Trump Trade War

[Toe]

My company (fortune 100) experienced a sharp drop in stock price recently directly related to steel tariffs.

[gbasden]

Consider the following thought experiment.

I have a country of a 100 people. It's a communist society with the exception of buying pretty rocks. The prices are regulated. GDP is 100% measured by the number of rocks they sell. If they sell 10% more each year, GDP rises 10% every year. No inflation.

Similarly, if the number of rocks are regulated and I increase the money supply by 10% every year, you have 10% inflation. GDP and inflation are not dependent entities.

I'm super ignorant on these matters so this is probably facile, but I'm trying to understand. In this case, if the government prints no more money prices will stay the same? Doesn't this ignore a tremendous amount of external stimuli that affects prices? Couldn't we get price inflation simply because some part of production becomes more expensive?

[noxiousdog]

Consider the following thought experiment.

I have a country of a 100 people. It's a communist society with the exception of buying pretty rocks. The prices are regulated. GDP is 100% measured by the number of rocks they sell. If they sell 10% more each year, GDP rises 10% every year. No inflation.

Similarly, if the number of rocks are regulated and I increase the money supply by 10% every year, you have 10% inflation. GDP and inflation are not dependent entities.

I'm super ignorant on these matters so this is probably facile, but I'm trying to understand. In this case, if the government prints no more money prices will stay the same? Doesn't this ignore a tremendous amount of external stimuli that affects prices? Couldn't we get price inflation simply because some part of production becomes more expensive?

Lots of moving parts here.

First, lots of things can print money and in the case of the US the biggest factor is credit expansion.

example: Banks only have to keep 10% of their deposits. So if I give a bank $1,000, they can lend $900. The money supply just increased by 190%. This is the primary way the Federal Reserve limits money supply. By making borrowing cheaper or more expensive, the banks then will decide to lend/not to lend.

Yes, this ignores a tremendous amount of external stimuli like cost of capital and cost of labor on the production side vs supply and demand on the retail side.

You can't get inflation based on production costs. Dollars are limited in aggregate. I can only spend up to my budget and credit. If food cost $1,000,000/yr, we'd spend 100% of our money on food and starve and beg the rest of the time. It would leave me zero dollars for anything else so their prices would fall towards 0.

These explanations are not to discount economy features that may lead to inflation. Zarathud was not incorrect; he was just addressing something different than what I was attempting to make a point on. They were simply to show that increased GDP doesn't directly affect inflation.

Low (fairly stable) Inflation is a benefit to modern economies. It is far better for your populace (who is typically always in debt) to be paying with cheaper dollars than more expensive ones. However, you don't want high inflation because it decreases investment due to the cost of capital becoming so much higher while the ROI needs to increase due to risk.

[malchior]

You can't get inflation based on production costs. Dollars are limited in aggregate. I can only spend up to my budget and credit. If food cost $1,000,000/yr, we'd spend 100% of our money on food and starve and beg the rest of the time. It would leave me zero dollars for anything else so their prices would fall towards 0.

As mentioned before, you are still pushing an 'archaic' notion of inflation. Inflation in modern discussions almost always refers to the change in the costs of goods and services. That is how the US Government reports it anyway. Or how the billion prices project measures inflation -- which typically lines up pretty well to the official US Government numbers.

These explanations are not to discount economy features that may lead to inflation. Zarathud was not incorrect; he was just addressing something different than what I was attempting to make a point on. They were simply to show that increased GDP doesn't directly affect inflation.

This statement is generally incorrect. If GDP rises at a faster pace, then inflation as currently defined tends to rise with it. When the economy slowed down after the crisis in 2008, inflation followed GDP. In fact, deflation became a huge problem even as the Government was dropping money from the sky trying to stop it. Another case of this was in the late 90s when Japan had famous bouts of deflation even with the printing press running flat out at the Japanese Central Bank.

Edit: (Removed long winded example because it was too hard to follow) - Simpler example - the better way to think about it is in the context of aggregate demand. If aggregate demand in the economy outpaces the ability of the economy to meet that demand then there will be more inflation. Inflation more or less now indicates a deviation from the trend of 'sustainable growth' in the economy. So GDP growth above the sustainable rate (whatever it is in reality) will tend to drive inflation. It reflects that purchasing power decreases because the ability of the economy to supply aggregate goods can't keep up.

