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@trinhnomics

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Trinh

@Trinhnomics

Feb 10

I'm listening to Jonas Kaufmann thinking about tariffs and Asia. His voice is beautiful (we got tickets to see him 22 Feb - highly recommended). I'll do thread later on regarding tariffs etc but my bandwidth is limited lately given the admins.

Remember that US tariffs only matter for the 4.1trn that it imported from the world in 2024 - making it the biggest importer in the world or #1 customer.

Despite higher tariffs, the US has one of the lowest trade-weighted average tariffs in the world. What does that mean? If Trump wants & gets reciprocal tariffs, others will have to fall to US levels or the wall of protectionism rises to reciprocate others' wall of protectionism.

An example is the EU 10% tariff on auto for the US while the US has 2.5% on the EU auto.

So either the EU drops tariffs to 2.5% or the US can raise to 10% or pick at other items.

Meaning, it's the EU choice & rightly so to have 10% on the US, just like it's the US choice to do whatever it wants with goods coming from the EU.

The issue here of course is that the US is the largest importer of goods globally. There lies the headlines.

If you import almost nothing from the world and u raise tariffs, no one actually says you are protectionist because they gain nothing and lose nothing.

Who is good at dealing w/ the US? Look to Japan. They are the pros. They have an FTA & has been deploying tons of FDI to the US. Hence I think Japan will be unscathed.

Are tariffs the only trade barriers you can pose? Absolutely not. Non-tariff barriers are also huge barriers to global trade.

Anyway, talk soon! Don't get depressed by the headlines - they tend to make you think something is bigger than it is.

The news' job is to shock and awe. The reality is global markets are taking everything w/ stride because, well, much worse news was priced in.

And btw, Trump has higher approval ratings than his first term for the same honeymoon phase.

What does that tell you? Well, he's gonna keep going.

cbsnews.com/news/trump-app…

Read 8 tweets

Trinh

@Trinhnomics

Jan 22

President Trump was inaugurated and the big question is to whom tariffs will be applied, not whether. Markets priced 8-9% tariffs on world before inauguration & so the dollar softened as he did not do this on Day 1.

But rest assure, it's coming. Let's talk about consequences through answering 3 key questions.

Ready?

https://x.com/Trinhnomics/status/1859475504132390955

First, I talked about tariffs here on this thread if you didn't read before () & this is a follow-up.

Question #1: Who is most vulnerable to Trump 10% tariff to the world in Asia?

https://x.com/Trinhnomics/status/1859475504132390955

First, I want to talk about a few ideas that was talked about in the previous thread on impact of tariffs.

One is of course tariff level. He says 10% higher so that's our assumption here. Second, elasticity of demand assumption, which I took as 4, which is basically from the literature and also from the Fed paper.

Anyway, to think about impact on GDP, you have to think how big of a trader they are anyway in terms of exports to the US.

Chart 3 shows you that exports to the US is the highest for Vietnam & lowest for Australia, Indonesia and India.

Chart 2 shows you that what is the manufacturing share of GDP an the highest is Taiwan, China, Thailand, Vietnam & Malaysia. Lowest is Australia and India.

Okay, let's talk about what that means.

Read 19 tweets

Trinh

@Trinhnomics

Jan 14

Okay, yesterday, you had China rocking global trade with a USD1trn merchandise trade surplus, but by Friday (17th), we'll get news that China industrial profits are FALLING for a 3rd year in row.

What's going on? How does this work? And finally, what does it mean for the rest of the world?

Let's look at China industrial profits for 2024 from Jan to November.

It's down -4.5% & in 2023 it was down & in 2022 it was down.

Fine, but not all sectors experienced decline. These are the sectors with some profit: food manufacturing, textile, tobacco, furniture manufacturing, electricity, waste, and basically a few sectors kind of not that negative or flat - general equipment.

Sorry, meant to write a longer thread but had to go! Long story short, China is experiencing a balance sheet recession and with a few sectors growing so all that savings is being channeled to it.

That means reduced profits and which means to make more money it has to sell outward & thus that translates to profits being squeezed increasingly abroad too as it gains market share.

