Tag: Trump’s Tariffs

Is Anything Besides Impeachment Going On?

The Daily Escape:

Sunrise, Churchill, Manitoba, Canada – October 2019 photo by Colin Hessel. Hat tip to blog reader Marguerite S.

While America is focused on our impeachment gridlock, we’ve missed a few things Trump has done that have far-reaching impact.

First, the US solar industry has lost 62,000 new jobs and $19 Billion in investments because of Trump’s two year-old tariffs on imported solar panels. The job loss is more than the 53,000 total number of workers employed in US coal mining, an industry Trump favors. Maybe those 62,000 people can just apply for the roughly 250 new coal mining jobs Trump created. The $19 billion in lost investment equates to 10.5 gigawatts in lost solar energy installations, enough to power about 1.8 million homes.

Despite the tariffs, global solar panel prices have continued to fall due to oversupply in China, but US solar panel prices still are among the highest in the world. That makes it more difficult for solar to compete with other forms of electricity generation such as natural gas.

Trump’s tariffs have had the greatest impact on newer solar markets such as Alabama, the Dakotas and Kansas, because they make solar uncompetitive.

Second, Trump announced revisions to the small arms export rules. The National Defense Authorization Act (NDAA) is currently in reconciliation negotiations. One of the differences between the House and Senate versions is an amendment that could loosen export controls on firearms. In November, the administration gave Congress notification of the proposed rule changes, which will go into effect on December 20th if Congress does not block it.

The US exports firearms and related technology on a large scale. From 2013 to 2017, the State Department reviewed approximately 69,000 commercial export license applications for firearms, artillery and ammunition reported at a value of $7.5 billion. Roughly two-thirds of these applications were for firearms.

Trump’s proposal would transfer control over the export of firearms and related technology from the State Department to the Commerce Department. The new rules could loosen the global trade in small arms, particularly in Latin America and the Middle East.

Export control is a complicated process with substantial paperwork designed to limit weapons or components falling into the wrong hands. The State Department currently manages this process for firearms. Moving control to the Commerce Department means that exports of these weapons will be subject to a less rigorous approval process.

Many observers, including the UN, have noted that the widespread availability of small arms is a “key enabler” of conflicts around the world. Despite calls for states to exercise tighter arm controls, the Trump administration is proposing to do just the opposite.

There are downstream effects of the proposal. It may make it easier for Latin American organized crime or terrorists in the Middle East to get guns and ammo more easily. Perhaps Trump wants to improve the Second Amendment rights of ME terrorists and Latin American gangs. Or maybe, he’s just in the tank for US gun manufacturers.

Third, a new Pew survey finds that only half of American adults think colleges and universities are having a positive effect on the country; 38% say they are having a negative impact, up from 26% in 2012. The increase in negative views has come almost entirely from Republicans and independents who lean Republican:

Since Trump was elected, Republicans who say colleges have a negative effect on the country went from 37% to 59%. Over that same period, the views of Democrats and independents who lean Democratic have remained stable, and overwhelmingly positive.

Democrats who see problems with the higher education system cite rising costs most often (92%), while 79% of Republicans say professors bringing their political and social views into the classroom is a major reason why the higher education system is headed in the wrong direction. Age is an important factor: 96% of Republicans aged 65+ say professors bringing their views into the classroom is the major reason why higher education is headed in the wrong direction.

Higher education faces a host of challenges in the future: Controlling costs, ensuring that graduates are prepared for the jobs of the future, and responding to the country’s changing demographics.

Trump and the GOP’s willingness to see everything from impeachment, to solar panels, to college education as an ideological battle are making addressing America’s problems impossible.

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Saturday Soother – September 21, 2019

The Daily Escape:

Badlands Storm, South Dakota – September 2019 photo by Bill Frazier

It’s officially the end of summer. We now move towards shorter days, sweater weather, and at least in the Northeast, raking leaves. But, in politics, few things change with the seasons.

Consider this factoid from Bloomberg about what the Trump administration has done to support farmers hurt by his China trade war:

“At $28 billion so far, the farm rescue is more than twice as expensive as the 2009 bailout of Detroit’s Big Three automakers, which cost taxpayers $12 billion.”

