Companies are mounting a campaign to soften the Trump’s trade threats, but Trump’s team says he is serious.
Trump Not Budging on Tariffs
The Wall Street Journal reports CEOs Want Trump to Change Course on Tariffs. He Isn’t Budging.
Donald Trump’s tariff threats have triggered a behind-the-scenes lobbying campaign to soften or alter the president-elect’s plans. But the effort faces a potentially insurmountable roadblock: Trump isn’t budging.
So far, executives are facing setbacks as they canvass Trump’s aides for advice on how to influence the president-elect’s next steps. Trump is largely acting on his own, leaving his incoming team of advisers with few opportunities to shape his thinking. His recent late-night social-media statements about tariffs have come with little warning even to some of his closest allies, according to people familiar with the matter.
Trump’s team has told corporate consultants there is no waving the president-elect off his plans to make liberal use of tariffs once he gets into office, the people said.
Late last month, Trump said in a Truth Social post that he would place a 25% tariff on imports from Canada and Mexico if the countries didn’t do more to stem the flow of migrants and drugs across the border. He raised the prospect of imposing an additional 10% levy on goods coming from China because, he said, Beijing hadn’t done enough to prevent fentanyl from coming into the U.S. Days later, Trump warned that he could place 100% tariffs on Brics countries, which include Brazil, Russia, India, China and South Africa, if they try to replace the U.S. dollar as the main global currency. That is on top of his pledge during the presidential campaign to impose across-the-board tariffs of as much as 20% on all U.S. imports.
A lobbyist who worked in the first Trump administration said that he now warns clients to take what Trump says about his use of tariffs at face value and that there is little consultants can do to dissuade him from using these tactics.
If confirmed, Rubio and Bessent would play central roles in shaping and defending Trump’s tariffs, alongside the businessman Howard Lutnick, Trump’s pick to lead the Commerce Department, and Jamieson Greer, whom the president-elect has chosen as his U.S. trade representative. Trump has said Lutnick will help oversee his trade agenda with Peter Navarro, a longtime adviser to the president-elect who is a proponent of sweeping tariffs. The team will have to deal with the concerns of foreign allies and adversaries alike, as well as companies and lawmakers.
The Trump transition senior adviser Brian Hughes said the president-elect would “implement economic and trade policies to make life affordable and more prosperous for our nation.”
Some companies and Republicans are holding out hope that Trump’s promises to impose stiff tariffs won’t translate into action because they are being used as a negotiating tactic to extract concessions from other countries.
A day after Trump announced that he had chosen Navarro as a senior trade adviser, a Journal reporter received an email from H.O. Woltz III, the chief executive of Insteel Industries, with a request: How can he get in touch with Navarro to discuss Trump’s tariff policies?
Woltz’s company is the country’s largest manufacturer of steel wire products used to reinforce concrete for construction projects. When Trump imposed tariffs on steel imports during his first term, the price of the raw material used to make the company’s products rose “to the highest level in the world,” Woltz wrote.
Take Trump Seriously or Literally?
A close friend of mine is fond of saying “Take Trump seriously, not literally.”
In this case, where is the line between seriously and literally?
There is no doubt Trump will raise tariffs. The more literally Trump does what he says, the more damage he will do to the US.
Tariffs Act to Increase Prices
Tariffs are a tax on consumers. Either importers eat the increase or consumers do. There is no evidence supporting anything else. The above article makes it clear what happened to steel.
Steel price hikes are unavoidable because the tariff is on a specific set of goods, not a country.
Tariffs on countries can be avoided via backdoors to other countries. Trump reduced the trade deficit with China but at the expense of an increased deficit with Mexico, Vietnam, and Canada.
Also tariffs act to strengthen the US dollar. This also mitigates a portion of the tariff.
Tariff the Whole World?
That’s Trump’s threat now because he failed in his first term to reduce the US trade deficit.
The US trade deficit also rose and during the Biden administration despite the fact that Biden kept all of Trump’s tariffs intact and even added some on China.
