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Triple Tantrum: Stocks Sink, GOP & EU Outrage on Trump’s Steel Tariffs

March 2, 2018

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12:01 am

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38 comments

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Economics

Feature images is of a steel mill in Germany from the New York Times article Trump Plans Tariffs on Steel and Aluminum and Markets Slump.

The NY Times commented “At a White House meeting on Thursday, President Trump said that he did not want any nation to be exempted from the order.”

GOP Tantrum

GOP leaders unleashed a verbal attack on Trump over his plan to impose steel, aluminum tariffs.

Republicans in Congress broke ranks with the president in an unprecedented way, with one after another coming forward during the day to caution about the dangers of tariffs and plead with Trump to hold off on any action.

“My advice was…that you’ve gotta be careful here, you get into a tariff war,” Sen. Roy Blunt, R-Mo., told reporters. “SoI would prefer that this was not where we were.”

Canada, a U.S. ally and large trading partner, said Thursday that it views “any trade restrictions on Canadian steel and aluminum as absolutely unacceptable.”

Sen. Mike Lee, R-Utah, said Trump’s tariffs would be a “huge job-killing tax hike” consumers.

[Senator Orrin] Hatch said, “I don’t believe tariffs work very well and, secondly, it creates tariff wars.”

EU Tantrum

The EU also threw a hissy fit, promising a Firm Response.

“We strongly regret this step, which appears to represent a blatant intervention to protect U.S. domestic industry and not to be based on any national security justification,” the European Commission chief executive Jean-Claude Juncker said in a statement.

“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk … The EU will react firmly and commensurately to defend our interests.”

Stock Market Tantrum

Costs

According to the World Steel Association, buildings and infrastructure use 50% of global steel production. The article also notes nearly 95 million vehicles were produced in 2016. On average, 900 kg of steel is used per vehicle. That’s 1,984 pounds of steel per car.

The cost of infrastructure replenishment just rose significantly as did building construction costs. The automakers were not pleased with this announcement. They are already on very soft footing.

Fair Trade, Free Trade, Smart Trade

Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!

— Donald J. Trump (@realDonaldTrump) March 1, 2018

Steel production jobs gained, if any, will be at a cost of higher expenses, lower production and more jobs losses in every other sector of the economy.

Here is the formula Trump desperately needs to understand.

Fair Trade = Free Trade = Smart Trade

Trump’s move is very foolish. Other nations will retaliate and net exports will sink.

Fair Trade = Free Trade = Smart Tradehttps://t.co/frHjW8u6VV @realDonaldTrump is about to start an unwinnable global trade war

— Mike “Mish” Shedlock (@MishGEA) March 2, 2018

The saddest part of this setup is Trump’s tax cuts are guaranteed to increase the trade deficit as well as the budget deficit. Matters will get worse.

For a mathematical explanation of trade deficits, please see Trump’s Tariffs Show He’s “Clueless About Trade”.

Also consider Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Trump’s trade policies are set to exacerbate the next global recession, but economic illiterates are egging him on.

A global trade war looms.

Mike “Mish” Shedlock

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38 Comments

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ahengshp58

8 years ago

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8 years ago

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8 years ago

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Escierto

8 years ago

Come on, Trump, raise the tariffs and barriers even higher! Maybe you can sink the economy into a deep recession by November. Just in time for the blue wave, baby!

RB2

8 years ago

love free trade and it is stinko that all other countries apply a tariff on our goods coming into their country. France, yes, eu yes, china absolutely.

2banana

8 years ago

Mish. Then explain how the massive pro-China trade barriers and pro-China tariffs have allowed Chinese manufacturing to boom to the point of a $100 billion/year trade surplus.

“Steel production jobs gained, if any, will be at a cost of higher expenses, lower production and more jobs losses in every other sector of the economy.”

Mish

8 years ago

I have no idea where I got that number from other than I typed in a number wrong. Thanks will fix

Webej

8 years ago

More expensive construction and cars. It will be great for American exports (not) and American consumers, who are hoarding their savings (not) instead of buying more expensive cars.

Webej

8 years ago

Sounds a little to heavy for an average

killben

8 years ago

Mish, while I agree with you on Free Trade, when other countries do not follow it and impose tariffs, then why should Trump not do the same. Yes it will lead to a Trade war. So be it! What I mean you cannot have different rules for trading partners. Same with currency, every country wants to depreciate its currency to prosperity.