[noxiousdog]

You can't get inflation based on production costs. Dollars are limited in aggregate. I can only spend up to my budget and credit. If food cost $1,000,000/yr, we'd spend 100% of our money on food and starve and beg the rest of the time. It would leave me zero dollars for anything else so their prices would fall towards 0.

As mentioned before, you are still pushing an 'archaic' notion of inflation. Inflation in modern discussions almost always refers to the change in the costs of goods and services. That is how the US Government reports it anyway. Or how the billion prices project measures inflation -- which typically lines up pretty well to the official US Government numbers.

Of course. That's how you measure it. The question is why do the prices rise in aggregate? It's because in aggregate people have more dollars to spend. There can be a lot of causes for that.

These explanations are not to discount economy features that may lead to inflation. Zarathud was not incorrect; he was just addressing something different than what I was attempting to make a point on. They were simply to show that increased GDP doesn't directly affect inflation.

This statement is generally incorrect. If GDP rises at a faster pace, then inflation as currently defined tends to rise with it. When the economy slowed down after the crisis in 2008, inflation followed GDP. In fact, deflation became a huge problem even as the Government was dropping money from the sky trying to stop it. Another case of this was in the late 90s when Japan had famous bouts of deflation even with the printing press running flat out at the Japanese Central Bank.

Obviously they are related. They have similar inputs. But GDP isn't a cause. GDP is a way to measure all the buying and selling. Inflation is a way to measure how much the price of those things rises or falls.

re Japan: The printing press can run all it wants. If nobody is taking the money, you won't have any inflation. Wages and credit didn't expand so there was no inflation.

Edit: (Removed long winded example because it was too hard to follow) - Simpler example - the better way to think about it is in the context of aggregate demand. If aggregate demand in the economy outpaces the ability of the economy to meet that demand then there will be more inflation. Inflation more or less now indicates a deviation from the trend of 'sustainable growth' in the economy. So GDP growth above the sustainable rate (whatever it is in reality) will tend to drive inflation. It reflects that purchasing power decreases because the ability of the economy to supply aggregate goods can't keep up.

I think this is mostly correct except you don't measure the "ability of the economy to supply aggregate goods" as GDP or GDP growth. GDP is the total value of all of those goods sold at production. In essence inflation is a component of GDP (which is why it's subtracted out during reporting).

I would recommend this document by the Bureau of Economic Analysis.

[malchior]

You can't get inflation based on production costs. Dollars are limited in aggregate. I can only spend up to my budget and credit. If food cost $1,000,000/yr, we'd spend 100% of our money on food and starve and beg the rest of the time. It would leave me zero dollars for anything else so their prices would fall towards 0.

As mentioned before, you are still pushing an 'archaic' notion of inflation. Inflation in modern discussions almost always refers to the change in the costs of goods and services. That is how the US Government reports it anyway. Or how the billion prices project measures inflation -- which typically lines up pretty well to the official US Government numbers.

Of course. That's how you measure it. The question is why do the prices rise in aggregate? It's because in aggregate people have more dollars to spend. There can be a lot of causes for that.

I'd still argue that the prices rise because there is more demand than supply (or inputs went up in price but that is again supply/demand). The AD-AS model covers this. If customers expect inflation to increase then they'll purchase now leading to an increase of AD and prices will go higher (a self-fulfilling prophecy). And sure there has to be more 'money' in the sense that it has to be paid for but often times that is just credit. Offered by companies hundreds of thousands of times a day to their customers. The increase in credit and money supply often follows the market. Not the other way around. In other words, there is a built-in expectation of inflation.

Obviously they are related. They have similar inputs. But GDP isn't a cause. GDP is a way to measure all the buying and selling. Inflation is a way to measure how much the price of those things rises or falls.

Right - I said followed it specifically for this reason. I went back and re-read and incorrectly thought you were arguing they weren't linked at all.

re Japan: The printing press can run all it wants. If nobody is taking the money, you won't have any inflation. Wages and credit didn't expand so there was no inflation.

