Tariffs and Potential Inflation

[BigHornRam]

Imagine paying that kind of dough, then promptly being sunk by a Russian submarine on day two of WWIII.

I was thinking the cruise ship would not be able to buy fuel due to rationing, and would spend the last 3 years anchored off some 3rd world hell hole. Your imagination is even more morbid!

 

[BigHornRam]

Anti trumpers going down because of russia

Trump and Putin probably have shares of stock in this cruise line.
I also hear Mica and Joe are being offered employment as celebrity hosts for the cruise.

 

[Bonasababy]

It’s a good point, but it was viewed as election year noise mostly just to match Trump's tariff rhetoric. Much like the not taxing tips. Most of the list is to protect American car manufacturers (sound familiar?), and I think GM is pulling out of China. I could argue that is narrow, small list of items, but either way, those were a bad idea too. It probably raised prices on my Anker power bank, so I'm outraged. I'm not sure why you are so upset at people not paying attention to announcements of changes in the 301 list and not reacting equally? Do you realize how many items are on that list? Here is one line item. The doc is hundreds of pages of these.
View attachment 349952

I agree a lot of important, core products should be moved back to America, or at least to a partner. Covid did teach a lot of these lessons. It doesn't matter if it is Trump, Biden or JFK, tariffs are bad idea because they raise prices and are inefficient from an economic perspective. In the interest of education, here is a snapshot of just China trade from a few years ago. It gives a good idea of where retaliatory tariffs will go. Now slapping tariffs on EVERY trading partner, which was the selling claim, and you have problems.
View attachment 349954

I agree with your thought that Biden's tariffs were more targeted--some in fact (semiconductor and solar panels for example) were clearly designed to boost domestic production and not be so reliant on country's we can't count on.

I for one never implied all of Bidens tariffs were OK--but that the scale and number Trump has been talking about are a real concern--they dwarf what Biden did. Its diving into territory where I think you need specific examples to dissect--we had one earlier in the thread I think. Tariffs designed to boost domestic sources without assistance or the potential for those domestic sources to get up and rolling aren't going to help do anything but drive our prices up in the short term. In the long term I wonder what manufacturers think about the stability of incoming domestic and foreign policy--I could see some who want to initiate or expand say it's too uncertain and volatile a time to risk.

Markets--and most long term capital investors--prefer stability or the assumption of it.

 

[Sytes]

Good read:

https://www.reuters.com/world/china/why-chinas-economy-is-more-vulnerable-trump-tariffs-this-time-2024-11-06/

It's an economic war. With that, U.S. will feel it. Though Trump's tariffs, atop Biden's, atop Trump's original, it beats the hell out of lives lost for both countries.

 

[VikingsGuy]

Good read:

https://www.reuters.com/world/china/why-chinas-economy-is-more-vulnerable-trump-tariffs-this-time-2024-11-06/

It's an economic war. With that, U.S. will feel it. Though Trump's tariffs, atop Biden's, atop Trump's original, it beats the hell out of lives lost for both countries.

So, if the 50s/60s/70s/80s were known as the “Cold War”, do the 2020s/2030s become known as the “cheap Walmart crap & flat screen tv war”?

 

[Handlebar]

This all seems to be predicated on whether there will be tariffs or not, but the threat of a tariff may be only a negotiation tactic.

 

[noharleyyet]

Perhaps we should move on from what has been...seems I heard that somewhere.

 

[brymoore]

Why exactly are we fighting trade wars with China and the world?

 

[VikingsGuy]

Why exactly are we fighting trade wars with China and the world?

My 2 cents - to virtue signal about on-shoring manufacturing jobs (that will only happen in tiny pockets) and to take small steps to re-engage defense-critical supply chains (but likely too little too late).

 

[noharleyyet]

My 2 cents - to virtue signal about on-shoring manufacturing jobs (that will only happen in tiny pockets) and to take small steps to re-engage defense-critical supply chains (but likely too little too late).

Exactly, we naturally align according to our preferred signal with conjecture and aspersion for the 'other' team.