In short, Trump failed, and the result is seen in the lead chart.
His threat is now to tariff the whole world. Should we take that literally?
Trump’s Tariff Claims on Truth Social
May 31, 2023: Remember, I terminated the worst trade deal in USA history, NAFTA, and replaced it with the best, USMCA. Also got China to pay our great FARMERS 28 Billion Dollars in damages! [Both sentences are blatant lies.]
June 19, 2024: The Smoot-Hawley Tariff Act was passed AFTER the Great Depression had already started. If you want to study Tariffs, and how powerful they are, study the administration of President William McKinley. America had so much money they didn’t know what to do with it!
August 19, 2024: I will revoke China’s Most Favored Nation Trade Status. I will pass the Trump Reciprocal Trade Act. If China or any other country makes us pay a 100 or 200 percent tariff, we will make them pay a reciprocal tariff of 100 or 200 percent right back. You hurt us, we hurt you! Eye for an Eye.
September 2, 2024: In my First Term, we achieved Major Successes to protect American Workers by negotiating Free and Fair Trade Deals, passing the USMCA (U.S./Mexico/Canada), and giving Businesses and their Workers the tools to thrive. [For the success or lack thereof of Trump’s claim, please see the next chart.]
2024 US Balance of Trade Through September
Trade Realities
- When Trump took office in 2017, the trade deficit with Mexico was $69.06 Billion. It’s now $125.47 billion for just 9months.
- The Mexico+Taiwan+Vietnam (MTV) deficit went from $124.08 billion to $270.59 in the same time frame despite the fact that Biden kept Trump’s tariffs.
- When Trump took office in 2017, the total trade deficit was $792 billion. When he left office it was $901 billion. It’s now $872 billion for just 9 months despite the fact Biden continued Trump’s trade policies.
USMCA the Best Deal in History
Trump now threatens to break his alleged best deal in history with 25 percent tariffs.
With USMCA, I do not take Trump either seriously or literally. NAFTA and USMCA were signed off by the Senate.
I view 25 percent tariffs on our top trading partners as not only blatantly stupid, but something that would be challenged in court and lose.
That process could take a while, but in the meantime both Canada and Mexico would retaliate. We get huge supplies of medical kits from Mexico. And if Trump was stupid enough to do what he says, Mexico could stop sending medical supplies to the US and we would not have kits for US medical operations.
There would be huge, instantaneous, very negative reactions. So, in the case of USMCA, I sense an obvious bluff. Perhaps Trump gets some minor concession and brags about it, but don’t look for much here.
BRICS Silliness
The idea of a BRICS currency going anywhere is silly. And this is where Tr
Trump shows he is really clueless.
“Trump warned that he could place 100% tariffs on Brics countries, which include Brazil, Russia, India, China and South Africa, if they try to replace the U.S. dollar as the main global currency.”
60 percent tariffs on China would probably kill all US trade with China. More importantly, that the dollar is the world’s reserve currency is one of the reasons countries can dump excess goods into the US.
China does not want to have the world’s reserve currency because it implies trade deficits and the end of China’s export mercantilism.
So Trump is blowing total bullsheet, insisting the world stay on a system that guarantees the US will have a trade deficit!
What a hoot.
A reserve currency was not always synonymous with large, growing trade deficits, but it became that way once president Nixon ended convertibility of gold.
That move by Nixon is what allowed massive fiscal deficits at will. Those large fiscal deficits coupled with global export mercantilism outside the US resulted in large US trade deficits.
So if Trump wants to fix the trade deficit, he also needs to fix fiscal deficits. He won’t.
Assume I am Wrong
Let’s assume that Trump is right and he brings manufacturing back to the US and fixes the trade deficit. In short, let’s assume Trump’s tariffs act to balance trade.
But balance how?
The implication is higher consumer prices (more inflation) because the US will not be able to compete with China, Vietnam, or Mexico.
