Trump has put a gun to China's head and we're [Australians] in the crossfire
"rump’s Potemkin Economy [...] And the early phase of the trade war that was supposed to be “good, and easy to win” isn’t generating the kinds of headlines Trump wanted. Instead, we’re hearing about production shifting overseas to escape both U.S. tariffs on imported inputs and foreign retaliation against U.S. products. It’s really worth reading the submission by General Motors .. https://www.regulations.gov/document?D=DOC-2018-0002-1991 .. to the Commerce Department, urging a reconsideration of a tariff policy that “risks undermining GM’s competitiveness against foreign auto producers” and “will be detrimental to the future industrial strength and readiness of manufacturing operations in the United States.” In other words, “Don’t you understand global supply chains, you idiot?”"
By Stephen Bartholomeusz 18 September 2018 — 11:58am
The Trump administration has followed through on its threat to impose another $US200 billion ($280 billion) of tariffs on Chinese imports, pushing two of the world’s most important economies to the brink of a full-scale trade war that would have flow-on implications for Asia and Australia.
IMAGE - A tricycle porter transports packs of toilet paper in Beijing. Photo: AP
Should China retaliate – which it has pledged to do – Trump said the US would impose tariffs on a further $US267 billion of China’s exports. With the initial $US50 billion of tariffs announced earlier this year, that would cover all of China’s exports to the US. Last year they were $US505 billion.
The announcement, which Trump said was in response to China’s "unfair policies and practices relating to United States’ technology and intellectual property,’’ came ahead of scheduled trade talks between the two countries later this month.
China has said it would abandon those talks if the tariffs were imposed. While the Trump administration might see tariffs as leverage to force China to bow to its demands, Beijing has made it clear that, while it is prepared to negotiate on trade, it won’t do so with a gun to its head.
While there are measures China can take to retaliate, it is limited by the imbalance between its exports to the US and its imports from the US, which amount to only about $US130 billion a year.
It has signalled it might target products manufactured in China that are critical to the supply chains of US technology and manufacturing companies; products relatively low in value but not easily or readily available elsewhere.
It could also do more of what it has already done. Since April, as the trade tensions began escalating, the yuan has depreciated against the US dollar by almost 9.5 per cent. It could offset the new tariffs by allowing it to drift lower, although further and significant depreciation would risk triggering an exodus of capital.
There is little doubt the tariffs will do harm to an economy already weakening as the Chinese authorities try to reduce the level of financial leverage in their system. It will cost jobs and economic growth even though China is now far less reliant on exports than it once was.
Lower economic growth in China would have spill-over effects to the rest of Asia given that, just as it provides critical links in the supply chains of US companies, they are also plugged into its supply chain.
VIDEO - Trump slaps $200b more tariffs on China 01:44
The new tariffs of $200 billion on Chinese goods will bring the electronics sector into the trade war.
For Australia, where the dollar has already shed nearly 10 US cents of value since late January, there’s a direct impact on our resource exports from lower Chinese growth and an indirect one given that our currency and financial markets are seen as a safe proxy for an exposure to China.
The perverse aspect of the Trump trade wars, where the initial tariffs on largely intermediate products have now been extended to finished consumer goods, is that they will impact US companies and consumers as much as they do China.
While Trump says the tariffs will mean "a lot of money coming in to the coffers of the United States’’ they are really a tax on US companies and consumers. Either companies will absorb the price impacts - which would mean lower profits, less investment and fewer jobs – or they will pass them on to consumers.
It’s also obvious that Trump and his trade advisers don’t understand global supply chains.
While Trump wants US companies to shift their manufacturing from China and elsewhere to the US, not only would that make the US companies higher cost and less competitive in international markets but it could take years to build the manufacturing plants or re-engineer supply chains.
Bob Woodward's book Fear: Trump in the White House, provided a scary insight into Trump’s understanding of trade issues.
Former chief economic adviser Gary Cohn tried desperately to convince Trump that tariffs would cost jobs and investment and raise little revenue, at one point telling him that he had a "Norman Rockwell’’ view of an American economy that bore no relationship to the services-dominated US economy today.
"If we’re not right, we’ll roll them back,’’ Trump is reported to have said.
IMAGE - China's exports hit by Trump's new $US200 billion of tariffs. Photo: AP
When Cohn tried, using data and history, to argue against Trump's conviction that trade deficits with other countries made the US the loser, the book reports Trump as saying: "I know I’m right. If you disagree with me, you’re wrong.’’
It is that simplistic (some might say ignorant) view of trade that has led the US into trade confrontations with China, with its North American Free Trade Agreement partners Canada and Mexico, with South Korea and with Europe.
If the US continues down this path it will damage the global economy and the layers of multi-lateral relationships that have underpinned growth in the post-war era. It will also do a lot of damage to the US itself.
War on wages: Australians [Americans] are working harder and going backwards
"Trump’s Potemkin Economy"
I put "Americans" in there as you could pretty well substitute America in for Australia in this article and it would pretty well fit for most everything. Just perhaps your wage growth is picking up faster than ours, and we were not hit as hard by the GFC. Certainly the causes, consequences and proposed solutions all read as if this article was written about America.
By Anna Patty Updated5 August 2017 — 5:58amfirst published 4 August 2017 — 12:15am
When Sahar Khalili started work as a casual pharmacist eight years ago, she was paid $35 an hour. Over the years that has fallen to as low as $30 while her rent has more than doubled.