Gasmire

8 years ago

“On average, 900 kg of steel is used per vehicle. That’s 1,102 pounds of steel per car.”
Incorrect. 900 kilograms = 1984.160 pounds.

Kinuachdrach

8 years ago

So the EU is outraged? Brings to mind that old line from the movies: ‘Frankly, my dear, I don’t give a damn’.

stillCJ

8 years ago

I beg to differ: if Goldman Sucks goes under it would be a huge benefit to most Americans.

stillCJ

8 years ago

“No loss to anyone if Goldman Sachs should go under.” ~ Stuki

Stuki

8 years ago

@whirlaway
“Sure they will. Desperate people resort to desperate remedies. The system has failed them. They don’t give a rat’s behind to those who are doing well now. As simple as that.”

If the system fails you, work to get rid of it. For real. Don’t double down by pumping you fists for yet another clown doing essentially the same thing, aside from helping a few of his campaign contributors in uncompetitive industries rent seek, while promising to say something mean and inane about Mexicans from time to time.

Instead, get behind ending the Fed once and for all, damn the supposed consequences. If every bank in the US goes bankrupt, every bankster jumps from his top floor corner office and every homeowner is “upside down,” great! That just means plenty of available cheap, nice houses and office space to rent or squat in. Plenty of people willing to start new banks if they are needed. No houses will magically vanish into thin air just because someone at one point overpaid for them. No loss to anyone if Goldman Sachs should go under. Show the world that you don’t give a rat’s ass about those who are doing well. For real.

Get rid of income taxes. That will put some more money in your pockets. Bring the military home, then dismantle it. Less money wasted on something you’ll never see a cent from. As well as a plentiful supply of nice guns to protect yourself with, should some hobgoblin swim across an ocean to come git’ya. It’s not as if Trump’s security detail will be there for you…

Get rid of 95% of government, period. Or 97. Or even 90 would be a decent start. Again, less money spent on that swamp, means more money sloshing around chasing labor. And lower cost of doing business in the US vs other places, meaning more of that chasing will take place here. Bidding up wages for workers.

Then massively restrict the ability of ambulance chasers to sue. Which does nothing but de facto mandate employers waste money on insurance, rather than spend it on those doing work. Then, severely restrict “intellectual property” ”rights.” If a worker has learned how to do something, encourage him to set up shop competing with his former employer. Unconstrained. Hence bidding up the wages of workers that currently have few opportunities but to stay put where they are, because the currently wealthy and entrenched are relying on government to restrict competition from upstarts.

Completely get rid of all and any restriction on doctors, nurses, drug makers/sellers what have you, from India, China or anywhere, from setting up shop anywhere in the US they darned well fancy. Driving down the cost of medical care in the process. Since, just as free trade in manufactured goods that laborers make, is always and everywhere good for the economy, so is free trade in services. Including medical ones. (Legal ones too for that matter, but that’s a bit more involved of an argument.)

Etc., Etc. I’m sure I have missed more than I have included, as the sheer size of the US leeching complex has by now grown so gigantic, it would take a phone book to list it all. And, as none of those guys produce, if anything at all, even close to what they consume; what they consume must, by algebraic necessity, come out of the takehome of those who do produce. A large share of which is workers. Perfectly explaining where the latter’s missing salaries have gone.

abend237-04

8 years ago

Populists love trade barriers(until their own local factory is shut down); Trump is a populist president. We get the government we deserve. Trump is also a symptom…of the effects of Nixon “temporarily” closing the gold window 45 years ago. Turns out there really is no permanent way to higher living standards than productivity increases and savings. We’ll all get to re-learn that lesson soon together.

tedr01

8 years ago

China imports lots of U.S. coal so I wonder how these tariffs will affect the U.S. coal industry??

baldski

8 years ago

I have no bitch with Canada they play by the rules and they know how to handle Japan. Some years ago they got into a dispute with them over plywood. The Japanese would not budge and wanted to take over plywood manufacture. The Canadians gave all their Custom officers a months vacation and when the TV’s and Toyota’s piled up on the docks of Vancouver, they immediatley sent a JAL 747 with a delegation to Ottawa to clear up the misunderstanding.