You can see that in the export data where exports grow but imports not so much. In Germany's case, it's losing out of both ability to export to China (Chinese imports of German stuff decline) & also China selling more of its goods in Germany.

But that is not all. The Germans are likely facing competition in third markets too.

And replace Germans with others like Japan, South Korea, and of course even not big traders like Indonesia.

So China's problem of weakening profits is global.

Read 4 tweets

Trinh

@Trinhnomics

Jan 13

https://twitter.com/fbermingham/status/1878727621967782371

Big news: China trade surplus reached 1trn in 2024. What are the losers of China trade surplus and what does that tell you about the world?

First, let me go through China's NOMINAL (volume is much higher) trade relationship with the world.

https://twitter.com/fbermingham/status/1878727621967782371

First, let's talk about the losers, as in DECLINE IN CHINA IMPORTS.

Germany saw imports from China decline by -10.7%, followed by France (-5.9%) and then Italy (-3.2%). Meaning, the Dutch still got something China want (ASLM chip making machine) but others saw decline of goods.

To add salt to injury, not only is Europe losing market share in China, Chinese goods have RISEN in Europe in nominal term or exports rose to 516bn.

But that's just Europe. It likely also lost out in other markets too, but the US. Europe gained US market share.

Who else lost out in LESS CHINESE IMPORTS (contraction in nominal term)??? Well, Thailand, which is a -5.2% contraction, Indonesia too! -4% (Chinese demand weak so commodity weak = less imports) And Japan -2.6% and also Australia -10% (Chinese demand weak so less demand for commodity etc)

And of course India at -3%. India is an interesting case because it loses in EXPORT TO CHINA BUT China has managed to export more and so India got a pretty large deficit with China at more than -100bn.

Read 9 tweets

Trinh

@Trinhnomics

Dec 20, 2024

It is a beautiful day in HK. I’m at lunch, well, waiting for my bff at a wonderful Italian place called Cantina (next door was our wedding reception 5 yrs ago) & opened up my fav pink paper & the FT Big Read was Ursula choking Europe with regulations (she also chairs a paper that also supposed give her more money to deregulate). There lies the rub. Can u let the person who has led Europe down this rabbit hole be the person to lead it out of it? Some pics from my walk from home to lunch. Hong Kong 🇭🇰 is lovely, best time to visit is October, November & December.

“Inflexible EU rules set Europe’s car 🚗 industry for failure” says critics according to the paper.

“Conservatives & far-right lawmakers accuse the bloc’s ambitious green & digital agendas of punishing citizens & businesses.”

Interesting the definition of conservative & far-right. But irrespective, you can see the results.

She & Draghi chaired a report that says the EU is uncompetitive & too regulated & strangled. Behind.

Okay, but who has been in charge?

Not the conservative & far-right. Ursula has been in charge. All along.

So if we have to measure her performance with, well, outcome, then what is the score card? She said it herself in the report.

If kept at the same rate path, well, well…

Read 7 tweets

Trinh

@Trinhnomics

Dec 6, 2024

The RBI just cut the cash rate by 50bps and kept the policy rate on hold at 6.5% as slowing government spending and a weakening manufacturing sector is dragging down GDP growth.

This is my short thread on examining the India-Japan investment and trade relationship & why they haven't changed much in 10 years despite India being a big domestic demand market that Japan needs.

I argue that this is symptomatic of what is happening to Indian firms themselves. They find it hard to scale and leverage the labor endowments the country has.

How do we change this? Well, by changing the norms of thinking that the government needs to micro manage everything. It should set framework but let Indian private sector flourish.

Let's go.

First, what is the India Japan relationship? Well, it's getting better but remains SMALL relative to the ASEAN Japan (Vietnam Japan for example). Japan investment to India despite India being a huge domestic demand market that is super complementary to Japan weak demographic trends is at 4% of total. Look at ASEAN. Yes, at peak around 28% and settling about 24% of total.

India is a ginormous market. So why growing just from 2 to 4% of total???

Now let's look at Japan imports from India - it basically remains flat at a small level of 1% of total. Meanwhile, imports from China is 22% and ASEAN 15%.

So Japanese FDI to India has increased to 4% of total but imports remain small.

Basically this relationship remains small and has a lot of scope to grow.

Read 10 tweets

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