Connect with us

Economy

President Trump, this is what happens when you meddle in the economy

Published

on

President Trump proved me both wrong and right simultaneously this week: right because the consequences of his actions are precisely what I predicted they would be if he decided to go there, and wrong because for some reason I haven’t fully accepted that if you don’t think Trump will do something, he almost inevitably will.

Earlier this week, I was discussing the highs and lows of a Trump presidency with my co-workers. Some of the major highlights of his rookie year in office were the massive rollbacks in business regulations and record-breaking stock values. I argued that the market’s rise can be attributed not necessarily to anything Trump has done, but specifically to what he hasn’t done. Where investors are confident that they will not be burdened by regulations, penalized for expanding their wealth, and sideswiped by unpredictable and unstable economic policy, they feel confident investing in the economy, and the national market booms.

Any time the government gets overly involved in business, business declines — especially to the detriment of middle-class workers. This has been established time and time again through the Smoot-Hawley Tariff Act of 1930, mandatory wage and price controls under Hoover, the Wagner Act of 1935, the Bush tariffs of 2002, subsidized subprime mortgages leading up to the 2008 housing crisis, and the Fight for 15, which is estimated to cost around 400,000 low-wage jobs by 2022 in California alone.

My co-workers agreed. Not only is it logical, but it’s observably true. The 1987 crash could’ve had far more dire results, after all, if Reagan hadn’t kept his distance from corrective measures.

But leave it to Trump to ruin one of the approximately four good things he had going for him.

When the president announced on Thursday that he would be imposing steel and aluminum tariffs, the Dow Jones nosedived 600 points, recovering about 150 of those by the end of the day. This just one week after his announcement of the imposition of solar panel and washing machine tariffs.

All told, the Dow has fallen 1,200 points since Monday, and it will be far worse once these tariffs are officially imposed. Investors are uneasy, but they can at least hold onto a semblance of hope that the president can be talked out of his suicide mission.

Not only is Trump’s claim that a country without steel isn’t really a country patently ludicrous, but so is his assertion that we can have free, fair, and smart trade together. “Fair” means “controlled;” “smart” means controlled;” “controlled” means “not free.”

As for his claims that the steel industry is in bad shape, he apparently hasn’t cracked open a single study on the matter. As amassed by Daily Wire, steel production rose last year, the U.S. handily controls the market on steel, the nation’s leading steel manufacturers have seen exponential growth in stock, earnings, and wages, and by and large any loss of steel jobs can be attributed to technological advancements (which lead to job growth in other fields) rather than trade deficits.

Speaking of supposed trade deficits, President Trump claims that spending more on a country’s goods than they spend on ours is “not fair or smart.” This is a fundamentally flawed approach to business. I’ve given far more money to Costco than it’s given to me, but presumably, I chose to spend that money because I valued the product higher than the purchase price. In a voluntary transaction, assuming no fraud, both sides are better off.

Trump’s insistence on “America First” to the detriment of America reminds me of one of my local city council members, who campaigned (and won) on the promise that she would only shop within our city limits, even cutting up her Costco card (the nearest Costco is two cities away, a roughly fifteen-minute drive) to emphasize the point.

Here’s the problem: there are hardly any shops or restaurants in my city, due to exorbitant taxes and a hostile business environment. We boast a half-dozen chain restaurants and a Wal-Mart next to our freeway exits, but everything else is an absurdly priced mom and pop shop, and I don’t have the money for that kind of constant virtue. As such, my wife and I almost exclusively drive two cities up on date nights to where we can find virtually every kind of restaurant and store we could hope for.

Capitalism thrives on providing the greatest service for the lowest price, incentivizing innovation and public accommodation. Trade wars excuse local stagnation, allowing businesses to become complacent and cease to progress. That is not good for any economy.

Moreover, foreign imports affect domestic jobs far more than Trump gives them credit for. Tariffs incur higher costs on manufacturers, making production more expensive. This will lead to either price hikes, wage cuts, layoffs, or a combination of the three. Steel tariffs will cost thousands of American auto jobs, and aluminum tariffs will force significant layoffs in the beer industry.

This is rudimentary economic awareness, of which it appears Trump has none.

Finally, this proposal has major international implications. Jean-Claude Juncker, president of the European Commission and leader of the E.U., has declared that if Trump wants a trade war, he’ll get one, according to a New York Times report. Juncker has announced tariffs on Harley-Davidsons, bourbon, and blue jeans, with an intention to match trade penalties tit for tat with the United States.

Still, Trump insists that “trade wars are good and easy to win.” Perhaps he could name one if he’d ever read a book.