The US would be the world’s highest cost producer. Refer to the example of steel above. So what exactly would that do for US exports?
The success in reducing the trade deficit and returning manufacturing to the US would simultaneously be success in reducing exports.
We have more made in America! But US consumers will pay the highest prices in the world.
In this example, where I am assuming Trump “succeeds”, exactly what are we going to be exporting to China, Brazil, Latin America, anywhere, given the US will be paying the highest wages and our goods will be the world’s most expensive?
Should Anyone Care Whether Underwear Is Produced in the US or China?
On November 22, I asked Should Anyone Care Whether Underwear Is Produced in the US or China?
This ridiculous-looking question gets to the heart of tariff discussions.
The answer is no. More precisely, we should take all of the underwear China, Vietnam, or the world wants to give us for free.
Free underwear would be fantastic. US consumers would have more money to spend on other goods and services. To argue otherwise is akin to candlemakers proposing to tax the sun for the free energy it provides.
The same does not apply to airplanes, microchips, and weapons. For strategic reasons, the US does not want to be dependent on Russia, China, or Iran for any goods of strategic importance.
Unfortunately, Trump makes no distinction between underwear and strategic items.
Also, Trump’s threat on the whole world is counterproductive to goal of reducing deficits with China.
Q: Why?
A: If we increase tariffs on China by 25% and the rest of the world by 25% as well there is no incentive for US importers to shift from China.
The same applies to a lesser extent if Trump were to raise tariffs on China by 25 percent and the rest of the world by 15 percent. In this case, if China could devalue the yuan by 10 percent, making up the difference.
Also, my lead charts show targeting countries mostly resorts in trade shifts as opposed to improved trade balances.
Minerals US Needs for Weapons and Technology
Please note China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology
In a warning shot to the Trump administration, China tightens export controls on some dual-use minerals.
China produces an astonishing ~70% of the world’s rare earth minerals and controls nearly 50% of the global antimony supply [Used in communication equipment, night vision goggles, explosives, ammunition, nuclear weapons, submarines, warships, optics, laser sighting and more].
China controls about 90% of global rare earth processing on minerals mined elsewhere.
Biden and Trump are Both Wrong on US Steel Nippon Merger
Yesterday, I noted Biden and Trump are Both Wrong on US Steel Nippon Merger
President Biden will block the merger of US Steel and Nippon based on alleged national security risks. It’s really the opposite.
If a Cleveland Cliffs merger took place instead of the Nippon deal, Cleveland Cliffs would have control 100% of blast furnace production in the U.S. and 65% to 90% of domestic steel used in vehicles.
That’s the real security threat. And the side impact is US auto manufacturers would have to raise prices to accommodate higher priced steel.
Also, Trump promised to make it easier for foreign companies to produce in the US. If Nippon is blocked, that will be another Trump lie.
Finally, Trump’s worry over underwear (imports in general), is likely to resort in a shutdown of the imports we strategically need.
Trump has seriously conflicting goals on inflation, security, made in America, exports, trade balances, and fiscal deficits.
He does not at all understand why the US has trade imbalances.
A sensible strategy would be to act on items of strategic importance, not fake national security claims.
Unfortunately, The best we can hope for is Trump is mostly bluffing because trade wars are neither good, nor easy to win, especially when Trump does not understand why we have the trade deficits in the first place.
¹The US is the greatest ever
²If there is a trade deficit, it must be other countries are cheating
³If dollars to pay for it are leaving the country, it means the US is giving away wealth
⁴If other countries don’t obey, then we must force them to comply
This is very coherent; everything follows from #1, which is axiomatic.
Another word would be: d e l u s i o n a l
Trump’s bark is much worse than his bite. But to be fair, his bark largely seem to generate the desired effect, leaving not need for a viscous bite.
The Donald didn’t say anything about a BRICS currency, but about their use of national currencies rather than the Usonian currency for their trade, something that they stated is their goal and is already happening.
“The more literally Trump does what he says, the more damage he will do to the US.”