Right. I don't think we are truly disagreeing. What you seem to be describing is the lack of aggregate demand in the economy. Growth was lagging the increase in productive capacity. They automated too much, their birthrate fell, wages got stagnant, then got into a liquidity trap and couldn't print their way out no matter what. They needed to basically throw out the notion that there'd be a cap on inflation. They still haven't acted 'irresponsibly' in that sense and haven't been able to break out of the trap. The US did so and we got out of ours following the events in 2008.

I think this is mostly correct except you don't measure the "ability of the economy to supply aggregate goods" as GDP or GDP growth. GDP is the total value of all of those goods sold at production. In essence inflation is a component of GDP (which is why it's subtracted out during reporting).

I would recommend this document by the Bureau of Economic Analysis.

Again - don't think this is disagreeing. I was just talking about the inbalance between aggregate demand and aggregate supply causing inflationary pressures.

[Zarathud]

Inflationary pressure increases in a growing economy as the money is constantly turned over to buy something, rather than hoarded or invested in a bubble. High demand means constant economic activity, which drives up prices.

[Holman]

Our Trade Deal with China is moving along nicely, but in the end we will probably have to use a different structure in that this will be too hard to get done and to verify results after completion.

This literally says "Our trade deal is totally on track and will never work."

[Carpet_pissr]

Our Trade Deal with China is moving along nicely, but in the end we will probably have to use a different structure in that this will be too hard to get done and to verify results after completion.

This literally says "Our trade deal is totally on track and will never work."

Apparently 12,200 people love bullshit a good contradiction.

[em2nought]

China just slashed their tariff on pretty rocks. I'm surprised the fake news headlines don't read

Tariff reduction, as small as Trump's hands, will help descendants of Nazis at BMW

https://www.npr.org/2018/05/22/61337391 ... s-with-u-s

[Vorret]

Whelp newer tariffs on Steel and Aluminium

[Captain Caveman]

Whelp newer tariffs on Steel and Aluminium

Placed on allies Canada, Mexico, and the EU.

This should go over well.

[Isgrimnur]

USA Today

Commerce Secretary Wilbur Ross said that Canada, Mexico and the European Union would be subject to a 25% tariff on steel and a 10% tariff on aluminum beginning at midnight. Brazil, Argentina and Australia agreed to limit steel exports to the U.S. to avoid tariffs, Ross said.
...
The move also promoted criticism from at least one farm state Republican, Nebraska Sen. Ben Sasse.

“This is dumb," Sasse said. "Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents."

The decision comes days after the Trump administration announced $50 billion of new tariffs on Chinese imports, after officials had earlier said it was "putting the trade war on hold" with Beijing. Ross told reporters Thursday that he still expects to travel to China to continue trade talks this weekend.
...
Trump last week ordered officials to investigate whether auto tariffs are also required to maintain national security, a move largely seen as a negotiating tactic amid U.S. talks with Canada and Mexico over the drafting of a new North American Free Trade Agreement.

The U.S. imported 34.6 million metric tons of steel last year, a 15 percent increase from 2016, according to the U.S. Department of Commerce. Canada is the largest exporter of steel to the U.S., followed by Brazil, South Korea and Mexico.

[gilraen]

Placed on allies Canada, Mexico, and the EU.

This should go over well.

Ya think?

Mexico responds with tariffs of their own

EU to impose measures against U.S. tariffs "in the coming hours"

Canadian Foreign Affairs minister pledges retaliation

[Holman]

Whelp newer tariffs on Steel and Aluminium

Placed on allies Canada, Mexico, and the EU.

This should go over well.

A few trademarks for Ivanka could make this all go away. You'd think they'd know that by now.

[Sepiche]

A few trademarks for Ivanka could make this all go away. You'd think they'd know that by now.

That is exactly what this tariff BS is all about. It riles up his base and makes them think he's actually doing something, but more importantly it gives Drumpf leverage with which he can blackmail these countries into lining his pockets.

China is happy to play ball and give Drumpf what he wants which is why, despite all the rhetoric directed their way, no tariffs. Canada and the EU aren't willing to pay Drumpf off, so... tariffs.

[Fitzy]

The move also promoted criticism from at least one farm state Republican, Nebraska Sen. Ben Sasse.

