December 3, 2019


On Monday, “U.S. President Donald Trump [announced] tariffs on U.S. steel and aluminum imports from [Brazil and Argentina]… In an early morning tweet, Trump said the tariffs, ‘effective immediately,’ were necessary because ‘Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers.’” Reuters

Trade talks with China are ongoing. “Beijing’s top priority in any phase one trade deal with the United States is the removal of existing tariffs on Chinese goods, China’s Global Times newspaper reported on Sunday, amid uncertainty on whether the two sides can end a 17-month trade war.” Reuters

Sidenote: “The Trump administration is proposing tariffs on up to $2.4 billion worth of French imports — including Roquefort cheese, handbags, lipstick and sparkling wine — in retaliation for France’s tax on American tech giants like Google, Amazon and Facebook.” AP News

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From the Left

The left is critical of the tariffs and Trump’s negotiating style.

Trump has a “new rationale for his tariffs: He claims that the two South American nations are manipulating their currencies and deserve to be punished. That’s very different from what Trump said in 2018, when he first imposed tariffs on steel and aluminum imports, and it marks the latest unpredictable trade shock from the White House as business leaders are begging for more certainty… In announcing the new tariffs, Trump also called on the U.S. Federal Reserve to lower interest rates in a way that could weaken the U.S. dollar, pushing the central bank to take the type of action he has criticized other countries for doing…

No one knows where any of this is going, but that’s the point. It’s another dose of uncertainty and a reminder that Trump is ready for a currency war on top of a trade war.”
Heather Long, Washington Post

“Both Brazil and Argentina are dealing with their own economic woes. In Argentina, the right-leaning (and soon to be outgoing) Mauricio Macri administration has battled a financial crisis, including struggling to control the falling peso. Brazil’s own currency has suffered recently, and what’s going in Argentina is partly to blame. At least according to Trump’s own Treasury Department, as of May, neither Brazil nor Argentina are on the watch list of countries requiring closer attention to their currency practices…

“Meanwhile, the politics of Trump’s announcement are a bit strange. Brazil’s new right-wing populist president Jair Bolsonaro has strengthened the country’s relationship with the like-minded Trump administration, and Trump had previously talked up a possible US-Brazil free trade deal… More broadly, the US-China spat has rattled the entire global economy. And, of course, Trump is still waging a trade battle with the EU (though some of the recent tariffs were allowed by the World Trade Organization). He has yet to get his revised NAFTA deal through Congress, though there’s still hope there. And now, Trump is entering the 2020 election year adding even more volatility to America’s trade situation by targeting Brazil and Argentina.”
Jen Kirby, Vox

“This was the year things were supposed to change between Brazil and the United States. Years of leftist rule in Brazil were over. Jair Bolsonaro, an avowed fan of President Trump and the United States, was now president. And he was promising a dramatic reorientation in Brazil’s foreign policy, away from its cast of socialist alliances and toward the United States…

“As a candidate, [Bolsonaro] traveled to Taiwan and announced he would end a foreign policy he derided as unacceptably ‘friendly with communist regimes.’ But it has been China — not the United States — that has repeatedly come to his aid when he needed help. Last summer, as the Amazon rainforest burned and countries started threatening to ban Brazilian exports of beef — its production has accelerated deforestation — China announced it would buy more. Then last month, in a giant oil auction Brazilian officials had touted as historic, China helped stave off another embarrassment: All international bidders stayed away — except for the Chinese… [This latest incident] has opened the door for China to accelerate its push into Latin America.”
Terrence McCoy, Washington Post

Regarding trade talks with China, “Investors are betting that President Donald Trump will deliver a partial trade deal… soon, boosting anemic economic growth, sustaining the bull market in stocks and offering the hope of calmer waters for global commerce. But careful what you wish for. What looks like a step forward may actually be a step back. The prospect of as so-called phase one deal, even if it sticks through next year’s tumultuous presidential election campaign, may make a broader phase two agreement even harder…

“Ever since the U.S. backed China’s accession to the World Trade Organization in the late 1990s, American policy has been more or less consistent… The strategy included a mix of both positive enticements and punitive sanctions… [By contrast] Trump’s tougher rhetoric and his escalating tariffs represented an extreme version of a shifting consensus, and it certainly got Beijing’s attention. But his demands, beyond more orders to reduce America's trade deficit with China, were vague and his negotiating tactics left the Chinese wondering if any deal would stick… the next phase of negotiations offers Beijing few incentives to tackle sensitive structural reforms.”
Christopher Smart, Bloomberg

From the Right

The right is generally critical of the tariffs.