Remember the auto bailout? Republicans were largely against it. The government shouldn’t pick winners and losers, let Mr. Market do it. While the auto industry was bleeding jobs, the bailout saved GM and Chrysler. It also helped restore jobs. Marketplace reports that in the Great Recession, auto-manufacturing lost 334,000 jobs, and membership in the United Autoworkers Union (UAW) fell by 150,000.

Since then, as vehicle sales rebounded, those job losses were gradually reversed. In July 2016, US auto-manufacturing employment surpassed its December 2007 pre-recession level of 957,000 jobs. The UAW however, remains more than 50,000 members short of its pre-recession high.

Back to the farmers. Because of the tariff war with China, farmers will receive $19.5 billion in direct government bailout money in 2019, the most since 2005. That doesn’t include an extra $10.5 billion in federally subsidized crop insurance payments, the main vehicle of the farm subsidy program.

This is a move to protect Trump’s political advantage with his Midwest base for the coming election in 2020. But, who is benefiting? It’s mostly the corporate farms, and the largest individually-owned farms. From Modern Farmer:

“The idea is fairly clear: the larger a farm is, the more it has to lose, and thus the more money it takes to make whole.”

The Environmental Working Group (EWG) analyzed USDA data and found that 82 farmers collected over $500,000 each in 2018-2019. In comparison, the EWG found that the bottom 80% of farmers received less than $5,000 each.

This latest tranche of government money comes after the USDA changed the rules regarding who qualified. Previously, each farmer applying for assistance had to have an average adjusted gross income of less than $900,000 per year. Now, there’s no limit on the size of an applicant’s income, as long as 75% “is derived from farming, ranching, or forestry related activities.”

That opens the trough to the biggest corporate farms, to super-rich investors, and the biggest family farms. Not surprisingly, since the Trump administration’s efforts are aimed at protecting those who are among his large donors, rather than the most vulnerable farmers, there are no cries that this is “socialism” by the GOP.

Apparently, this is capitalism at its best, but what we did to save the auto industry was socialism.

On to our Saturday Soother, that interlude in the week when we try to forget what Trump may have promised to a foreign leader, or what Cory Lewandowsky did to Jerry Nadler. We focus instead on what excuses we can use to avoid the coming fall clean-up. Here, on the fields of Wrong, we are taking in our bluebird houses, the fledglings left a week ago. A few hummingbirds are still around, but will certainly be gone next week. The apple trees have lost most of their leaves, and the deer are eating the fruit that falls to the ground. We’re trying to wait until early October to turn the heat on, but the last two nights have been in the high-30s.

Let’s warm up today by brewing up a hot, steaming cup of Ethiopia Sidamo Gora Kone ($19/12 oz.) from Sacramento, CA’s Temple Coffee Roasters. The roaster says it has a sweet-savory structure with a crisp, lightly satiny mouthfeel. You be the judge.

Now settle back and listen to a musical selection for the change of season. Here is “Autumn” a petit adagio from Alexander Glazunov’s “The Seasons”. The music was written as an allegorical ballet, but we’re going to listen to a symphonic treatment. It was composed in 1899, and first performed as a ballet by the Imperial Ballet in 1900 in St. Petersburg, Russia. Here, it is played by the Czech Radio Symphony Orchestra of Bratislava conducted by Ondrej Lenard:

Those who read the Wrongologist in email can view the video here.

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Saturday Soother – Dorian Edition, September 7, 2019

The Daily Escape:

Garden of the Gods, Colorado Springs, CO – 2019 photo by ForkMan. Cheyenne Mountain is in background.

(There will be no Sunday Cartoons this week.)

Trump’s decision to change our posture toward China from free trade to trade war is one of the most significant policy shifts in recent American history. And despite the hand-wringing by corporations and politicians, there’s a grain of value in what Trump is attempting to do.

For sure, it’s unclear if he really knows what he’s doing, but it highlights whether we have a strategy for our trade relations with China. American policy makers must look at and answer a few questions:

  • Why is our industrial supply chain located within our economic adversary?
  • Doesn’t our military readiness therefore depend on that adversary?
  • Why are American companies allowed to transfer critical technologies to China in exchange for short-term market access?
  • Why is Tesla building self-driving cars in Shanghai?
  • Why should Google be running an Artificial Intelligence (AI) lab in Beijing after canceling an AI contract with the Pentagon?

