Trade Wars and Protectionism

Stocks rose yesterday, and will probably give back their gains today.  Lots of slow down, but no melt down like 2008.

Per the Wall Street Journal on August 13:

The Trump administration abruptly suspended plans to impose new tariffs on about $156 billion in goods from China, saying the move was driven by concerns about the impact an escalating trade fight would have on businesses and consumers ahead of the holiday shopping season. The shift fueled a rally on Wall Street, sending the Dow Jones Industrial Average up 1.44% to 26279.91. But it wasn’t immediately clear if the retreat marked a significant step toward resolving the more than yearlong trade conflict between the U.S. and China.  Under the reprieve, the U.S. agreed to postpone until Dec. 15 tariffs of 10% on smartphones, laptops, toys, videogames and other products that were set to take effect on Sept. 1. The value of those goods imported in 2018 was about $156 billion, according to a Wall Street Journal analysis.

Did Trump just now realize that tariffs could result in higher cost to consumers?

The New York Times columnist, Thomas Friedman,  yesterday (Aug 13)  had some comments which sounded complimentary of Trump:

Trump was right in arguing that America should not continue to tolerate systemic abusive Chinese trade practices — intellectual property theft, forced technology transfers, huge government subsidies and nonreciprocal treatment of U.S. companies in China — now that China is virtually America’s technology equal and a rising middle-income country.

Friedman quickly changes his tune.  Good objectives coupled with a failing strategy  leads nowhere.  Actually, tariffs hurts rather than helps the US economy.    Friedman mentions Trump is obsessed with the trade deficit.  As long as workers are paid low wages in China, it is not really a fixable problem.

See Thomas Friedman’s column, Trump and Xi Sittin’ in a Tree.   If you don’t know this song, the next line goes  K I S S I N G.  However, this is another tree, where the sides are too far apart for meaningful discussions, and neither has a way down from their high perches.   Friedman writes,  “Both men have overplayed their hand and are desperate to be seen as the winner in their trade war.”

Fareed Zakaria gave a more broad perspective of how imposing tariffs on a country do not accomplish anything but an immediate retaliation, and the consumer pays the price every time.   CNN link 

Finally,  our Make America Great Again President can no longer claim that the stock market made exceptional gains since he’s been in office.   See  CNN comparison.

Stay tuned,

Dave

 

 

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