 

[SAJ-99]

Good read:

https://www.reuters.com/world/china/why-chinas-economy-is-more-vulnerable-trump-tariffs-this-time-2024-11-06/

It's an economic war. With that, U.S. will feel it. Though Trump's tariffs, atop Biden's, atop Trump's original, it beats the hell out of lives lost for both countries.

We know that China's economy is not doing great. But on the positive side, they are exporting lower inflation/deflation to the US for those goods. That is a factor that can't be ignored.

Exactly, we naturally align according to our preferred signal with conjecture and aspersion for the 'other' team.

I hate the default that any view is driven by "team". Let's pretend there is a US company that produces Widgets that competes with a China Widget maker. Under a 25% tariff, regardless of who put it on, looks like this.

US Widget $10

China Widget $8
Tariff (25%) $2
Total $10

Market share is split 50/50.

US widget makers says it is still unfair that the Chinese widgets are the same price and encourages increasing the tariff to 50%. New Price...

China Widget $8
Tariff (50%) $4
Total $12

What do you think the US manufacturer will do?
a) invest and expand production to account for the assumed increase in market share capture?
b) increase the price to $12

There is a lot that goes into this, like production capacity, supplier capacity, cost of borrowing, cost of labor, etc. I can say with 100% certainty that the price will get jacked up to $12 in the short term, because none of those things happen as fast as implementing the tariff. If widgets is a t-shirt, every consumer is going to be mad. If a widget is a high-end hunting pack, only HT'ers will be mad.

 

[noharleyyet]

We know that China's economy is not doing great. But on the positive side, they are exporting lower inflation/deflation to the US for those goods. That is a factor that can't be ignored.

View attachment 350036



I hate the default that any view is driven by "team". Let's pretend there is a US company that produces Widgets that competes with a China Widget maker. Under a 25% tariff, regardless of who put it on, looks like this.

US Widget $10

China Widget $8
Tariff (25%) $2
Total $10

Market share is split 50/50.

US widget makers says it is still unfair that the Chinese widgets are the same price and encourages increasing the tariff to 50%. New Price...

China Widget $8
Tariff (50%) $4
Total $12

What do you think the US manufacturer will do?
a) invest and expand production to account for the assumed increase in market share capture?
b) increase the price to $12

There is a lot that goes into this, like production capacity, supplier capacity, cost of borrowing, cost of labor, etc. I can say with 100% certainty that the price will get jacked up to $12 in the short term, because none of those things happen as fast as implementing the tariff. If widgets is a t-shirt, every consumer is going to be mad. If a widget is a high-end hunting pack, only HT'ers will be mad.

I've absolutely no doubt you can sell from both sides of the same desk...

 

[Sytes]

Why exactly are we fighting trade wars with China and the world?

"The optimism that accompanied China’s entry into the World Trade Organization (WTO) twenty years ago has vanished as Beijing continues to embrace state-led development, pouring subsidies into targeted industries to the detriment of U.S. and foreign companies. Though U.S. consumers have benefited from the flood of cheaper goods from China, millions of Americans have lost their jobs due to import competition. Meanwhile, investment by Chinese companies is raising national security concerns. The United States has long accused China of pressuring American companies to hand over their technology, or of pilfering it outright. How to respond to China now sits at the center of the U.S. political debate, with President Joe Biden following his predecessor, Donald Trump, in adopting an aggressive economic approach."

The Contentious U.S.-China Trade Relationship

Trade between the world’s two biggest economies has ballooned in recent decades, bringing significant benefits but also perils that have led to calls to rethink the relationship.

www.cfr.org

 

[Bonasababy]

Why exactly are we fighting trade wars with China and the world?

Fair question

Lot more complex than stated by some here.

I think this piece covers some of the incoming admin's intent and the likely result from an economists and fiscal policy position well.

How Will Trump’s Universal and China Tariffs Impact the Economy?

President-elect Trump may want to impose tariffs to encourage investment and work, but his strategy will backfire. Tariffs will certainly create benefits for protected industries, but those benefits come at the expense of consumers and other industries throughout the economy.

taxfoundation.org

Keep in mind what they are talking about

• 60%tariffs on chinese goods
• tariffs of up to 100 percent on mexican goods
• 10-20% tariffs on EVERYTHING else imported into this country.