One of the great lies of modern America is that free markets led to the Great Depression. In reality, a crash that could have ended after only a moderate recession resulted in a massive, decade-long depression thanks to government intervention by way of a trade war, job stimulus, and the New Deal, and it only ended thanks to World War II’s global devastation and its reallocation of twelve million workers into the military. Trump is on the verge of creating his trade war, and with his proposed $1 trillion infrastructure package, look for the sequel to the Hoover Dam.

If Trump continues down this path, things will get much worse before they get better. Hopefully, if dissenting voices are loud enough, the president will be dissuaded from this disastrous course.

Those who don’t know history are doomed to repeat it, and those who claim to not read books because they already arrive at correct decisions “with very little knowledge other than the knowledge I [already] had, plus the words ‘common sense,’ because I have a lot of common sense and I have a lot of business ability,” don’t know history and clearly don’t know economics.

Richie Angel is a Co-Editor in Chief of The New Guards. Follow him and The New Guards on Twitter, and check out The New Guards on Facebook.

Liked it? Take a second to support NOQ Report on Patreon!
Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Economy

J&J hammered by report it knew of asbestos in baby powder

Published

on

J&J hammered by report it knew of asbestos in baby powder

NEW YORK (AP) — Johnson & Johnson is forcefully denying a media report that it knew for decades about the existence of trace amounts of asbestos in its baby powder.

The report Friday by the Reuters news service sent company shares into a tailspin, suffering their worst sell-off in 16 years.

Reuters is citing documents released as part of a lawsuit by plaintiffs claiming that the product can be linked to ovarian cancer. The New Brunswick, New Jersey company has battled in court against such claims and on Friday called the Reuters report, “one-sided, false and inflammatory.”

Shares are down more than 9 percent, the most severe decline since 2002.

In the report, Reuters points out that documents show consulting labs as early as 1957 and 1958 found asbestos in J&J talc. Further reports by the company and outside labs showed similar findings through the early 2000s.

In its statement Friday, Johnson & Johnson said “thousands of independent tests by regulators and the world’s leading labs prove our baby powder has never contained asbestos.”

Liked it? Take a second to support NOQ Report on Patreon!
Continue Reading

Economy

Fed survey cites rising concerns about trade tariffs

Published

on

Fed survey cites rising concerns about trade tariffs

WASHINGTON (AP) — The Federal Reserve said Wednesday that the U.S. economy was growing in the fall, but there were concerns about higher tariffs from a widening trade war, rising interest rates and tight labor markets.

In its latest report on economic conditions around the country, the Fed said that most of its 12 regions saw moderate growth through late November. Dallas and Philadelphia said growth had slowed, while St. Louis and Kansas City depicted growth as slight.

The report, known as the beige book, found that optimism about the future had waned somewhat, with business contacts citing “increased uncertainty.”

The survey will used at the Fed’s next meeting on Dec. 18-19. The central bank is widely expected to boost its benchmark rate for a fourth time this year at that meeting.

The beige book report noted problems the higher tariffs from Trump’s get-tough approach to trade were causing: rising costs for manufacturers, weaker sales at companies and farmers hurt by retaliatory tariffs imposed by China and other nations.

Even with the tariff concerns, the beige book said most districts continued to report moderate growth in manufacturing.

The impact of rising interest rates affected interest-rate sensitive sectors such as housing, with the beige book noting that new home construction and sales of existing homes were either holding steady or experiencing slight declines.

The Fed survey said that labor markets had tightened further across a broad range of occupations.

“Over half of the districts cited firms for which employment, production and sometimes capacity expansion had been constrained by an inability to attract and retain qualified workers,” the report said.

Unemployment fell in October to a 49-year low of 3.7 percent with economists forecasting further declines in the coming months. A key reason the Fed has been raising interest rates is to slow the economy to ensure that tight labor markets don’t unleash unwanted inflation pressures.

With labor markets already so tight, the Fed said that many districts were seeing examples of firms enhancing their nonwage benefits, including health benefits, profit-sharing, bonuses and paid vacation days.

Despite the wage pressures, the report said that prices continued to increase at a modest pace in most districts although reports of tariff-inducted cost increases have spread more broadly in such areas as manufacturing, retailing and restaurants.

Liked it? Take a second to support NOQ Report on Patreon!
Continue Reading

Economy

White House intensifies confusion and fear on US-China deal

Published

on

White House intensifies confusion and fear on US-China deal

WASHINGTON (AP) — The Trump administration raised doubts Tuesday about the substance of a U.S.-China trade cease-fire, contributing to a broad stock market plunge and intensifying fears of a global economic slowdown.

Investors had initially welcomed the truce that the administration said was reached over the weekend in Argentina between Presidents Donald Trump and Xi Jinping — and sent stocks up Monday. But on Tuesday, after a series of confusing and conflicting words from Trump and some senior officials, stocks tumbled, with the Dow Jones shedding about 800 points, or 3.1 percent.