The right is generally critical of the tariffs.

Trump “seems to think he can use tariffs as a two-fer to help struggling U.S. steel makers while punishing Argentina and Brazil for displacing U.S. farm exports to China. He’s wrong on every count. The Argentine peso has plunged 37% this year amid hyperinflation and fears that the Peronists who won the recent election will devalue and walk away from their debt as they have so often… The Brazilian real has slid somewhat this year amid broader tumult in emerging markets. But its central bank has intervened to shore up the exchange rate. President Jair Bolsonaro is trying to revive the economy with trade agreements, deregulation, and pension and tax reform. Mr. Trump’s new tariffs will undermine political support for those reforms…

“[Meanwhile] The benefit of steel tariffs for U.S. metal manufacturers has largely been offset by the collapse of demand caused in large part by economic uncertainty that his protectionist [policies] have unleashed. Steel prices have plunged by nearly half since June 2018 amid a global manufacturing recession, ebbing trade flows and less capital investment… As he negotiates with China, the President should be building trade alliances with the rest of the world and reducing protectionist fears. Instead he uses tariffs as a coercive tool at any time for or any reason even against friends who have acted in good faith.”
Editorial Board, Wall Street Journal

“[In 2002] President George W. Bush imposed import tariffs [on steel]. The results weren't pretty… steel is an input into other processes; it's what economists call an ‘intermediate good.’ We like inputs being cheap because it means that making things out of them is cheaper. So, if we make inputs more expensive, then the things made from them become more so; thus the people making the more expensive things lose their jobs as we buy less or fewer of them...

“We actually found out that more people lost their jobs as a result of the tariffs [in 2002] than the entire number of people who worked in the steel industry. This is what happens when you play games with input prices. Other estimates put the cost of each steel job saved at $800,000. That is, we could have paid each of them to stay home and do nothing and been three-quarters of a million better off per job ‘saved.’”
Tim Worstall, Washington Examiner

“A new study by the New York Federal Reserve Bank suggests Americans are paying for the tariffs on Chinese imports, instead of the Chinese… The NY Fed’s study makes two important distinctions on the failure of the tariffs: import prices aren’t dramatically falling and Americans are paying for any cost increases…

“So why bother with the tariffs at all, if they’re not working beyond causing economic pain in China and the United States? Cross border investment is already down and likely to fall further. It’s like America is willing to chop off one of its arms to make sure China’s economy falls into the abyss. Sure, the American economy might bleed out but at least it will take longer than the Chinese one. It’s still a dangerous strategy to employ especially when considering how economic pains in one country cause issues in others.”
Taylor Millard, Hot Air

Some, however, argue that “for 50 years, China was barreling towards its stated goal of toppling America as the world’s economic and military superpower by 2049, not least by cheating on trade rules and stealing technology. President Trump, almost literally single-handed, challenged the conventional wisdom that China’s rise was inevitable...

“As a direct result of the Trump tariffs, manufacturers are moving out of China, and many more have signaled they’ll be looking to do the same soon. And the foundation of China’s power is crumbling before our eyes. They’re desperate for a trade deal. And they’re even saying they’ll finally act on intellectual property theft.”
Steve Hilton, Fox News

“China today poses a bigger economic challenge than the Soviet Union ever did. Historical estimates of gross domestic product show that at no point during the Cold War was the Soviet economy larger than 44 percent of the economy of the United States. China has already surpassed America by at least one measure since 2014: G.D.P. based on purchasing power parity, which adjusts for the fact that the cost of living is lower in China. The Soviet Union could never draw on the resources of a dynamic private sector. China can.”
Niall Ferguson, New York Times

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