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https://twitter.com/Trinhnomics/status/1429979194314792961

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Trinh

@Trinhnomics

Apr 15

Let's talk about Trump tariffs. They are up, it's a question of whether how much, to whom, which sector rather than whether.

I want to clarify a simple fact that needs to be nailed home - trade and investment go together. Tariffs are a friction to trade & if you just take the idea that tariffs are going up (we'll discuss soon the details) then INVESTMENT IS GOING TO BE RESHUFFLED.

Half of global FDI is US driven. Global investment will be reshuffled. Okay, let's talk about first w/ who is LEAST TARGETED & we got to who is MOST.

Trump trade authorities come from 3 sources:
1) International Emergency Economics Power Act (IEEPA) to give the president the power to declare a national emergency & impose tariffs.

He did this w/ fentanyl for Mexico & Canada + Reciprocal tariffs.

2) Section 232 Tariffs that basically gives the Secretary of Commerce (Lutnick) the power to do a COMPREHENSIVE investitations to determine sectors that undermine US national security

3) Section 301 Tariffs - Basically to target a specific country, this one is a China tariff one and the power goes under USTR.

If power is given to the president and one can say whether he's abusing power or not or there's too much power concentrated in one (designed as such to address areas that Congress is too slow), can it be taken away?

Yes, but not by the Supreme Court because it would say that this is a political issue & to be solved politically.

So it would take Congress. But while there is something going on, this is very unlikely. Congress is too, well, I don't mean to say anything negative but you know what Mark Twain said about Congress, to deal with this.

So we are stuck w/ tariffs & unless tariffs call the house to fall down, tariffs are here.

Let's talk then big picture vs going down on Trump cards/flip flip because I think the chaos is by design & not an accident.

Okay, who hasn't been tariffed? Mexico and Canada but specifically only USMCA content.

Read 15 tweets

Trinh

@Trinhnomics

Apr 14

The questions is what is Trump's team plan for getting these materials for the US now that we are on track for a Cold War.

If globalization didn't consider the strategic aspect of production, as in offshored so much that you no longer have what you need for production and blind faith in a globalized worth that has few if not just 1 supplier, then what is the game plan for deglobalization?

Interestingly:

a) Japanese companies have more than a year of supply as they experienced this with China in 2010 when China used rare-earth as leverage in geopolitics;
b) American companies have LITTLE OR NO INVENTORY;
c) The only US mine - Mountain Pass - not commercially viable until end of the year.

So I guess they will have to buy it via third market that will mark this stuff up. Tariff arbitrage is a new industry.

Btw, the export controls aren't just for the US - they are tightening it for any country, including Japan and Germany.

So China is also weaponizing its supply chain chokehold for the global economy. The question is what is everyone doing about it to break it.

Read 4 tweets

Trinh

@Trinhnomics

Apr 11

Made in China is essentially done in the US if tariffs stay where they are. For final goods, it's just a one-off shift in price & transitory. That to me is so shocking if you think about it.

But what about intermediates? That's about half of total imports. Because it impacts production in the US and will cause supply shocks & won't be transitory.

Trump Team on Reciprocal Tariff Day or "Building Leverage Day" or playing all his cards at once:

I'll smack everyone with tariffs because I am #1 in importing. If you have a trade deficit, you get a tariff.

Actually, on second thought, I'll also tariff my net customer Australia who buys more from us and has zero tariff.

Take that! How do you like Liberation Day!!! Winning.

Everyone is shocked, sad that the #1 customer of merchandise trade (btw, the US has NET SURPLUS IN SERVICES, which means it rips everyone off in services but oh well) decided to punish so most just laid low & hope for the best.

China retaliated.

What is interesting is that most haven't played their cards because they don't want to. They want to continue to sell. But if they are pushed to not sell, well, they will think of what "leverage" do they have.

Let's think. Using Trump's Team logic, let's name a few leverage others have:

US SURPLUS IN SERVICES - that's the EU strategy in case talks fail to knee cap US tech. But it's not in the EU interest to do this but they will do it if they feel they are pushed.

Read 10 tweets

Trinh

@Trinhnomics

Apr 3

This is a thread on Trump's latest barrage of tariffs:
1) What are they?
2) Who is most impacted?
3) And what are the Asian economies going to do about it, short-term and medium term?

@sharp_writing
asia.nikkei.com/Opinion/Vietna…

Trump reciprocal tariffs are not about "cheating" and differential in "tariff rates" or "non-tariff" barriers. They are simply benchmarked using outcome & calculation using bilateral trade balance divided by US exports divided by 2. Yep, basically, trade balance. So?
a) Everyone gets 10% at the minimum - so Australia, which has a trade-surplus and an ally, whelp, gets 10%; Trump team high-fiving each other on this win.
b) And then there's the mid range of 20s - Yes, Japan + Malaysia, South Korea and India. SK is supposedly having an FTA with the US or free-trade and there's no tariff barrier between the two but you know, who cares, let's slap this one because they somehow "cheat" and "rip us off" because, well, we import Korean stuff like cars and ships and makeup.
c) Indonesia, Taiwan and Thailand get slapped with 30s ish level and it doesn't really make sense but whatever. Oh, interestingly, semiconductor is exempt, which is like more than 50% of Taiwan's export to the US so I mean, why be so mean unless they are exempting it to tax later.
d) China gets 54% or actually part of the 30s - 34% to be precise and with 20% that means it's 54% and not sure if this is on top of what other tariffs. Anyway, we know they are hawkish on China so Vietnam is interesting because, little Vietnam has been a good trade partner but gets slapped anyway with 46%. Yep, 46%.

