We’ve all obviously heard about Trump twitter war with Harley-Davidson over their decision to open a new overseas plant in the wake of retaliatory tariffs imposed by the EU. And there’s been the warning from a Missouri Nail manufacterer who says they may have to lay off over 250 workers due to tariffs on steel from Mexico.
Now this:
A coalition representing major foreign automakers including Toyota Motor Corp, Volkswagen AG, BMW AG, and Hyundai Motor Co, said the tariffs would harm automakers and U.S. consumers. The administration in May launched an investigation into whether imported vehicles pose a national security threat and President Donald Trump has repeatedly threatened to quickly impose tariffs.
“The greatest threat to the U.S. automotive industry at this time is the possibility the administration will impose duties on imports in connection with this investigation,” wrote the Association of Global Automakers representing major foreign automakers. “Such duties would raise prices for American consumers, limit their choices, and suppress sales and U.S. production of vehicles.”
The group added: “Rather than creating jobs, these tariffs would result in the loss of hundreds of thousands of American jobs producing and selling cars, SUVs, trucks and auto parts.”
On Friday Trump threatened to impose a 20 percent tariff on all imports of EU-assembled cars. On Tuesday Trump said tariffs are coming soon. “We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs. In the end it will all even out – and it wont take very long!” Trump tweeted.
What they’re describing here is the potential collapse of the U.S. auto industry, which once upon a time might have seemed far-fetched but we should all remember that it very nearly happened already in 2008-2009 and realize that the possibility of going back to the bad old days of the Great Recession is a very serious threat.
And this group wasn’t the only one to sound this alarm.
The Alliance of Automobile Manufacturers, representing General Motors Co, Ford Motor Co, Daimler AG, Toyota and others, urged the administration in separate comments filed Wednesday not to go forward.
“We believe the resulting impact of tariffs on imported vehicles and vehicle components will ultimately harm U.S. economic security and weaken our national security,” the group wrote, calling the tariffs a “mistake” and adding imposing them “could very well set a dangerous precedent that other nations could use to protect their local market from foreign competition.”
The Alliance said its analysis of 2017 auto sales data showed a 25 percent tariff on imported vehicles would result in an average price increase of $5,800, which would boost costs to American consumers by nearly $45 billion annually.
Automakers are concerned tariffs will mean less capital to spend on self-driving cars and electric vehicles.
“We are already in the midst of an intense global race to lead on electrification and automation. The increased costs associated with the proposed tariffs may result in diminishing the U.S.’ competitiveness in developing these advanced technologies,” the Alliance wrote.
This is already causing some real fear among workers that are direction impacted.
During an interview with MSNBC, Mid-Continent Nail operations manager Chris Pratt said that his workers are facing the imminent prospect of losing their jobs if Trump does not find a way to ease off on his tariffs soon.
“They’re scared,” Pratt said of his workers. “They have fear — fear for their jobs, you know, and rightly so.”
When asked what his message to Washington, DC was about the president’s economic policies, Pratt simply replied, “Save our jobs.”
He then directly addressed Trump.
“President Trump, if you hear this, you know, this job means a lot to this community,” he said. “To the people that work here, to the suppliers we have, it affects more than just the 500 jobs we have here. So please help.”
So all that's bad, but wait — it gets worse. As Ursulafaw wrote yesterday various countries which have been threatened with tariffs have not only begun to issue retaliatory tariffs, they’ve also begun to arrange new free trade deals with each other which essentially allow them to go around and replace the imports and exports they're losing from the U.S.
“South Korea became so frustrated as it renegotiated its six-year-old trade agreement with the United States in the spring that it became determined to turn elsewhere,” the Times writes. “South Korea’s trade minister started a ‘trade diversification’ strategy soon after the agreement was announced.”
Among the examples, when the U.S. pulled out of a trade deal with Canada they cut a deal with New Zealand.
“These moves are a direct response to the Trump administration’s unreliability and unpredictability, and they are a clear sign that the administration’s trade policy priorities — renegotiating deals and punishing violations — are not working out as expected,” the Times writes.
