Why Trump Can’t Spin the Trade War

transporter

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Why Trump Can’t Spin the Trade War

President Trump has spent the last few days furiously tweeting false claims about who is bearing the cost of his trade war with China. Trump insists— wrongly—that China is paying billions of dollars in tariffs, rather than U.S. consumers and businesses. Nearly every expert, including his top economic adviser, Larry Kudlow, disagrees.
Even Larry Kudlow understands how tariffs work!! That says what a basic concept tariffs are as Kudlow is worthless as an economist...and it shows what little grasp of reality our inept and incompetent president has.

...The reason Trump’s claims resonate so powerfully with certain voters is that they don’t have any personal experience that would cause them to doubt what the president and Fox News are telling them...

The trade war is different. By design, its effects are spread throughout the U.S. economy. A new Goldman Sachs report makes clear that U.S. consumers are shouldering the entirety of the economic burden:

New evidence on the effects of the 2018 tariff rounds from two detailed academic studies points to larger effects on U.S. consumer prices than we had previously estimated, for two reasons. First, the costs of U.S. tariffs have fallen entirely on U.S. businesses and households, with no clear reduction in the prices charged by Chinese exporters. Second, the effects of the tariffs have spilled over noticeably to the prices charged by U.S. producers competing with tariff-affected goods.
Unlike immigration, the Chinese retaliatory tariffs were felt acutely by some of Trump’s most fervent supporters. Take farmers. As I documented last spring, the 30 congressional districts most reliant on soybeans for economic activity all voted for Trump in 2016. Since then, their pain has only intensified. This week, soybean prices fell to the lowest level in 12 years.

But if Trump follows through on his threat to impose a broad new round of tariffs, the number of Americans affected would grow dramatically. The initial wave of $250 billion focused on intermediate or capital goods: the sorts of materials businesses use to make finished products. The next round will focus on $300 billion of consumer goods, everything from iPhones to golf clubs to coffee makers to t-shirts and sweaters. As Bloomberg News put it on Monday, anyone who shops at a mall will become a victim of the trade war. One estimate puts the annual cost at $500 per U.S. family. Collectively, it’s enough of a hit that Goldman Sachs estimates inflation could rise by half a percentage point, while Moody’s Analytics says it could shave 0.8 percentage points of U.S. growth by late next year.

...

But plenty of Trump supporters can see that his trade war is worsening their lot. If he pushes ahead with another $300 billion of tariffs, the number of people who find themselves worse off will grow to include just about everybody. And Trump will have a hard time peddling the notion that China is showering the U.S. with an economic windfall because their own lives will tell them otherwise.
 

Yooper

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The Hill has a nice article on the subject (link): "Trump, China and trade: Who blinks first?"

Worth clicking over and reading the whole piece. But let me post two snips with comments. And one closing comment.


Snip 1:
Many trade experts agree that China has more to lose from a prolonged trade war with the U.S. But Xi is seen by some as playing a weakened hand because of pressure from hard-liners in Beijing who do not want to accept an agreement they believe would force their country to lose face.
Comment 1:
This "lose of face" is a really big deal. It was always a very important dynamic when I dealt with my Chinese counterparts. I suspect the "lose of face" angle is something Trump is working with. The irony is that if Trump relents to give Xi some breathing room the OP will moan and groan that Trump is caving. But if Trump doesn't bend the OP moans Trumps not acting very smart. So let's discount the OP and address how intelligent adults will work through this.

Snip 2:
Pettis said China must transform its economy to reduce reliance on debt, and the trade dispute with the U.S. has complicated those efforts. The longer the standoff with the U.S. drags on, the weaker Xi will appear and the more difficult it will be for him to enact his economic agenda.

“That, in my opinion, is why last week China seems to have given up its more moderate approach to become a lot angrier and tougher,” said Pettis. “This is playing to domestic audiences.”

Trump administration officials expressed frustration that such conditions make it difficult to negotiate with their Chinese counterparts.
Comment 2:
The Chinese are playing with the weaker hand. So it's hope is to string out the deadlock in the hope that Trump "backs down" (at least that will be how it will be played to the Chinese domestic audience) as the 2020 elections are in full swing.

Final comment:
The two countries are playing "tit for tat"; trying to correct the other's behavior (to line up with one's national interests). It will go on until one backs down (and then it moves on to the next phase: how is the back-down spun for domestic and international public consumption?). In other words, Game Theory in action.

--- End of line (MCP)
 
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