White House aides have struggled to explain the details of what the two countries actually agreed on. And China has not confirmed that it made most of the concessions that the Trump administration has claimed.

“The sense is that there’s less and less agreement between the two sides about what actually took place,” said Willie Delwiche, an investment strategist at Baird. “There was a rally in the expectation that something had happened. The problem is that something turned out to be nothing.”

Other concerns contributed to the stock sell-off, including falling long-term bond yields. Those lower rates suggested that investors expect the U.S. economy to slow, along with global growth, and possibly fall into recession in the coming year or two.

John Williams, president of the Federal Reserve Bank of New York, also unnerved investors by telling reporters Tuesday that he supports further Fed rate hikes. His remarks renewed fears that the Fed may miscalculate and raise rates so high or so fast as to depress growth.

The disarray surrounding the China deal coincides with a global economy that faces other challenges: Britain is struggling to negotiate its exit from the European Union. Italy’s government is seeking to spend and borrow more, which could elevate interest rates and stifle growth.

And in the United States, home sales have fallen sharply in the past year as mortgage rates have jumped.

Trump and White House aides have promoted the apparent U.S.-China agreement in Buenos Aires as a historic breakthrough that would ease trade tensions and potentially reduce tariffs. They announced that China had agreed to buy many more American products and to negotiate over the administration’s assertions that Beijing steals American technology. But by Tuesday morning, Trump was renewing his tariff threats in a series of tweets.

“President Xi and I want this deal to happen, and it probably will,” Trump tweeted. “But if not remember, I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so.”

Trump added that a 90-day timetable for negotiators to reach a deeper agreement had begun and that his aides would see “whether or not a REAL deal with China is actually possible.”

He revisited the issue later Tuesday with a tweet that said: “We are either going to have a REAL DEAL with China, or no deal at all – at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal – either now or into the future. China does not want Tariffs!”

The president’s words had the effect of making the weekend agreement, already a vague and uncertain one, seem even less likely to produce a long-lasting trade accord.

“We expect the relationship between the world’s two largest economies to remain contentious,” Moody’s Investors Service said in a report. “Narrow agreements and modest concessions in their ongoing trade dispute will not bridge the wide gulf in their respective economic, political and strategic interests.”

Among the conflicting assertions that White House officials made was over whether China had actually agreed to drop its 40 percent tariffs on U.S. autos.

In addition, Treasury Secretary Steven Mnuchin said Tuesday on the Fox Business Network that China agreed to buy $1.2 trillion of U.S. products. But Mnuchin added, “If that’s real” — thereby raising some doubt — it would close the U.S. trade deficit with China, and “We have to have a negotiated agreement and have this on paper.”

Many economists have expressed skepticism that very much could be achieved to bridge the vast disagreements between the two countries in just 90 days.

“The actual amount of concrete progress made at this meeting appears to have been quite limited,” Alec Phillips and other economists at Goldman Sachs wrote in a research note.

During the talks in Buenos Aires, Trump agreed to delay a scheduled escalation in U.S. tariffs on many Chinese goods, from 10 percent to 25 percent, that had been set to take effect Jan. 1. Instead, the two sides are to negotiate over U.S. complaints about China’s trade practices, notably that it has used predatory tactics to try to achieve supremacy in technology. These practices, according to the administration and outside analysts, include stealing intellectual property and forcing companies to turn over technology to gain access to China’s market.

In return for the postponement in the higher U.S. tariffs, the White House said China had agreed to step up its purchases of U.S. farm, energy and industrial goods. Most economists noted that the two countries remain far apart on the sharpest areas of disagreement, which include Beijing’s subsidies for strategic Chinese industries, in addition to forced technology transfers and intellectual property theft.

Chief economic adviser Larry Kudlow acknowledged those challenges in remarks Tuesday morning.

“China’s discussed these things with the U.S. many times down through the years and the results have not been very good,” he said. “So this time around, as I said, I’m hopeful, we’re covering more ground than ever … So we’ll see.”

Complicating the challenge, Trump’s complaints strike at the heart of the Communist Party’s state-led economic model and its plans to elevate China to political and cultural leadership by creating global champions in robotics and other fields.

“It’s impossible for China to cancel its industry policies or major industry and technology development plans,” said economist Cui Fan of the University of International Business and Economics in Beijing.

Trump had tweeted Sunday that China agreed to “reduce and remove” its 40 percent tariff on cars imported from the U.S. Mnuchin said Monday that there was a “specific agreement” on the auto tariffs.

Yet Kudlow said later that there was no “specific agreement” regarding auto trade, though he added, “We expect those tariffs to go to zero.”

___

Associated Press writer Joe McDonald in Beijing contributed to this report.

Liked it? Take a second to support NOQ Report on Patreon!
Continue Reading
Advertisement

Facebook

Twitter

Trending

Copyright © 2018 NOQ Report