Parameters: Steel And Aluminum Tariffs Are Not Isolated - They Are Tied To Trading Of Other Vital Goods

Source: The Times In Plain English

The world trading process can be thought of as a giant machine with many moving parts.  At times, different parts take on greater importance.  Although, in total, each part is tied to one another.  Why do I state the obvious?  The recent move (or proposal) by the Trump Administration stands to verify the obvious -- that 'traded goods' are tied to one another.  Meaning, if one traded good (such as steel) is shifted in value (by adding a tariff), then the overall machine changes to accommodate the overall shift.

Traded Goods Are Connected

Global free trade is good for the world despite what In a sense, exports and imports between various countries in the world are 'connected' together.  This was made apparent in an e-mail that I received yesterday from 'Politico Agriculture' stating the following regarding trade:

TRUMP DIGS IN ON STEEL, ALUMINUM TARIFFS: Leaders of both the House and Senate have criticized President Donald Trump's plan to slap tariffs on steel and aluminum imports, with Senate Majority Leader Mitch McConnell making his first public comments on the proposal on Tuesday. The Kentucky Republican said that lawmakers are telling the administration the action could "metastasize into a larger trade war," POLITICO's Nolan McCaskill reported.

House Speaker Paul Ryan has also personally warned Trump about the economic dangers and potential political backlash. And Sen. Orrin Hatch suggested that the trade restrictions would be a tax on American consumers and businesses while detracting from the breakthrough of recent tax cuts.

But GOP lawmakers don't appear to be changing the president's mind on imposing tariffs of 25 percent on steel imports and 10 percent on aluminum. Trump, during a press conference on Tuesday with Swedish Prime Minister Stefan Lofven, doubled down on his plan - even saying the tariffs will be applied in a "loving way," though he didn't expand on the meaning of that statement.

The president added that action was needed to address the "very unfair trade situation" between the United States and other countries, and he singled out the European Union as an example.

EU promises to target wide range of ag products: Our colleagues at POLITICO Europe obtained a four-page list of American imports that the EU is set to hit with duties of 25 percent to retaliate against Trump's tariffs, totaling nearly $3.5 billion worth of goods. The trading bloc would go after imports of corn, rice, cranberries, peanut butter, orange juice, kidney beans, bourbon whiskey and tobacco - valued at about $1.2 billion.

Groups unite to try to fight efforts: Agriculture and business groups were on Capitol Hill on Tuesday to lobby against Trump's pending tariff actions. The effort was led by the National Foreign Trade Council, which announced the formation of a new coalition of more than 30 groups that oppose tariffs on steel and aluminum imports, including those representing export-dependent industries and users of the two materials. A range of farm groups are involved, including the American Soybean Association, Beer Institute, Grocery Manufacturers Association, National Council of Farmer Cooperatives, National Pork Producers Council and U.S. Wheat Associates. Members will meet with the Senate Finance Committee today.

GMA Spokesman Roger Lowe said in a statement to POLITICO that the organization is continually meeting with members of Congress to explain how the president's proposed tariffs "will act as a regressive tax on food, beverage and consumer products, driving up costs for American families and mitigating economic momentum our industry is beginning to realize via tax reform." GMA and those lawmakers are encouraging the administration to take a "more balanced approach," Lowe said.

Wow! Before this announcement - a small percent of voters were concerned about our position as a nation in a world where global free trade has resulted in an imbalance where the U.S. pays more than other countries to keep the global trade business flowing.  Remember though, that the U.S. is the largest democracy aside from being the most developed and financially dominant country in the world.  We benefit the most in total.



While at the same time, global free trade has created a 'connected world' where "trusts" are built by preserving trade routes and norms between nations.  If we make an adjustment in the 'trade machine' - a shift will be caused which will jeopardize that "trust" if not erode any confidence in future trading mechanisms going forward from here.  What does this mean?



The result is that now all of those 'trade agreements' will have to be re-negotiated - which will be costly and take years and in the interim create instability in the global trade system.

Don't Believe Me

In a short video on 'CNN' anchor Andersen Cooper discusses with prior White House employees the results of imposing a 25% trade tariff on Steel and Aluminum which lasts 8 minutes in length:

If the video is not enough, the 'National Foreign Trade Council' has information on their web page regarding the decision to impose tariffs on steel and aluminum along with the overall dynamics (consequences) shown below:

The Alliance, whose membership includes over 30 sectoral associations representing a vast cross-section of American manufacturers and farmers, will meet with members of Congress and the Administration to express their concern about the downstream effects of the proposed tariffs on imports of steel and aluminum announced by President Trump last week and the potential for foreign retaliation against the President's action.

"Our alliance represents some of the most competitive industries in the U.S. economy, and we are deeply concerned about the effects that these tariffs will have on industries and companies that use steel and aluminum," said Rufus Yerxa, President of the National Foreign Trade Council. "We are also concerned about the retaliation against America's most competitive exporters. This ‘double whammy' of higher prices to our domestic producers and retaliation against our exporters will endanger tens of thousands of quality American jobs."

In a policy paper also released today, the Alliance outlined the member's concerns regarding the proposed tariffs, including the following:

1) Damage to downstream users and American consumers;

2) Damage to U.S. exports; and

3) Damage to U.S. economic growth.

With the clear implications laid out above from the National Foreign Trade Council, one would think that any position counter to that message would be considered ludicrous.  An article appeared in 'The New York Times' on Sunday titled "Trade War Prospect Shakes Part of Trump Base: Midwest Farmers" with the following thoughts from a soybean farmer from the Midwest:

“The ag economy is not very good right now — fragile is the polite word for it,” Mr. Gould said.

His wife, Sandy, across the table, jumped in: “It’s in the tank is what he means.”

Mr. Gould continued, “So then when you go to great lengths to upset some of your key customers, there’s reason for concern.”

Three out of every five rows of soybeans planted in the United States find their way out of the country; half of those, valued at $14 billion in 2016, go to China alone. Mr. Gould estimates that 90 percent of his soybeans are exported, and 70 percent of his corn, so what he calls Mr. Trump’s “trade antics” — particularly his criticisms of Nafta — nag at him.

“It’s not only what happens today, but it’s the reputation of becoming an unreliable supplier,” he said.

Still, he’s not sure what will happen next, and he thinks that many farmers who supported the president are not yet ready to abandon him. “I think they’re going to wait and see how this thing plays out,” he said.

The message is clear.  Trade exports from the United States will definitely be impacted by the recent tariffs on steel and aluminum by the Trump Administration.  The question is just "how much will those tariffs be in the end to counter Trump's tariff."

Conclusion...

With the excerpts above in mind, I am astounded that the farmers are still hanging on to a 'sinking ship.'  That 'sinking ship' is the tariffs implemented by the Trump Administration.  The following actions put forth by the current Administration lead me to think critically about the following questions about the 'consequences' of tariffs:


When will the public get the message?  When the price of cars increase?  


When the cost of produce increases?  


Will consumers be able to tie the two 'connected' commodities together?  


These are important questions to consider.  The answers will become apparent in the future of consumers choices and opinions.  Further, the next time that the 'voting' polls are open, the consequences will be apparent as well.




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