Our corporate overlords’ answer? Because the market wills it.

But markets choose one global power over another only for narrow financial reasons. The market will happily move its business to a surveillance state if it means bigger CEO bonuses and higher profits. In this competition, Corporate America’s ideological commitment to free trade is as big a handicap to us as the Soviet Union’s commitment to central planning was during the Cold War.

Republicans and their corporate partners reject the idea of America having an industrial-policy to support key strategic economic sectors. China has an industrial policy. It’s focused largely on AI, integrated circuits, telecom, and steel. We no longer have high end manufacturing, and we’re losing other strategic industries.

This means that Beijing is likely to pick our “winners” for us. Corporations use the old Ricardian comparative advantage to organize their supply chains. This means that we will watch helplessly as American innovations are transformed into economic engines in China, while our corporations will reap efficiency gains by locating their engineering and management operations next to their Chinese manufacturing.

Inevitably, the innovation in which we pride ourselves will depart as well.

A recent survey of 369 manufacturers found that American firms are moving their R&D operations to China not just to take advantage of lower costs, but to be in close proximity to their supply chains. About 50% of foreign R&D centers in China are now run by American companies. This has helped China achieve first place in market share for manufacturing R&D.

If we remain neutral regarding where our supply chains are located, “we innovate, they build” will become “they innovate, they build.”

So, an unintended consequence of Trump’s tariff war is that maybe American politicians will wake up to the strategic battle underway with China, and realize how our American corporations are lining up on the side of our competitor and economic adversary.

Enough of the outside world, time for a rainy Saturday Soother if you are on the east coast of the US. Wrongo is sitting on Cape Cod, and the weather service here has announced tropical storm warnings for Saturday. So, settle back and watch the Weather Channel!

Now brew up a mug of Panama Finca San Sebastian ($12/12 oz.) with its deep chocolate notes supported by subtle but persistent sweet floral tones. It comes from the brewers at Thermopolis, Wisconsin’s Jack Rabbit Java.

Now, as you watch Dorian news over and over until your mind is numb, listen to the great 1980’s hit from the Eurythmics, “Here Comes the Rain Again”:

Those who read the Wrongologist in email can view Annie Lennox here.

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Saturday Soother – Trump Mexican Tariff Edition, June 1, 2019

There’s No Escape Today:

More tariffs! This from CNN:

“President Donald Trump threatened on Thursday to impose new tariffs on Mexico if the country does not step up its immigration enforcement actions, combining his boiling border-related frustrations with his preferred method of punishing foreign countries.

Trump said in a White House statement that the first round of tariffs would begin on June 10 at 5% ‘on all goods imported from Mexico.’ The statement said Trump would carry out his threat under authority from the International Emergency Economic Powers Act and that he would lift tariffs only ‘if the illegal migration crisis is alleviated through effective actions taken by Mexico.’

The statement warned further that if Mexico does not act as Trump demands, tariffs would go up to 10% by July, 15% by August, 20% by September and reach a permanent level of 25% by October.”

Mexico probably does need to do more to stop migrants crossing their country.

OTOH, they like America, have rules that safeguard migrants. It’s doubtful that the Trump administration has studied those rules or cares about them, any more than they care about ours.

According to Forbes, The US imported $346.5 billion in goods from Mexico last year and for the first three months of 2019, they increased 5.4%. At that rate there would be $365 billion imported in 2019. At a 5% tariff, companies would have to either raise prices or take an $18 billion hit to profits. And it is companies and eventually consumers that will pay these new Trump tariffs, not the exporting country as Trump consistently misrepresents.

This is why the DOW fell 355 points on Friday.

Trump used the International Emergency Economic Powers Act as his legal basis to place tariffs on Mexico. It’s a Cold War-era law that actually vests the presidency with absurdly broadly defined, near-dictatorial powers in many areas. But, prior presidents, even Reagan and Bush 43, never conceived in their wildest dreams of using them except in an ACTUAL emergency. And they didn’t.