Mutual dislike of Trump is even uniting old rivals like Mexico and China, which long competed for global industry.
Now, Mexico’s trade minister has visited China to look at how they can exert “strategic leverage,” to look at “alternatives” to the United States.
The United States will always be a major player, but the world is moving on, the Times writes.
“There is a danger… in overestimating our negotiating leverage. Trade patterns will shift as our partners look elsewhere. We have spent decades building trust with our allies. We are now squandering it,” the Times writes.
All of this means that these shifts in the trade winds, even if Trump decides to drop his tariffs, things aren’t likely to snap back to where they were.
We’re looking at a potentially deadly lose-lose scenario where U.S. companies will have an increasing difficulty accessing supplies they need and selling their finshed products overseas, which is of course exactly opposite to what Trump intended but shows why other administrations haven’t done anything this bone-headed in the past.
America may be a big shark in the trade pond, but it's not big enough to ovewhelm all he other pirahna that could counter attack en masse.
Trade Wars are dangerous because you never know exactly how other countries are going to reaction and counter attack. In fact, Japan’s original rationale for attacking the U.S. at Pearl Harbor was because of tarif and sanctions.
In the late nineteenth century, Japan’s economy began to grow and to industrialize rapidly. Because Japan has few natural resources, many of the burgeoning industries had to rely on imported raw materials, such as coal, iron ore or steel scrap, tin, copper, bauxite, rubber, and petroleum. Without access to such imports, many of which came from the United States or from European colonies in southeast Asia, Japan’s industrial economy would have ground to a halt. By engaging in international trade, however, the Japanese had built a moderately advanced industrial economy by 1941.
At the same time, they also built a military-industrial complex to support an increasingly powerful army and navy. These armed forces allowed Japan to project its power into various places in the Pacific and east Asia, including Korea and northern China, much as the United States used its growing industrial might to equip armed forces that projected U.S. power into the Caribbean and Latin America, and even as far away as the Philippine Islands.
…
Accordingly, the Roosevelt administration, while curtly dismissing Japanese diplomatic overtures to harmonize relations, imposed a series of increasingly stringent economic sanctions on Japan. In 1939 the United States terminated the 1911 commercial treaty with Japan. “On July 2, 1940, Roosevelt signed the Export Control Act, authorizing the President to license or prohibit the export of essential defense materials.” Under this authority, “[o]n July 31, exports of aviation motor fuels and lubricants and No. 1 heavy melting iron and steel scrap were restricted.” Next, in a move aimed at Japan, Roosevelt slapped an embargo, effective October 16, “on all exports of scrap iron and steel to destinations other than Britain and the nations of the Western Hemisphere.” Finally, on July 26, 1941, Roosevelt “froze Japanese assets in the United States, thus bringing commercial relations between the nations to an effective end. One week later Roosevelt embargoed the export of such grades of oil as still were in commercial flow to Japan.”[2] The British and the Dutch followed suit, embargoing exports to Japan from their colonies in southeast Asia.
People say that Japan’s attack was a “surprise” but it certainly shouldn't have been considering the economic climate. Similarly we shouldn’t be surprised as growing world-wide anger at Trump’s trade policides continues to isolate us economically and deeply damage our businesses, industries and workers.
Including those workers, like Chris Pratt from the Nail plant in Missouri, who originally voted for Trump in the hope that his “America First” policy would bring them personal prosperity [With little or no regard for the direct harm he would cause people of color, immigrants, LGBT and other marginalized groups with his bigoted mendacious policies.]
Now, they're the ones on the firing line.
Thursday, Jun 28, 2018 · 8:14:51 PM +00:00 · Frank Vyan Walton
One thing Ursulafaw didn't get into — even though her report is highly detailed, but it’s highly relevant — is fact that since the Trump tax cuts and his tariff threats began they have been making Wall Street highly nervious and jumpy for months. Just look at what’s been happening with the Dow over the last year since Trump was bragging about it reaching “record highs”
It's not hitting records anymore.