baldski

8 years ago

The USA has been getting screwed on trade for over 40 years that I know of. I proposed my idea of fair trade with Japan about 30 years ago, you send in one Toyota and I’ll send you one steer for starters.

baldski

8 years ago

The Japanese go to great lengths to exclude foreign products. I have read articles in the Asahi Daily Newspaper about the fact that the intestines of Japanese people are different and they cannot process American beef well because they are used to Japanese beef. Another article told about Italian and French skis not working well because Japanese snow is different and Yamaha skis work better. I kid you not.

baldski

8 years ago

None

baldski

8 years ago

How many American car factories are located in Japan or Korea?

Six000mileyear

8 years ago

Markets were in selling mode leading up to Trump’s announcement. Trump wasn’t the selling catalyst. In fact, SPX futures clawed back and then some after the announcement. Markets opened higher than yesterday’s close.

baldski

8 years ago

Also where were these Buicks made????

baldski

8 years ago

How about Japan and Korea??

baldski

8 years ago

I wish Mish and the other free traders would tour the far east and see what is for sale in the markets of Japan, Korea, and China. Their idea of free trade is everything goes out and nothing comes in. Mercantilism of the highest order. How are you supposed to trade when they do not let anything in ??? Mish, please take a trip down the Motomachi’s of Japan, Korea, or China and tell me how many American made products you can find?? Then maybe I would listen to you or anyone else about trade.

Carl_R

8 years ago

Well, this will cost a ton of manufacturing jobs. Any American manufacturer who makes a product that includes steel is now at a 30% disadvantage to products made overseas. Once all American manufacturers who use steel are wiped out, the steel industry will be dead, too. Now, there is a way to prevent that. The US must now also impose a tarrif on all products that include steel, based on the amount of steel they contain. That, in turn, will assure broad retaliation from other countries.

whirlaway

8 years ago

Sure they will. Desperate people resort to desperate remedies. The system has failed them. They don’t give a rat’s behind to those who are doing well now. As simple as that.

shamrock

8 years ago

According to the Wash. Post steel imports were $29B and aluminum $17B. 30% of that is a $13.8B tax increase. Add in the lumber, washing machine, and solar panel tariffs that’s starting to add up and take a real chunk out of the previous tax cuts.

tedr01

8 years ago

Exactly. Good point. And states running deficits. And let’s not forget about the coming insolvency of the Medicaid, Medicare, and Social Security Trust funds. Good luck trying to find a reasonable solution to those impending disasters.

OkieNomics

8 years ago

that should have said, “running government spending deficits.”

OkieNomics

8 years ago

“Mathmatically the US is going to run trade deficits and tariffs cannot possibly help.” I read the article, I’ve studied the issue. Puzzle me this. Suppose the U.S. unilaterally announces a complete cessation of imports, starting tomorrow. At the same time, the U.S. is running trade deficits. According to “the math” we’d be running trade deficits, despite zero imports. How’s that again?

Mish

8 years ago

Economic illiterates are what they are and Trump is one of them. Mathematically, the US is going to run trade deficits and tariffs cannot possibly help.

hef1

8 years ago

How much can things possibly get for them? Does the Smoot-Hawley Tariff and the Great Depression ring a bell?

Greggg

8 years ago

More long candles in the future.

Stuki

8 years ago

“….they will take their chances with things like these and with leaders like Trump”

As they did with Chavez…

whirlaway

8 years ago

Among those who you call “economic illiterates” are those in middle America without steady jobs, reeling under opioid problems and problems with no end in sight. All that you propose to “help” them is to further cut their already low wages and allowing the destruction of the social safety nets….

So thanks but no thanks, they will take their chances with things like these and with leaders like Trump. How much worse can things possibly get for them???? If things get worse for people like you, don’t expect THEM to give a DAMN!!!! After all, what did you do for them????

Stuki

8 years ago

“The EU will react firmly and commensurately to defend our interests.”

..And, per all precedent, misguidedly and self destructively. Doing exactly what Trump is doing in to the US.

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Triple Tantrum: Stocks Sink, GOP & EU Outrage on Trump’s Steel Tariffs

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