Trump doesn’t care, he sees a hammer, and decides that it isn’t for driving nails; it’s for breaking Mexican kneecaps. Matt Yglesias explains that there’s an easy climb down for Trump in this. Migration from/through Mexico is very seasonal, peaking in the spring, and declining sharply in the summer.

Trump will probably pretend to get some concessions from Mexico and declare victory in a couple of months. His moron supporters will surely applaud that.

At some point, Democrats will have to frame these and Trump’s other tariffs for what they are: a national sales tax on imports. Dems need to start explaining to the public that these tariffs are a national sales tax on everything from Mexico, including cars and components for US car manufacturers. Maybe saying this:

“Trump is making Americans pay a sales tax on imports until illegal immigration stops. How will Americans paying higher taxes force Mexico to stop illegal immigration?”

That’s how it should be framed.

Enough! We’ve been Mueller ’ed and Trump ’ed all week, and it’s time for your Saturday Soother!

On the first day of June, Wrongo hopes that you are in short sleeves, and thinking of getting outdoors, and that doesn’t mean shopping at the mall.

Let’s start by brewing up a vente cup of Hawaii Kau Champagne Natural from Paradise Roasters ($19.95/12 oz.). This coffee tied for the highest rating in Coffee Review’s May 2019 tasting report of Hawai’i-grown coffees. They say that its tropical and floral aromas lead into a sweet and complex dessert-like cup.

Paradise has experimented with yeast fermented coffees that produce a more intense and complex flavor than traditional methods. It evokes Champagne, fruity but dry, and not effervescent. They only roast this coffee on one day: June 3rd, 2019. So you have been alerted to act fast.

Now, move outside, assuming you live in a part of the world that isn’t suffering from rain or tornadoes. Put on your wireless headphones, and listen to a Philadelphia-based Irish band, BarleyJuice, play their tune, “Weekend Irish”:

Sample Lyric:
And the blood runs deep,
When the booze is cheap,
Long as you ain’t got an agenda to keep,
You can be a Weekend Irish, hey!
Aye, aye, we’re the Weekend Irish

And we’ll raise a hand,
To the motherland,
Best part of being an American,
To be a Weekend Irish

Those who read the Wrongologist in email can view the video here.

The Wrongologist does not condone identity politics, unless it involves weekend singing, dancing and drinking.

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Trump’s Tariffs Unite China and Russia

The Daily Escape:

Detail of the Peacock Gate, the City Palace, Jaipur India – photo by Miya.m – CC BY-SA 3.0

Do you know about the Eastern Economic Forum (EEF)? The EEF was started by Russia in 2015, as part of Moscow’s push to revitalize its ties with Asia after its relations with the West began to sour. The US doesn’t attend, although CA governor Jerry Brown attended in 2017.

Now, it attracts heads of state from around the East Asian region. President Xi of China attended this year for the first time. It was the third time that Xi and Putin have met in 2018, and the outcome of the EEF meetings could have significant implications for the US.

The Diplomat reported that according to Li Hui, China’s ambassador to Russia:

At present, China-Russia relations are at their best in history
the two heads of state attending significant events held by each other are important manifestations of the high-level bilateral relations.

So, why now? What’s behind China’s and Russia’s fast-developing relationship? It seems to be the US tariff war. The Asia Times says:

Xi defines the partnership as the best mechanism to ‘jointly neutralize the external risks and challenges’. For Putin, ‘our relations are crucial, not only for our countries, but for the world as well.’

At the EEF, Putin and Xi agreed to keep increasing bilateral trade payable in yuan and rubles, bypassing the US dollar. Putin also swiped at Trump’s tariff policies:

The world and global economy are coming up against new forms of protectionism today with different kinds of barriers which are increasing….basic principles of trade — competition and mutual economic benefit — are depreciated and unfortunately undermined, they’re becoming hostages of ideological and fleeting political situations, in that we see a serious challenge for all of the global economy, especially for the dynamically-growing Asia-Pacific and its leadership…

Reuters reported that Xi also appeared keen to foster closer relations with Russia:

Together with our Russian colleagues, we will increase fruitful co-operation in international affairs and intensify co-ordination…to oppose the policy of unilateral actions and trade protectionism…

Their relationship will continue to improve, since the Trump administration plans to continue ratcheting up its trade war. Trump recently threatened placing tariffs on all Chinese exports to the US.