“This is dumb," Sasse said. "Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents."

I am thankful that Congress didn't abdicate their constitutional duty to impose tariffs and regulate international trade.

[El Guapo]

The move also promoted criticism from at least one farm state Republican, Nebraska Sen. Ben Sasse.

“This is dumb," Sasse said. "Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents."

I am thankful that Congress didn't abdicate their constitutional duty to impose tariffs and regulate international trade.

I am sure that Trump is deeply concerned that Sasse is whining.

[Isgrimnur]

The move also promoted criticism from at least one farm state Republican, Nebraska Sen. Ben Sasse.

“This is dumb," Sasse said. "Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents."

I am thankful that Congress didn't abdicate their constitutional duty to impose tariffs and regulate international trade.

It’s not that important. Not like the power to wage war or anything.

[Fitzy]

Thank god for heroes like Congressman Devin Nunes who are demanding that Congress use their Constitutional oversight powers to protect innocent and powerless people like President Trump.

[Pyperkub]

Placed on allies Canada, Mexico, and the EU.

This should go over well.

Ya think?

Mexico responds with tariffs of their own

EU to impose measures against U.S. tariffs "in the coming hours"

Canadian Foreign Affairs minister pledges retaliation

such much winning by going to war with our allies.

[Daehawk]

Trump wants to ban German luxury cars now.

Seeing as 800k of them are made here that could be problematic.

[LordMortis]

Trump wants to ban German luxury cars now.

Seeing as 800k of them are made here that could be problematic.

Details! Details!

All I know is I bought into a global stock index based on dividend, rather than growth (ie mainly production and manufactuing) and it's been shitting the bed for the last two weeks, so I'm blaming Trump. I have no fact to back this blame. But I'm doing it anyway

[El Guapo]

Placed on allies Canada, Mexico, and the EU.

This should go over well.

Ya think?

Mexico responds with tariffs of their own

EU to impose measures against U.S. tariffs "in the coming hours"

Canadian Foreign Affairs minister pledges retaliation

such much winning by going to war with our allies.

They're our allies, not Trump's allies.

[Carpet_pissr]

Poor Sasse, look what has become of your party. Given the “new Republicanism” under Trump, there are quite a few Sasse’s out there who should probably consider switching parties.

I actually want to read his relatively recent book as well, but my library doesn’t have it yet.

[El Guapo]

Poor Sasse, look what has become of your party. Given the “new Republicanism” under Trump, there are quite a few Sasse’s out there who should probably consider switching parties.

I actually want to read his relatively recent book as well, but my library doesn’t have it yet.

As long as he's abetting Trump's tyranny - and he is, notwithstanding his complaining about it - I don't really care much what he has to say.

[pr0ner]

[Grifman]

Trump's trade "war" reveals that he's not much of a "general" when it comes to strategy. You perhaps can wage a trade war on a country or two, but Trump's fighting a bunch of countries. The problem with his strategy is that the pain he in inflicting is hitting an individual country on a single or just a few products. But because multiple countries are are firing back all at the US, so multiple products are being hit. We end up bearing more pain as a country than any of the individual countries we are hitting with tariffs. He's initiated the equivalent of a multiple front war and we know how those turn out - ask Germany. This is just not a well thought out plan, but no surprise there.

[Isgrimnur]

[Holman]

It's worth noting that Putin had several goals in seeing Trump elected. One was to get sanctions dropped, but this has been made more difficult because people noticed the Trump-Russia connection.

Another, though, was to put the US on an erratic insular course that could split it from its European allies.

Mission accomplished.

[LordMortis]

It's worth noting that Putin had several goals in seeing Trump elected. One was to get sanctions dropped, but this has been made more difficult because people noticed the Trump-Russia connection.

Another, though, was to put the US on an erratic insular course that could split it from its European allies.

Mission accomplished.

I read an interesting piece that posited Putin's goal win or lose was to demonstrate the US was no better and no better off than Russia.

https://www.theatlantic.com/magazine/ar ... me/546548/

The original aim was to embarrass and damage Hillary Clinton, to sow dissension, and to show that American democracy is just as corrupt as Russia’s, if not worse. “No one believed in Trump, not even a little bit,” Soldatov says. “It was a series of tactical operations. At each moment, the people who were doing this were filled with excitement over how well it was going, and that success pushed them to go even further.”

