Economics of a Bully

This just in:  Trump’s tariffs have started a global trade war in which there are no winners.  Not unless you call the smug satisfaction Trump gets when he is bulling someone a “victory.”

Here is what tariffs do.  They are a tax on an imported good.  For example, if China once sold a cell phone in the United States for $400, then a 25% tariff would increase the cost of that phone to $500.  We put a tariff on China and Americans pay more for goods they buy from China.

To be clear…the tariff on imported goods is a tax on Americans.

If this is true, why would anyone implement tariffs?

Setting Trump aside for the moment, there are times that tariffs are practical.  For example, let’s suppose China has a huge technological and cost advantage when it comes to producing solar panels.  Let’s also assume that the United States would like to encourage the development and production of solar panels domestically.  Since China has such a huge advantage and can sell panels much cheaper than we can make them, any company in the United States that produces panels will not be able to compete.  Their panels will not be as advanced nor as cheap as those from China.

Enter the tariffs…

By putting tariffs on Chinese solar panels, their panels will now cost Americans more to buy.  In fact, the Chinese panels are now so expensive that we will buy American panels instead.  This allows a domestic industry to survive and grow.   Eventually, we will be on par with China and the tariffs, no longer needed, will go away.

So, the tariff increased the cost of solar panels but in exchange, we got a foothold in a huge global market for our domestic panels.

Let’s bring Trump back into the picture.

As president, he is allowed to unilaterally implement tariffs up to 25% if it is in the interest of national security.   For example, to protect an American industry that contributes to defense.

What Trump has done is to impose arbitrary tariffs on China, the E.U. and Canada without any clear rationale.  No one, including those in this cabinet, know what it is that he is actually trying to do.  No one can tell us what the “national security” issue is.

And what’s worse, those countries he is imposing tariffs on don’t know what he wants.  They don’t know what he is trying to negotiate for.  He says things like “China is treating us unfair” without clarification.  He puts tariffs on Canadian milk as if this will prevent a national security breach.  He puts a tariff on German cars and leaves the E.U. to scratch their collective heads in confusion.

Trump does all of this for two reasons.  The first being because he can.  The Republican Congress has indicated to Trump that they will not challenge any issue he wants to take on.

The main reason for tariffs is that Trump is a bully.  He puts tariffs on counties for the same reason the biggest kid in 3rd grade beats up on the other, smaller kids.  He is mean and insecure.  Being a bully is the best way he has come up to deal with this.

So, the world is entering a trade war because Trump basically needs a nap.

And as the result, Americans will pay more for many for the products they buy every day.

Vote in November and get the Republicans out of our house.

Up, up and away…

Jim

 

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A look at how bully Trump negotiates…

This just in:  Here is a quote from renowned economist Jeffery Sachs, a professor at Colombia University…”no one expressed a single word of respect for Trump during his (Sachs’) recent trip to Europe.”

Here is a link to Sachs’ article.  You should read it then pass it along.

The world has no respect for Trump.  They are also starting to look at us a bit sideways.  Who can blame them.  After all…Trump was voted in by us.

I wanted to just take a moment to point out the obvious – Trump’s singular style of negotiations.  We’ve heard stories about how he bullies those that did work for him in the past.  In those cases, it was always “his word against theirs” but it always seemed like he would put his team of lawyers after a contractor that he didn’t want to pay.

Let’s look at The Wall.  Trump cannot finance The Wall because he doesn’t make the national budget.  Also, those that make the national budget don’t want The Wall.  So here is what Trump did…He took the very successful DACA arrangement and threw it out the window.  It didn’t expire.  It wasn’t broken until he broke it…on purpose.

His next step was to tell the Democrats that if they wanted DACA back, they would give him his Wall.  The Democrats said, “No, we have better stuff to spend $25 billion on.”  So, Trump goes out to the world and says, “The Democrats are the reason we don’t have DACA.  I want DACA but the Democrats don’t want it.  It’s all their fault.”

This is effective because his faithful don’t check the facts.

Then… Trump wants better trade deals.  He doesn’t really know what that means.  After all, I have NEVER heard him mention a single factual thing about any trade deal.  It’s mostly stuff like, “We are being treated very unfairly.”  What does that mean?  Give us a single issue so we can agree with you.  But no…he can’t because he has no understanding of economics (see article linked to above).  Instead, it appears that he just wants some sort of deal, any deal, so he can say that he’s a big deal maker.  I point to the tax deal as an example of this.  It made things in our country far worse (Here is a link to a recent UN study on the impact of Trump’s policies).

His next step is to impose tariffs on Canada, Mexico and the E.U.  He cites national security as his rationale.  He is telling a gullible base that we need to save our steel industry so we remain strong.  To save this industry, he has declared a trade war on all of our global allies.   His hope is that all of these countries will shake in their boots and give him some sort of concession on existing trade deals.

Instead, EVERYONE in the world is imposing retaliatory tariffs against the United States.  There are even companies that are refusing to make any further investments in the U.S. so long as Trump is in power.

So, Trump’s negotiating strategy is to find a big stick and say, “Don’t force me to hit you with this because if you do, it will be your fault.”

And the world…didn’t blink as he had hoped.

Instead, they are uniting against us and rightfully so.

Thanks to Trump, the United States of America has become the face of the “Bad Guy” in the eyes of the world.

We are not the leaders anymore…

Up, up and away…

Jim

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