And, on the same day as Xi arrived for the EEF, Russia kicked off its Vostok 2018 military exercises, with China taking part for the first time.

All of this is largely a giant signal to the US, since Russia can’t come close to replacing the US as a major trade partner for China. Sino-Russian trade is less than $100 billion per year, while trade between the US and China was more than $630 billion last year.

China’s strategy is to start by reducing its dependence on US agricultural imports. One example is soybeans. Econbrowser reports:

The Chinese plan is — in addition to relying on Brazil and Argentina — to switch to other sources, like palm mill, rapeseed, sunflower seed, and other countries, such as Russia, Ukraine and Kazakhstan, for soybeans. Obviously, the development of other countries’ ability to grow soybeans will take time. But that was also true for Brazil.

More broadly, attending the EEF gave Xi another platform from which to attack the US trade war, and pledge to defend rules-based trade. Our partners, the presidents of South Korea and Japan, also are watching closely. South Korea is looking to build a rail connection across Siberia, which requires help from China and Russia. The South China Post reported on Japan’s Prime Minister Abe, who attended the conference, and agreed to a summit with Russia:

Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin agreed Monday on further details of joint economic activities on disputed islands off Japan’s northernmost main island of Hokkaido

They also confirmed their close cooperation toward the denuclearization of North Korea ahead of the third summit between North and South Korea, scheduled for September 18.

The message is that the nations of Asia no longer see us as a reliable partner, and are walking toward forging new alliances with both China and Russia.

Our walking away from the Trans Pacific Partnership, which included all Asian countries except China in a free trade zone, seems to have been a geopolitical error. Trump’s tariff war seems to be another.

The US is alienated from Russia over US election interference, cyber warfare, Ukraine, Crimea and Syria. We have responded with sanctions, and truculence.

The US is alienated from China over trade, and the Trump administration’s perception that China isn’t helping our negotiations with North Korea.

We are at risk of being sidelined in Asia, and our allies are watching.

What’s this administration’s plan to succeed on all of these fronts in Asia?

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Saturday Soother – August 11, 2018

The Daily Escape:

Near Helena, MT – 2018 photo by u/jacobs64

Today is Wrongo’s and Ms. Right’s wedding anniversary. No worries about cards or gifts, we usually celebrate this day alone, together. Tonight, we’re going to a bespoke dinner at a quirky French restaurant in Litchfield County, CT. There will be great food, champagne, and a couple of very good wines.

We’ve all made it through the 81st week of Trumpfest, and please, let’s not count how many weeks remain.

This week featured a DC judge threatening Jeff Sessions with contempt of court after his people committed another immigration sin, and the continuing saga of the Manafort money laundering and tax evasion trial in Virginia. Devin Nunes proved once again that he should be removed from his seat in Congress. And there was VP Pence’s announcement of the Space Farce.

This week also marked the resignation of Richard Nixon, in 1974.

But as we hit the weekend, Wrongo wants to talk Turkey. This week saw the relationship between Turkey and the Trump administration hit a new low. Here are a few of the developments: Relations with Turkey haven’t been good for years, but the current problems were sparked by Turkey’s detention of an American pastor, Andrew Brunson, on espionage charges. We’ve insisted that he be released.

Then, Turkey asked for the US to extradite Fethullah Gulen, an Islamic cleric living in the US in return for Brunson. We weren’t about to do that, so instead, Washington imposed sanctions against two cabinet-level officials in President Erdogan’s administration.

After the sanctions, the Trumpets thought they had made a deal with Turkey, whereby Turkey would release Brunson in exchange for Israel releasing a Turkish woman it had accused of funding Hamas. The Turkish woman was released, but Brunson wasn’t.

Then, the Trump administration doubled existing tariffs on Turkish steel and aluminum. The Turkish currency, the Lira, fell by 15% on Friday. But, the escalation continued when Turkish lawyers sued US soldiers at Incirlik Airbase, supposedly because they were working with Fethullah Gulen to overthrow the Turkish government. Incirlik is a place where the US stores nuclear weapons. It is the primary base for our air war in the Middle East. General Joseph Votel, head of US Central Command, is also named in the complaint.