Link to research:
research.natixis.com/Site/en/public…

So remember that they just want to come across to the home base pretty hawkish and so if you read their tariff levels for some countries, it doesn't make sense. But the base loves it. Make America Great Again.

Poor Bangladesh, Cambodia, Laos, and Myanmar all get pretty high level. In fact, super targeted.

Remember that the US is supposedly nice and trying to help these countries develop. Nah. Forget that. Give them a ton of tariffs to make it hurt. We dismantle USAID, we don't give out support and we now will take away your ability to sell your cheap labor to improve your livelihood so that, well, Americans can pay more for tshirts and socks.

Vietnam, the US bombed heavily during the Vietnam War, and now they have picked themselves up selling things cheaply made and things have improved a bit but let's just make it hurt. 46%.

Trump is waging an all-out trade-war on Asia. Southeast Asia. I feel really bad for Myanmar that got hit pretty big after the earthquake. Look how hard they hit these competitors to the mighty USA. Look at Cambodia, Laos etc. Bangladesh!

1. Cambodia - 49%
2. Laos - 48%
3. Madagascar - 47%
4. Vietnam - 46%
5. Myanmar (Burma) - 44%
6. Sri Lanka - 44%
7. Bangladesh - 37%
8. Serbia - 37%
9. Botswana - 37%
10. Thailand - 36%
11. China - 34%
12. Taiwan - 32%
13. Indonesia - 32%
14. Switzerland - 31%
15. South Africa - 30%
16. Pakistan - 29%
17. Tunisia - 28%
18. Kazakhstan - 27%
19. India - 26%
20. South Korea - 25%
21. Japan - 24%
22. Malaysia - 24%
23. Côte d'Ivoire - 21%
24. European Union - 20%
25. Jordan - 20%
26. Nicaragua - 18%
27. Philippines - 17%

whitehouse.gov/presidential-a…

Read 15 tweets

Trinh

@Trinhnomics

Apr 1

https://twitter.com/Trinhnomics/status/1906588239588454537

At the Asia Society to listen to Asia’s view of Trump 2.0. Will share later ideas shared!

https://twitter.com/Trinhnomics/status/1906588239588454537

China:

Highly popular in China as he is entertaining as he has made China great again. His pressure has pushed China reforms forward. China has become more resilient and less reliant against the US. Chinese indigenous tech is decent & confidence domestically is highest ever. External pressure has rallied stakeholders around the central leadership for advancing tech & expanding domestic demand. Exports will not be a key driver & infra ROI down. China has benefited from Trump pressure.

Trump has a good story teller for China as Trump has helped the China story. The Chinese is projecting stability in a more volatile world & saying that China is open for business while the door is closing by the US.

DowJones & SPX down while China is up. Nasdaq down & HSI up. All thanks to Trump.

Middle East:

Everything Trump does in the Middle East is for Trump to focus to China. Trump puts on the table risky strategies. He wants to bully Iran to the table. Bombing Yemen is an example.

No one takes Trump seriously. What he says versus what he does. What he says is the maximum. Example is Palestine. The best strategy is to wait him out & Iran strategy is waiting him out & Iran has no leverage except time.

Time showed his hand of not having time. In a hurry.

People are convinced that Trump is going to collapse in six months. So give him something but not in a hurry to give him a good deal.

Considerations. Trump is willing to negotiate with Russian directly. He is willing to play outside US foreign policy. His handling of Zelenskyy is like a loan shark makes it difficult for Iranians to respond to him.

For Iranians, it is not what he tells them but what he does to others. For him to have wins quickly, he would have to pay the price.

He can’t give Iran what he wants with Israel. The Middle East problem won’t be solved easily.

Read 16 tweets

Trinh

@Trinhnomics

Mar 31

Trump "Liberation Day" is coming & if it is anything to go by like other tariff days, it won't feel "liberating." Why? Because he is front-loading bad news.

It sounds crazy but I have given it some thoughts and here are what I think his short-term objectives.

First, we know he has 20% tariffs on China on top of others so we are now got a lot of friction to trade with China, which the Trump administration sees as its #1 security threat.

But isn't happy with this friction to trade and investment and keen to close loop holes. Remember that Biden also increased tons of investment and tariff curbs with China.

How to close it is the question? It requires others to do it. Who are the others? The easiest is Mexico and Canada as they have USMCA, which Trump agreed in 2020 (previously NAFTA).

There are clues to what Trump wants from Canada and Mexico in the latest 25% AUTO tariff.

Why? There are exemptions to USMCA for US content and also the implementation of tariff is contingent on them figuring out how this 25% tariff is going to work.

Meaning, USMCA essentially is still in force but only exemptions in USMCA.

But Trump isn't happy w/ current USMCA. Wants change.

Read 11 tweets

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