists pan Trump trade policy as 'terrible,' risks ending economic expansion

Dion Rabouin

Financial Markets Reporter

Yahoo Finance2 March 2018

U.S. President Donald Trump’s latest trade tariff proposals have some economists questioning whether the president and his team understand economics.

Trump doubled down Friday on his proposal to add a 25% tariff on steel imports and a 10% tariff on aluminum imported to the United States from other countries, a move that prompted a sell-off in U.S. equities and the dollar after it was announced on Thursday.

“This is a clear demonstration that the Trump administration does not understand trade economics,” said Bernard Baumohl, managing director and chief global economist at the Economic Outlook Group, in a phone interview. “These tariffs when they’ve been imposed in the past have done more harm than good. The problem is that politicians have an ahistorical memory that goes back sometimes to breakfast.”

 

After weeks of rumors and counter-rumors about his administration’s intentions, President Donald Trump on Thursday announced he would sign off on measures designed to protect US producers next week.

More

The European Union, Canada and other nations have already declared they will retaliate if the tariffs become law. One EU official even called the proposals a “declaration of war.”

The proposal has generally been panned by economists and market analysts who see this latest endeavor as Trump playing politics rather than boost the economy.

 

A chart compiled by the Institute of International Finance shows what states are home to the most steel-producing and steel-intensive industry jobs.

More

“I think it will be ineffective in the long run,” Thomas Simons, money market economist at Jefferies & Co. told Yahoo Finance. “Trump has a point about having smart trade relationships and not being put in extremely disadvantageous position but this is more of a blunt way of going about it than would be effective.”

Job losses could be much worse than job gains

Economists have also noted that in the United States there are substantially more industries and workers that rely on steel as an input than are actual manufacturers of the metal.

The Institute of International Finance points out that, as with many manufacturing industries, technology has been replacing human jobs in metal production for years. They estimate the steel and aluminum manufacturing sectors only account for about 150,000 jobs. On the other hand, there are nearly 2 million jobs across the country in steel-intensive industries where steel is at least 5% of input requirements, including the auto sector, construction, appliance and machinery manufacturing. Those will see input costs rise.

“Companies may be forced to maintain costs via job cuts, putting jobs located in Trump states at risk,” IIF Managing Director Kristen Silverberg and Senior Analyst, Political Risk Scott Farnham wrote in a policy note.

Story Continues

[bostonangler]

3 minutes ago, coorslite21 said:

Yes, and don't forget Yahoo.........word for word.....and the real author.....Dion Rabouin.....yahoo is rather left leaning on whatever they issue.....at least that is how I view them........

 

 

I agree, but it is filled with quotes from people who are experts in finances... The bottom line is that in a global economy if one country acts the others react. No one is saying a trade war will drive prices down.

 

B/A

[bostonangler]

Very interesting, but of course some will say this is Fake News...LOL

 

https://finance.yahoo.com/video/kevin-oleary-tariffs-negotiating-tactic-190700308.html

Edited March 3, 2018 by bostonangler

[coorslite21]

10 hours ago, coorslite21 said:

Trade wars can be good, especially if you hold all the high cards......

 

The US has held the high cards for a long time..........and and one point realized they did.......

 

Somehow that changed........probably one of those where if you follow the money you might learn where the special interests paid off those creating the laws in trade.........

 

How does someone enter the Senate, or Congress, with a net worth of a couple of hundred grand........earn that same amount yearly..........and retire a few years later as a multi-millionaire??

 

No need to fear fair trade.....IMO

[bostonangler]

3 minutes ago, coorslite21 said:

How does someone enter the Senate, or Congress, with a net worth of a couple of hundred grand........earn that same amount yearly..........and retire a few years later as a multi-millionaire??

 

Good question... I personally worked on a campaign for a congressman. When he first ran he was an unsuccessful realtor and lived in a modest home. When we did his reelection campaign for his second term, he lived in a mansion, drive expensive imported cars.. He was wealthy. He didn't run for a third term, he became a lobbyist. 

 

B/A

[md11fr8dawg]

And there you have it, another swamp creature and product of the vast corruption in our government no matter which party. This is why it is so hard to drain the swamp. These puss bags don't want to give up the gravy train.

[bostonangler]

21 minutes ago, md11fr8dawg said:

And there you have it, another swamp creature and product of the vast corruption in our government no matter which party. This is why it is so hard to drain the swamp. These puss bags don't want to give up the gravy train.

 

Exactly.. 

 

B/A

[Indraman]

This is another move that I am not liking by this President. I know this was one of his campaign promises, but this issue is very delicate and could lose him a lot of support.

 

There are industries where our Corporations can't compete due to unfair practices in the Global economy. For example for most of my career, I worked in the Tech Industry and had direct knowledge of the intricacies of bringing American products into China and Mexico. For both countries, the import fees were definitely in favor of those countries. We were seeing charges as high as 35% on some of our goods and services. To bring similar products back into the US there were basically no extra charges, only the cost of doing logistics. This caused us to look into setting up facilities in those countries to reduce these fees. Why do you think so many American products moved production oversees? The low cost of Labor, lower environmental regulations and costs, and no tariffs coming into America.

 

I believe there are areas that can be addressed by this President, but it must be targeted for those countries and industries who do this to our goods and services. 

 

Indy