Turkey is at best, an obstreperous member of NATO, who by holding significant geography, are strategically important to keeping Russia bottled up in the Black Sea. Yet, Turkey just ordered Russia’s latest, greatest air defense missile, the S-400, to consternation in the US. We countered by delaying Turkey’s orders of our latest, greatest jet fighter, the F-35.

Our sorry relationship with Turkey is another example of Trump’s failed “Art of the Deal”: His gut instinct is to escalate the problem, in this case, by imposing more tariffs, instead of stepping in with leadership and diplomacy to help resolve the underlying relationship problems.

Funny how he’s for diplomacy only with Russia and North Korea.

Had enough of this week’s emotional roller coaster? You bet. Time to turn off twitter, email, and network news. It’s time for a Saturday Soother.

We start by brewing up a strong cup of Los Planes coffee ($19/12oz.), from Theodore’s Coffee in Michigan. They import the beans from the Finca Los Planes farm in Honduras. This coffee is unique, because its beans are larger than average coffee beans. Theodore’s says that the coffee has subtle notes of fruit, particularly blackberry and raspberry.

Now, settle back cup in hand, and wearing your best earphones, listen to Yo-Yo Ma, Edgar Meyer, and Mark O’Connor perform O’Connor’s composition “Poem for Carlita” in Avery Fisher Hall at Lincoln Center in New York City. Of the performance, O’Connor said:

When I wrote “Poem for Carlita” for Yo-Yo Ma, I hoped he would play this exactly the way he plays it. The experience was riveting. It was one of my most dramatic and romantic instrumental journeys and he was the one to expose every nuance of passion in the music. He saved his best for this performance…tremendous.

Here is “Poem for Carlita”:

Those who read the Wrongologist in email can view the video here.

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Sunday Cartoon Blogging – July 29, 2018

They found water on Mars. It appears to be salt water. Maybe we’ll build a giant desalinization device, and a few survivors of this hell on earth can give a fresh start to humanity on Mars. Also, Russian scientists found nematodes in Siberia that have been frozen for nearly 42,000 years. With climate change, they were visible to scientists. A few came back to life in the lab:

After being defrosted, the nematodes showed signs of life, said a report today from Yakutia, the area where the worms were found. ‘They started moving and eating.’ One worm came from an ancient squirrel burrow in a permafrost wall of the Duvanny Yar outcrop in the lower reaches of the Kolyma River….Another was found in permafrost near Alazeya River in 2015, and is around 41,700 years old….They are both believed to be female.

Both of those news items are more believable than much of what we hear from Washington, DC these days. For example, Trump’s speech to the Veterans this week included his caution about believing the news media. That led to this cartoon by Darin Bell:

And consider the gloating about “historic growth” in GDP by Trump. John Harwood schools us on the data:

If you think that’s fake news, check out the data.

Trump went off on Iran. What could be behind President Rouhani’s provocations?

Michael Cohen stayed in the news again this week. He’s gonna get a TV series:

Tariffs are always a tax on consumers. Donny is here to collect:

Americans no longer have unlimited voting rights, or election security in the US. This is believable:

Establishment Democrats always react the same way:

Wrongo isn’t on board with the democratic socialism platform, but he believes that corporations should be subjected to tighter regulations. They should pay more in taxes. They should be forced to reimburse the people for the deleterious impacts of their activities, like cleaning up factory sites that have polluted the land.

And every American should have access to healthcare, childcare, and some form of employment. We could make the choice to provide a free education to every American if it were a higher priority than new bombers, or aircraft carriers. ICE should be reformed, not abolished.

Establishment Democrats are trying to scare voters away from candidates who support the democratic socialism agenda. They should relax, democratic socialism isn’t about taking everything what you have away, and making it government-owned.

When you consider the perils and benefits of democratic socialism, you should think about Europe. Five of the top 10 happiest nations in the world (according to the UN) are Scandinavian: Finland, Norway, Denmark, Iceland, and Sweden. And they are all democracies.

