Guest Post by Brett Arends
Are you kidding me?
I’m used to partisan, inaccurate drivel from all sides these days, but the media’s coverage of President Trump’s tariffs and the so-called “trade war” takes some kind of cake.
There’s no serious doubt that some in the media would absolutely love to tank the stock market. They figure that would hurt Trump’s re-election chances in 2020. Monday’s stock market slump, which saw the Dow Jones Industrial Average DJIA, +0.82% tumble 2.4% and the Nasdaq Composite 3.4%, looked just like what the doctor ordered.
I write this, incidentally, as someone who is no fan of the president. But I remember when politics was supposed to stop at the water’s edge.
And, anyway, facts are facts. Most of what the public is being told about these tariffs is either misleading or a downright lie.
I’ve been following the coverage all weekend with my jaw on the floor.
Uncle Sam benefits
Yes, tariffs are “costs.” But they do not somehow destroy our money. They do not take our hard-earned dollars and burn them in a big pile. Tariffs are simply federal taxes. That’s it. The extra costs paid by importers, and consumers, goes to Uncle Sam, to distribute as he sees fit, including, for example, on Obamacare subsidies.
It wasn’t long ago the media was complaining because Trump was cutting taxes. Now it’s complaining he’s raising them. Confused? Me too.
And the amounts involved are trivial. Chicken feed.
President Trump just hiked tariffs from 10% to 25% on about $200 billion in Chinese imports. In other words, he just raised taxes by … $30 billion a year.
Oh, no!
The total amount we all paid in taxes last year — federal, state and local — was $5.51 trillion. This tax increase that has everyone’s panties in a twist is a rounding error.
Investors panic needlessly
Meanwhile, the total value wiped off U.S. stocks during Monday’s panic was about $700 billion. More than 20 years’ worth of the new tariffs.
Even if Trump slapped 25% taxes on all Chinese imports, it would come to a tax hike of … $135 billion a year. U.S. gross domestic product (GDP) last year: $20.5 trillion.
So even this supposedly scary “escalation” of this “tariff war” would, er, raise our total tax bill from 26.9% of GDP all the way to 27.5% of GDP.
Oh, and isn’t it interesting to see some people’s priorities? Apparently the most shocking part of this trivial tax hike is that it might raise the price of new Apple AAPL, -0.86% iPhones.
Last I checked, these were luxury items, right?
U.S. consumers gain
Meanwhile, the trade spat seems to be bringing down food prices. China is going to take less of our farm products. So wheat prices are down 20% since the start of the year. Soybeans are at 10-year lows.
Good for consumers, right?
No, no, of course not! Silly you. This is also bad news … for farmers!
And all this ignores the much bigger picture, anyway.
The tariffs are simply a means to an end. The president is trying to get China to start buying more of our stuff. He knows the so-called Middle Kingdom, which now has the second-biggest economy in the world, responds to incentives more than to nice words. These tariffs give China an incentive to open up.
OK, so China’s first reaction is just to retaliate. Big deal. That’s just posturing.
Right now we export less to China than we do to Japan, South Korea and Singapore put together. That’s the point. So the effect of China’s new tariffs on the U.S. are yet another rounding error. Even if China banned all imports from the U.S., that would amount to only 0.6% of our gross domestic product. And we’d sell the stuff somewhere else.
Don’t buy the hysteria. President Trump is simply trying to pressure our biggest competitor to buy more American goods. That should be a good thing, even if you don’t like him.
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They do destroy your purchasing power, which is also destroying your money, duh. More taxes reduce your purchasing power as well. To be accurate, it will reduce your purchasing power by 25%. The attempt to instill cognitive dissonance into your readers minds is an epic fail Brett.
That’s not entirely true Brett. People are complaining because Trump cut taxes in one income sector of the economy, and only one, the rich. There was no cut for the middle class or poor. The middle classes taxes were raised.
Wrong.
Soy and wheat are all bad for you. These foods are not food at all, they are not fit for human consumption. The reason they are used as fillers in food stuff is because they are cheap. The US is #1 in diabetes as a result. I guess it’s good for big pharma and the medical industrial complex though.
My jaw is hitting the floor after reading this spin propaganda piece which is as far from reality as the North Pole is from the South Pole.
Michael Snyder has it figured out.
Investors May Be Laughing At China’s “People’s War” Now, But Here Is Why They Won’t Be Laughing For Long…
http://theeconomiccollapseblog.com/archives/investors-may-be-laughing-at-chinas-peoples-war-now-but-here-is-why-they-wont-be-laughing-for-long
It’s really common sense and Brett doesn’t get it.
Agreed, wheat, and especially soy, are not terribly heath foodstuffs.
But as a small business owner with several pass through companies (s corps/partnerships), we did benefit from the tax law changes. All combined, we have way under $1,000,000 gross. The other small business owners-florist, auto repair, grocers, drivethru, etc.- benefitted as well. All “corporations” are not evil. The overwhelming majority of people you do business with are organized that way.
Capital Flows people.
Recession fears in China pushed the Wan down 3%.
So on 600 billion, that’s an 18% reduction in whole sale prices.
Not to mention flight to safety. The US T Bill pushing the dollar stronger against all world currencies.
Trump is playing with a loaded canon. And is laying the groundwork against the comming collapse of the Euro.
We can directly tax Germany for Defense as that happens.
“We can directly tax Germany for Defense”
Because the NSA has the password to Chancellor Merkel’s bank account!
Game over!
It’s really deceptive to call this a “trade war”. The Fed prints dollars out of thin air which are traded for finished goods from China. Having the world’s reserve currency has been an advantage hardly anybody appreciates. It’s like counterfeiting money to buy everything you want, producing nothing, then complaining that nobody is buying stuff from you.
So, sure, let’s raise the prices we pay and accelerate the day when the world wises up and dumps dollars.
Good article.
typical orange man bad article
I didn’t take it that way.
You down voters are probably the same guys telling me to “GET OUT NOW” since DOW 15,000. Probably the same guys wasting money to watch the Porter Stansberry webinars on how to survive the coming market Armageddons. LOL!
Stansberry was banned from the securities industry and is a felon ….committed fraud. Look it up
The bottom line is : Do you want jobs or cheap stuff?
You didn’t see any jobs with the Tax Cuts and Jobs Act, why are you going to see any jobs with this?
Yes
The tariffs are 30 years too late, no domestic production left to protect. The US needs to re-industrialize, but how does a bankrupt nation do this?
Re-industrialize means a factory with one employee and ten thousand robots these days. There are no jobs re-industrializing. Why people do not get this simple truth is beyond me.
There will be no jobs. Manufacturing does not require employees anymore. And why would the factories relocate here when there are still far cheaper nations with fewer regs in which to place new factories?
EC – yep, that is appropriate.
When the US began losing steel to the Japanese, the Japanese were paid what 1/10th what he highly overpaid steel workers were making, who had had a monopoly of sorts on steel making, and who held the companies and public to ransom.
In addition to being paid a fraction of what the US steel makers made, the Japanese made something like four or five time more steel per employee. So all up, wages per unit of steel were about 1/40th as much in Japan.
That is what protected markets do to a nation – it makes them uncompetitive. It is competition that drives efficiency. Tariffs will not make the US more efficient nor more competitive. That is the simple truth of it. And unless the tariffs are universal to all nations, the manufacturers will simply move to the nation where it is most cost advantageous and where they can be most competitive.
Everyone on wall street knows the chinese have renamed over 29,000 items and changed to new upc codes to ship the same stuff in without any tariffs! There is actually very little being tariffed…..but the avg idiot sells his 401k outta fear. Its a huge buying op on these dips….