“Trump shows he is really clueless.”
And this was the better choice?!
Stupid people demanded stupid representation.
By definition, these tariff threats have to be serious or they cannot be used as a negotiation tactic. I suspect however that Trump would have a very low threshold for a stock market correction which would likely follow, and so he will backdown like he did in 2019 with China when stocks started to crack back then.
Its very interesting to see this Trump era.
The world needs US its mega deficit spending. If US doesn’t buy US is nothing.
Nobody will care. ( China can provide whatever the world needs except debt )
US needs the world to provide their cheap labour, cheap products and most of all to
buy its debt. ( to use $, reserve currency )
Pretending he doesn’t care the world and bullying.
China and global South are much more powerful than 50 years ago.
Be careful what you wish for.
An interesting discussion. People say things without thinking.
For example: from vboring.
“The US is uniquely well positioned for tariffs. We have every resource and every production capability.”
Nope. Not even close. Take steel. Mish says Trump wants tariffs on all steel imports, no matter where they come from.
I am unsure how this helps because we need to import almost all the coated steel used in oil and gas drilling and pipelines, because we do NOT have the production capacity in the US. It would take many years to develop this capacity. How do we “drill baby drill” and add new pipelines without this capacity?
In addition, we import over 8 million barrels of heavy oil per day and export 10 million barrels of light shale oil per day. Why? Because US refiners are designed exclusively for heavy oil. It would take a decade to build new refineries to handle light oil, and the shale oil will mostly be gone by then.
We get 5 million barrels per day of Canadian heavy oil. Put a 25% tariff on Canadian oil and fuel prices rise by $1 per gallon.
And, all 25 refineries in those red US Midwest states rely exclusively on Canadian oil.
John Galt said:
“C’mon Mish. Isn’t he allowed to negotiate?”
First, with blanket tariffs on all steel imports, exactly who is Trump negotiating with?
And, Trump says he wants to stop fentanyl and illegal immigrants from Canada. But most fentanyl that crosses the border is going INTO Canada from the US, not the other way around. Similarly, illegal immigrants cross the US/Canada border in both directions. Canada contributes less than 2% of all illegal US immigrants. So what does Trump hope to achieve with these tariff threats on Canada?
“First, with blanket tariffs on all steel imports, exactly who is Trump negotiating with?”
Bingo
And the only beneficiary is the steel producers.
Consumers lose, the auto workers lose, the small manufacturers that need or use raw steel lose.
Yep. And steel producers won’t benefit if they can’t produce that specific product.
You are overlooking the primary beneficiary: Trump.
All of the tariff threats = a “behind-the-scenes lobbying campaign”.
AmericaTrump First.It’s fascinating to watch people try to tie themselves in knots trying to rationalize “Trump first”, make it fit some narrative where Trump cares.
It is true that the US is well positioned in terms of resources, although complete autarchy is a pipe dream.
However, production has an intermediate structure: plant/capital; qualified labor; infrastructure. These all require a lot of time. Trump thinks he can undo 45 years of deindustrialization, outsourcing, and financialization at the snap of a finger, just by huffing & puffing. And that everything will survive in the meantime.
G o o d . Lu c k
This in turn means, recipients will have to live on reduced Social Security checks, starting after 2031, not in 2034.
https://www.peoplesworld.org/article/trumps-backdoor-scheme-to-destroy-social-security-medicare-medicaid/
He’s gone from “literally Hitler” to “literally McKinley” now?
You make a strong case. Let’s hope most of his threats are more bluster than reality.
Recommended Trump guidance:
“Always take him seriously; never literally.”
He has lawyers when literacy is needed. I’ll guess, like most successful marketers, his fine-print legal documents never match the promises.
I agree! Trump has always been very good at CYA & Covering All Bases. If he wasn’t, he would most likely be in jail, from what they threw at him. His legal support team, is absolutely stellar!
No, it’s that he is shameless and relentless.