The 30-year-old tried short bursts of locum work to try to balance the equation, but eight years after graduating her pay had not kept pace with inflation.
VIDEO - Why wage growth remains weak: NAB
NAB chief markets economist Ivan Colhoun looks at the possible reasons for slow wage growth around the globe.
"At the end of the day it also makes you feel that you are not valued by the pharmacy owner," she says.
Frustrated with the stagnating pay and increasing workload involving sales tasks unrelated to her pharmacy training and without any extra compensation, Khalili changed careers and now works in health IT. She still does pharmacy locum work on the side.
IMAGE - Sahar Khalili has moved out of her profession because of its wages. Ben Rushton
It is a tale that will resonate for many workers.
Most Australians have not had a pay rise in real terms in years in the face of an assault on wages which has policy makers, unions and business groups worried.
The typical Australian family takes home less today than it did in 2009, according to the latest Household Income and Labour Dynamics survey released this week.
Just on Friday the Reserve Bank cut its economic growth forecasts by half a percentage point for the rest of this year after confirming wages at their lowest share of total income in half a century.
Treasurer Scott Morrison has declared record low wage growth the "biggest challenge" facing the Australian economy.
Families are also wrestling with rising electricity prices, skyrocketing property prices and high demand for accommodation has also forced up rents.
There are many reasons given for the wage slump, some peculiar to Australia and others part of broader global trends.
GFC catching up
Having escaped the worst of the global financial crisis, Australian workers are now starting to share the pain of slow wages growth felt in the US since the 1990s and in Europe and Japan since the global financial crisis.
The mining boom and Rudd/Gillard government's multi-billion-dollar stimulus spending may have helped shield the economy from the worst of the GFC.
But since 2012 and 2013, Australian workers have felt stuck in a holding pattern of slow wages growth. Wages for the whole economy increased by 1.9 per cent in the year to March just in line with inflation.
[...]
"We've actually gone backwards," she says.
"I've learned to live with it. I have had to take on other related jobs to support myself. I haven't been able to make a living in my profession."
Donald Trump’s financial disaster zone: Presidential money woes
"Trump’s Potemkin Economy"
VIDEO - Trump or Obama: Who Deserves More Credit for the Strong Economy?
news.com.au November 28, 2018 5:17pm
It’s the Trump myth that even many of his detractors believe — whatever you say about the erratic United States President, he’s been good for the economy.
But is it true?
Mr Trump has consistently campaigned on putting “America First”, imposing tariffs on other countries that he says will help US companies.
And the signs seemed good. Unemployment is below 4 per cent, gross domestic product is over 3 per cent and wage growth just hit a nine-year high.
But while Mr Trump’s signature tax cuts may have pushed up GDP, that simply means increased spending — not investment.
The dollar has risen more than 7 per cent this year against the currencies of America’s major trading partners. While that may sound positive, a stronger dollar means US goods sold overseas cost more, and imported products are cheaper for Americans.
Donald Trump claims his fiscal policies have solved America’s trade woes — but the picture may be more complicated. Picture: Jim Watson/AFP
That means US companies don’t do so well overseas, which could lead to job cuts.
China is a big part of the problem, with the country manipulating the yuan to keep it low and improve its export market.
Robert Scott, from the Economic Policy Institute, told the Post China had destroyed 3.4 million American jobs, many of them manufacturing roles Mr Trump swore to protect in more rural states.
Mr Trump knows this. He repeatedly said the dollar is “too strong” and during his 2016 presidential campaign vowed to act against China.
But he has not taken action on currencies, instead relying on tariffs and taxes that have the opposite effect.
On Tuesday, the US President threatened additional tariffs on Chinese goods, dashing hopes his meeting with Chinese leader Xi Jinping at the G20 summit in Buenos Aires this week will lead to a de-escalation of tensions.
Mr Trump’s tax cuts and tariffs may not be all good news in the long term. Picture: Alex Brandon/AP
“Investors didn’t need that sort of wake-up call from the President headed into a major meeting for trade negotiations,” said Robert Pavlik, chief investment strategist and a senior portfolio manager at SlateStone Wealth.
“Investors were looking to the G20 meeting as a lifesaving line, but Trump threw cold water on it by talking too tough on trade.”
They are nervous, he added, buying shares in more stable stocks such as utilities and consumer staples.
There are concerns the trade tensions between the US and China will continue into 2019 — and that could have repercussions for the world.
Tariffs could cost American households $2,400 each in 2019, a new study warns
"Trump’s Potemkin Economy"
* Tariffs stemming from President Trump's trade conflicts could cost Americans $915 each, or $2,400 per household, in the form of higher prices, lower wages and lower investment returns in 2019, according to a new study.
* If the tariffs stay in place, the study says, the losses would add up to $17,300 per household by 2030.
* The study, commissioned by the lobbying shop for Koch Industries and conducted by consulting firm ImpactECON, looked at the potential cumulative impact of tariffs.
* The conservative Koch political network has argued against the Trump administration's protectionist trade policies.
Stephanie Dhue | @StephanieDhue Published 12:02 AM ET Tue, 27 Nov 2018 Updated 9:14 AM ET Tue, 27 Nov 2018
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