Will he do it all? No one knows, but the scale is clearly beyond anything Biden did.

I think there are solid reasons to treat China as dangerous and a hostile partner for trade we do have with them though. We need strong actions to discourage them but also measured ones--Not the Bull in a China shop run over them actions the incoming admin is claiming.

Just a few things off the top of my head

1) They are trying to take over Hong Kong, a major and important US trade partner--in Putin like fashion, increasingly bold
2) They openly steal patents trade secrets and other things against standards and laws and this hurts both US producers and consumers
3) They intentionally prop up chinese manufactures to drive prices down and drive US producers out of business

 

[noharleyyet]

I was thinking the cruise ship would not be able to buy fuel due to rationing, and would spend the last 3 years anchored off some 3rd world hell hole. Your imagination is even more morbid!

...imagine having to purchase two more cruises for Vance's terms.

 

[BigHornRam]

...imagine having to purchase two more cruises for Vance's terms.

8 more years on the ship with only Liz Cheney and Rosie O'Donnell for company. You got to really want it!

 

[INMT]

...imagine having to purchase two more cruises for Vance's terms.

No way that never trumper, err trump butt licker, err puppet will ever win.

 

[VikingsGuy]

We know that China's economy is not doing great. But on the positive side, they are exporting lower inflation/deflation to the US for those goods. That is a factor that can't be ignored.

View attachment 350036



I hate the default that any view is driven by "team". Let's pretend there is a US company that produces Widgets that competes with a China Widget maker. Under a 25% tariff, regardless of who put it on, looks like this.

US Widget $10

China Widget $8
Tariff (25%) $2
Total $10

Market share is split 50/50.

US widget makers says it is still unfair that the Chinese widgets are the same price and encourages increasing the tariff to 50%. New Price...

China Widget $8
Tariff (50%) $4
Total $12

What do you think the US manufacturer will do?
a) invest and expand production to account for the assumed increase in market share capture?
b) increase the price to $12

There is a lot that goes into this, like production capacity, supplier capacity, cost of borrowing, cost of labor, etc. I can say with 100% certainty that the price will get jacked up to $12 in the short term, because none of those things happen as fast as implementing the tariff. If widgets is a t-shirt, every consumer is going to be mad. If a widget is a high-end hunting pack, only HT'ers will be mad.

More like:

China widget $8 with capacity, local supply chain and labor to make 10 million
Local Govt subsidies as these jobs are essential to political stability -25%
US tariff (25%)
Final cost $8. (8-2+2)

US widget $12 with capacity, local supply chain and labor to make 1 million widgets

China market share 90%

So, US raises tariff to 100%

Final china cost $12 (8-2+6)

China final market share 80%

US raises tariffs to 200%, china bumps subsidies to 50%

Final china cost $12 (8-4+8)

etc
etc
etc

And even if you outright block the product, then price just jumps to $20 but 80% of US demand not filled at all due to inability to supply.

We are way past tariffs to price in govt support or environmental reg costs. The complex supply chains don't exist in the US and can't just pop up in a year or even 4 years.

 

[VikingsGuy]

". . . Though U.S. consumers have benefited from the flood of cheaper goods from China, millions of Americans have lost their jobs due to import competition. . . ."

The Contentious U.S.-China Trade Relationship

Trade between the world’s two biggest economies has ballooned in recent decades, bringing significant benefits but also perils that have led to calls to rethink the relationship.

www.cfr.org

40 years ago about about 34% of American workers where in manufacturing jobs. Now about 20% are. What that means is china screwed 14% of workers, but in turn low cost goods and low inflation overall benefited the other 86%. That is the problem with macro economics and politics - they don't necessarily track the same definition of "good". There is no doubt china has been net gain for a clear majority of American household bank accounts, but having 14% of high quality jobs displaced takes a huge social toll that comes through in populist politics.

 

[VikingsGuy]

1) They are trying to take over Hong Kong, a major and important US trade partner--in Putin like fashion, increasingly bold

Just to be clear - Hong Kong is theirs legally. We may not like what they are doing with it, but they are not unlawfully invading a neighbor.