The underlying lesson of competition: find what you are good at, and do it better and cheaper. A tariff looks like a tax, but is really a subsidy for poor performance.
Yes, but most of what we truly excel at, we use for ourselves. The Military, New Technologies, R&D, etc. Most everything else we must buy. We either suck at it (like Battery Technology), it’s too costly (Like Solar and Windmills), or we can’t afford to do it (The Labor), amongst many other factors, no?
Trump is negotiating as he has done his entire life. No one should be surprised that he is using tariffs as a tool to level the playing field and get what he wants.
He knows what he wants and he knows which are the best tools to use and he will use them. It’s refreshing to have someone who will act instead of saying nothing can’t be done because everyone knows blah blah.
Should Anyone Care Whether (FILL IN THE BLANK) are Produced in the US or China? [Note ‘or’ is not ‘and’]
Vaccines, commuter parts, missiles, hypersonic jets, nuclear weapons, books, medical equipment, machining equipment, lithium batteries, tomorrow’s energy systems, high-speed trains, commercial aircraft, military aircraft, ships, tanks, deep-sea submersibles, toothbrushes, condoms, birth control pills, space exploration rockets, mouse traps, 7th generation phones…..
Starships and other rockets.
My initial answer would be: any of the stuff that isn’t invented yet. However, you must survive in the event of hostilities, so…
Trump wants to make sure the sole printer of the global currency must be USA.
Why is my prosperity being made a hostage to the demands of a bunch of druggies, whether buying their poison from here, or abroad?
In the case of Canada, where I live, Trump wants efforts as far as human and drug smuggling. Both of those are operating in the organised crime regime. It wouldn’t be too hard to have an impact on the human part because they arrive by air to Montreal or Calgary from Cancun etc on the frequent flights. That can be slowed immediately. The drugs have been flowing over the border since decades, much harder to assess let alone stop.
In any case I see no reason why Canada won’t comply with the mandate enough to appease the man.
Correct. Canada can posture all it wants to (Ford threatening to cut off energy exports is laughable) but in the end it MUST comply because it stands to lose a lot more than the US will lose in a trade war.
“Correct. Canada can posture all it wants to (Ford threatening to cut off energy exports is laughable)”
What is more laughable is Trump increasing US imports of energy by 25%.
US oil production is currently on a high plateau and the only remaining question is which year the drop begins? The US becomes a major oil importer within the next 10 years. Much of the light oil produced in the Permean is unsuitable for US refineries.
I googled Saskatchewan exports to the US and all I see is much higher prices for American consumers in energy, food, major increased cost to farmers, etc.
This would be a lose/lost proposition for both countries.
Trading-Places-2024-Total-SK-Exports-to-the-US-1.pdf
The rhetoric may appeal to some but once you dig into the details, this would be a disaster also for the US.
The US is uniquely well positioned for tariffs. We have every resource and every production capability.
While the borders are open, we have cheap labor. If they close, we have expertise in automation.
The important question is how long tariffs will remain in place. Nobody will invest in domestic production capacity if they think the tariffs are short term.
And for some things with environmental impacts, we’ll have to see how successful DOGE will be. Moving mining to the US won’t happen without significant deregulation.
Meanwhile, those least affected, the already rich, will get their tax cuts, stat, while we await someday to arrive, paying for it.
If you have every resource and every production capability, and automation can provide cheap labor, what’s the problem?
Using tariffs to subsidize more expensive production will lead to less competitive industries in the USA. THAT IS THE REAL PROBLEM.
What the US needs to do is stimulate its innovation rate with a world class education for those citizens who are capable. This is not DEI. It means focusing resources on gifted kids, and importing gifted adults.
How the heck does anything radical, dramatic – or even useful get through Congress? I just don’t see it, even supposing they don’t obsess with impeaching him again.
It doesn’t. That’s why most Congress things are lawyers.
