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Jonathan Robinson @Robohogs
, 27 tweets, 5 min read Read on Twitter
Ok time to sound off politically. I am not going to take sides. I remain firmly #NeverTrump but also #NeverHillary. So take that into acct.
1. There is a sound basis for Trump’s position on trade. He is going about it incorrectly and he is unlikely to stick with it but .....
2. I do believe Ricardo on trade (somewhat surprised I recalled the theory and its name correctly lol). But without doing advanced reasearch, I suspect it falls apart in a world with multiple players and massive potential excess supply and one very large buyer.
3. It is incontrovertible that China, India and other nations protect their local mkts with protected sectors, high tariffs, non-tariff barriers, etc. Japan has the lowest tariffs out there, but the non-tariff barriers are massive (regs, distribution channels, etc.)
4. And the ag sector is the worst. Everywhere. U.S. Canada. Japan (growing crops where Narita needs another runway - true story). Brazil. Etc.
5. Up to now, there is nothing that controversial I hope except maybe my statement on Ricardian theory falling a bit apart in the real world. Now I will get controversial.
6. The U.S. has generally followed a pretty open trading practice with exceptions (ag, dumping in sectors like steel and semis, airlines, certain financial services). I am sure there are others. I look at this policy as helping the developing world and helping war-torn Europe
7. Some nations have taken advantage. Ones that stick out are Japan in 70/80s, Germany and China. Others are out there but these are the big cases. While EU tariffs are near US levels (saw articles both ways on who is higher - how measured), they protect cars (huge biz).
8. The general deep state/establishment position for both sides is free trade is good with open mkts particularly favored by GOP.
9. That is where the problem lies. No mainstream politician was willing to rock the boat. Only Trump was willing. Again, in a hamfisted manner. And I wish he would be less confrontational about it and only focus on China.
10. But it is likely that the only way to get someone willing to do it was this way sunce no one was willing to rock the boat. Yes, US consumers got great deals BUT U.S. industrial infrastructure was killed to an extent and the distriburive effects were terrible.
11. Playing nice probably also forced a conversion to new industries, esp. in services, where less competition existed. Banking. Investing. TV content. Movie content. Etc. BTW these are still big surplus items for US but all under some attack.
12. And while helping out consumers and other countries might still be best, arguing for doing so (by letting status quo be) really hurt large parts of the country - flyover country, rust belt, etc.
13. Some or most of this was inevitable. But most politicians spoke some words and did nothing much. Clinton even attacked (for other reasons) some industries in which these folks still had jobs (coal - although fracking killed those as much as regs)
14. But these workers see Trump attempting to do something and everyone else attacking him. Dems. Repubs. Investors. Traders. Academicians. Etc. And it cements him. The more opposition, the more likely he is to get elected.
15. But it provides incentives for our trade partners to go around us since Trump also attacking EU and NATO among others. China is trying to go direct with EU. Trans Pacific Partnership. Etc.
16. But China will have a hard time winning if Trump stays the course. China much more dependent on US exports than US depends on exprts to China. Yes consumers will be hurt as will companies and stocks but my guess is US will find new sources quickly.
17. But the big loss is that US companies would lose access to Chinese mkts (maybe) depending on how things evolve (their structures, partners, etc.,regs, rules, etc.).
18. But US economy will be hurt rather minimally even if full war with China while China will quickly run out of things to tariff.
19. China could then do other things though like sell US bonds (Fed could stop its unwind) or stop approving Western mergers (breaks WTO rules I think but US is too).
20. But Fed could help alleviate pain too by slowing rate rises or reversing. Looking at estimates from others, I think just a China fight might cost the US 1% of GDP based on stuff I have read. Wildcard is impact on confidence though.
21. Some raw rough numbers. A 25% tariff against China if no changes were made would cost consumers and businesses $150 billion. Real amount and mix depend on sourcing shifts, pass through amounts, etc. Lost exports harder to quantify. Uncertainty the wildcard as mentioned.
22. These impacts on the economy effect growth once (other than uncertainty) and with stimulus and deregulation overfeeding an aging business cycle might help cool things off except for inflation (but again a one-time shift higher). And biz changes would mitigate all of this.
23. I honestly see no way for either side to win but China has the worst hand given its still export-driven economy. And I do firmly believe China has taken advantage of the ROW under the WTO. Europe I think agrees which is why I wish Trump had just picked China.
24. My ideal would be some face saving agreement for all sides but with US pressing behind the scenes for real change in China. But remember I am establishment guy. This stuff upset me.
25. But there is a sound basis for the fight. It is just unseemly, hamfisted, terribly executed. Kneejerk reaction is to throw up. I do firmly believe $BABA and $BIDU helped to big extent by the unfair practices. (Alipay protected by rules and kept out of $BABA if memory serves).
26. In summation, I do not support this but it could last for a long time unless fast face saver. It will help Trump politically (bad thing). And it will increase economic volatility. But it is not Smoot Hawley. The dereg and tax cuts are more confidence bldg than it is killing
27. The end.
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