Ever since Alexandria Ocasio-Cortez upset the 4th ranking House Democrat by running on a democratic socialist platform, Dems worry that what worked in the Bronx won’t work in Kansas. They’re right, it won’t work in Kansas. That’s why candidates need to run on issues that are important to their districts. A voter in Kansas is probably more concerned over the price of wheat than he is about gay marriage.

But, running on the economy and jobs works everywhere.

Ocasio-Cortez campaigned with Bernie Sanders in Kansas. James Thompson, a centrist Democrat running for Congress in Kansas, said she might as well come out, because the local Republicans were going to call him a socialist anyway.

Democrats were called socialists in 1992 when Bill Clinton won. They shouldn’t panic – they should own the accusation.

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Saturday Soother – July 28, 2018

The Daily Escape:

Quote by John Maynard Keynes posted on the wall at the School of Economics, St. Petersburg State University, Russia – 2018 photo by Conor Morrissey

Welcome to the weekend. US GDP hit 4.1% for the second quarter of 2018. Trump was out there on Friday saying that the economic winning has only just begun, and that it’s due to the GOP tax cuts, and his moves to impose tariffs on our trading partners. He neglects to mention this year’s $1 trillion budget deficit that he and the GOP created. That’s what’s fueling our current growth, and it won’t last.

Speaking of tariffs, NPR reports that US ham and other pork products now face very high Chinese tariffs of between 62% and 70% after retaliatory tariffs by China. What happened next shouldn’t be surprising:

In recent weeks, the US Department of Agriculture has reported zero weekly export sales of pork to China….So our exports to the country have pretty much collapsed.

Does this mean cheaper bacon for America? As we have heard, “Trade wars are good and easy to win”. Apparently, the Stable Genius can bring home the bacon, but he can’t sell it abroad. Thoughts and prayers to all the pork producers who got conned.

US farm subsidies were about $23 billion last year. A year ago, the Trump administration proposed a $4.8 billion cut to that. Now he’s increasing the subsidy by a one-time $12 billion to make up for the effects of his tariffs.

OTOH, in the EU, farm subsidies for the 2021-2027 period are scheduled to be reduced by five percent to $420 billion. Maybe there will be some additional winning for our farmers, assuming we can export more to the EU. But the US isn’t above criticism: US dairy producers now have a whopping 1.39 billion-pound surplus of cheese; 4.6 pounds per American. Wrongo is doing his part to cut into the surplus, what about the rest of you?

And at the same time there is overproduction, there’s growing risk to our health due to overuse of antibiotics on dairy farms. America shouldn’t give up its food security and become dependent on other countries, but it’s time for clear(er) thinking about our agricultural policy.

The big news on Thursday night was that Trump’s former attorney, Michael Cohen, is now saying that Trump knew beforehand about the June 2016 meeting between his top campaign staff, his son and Russians promising dirt on Hillary Clinton. If true, it would add a lot to a case of Trump obstructing justice.

We’ll see if Mueller ever makes a case in the court of justice, vs. only in the court of public opinion.

Are you fed up yet with being told “what you’re seeing and what you’re reading is not what’s happening”? Or having Trump say that Putin is a good guy? Or, that North Korea is no longer a threat, that Canada is our enemy? Or, that some black football players hate America? Or, that immigrants are ruining everything? That our allies are out to get us, and there was no collusion!?

This takes Wrongo back to Cohen. Maybe he has the lead-up to the June meeting on tape as well.

In any event, we’ve closed the book on another hard week. Time to kick back, get soothed, and stare vacantly at all of the yard work we aren’t getting around to doing.

To help you relax, let’s open a cup of Martinez, California’s States Coffee & Mercantile’s new Reserve Cold Brew ($12/24oz. bottle). It is brewed from Tanzania beans, and is a ready-to-drink bottled black coffee. The brewer says it is richly sweet, with an umami undercurrent, and that adding whole milk mediates the umami impression, while amplifying the chocolate and spicy floral notes.

Wrongo says, go for it! Add ice and milk, and chug a couple to get your day started.

Now, settle back and listen to Ana Vidovic playing “La Catedral” by AgustĂ­n Barrios MangorĂ© on solo guitar. MangorĂ©, who died in 1944, was a Paraguayan virtuoso guitarist and composer, regarded as one of the greatest performers on the guitar. “La Catedral” is considered one of the most colorful, and difficult, works in the guitar repertoire. It is Barrios’ tribute to Bach:

Those who read the Wrongologist in email can view the video here.