While Trump rails against U.S.-born children of undocumented immigrants Russians are flocking to his properties to give birth to U.S. citizens.
https://www.thedailybeast.com/russians-flock-to-trump-properties-to-give-birth-to-us-citizens/
UM, because they think the US will give them a better life than in Russia. Frankly, I’d prefer Russians over Haitians any day. However, Biden Harris preferred gang members and criminals
I would add that articles like the one you linked to fall in the waste pile–crap news.
It is 99% anecdotal and emotional, with lots of supposition and few useful facts. AKA propaganda.
EG. How many Russians availed themselves of this ‘opportunity’ in the last five years, relative to other countries? What percentage goes to Trump hotels?
Yes! MSMs two favorite appeals: anecdotal and emotional. /s
It allows people to say: “did you hear about…”
“Everyone is saying…”
“Assume I am Wrong”
I can’t. Math is math. For each action there is an equal and opposite reaction. Balance of trade is just that. Books have to balance. Buy 10 shares of stock, someone else gets the money. It doesn’t matter where the underwear comes from, except to those who made it and lose their job. When there gets to be too many lost jobs, public sentiment changes with the effects of hollowing out various communities. That affects political outcomes. And here we are.
If you buy enough cheap underwear financed with a trade deficit, you eventually find yourself renting from the underwear makers and asking them for jobs.
Because they made a profit and you didn’t, leading to them owning everything and you owning used underwear.
The real issue, that Adam Smith didn’t deal with, is a trade deficit is in fact, a wealth transfer.
Yes but after a certain point you are in fact just giving the stuff away for free because you can’t be paid back because the other side of the trade has no way to do so. Once that point is reached, the side running the deficit is in control because if you move to collect, they declare bankruptcy (whether individual or at a state or even national level) and walk away
It’s the old saying “If you owe the bank a million dollars, the bank owns you. If you owe than bank billions of dollars, you own the bank’
TARIFFS are a Foreign Policy tool – to get what you want. These articles on Tariffs are mind numbing. And a waste!
One of the bullying tactics.
Militarily
By Trading
By Sanction
Thru’ Media
Politically
Economically
By Reserve Currency
Slow and steady Mish
C’mon Mish. Isn’t he allowed to negotiate? Don’t we want him to negotiate? How can he negotiate if simpletons don’t allow him to posture? If people insist that he begin trade talks by naively telling foreign countries that they we need the imports too badly and the last thing we want us a trade war. People reacted the same way when he threatened to leave NATO unless our allies began to share more of the burden of arming NATO. Oh what a rube!!! Doesn’t he know NATO is indispensable?! He is a nincompoop! He is a bull in a China Shop!!! Jeez. Then the other NATO countries started paying more.
So is it a bluff or not?
Second, Trump got a deal from China, not honored.
Third, you did not address the points I made assuming “success”
John Galt likes tariffs? The real Galt would say-take advantage of the cheap goods not protect a handful of politically connected workers. Maybe we can revisit the 70’s with American cars that fall apart on the way out of the showroom. Protectionism leads to shoddy overpriced products. Then I’m old I remember the day.
“Late last month, Trump said in a Truth Social post that he would place a 25% tariff on imports from Canada and Mexico if the countries didn’t do more to stem the flow of migrants and drugs across the border.”
If. The president of Mexico has already announced moves to stem the flow of migrants through Mexico. A sober Trudeau said that things could be worked out. Meanwhile, Trump has invited his old friend Xi to his inauguration. Rather an odd thing to do if one is planning to raise tariffs another 10% on an old friend.
Keeping his friends close and enemies closer so the saying goes
I have no idea why Trump invited Xi beyond speculation. He mght actually like the guy. Then again, ‘face’ is very important to Chinese.
I don’t either, but face time is important for sure. Trump actually feels the same way about that as well, I think anyway.
It may be because Trump will be doing most of his negotiations with China I would think. Pull him in right from the get go, and get him onboard to like minded ideas. Trump rarely makes moves, without advanced understanding as to why, to himself at least! IMO…
Largely depends on the day of the week.