“A lot of what they’ve done was very opportunistic,” says Dmitri Alperovitch, the Russian-born co-founder of the cybersecurity firm CrowdStrike, which first discovered the Russian interference after the company was hired to investigate the hack of the Democratic National Committee servers in May 2016. “They cast a wide net without knowing in advance what the benefit might be.” The Russian hackers were very skilled, Alperovitch says, but “we shouldn’t try to make them out to be eight feet tall” and able to “elect whomever they want. They tried in Ukraine, and it didn’t work.” Nor did it work in the French elections of 2017.

It's no more truth than any of the conservative hogwash editorials being passed as it were just the facts news but it's interesting just the same.

[Holman]

Putin's defense of autocracy at home is that western democracy is a lie: votes are rigged, media is manipulated, and there is no such thing as a true challenge to the ruling elites, so Russians are lucky that their rulers truly love the Russian people. He's very open in this presentation domestically, and it's all about quelling aspirations towards Euro-American accountability in government.

Trump is giving him everything he wants.

[Kraken]

Putin's defense of autocracy at home is that western democracy is a lie: votes are rigged, media is manipulated, and there is no such thing as a true challenge to the ruling elites, so Russians are lucky that their rulers truly love the Russian people. He's very open in this presentation domestically, and it's all about quelling aspirations towards Euro-American accountability in government.

Trump is giving him everything he wants.

Yeah, I read a piece last week arguing that the European countries are so weak diplomatically that their first impulse is to cozy up to Russia -- much of the friction there having arisen at the behest of the US in the first place. After 70 years of outsourcing their relations with powers outside of their bloc, European diplomatic corps are geared to focus on relationships with one another. Apart from those intra-European connections, their foreign policy has for decades consisted mainly of backing American sanctions (or not) and sending troops to American wars (or not). Even if we manage to fix our Trump problem in the near term, the historic trust and dependency are over, and unlikely to ever be restored.

[Holman]

The only workable utopia I can imagine is a Euro-American Social Democratic bloc. That's how you get the United Federation of Planets. Everything else is 1984 or The Handmaid's Tale or Mad Max.

Sure, that's all science fiction. But I have kids, so I've given hostages to the future. The future fucking matters.

[LordMortis]

Even if we manage to fix our Trump problem in the near term, the historic trust and dependency are over, and unlikely to ever be restored.

And we're watching it in real time watching every "God let me be wrong" prediction come true in real time.

[hepcat]

I think you’re underestimating the sense of relief every other country but Russia will have when we come to our senses and get rid of the orange narcissist. Obama built up enough trust with our allies...even with the Wikileaks reveals...that we’ll be fine. Well, most of us will. Folks like em2 will go into conspiracy theory overdrive. But that was gonna happen no matter what.

[malchior]

I think you’re underestimating the sense of relief every other country but Russia will have when we come to our senses and get rid of the orange narcissist. Obama built up enough trust with our allies...even with the Wikileaks reveals...that we’ll be fine. Well, most of us will. Folks like em2 will go into conspiracy theory overdrive. But that was gonna happen no matter what.

I wish this was true but it won't happen. We elected someone who should have been impossible to elect. He is antithetical to almost every policy position we've held. No one will take that chance again. On top, China is going to be flexing more and more and our partners will have to live with that reality too. The American experiment is pretty much over as *the* world leader. We'll remain a dominant world power but not even close to what we were used to.

[hepcat]

Folks said the same thing with Bush. We’ll recover. Of course, the world will still make jokes about how dumb we were to elect a reality tv star as our leader. But it will pass.

[Pyperkub]

Folks said the same thing with Bush. We’ll recover. Of course, the world will still make jokes about how dumb we were to elect a reality tv star as our leader. But it will pass.

But it keeps getting worse.

[hepcat]

Again, people said the same thing under Bush. I’m not trying to compare the two because Bush was an adult. But I don’t think we’re seeing the death of our democracy.

Personally, I think we’re just seeing the country learning the hard way that putting our faith in celebrities instead of actual people with a brain is just stupid.