If US tariffs do no good, neither will retaliatory ones
If tariffs on exports to the US do no good for Americans, then neither will tariff-shaped countermeasures imposed in Europe or elsewhere.
I like to read books. I don’t own a Kindle. Many of us, however, myself included, read our newspapers on-screen and thus it is that most of the investment banks’ research is also consumed on phones, tablets, laptops and desktops. Were it not so, then I could, as I used to, muse on how many thousands of trees would have had to be felled in order to produce the millions of pages of output filled with speculation on what President Trump will say when he speaks this evening from the White House’s Rose Garden and announces his plans for placing tariffs on exports to the USA.
Fact is that most of those trees would have died in vain and the paper wasted because we still have no clue, let alone a clear idea, of what he has in mind. More to the point, the implications going forward of what tonight’s announcements might be are just as unknown.
We think we know what the outcome of the Smoot-Hawley Tariff Act of 1930 was, although there remain many unresolved points as to whether the harsh imposition of tariffs on especially agricultural produce caused or only vitiated the impending recession that morphed into the Great Depression.
I was born less than 25 years after the Great Depression and there was of course FDR’s New Deal and a World War in between but I still remember as a kid watching film clips of wheat being shovelled into the fire boxes of steam engines for fuel as there was I suppose no other meaningful way of disposing of it.
A further half a century and a bit later, I suppose I must ask myself whether that was only done for the camera but either way it does remind us that disrupting international trade flows and trying to rebalance America’s as well as the world´s economy will be very painful. In some part more than in others, but nobody will remain unaffected. And how many positives will be drawn by Joe and Megan SixPack in middle America is also questionable.
What awaits as threatened retaliatory tariffs is even more unknown for it will not be until the powers that be see what grenades President Trump tosses into what ponds that a meaningful response can be tailored, although it is obvious that if tariffs on exports to the USA do no good for Americans, then neither will tariff-shaped countermeasures imposed in Europe or elsewhere.
I was by a fellow Teenage Scribbler given a clear and logical explanation of why America has been shortchanged by global trade rules and why it should have the right to pull the plug on some of them but, as I noted in yesterday’s comment, if you go fishing with hand grenades you can’t decide which fish are to die and which are to live. MAGA has no cares for collateral damage.
The original line was that, when General Motors sneezes, America catches a cold. That has become, more recently, that when America sneezes, the rest of the world catches the cold. Although the US share of global GDP is currently somewhere in the middle of the long-term range of between 20% and 30%, might it not be possible that if the rest of the world sneezes it might be America itself that ends up catching it?
Back in the 1990s, I worked for the Canadian firm of Wood Gundy, then recently acquired by CIBC, the Canadian Imperial Bank of Commerce. Hanging on the side of my desk I had a 1944 British WW II steel helmet, one of the ones that was shaped like a soup plate. When something disruptive happened in markets – I was there during the period of the Iraqi seizure of Kuwait and the ensuing First Gulf War – I would cry “Hard hats!” and put it on. After three of four times that joke was done, and I gifted it to one of the back-office guys who claimed to be a collector.
If I still had it, the first 24 hours after Trump has spoken might prove not to have been a bad time to still own it. We shall have to wait and see.
