Thursday, October 4, 2018

Trump's Overall Policies: Mosty on Very Shaky Ground With Quicksand Foundation

Mr. President: Check nearest mirror for source of your woes

Re: From the TLC (Liar-in-Chief) – guess who that refers to – one guess – one answer here:

Introduction:  The Trump overall policies are weak and apt to crumble anytime now, e.g., those awful trade tariffs, Trump cancelling treaties left and right that he believes will make us “great again” (even alone on the world stage and up shit creek losing allies quickly), and recently projections of gas prices creeping up again and now approaching $4.00/gal. My assessment at this point, Trump’s policy sits on quicksand.

This short reminder from the Guardian (UK) that makes the same point: But while the Trump administration has strengthened the US economy’s long-term growth potential in some ways, the other side of the ledger is rather grim.

For starters, a wide range of studies – from the work of the late economist David Landes to more recent research by MIT’s Daron Acemoglu and the University of Chicago’s James A Robinson – find that institutions and political culture are the single most important determinants of long-term growth. Recovery from the damage Trump is inflicting on institutions and political culture in the US may take years; if so, the economic costs could be considerable.  

Related from here (Forbes.com): The unmistakable substance of the Administration’s economic policy—echoing of course, Trump’s slogan of “Make America Great Again” — is one of both significant protectionism and castigating those outside of the United States as the primary source of any woes evident in the domestic economy.  

It’s fundamentally counterproductive for Trump to ignore that there is in fact plenty of blame to be had at home if he truly wants to achieve his stated objectives.  

And, finger-pointing at foreigners, no matter how well it might sell at rallies or on television, distracts attention from where it needs to be focused.

President Trump’s biggest political win, so far, is the tax-cut legislation he signed into law late last year. But Trump is now taking action that is essentially a tax hike on American consumers, and will offset a portion of the tax cuts he has been crowing about for nine months. And in typical renegade fashion, Trump is dismissing political orthodoxy by daring to hit voters with new taxes just weeks before a crucial election.

Trump is now poised to declare a 10% tariff on an additional $200 billion worth of Chinese imports, in addition to a 25% tariff on $50 billion worth of Chinese imports he imposed during the summer. So by Election Day in November, Trump will have placed new tariffs on $250 billion worth of stuff Americans buy every day.

A tariff is a tax collected when imported goods enter the country. It raises the cost of the good by the amount of the tariff.

So a 10% tariff on a $100 product would raise its cost to $110. Producers typically try to pass the added cost onto consumers, and as the cost of certain imported goods rises, the cost of similar products not subject to tariffs can also rise, since there’s less competitive pressure pushing prices down.

The new tariffs will raise the cost of thousands of everyday items, including electronics, appliances, bicycles, tires, toys, clothing and footwear. Based on last year’s level of imports, the new China tariffs amount to a tax hike of $32.5 billion per year. The Trump tax cuts, by contrast, lowered tax payments by about $130 billion per year. So by this simple math, the China tariffs would offset about one-fourth of the Trump tax cuts, if they stayed in place permanently.

Trump says that won’t happen. Tariffs, in his strategy, are a way of gaining leverage in negotiations meant to cement trade deals more favorable to the United States. Trump has said he wants a lower U.S. trade deficit with China, and better opportunities for American firms operating in China. Once there’s a deal with China, he’ll rescind the tariffs.

Except no deal is falling into place, creating what increasingly looks like an open-ended trade war destabilizing to both sides. Larry Kudlow, Trump’s top economic adviser, said: “We are ready to negotiate and talk with China any time that they are ready for serious and substantive negotiations.” 

Chinese officials say basically the same thing. Yet talks have obviously gotten nowhere, and there’s no sign of a breakthrough any time soon.

Trump seems to think his trade fight is hurting China more than it’s hurting the United States, which will ultimately give him a victory. He’s partly right. The Shanghai stock index is down 21% this year, for instance, and it just hit the lowest level since 2014.

The S&P 500, by contrast, is up nearly 7% and close to new record highs. But that doesn’t mean Trump will win. China shows no signs of capitulating, and it’s not even clear they know how to appease Trump, were they willing to do that.

From analyst, Tom Block at Fundstrat, who wrote in a recent note to his clients: “The President’s experience with negotiations is centered on real estate where if you don’t get the property, you move on to another property deal. The trade war with China is more complex, and an exit strategy may not be as simple as looking for another location for a casino or golf course.”

My 2 cents: All this underscores my contention that the overall Trump policy agenda platform is on quicksand – all the evidence points to that nearly every day.

Additionally, the way Trump’s father “trained him” as the NY TIMES exposé clearly shows indicates that Trump will not nor is apt to change his ways. Time will tell on that assessment – but all indicators point that way.

Thanks for stopping by.

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