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Monday Wake Up Call – April 9, 2018

The Daily Escape:

Canada Warbler

Are you worried yet? Last week ended with the stock market falling off the cliff. The Dow was down over 700 points, but recovered slightly to lose “just” 572 points. With the stock market, no matter what you plan on investing in, there are always risks. Before you do decide to get into this industry though, it is important to understand that there are some things you should know about stocks. It only makes sense to do your research into this before committing to anything. The volatility of the stock market makes it essential that you swallow your ego and seek professional guidance based on thorough and extensive research. Stocktrades can be of service to anyone looking to up their game and make sure their choices are as safe as possible. You’ll never be able to have a 100% success rate, with the risks summed up by recent events involving the President. Trump caused this by seemingly being pissed that the Chinese would fight back after his in-your-face tariff announcements.

Now, the Dow Jones average is down 9% from its January high.

And the administration couldn’t seem to get its messaging straight. Former TV pundit Larry Kudlow, now Trump’s economic advisor, told reporters on Wednesday the threat of trade sanctions was only a negotiating tactic. A rally of more than 3% followed. But Trump upended that notion on Thursday, ordering a review of even larger tariffs. So, on Friday, Kudlow said the opposite, claiming he had just heard about the additional $100 billion in tariffs Trump announced on Chinese imports.

From Bloomberg:

The Republican president’s renewed ramblings on trade dominated US equity markets this week, with a tweet-induced swoon on Friday leaving the S&P 500 Index 1.4 percent lower than where it started on Monday.

And there goes Trump’s reputation as the stock market president. A retired former colleague of Wrongo’s at the big NY bank is all over Facebook touting the Donald’s success at driving the stock market, but this chart from Bloomberg shows he’s wrong. It compares Trump’s first 444 days with the first 444 days of other presidents:

So, what to do? Do investors ride the roller coaster that is the Trump approach to trade, and watch Mr. Market deal with it by hammering their 401k? Or do they jump into cash and lock in a loss? From Benjamin Studebaker:

Theoretically, a full blown trade war with China could be really damaging. If the US and China were to stop trading tomorrow, the total value of US-Chinese trade lost would be about $648.5 billion. That’s about 3.5% of US GDP and 5.7% of China’s.

US inflation would increase, since American consumers will try to substitute more expensive goods for those they can’t import from China. Chinese unemployment would rise, as non-Chinese firms relocate from China to other developing countries to evade the tariffs.

The US wouldn’t be hurt as badly, because after a while, firms would find new locations to operate from. But the trade war won’t create many new American jobs – the offshore firms would either stay offshore, or they’d automate production in North America. The Chinese would be more lastingly damaged, as there isn’t a consumer market large enough to replace America’s.

That’s what Trump means when he says that trade wars are “easy to win” for the US. We can damage China more than China can damage us. Studebaker concludes:

But make no mistake–such a trade war would be highly disruptive. In 2009, the US economy contracted by 2.8%. A full blown trade war would blow this figure out of the water. It would be political suicide for the administration.

Trump’s stated goal is to get China to negotiate to protect US intellectual property rights. This is why his proposals have been relatively small – he’s not looking to break Beijing, just to bring it to the table.

If Trump can get China to make a deal with him, he can pass this off as a major foreign policy achievement. And because the stock market has been in panic mode, any positive result could make Trump look good in the eyes of his supporters.

OTOH, his supporters, like my former Bank colleague, think everything Trump does looks good.

Maybe the trade war won’t happen. But, maybe Trump should remember what Luke Skywalker said in the Last Jedi:

This is not going to go the way you think…

The “Art of the Deal” guy should know there are two sides to any negotiation.

So, wake up, Mr. Market! Stop jumping off a cliff with every tweet. To encourage you, here are Elvis Costello and the Attractions with their 1978 hit “Pump It Up”. Maybe it will give Mr. Market an idea about the right direction for the stock market:

Sample Lyrics:

Pump it up, until you can feel it

Pump it up, when you don’t really need it

Those who read the Wrongologist in email can view the video here.

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