Author Topic: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum  (Read 113657 times)

Cigarbutt

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #660 on: May 12, 2019, 05:53:20 AM »
The other major country with which US trade is booming is India. India also has a large population, labor pool that can be tapped into.

Exports are seeing 20% jump this year so far, on the back of 30% last year and 20%+ the year before. In each of the last three years, the deficit has fallen.

With massive investment flow from the US to India (from companies, individuals) and a large, prosperous Indian American population - I see this relationship growing.



^ The above mentioned move from Vietnam to China has been going on for a while because labor cost in Vietnam are lower than in China. Also a lot of local labor markets in China a simply saturated.
In the grand scheme of things, the India trade balance deficit is relatively small but still fits in the "unfair" category according to the official definition.
The balance has slightly "improved" lately but is still about 2,5x since 2008:
https://fas.org/sgp/crs/row/IF10384.pdf
The renegotiating phase with potential tit-for-tat is still going on:
https://www.livemint.com/politics/policy/as-us-delays-withdrawing-gsp-benefits-india-postpones-retaliatory-tariffs-1556766723738.html


shalab

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #661 on: May 12, 2019, 07:39:37 AM »
The "unfair" category is correct - I sent over papers to open a brokerage account in India and they were held up by customs for more than a month! I spent a bunch of cash to send it within a week. All that was in it were a bunch of documents and nothing of value. It is not fair to have almost zero  tariffs on one side and 50-100% tariffs on the other. Then there are non-tariff barriers like the customs case where things are held up with no reason.

Despite this, I see a bright future for US and India relations. US companies operate in India more freely than in China. Although there is trade/service deficit, more cash is being invested and investment income coming back to US. India is also a defense ally. Some of it is captured in this doc from us trade representative. 

https://ustr.gov/countries-regions/south-central-asia/india

US companies/individuals own property and investments in Indian companies. Cummins India, Proctor Gamble India, Colgate Palmolive India are all offshoots of US listed companies with the parent still owning significant chunks. BTI owns a third of ITC. The internet companies also have a foot hold in India and are doing well.


The other major country with which US trade is booming is India. India also has a large population, labor pool that can be tapped into.

Exports are seeing 20% jump this year so far, on the back of 30% last year and 20%+ the year before. In each of the last three years, the deficit has fallen.

With massive investment flow from the US to India (from companies, individuals) and a large, prosperous Indian American population - I see this relationship growing.



^ The above mentioned move from Vietnam to China has been going on for a while because labor cost in Vietnam are lower than in China. Also a lot of local labor markets in China a simply saturated.
In the grand scheme of things, the India trade balance deficit is relatively small but still fits in the "unfair" category according to the official definition.
The balance has slightly "improved" lately but is still about 2,5x since 2008:
https://fas.org/sgp/crs/row/IF10384.pdf
The renegotiating phase with potential tit-for-tat is still going on:
https://www.livemint.com/politics/policy/as-us-delays-withdrawing-gsp-benefits-india-postpones-retaliatory-tariffs-1556766723738.html

Cigarbutt

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #662 on: February 08, 2020, 05:19:58 AM »
Update about 'progress' on this front.

https://fred.stlouisfed.org/series/BOPGTB
Basically more of the same.

https://www.lowyinstitute.org/the-interpreter/chart-week-global-trade-through-us-china-lens
Growth in international trade has been the story of the last few decades and China, in a way, is no more in the catch-up phase.

https://research.stlouisfed.org/publications/economic-synopses/2019/05/17/historical-u-s-trade-deficits
I tend to think that Mr. Buffett was right about his concerns related to persisting trade deficits. The link above puts a benign twist to the issue. At some point, the US ran deficits in order to finance investments in productive capacity. Where the proceeds of international capital deficits are invested these days is the point of contention and debate. On a relative basis, the US has been investing in "services' and social capital with uneven results and China has decided to invest in an imposed social structure and some international ventures.
https://www.visualcapitalist.com/wp-content/uploads/2020/01/chinese-diplomacy-spending.html

The assumptions include that China will become a less productive welfare state and will continue to be friendly. I think the US (and the rest of the developed world) will end up in a favorable position but I continue to wonder about the transition phase.

Cigarbutt

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #663 on: May 29, 2020, 06:37:37 AM »
With Bretton Woods, the USD became as good as gold and, in 1971, there came the "temporary" suspension of conversion and the dollar itself became THE reserve currency whose status has been maintained and if anything has gotten stronger.
This development gave rise to an exorbitant privilege that facilitated the development of structural trade deficits. This reserve currency status tends to mitigate the pressures that would tend to depreciate the value of the USD thereby pushing the limit of the consumption/saving excess.
Current trend is unfavorable in the long term.
Mr. Buffett had written a nice conceptual article about this in 2003.
http://archive.fortune.com/magazines/fortune/fortune_archive/2003/11/10/352872/index.htm
He suggested that currency exchange adjustments were likely not enough.

Investment implications:
Ingredients for competitive devaluations and protectionist policies are in place, especially if the economy loses steam.
Hoping for a new equilibrium.
I understand that individuals and family units are not countries because countries are, in theory, perpetual but I wish that countries would think like a responsible citizen sometimes. We need "to test all of our abilities to find a solution".
I am long the USD but the conclusion is based on relative valuations. :)
What is the current academic view of Triffin's Paradox?
The Triffin dilemma, from a noob's perspective, implies that holding the status of international currency means providing USD liquidity to the world. The problem is the potential lack of discipline. In the 70s, inflation reared its ugly head but, with the fall of the Communist Camp, the USD became again the only game in town with, in effect, only residual 'goodwill' left to impose discipline.
International trade has entered a negative trend (started in 2019) and accelerated with the pandemic. The effects so far have been felt both in exports and imports but, if the trend continues, a global slowing of international trade will tend to 'help' the trade balance (this will have mathematical implications: savings, consumption etc).
In terms of discipline, this is a quote that summarizes well the age-old story of borrowers (from Mr. Paul Volcker when he candidly recognized the limits of central bankers): "It is human nature to like and demand growth. If credit is so freely available that it is in fact thrust upon you, you are likely to use it, sometimes even against your more considered judgement".
Some contend that the Paradox is a myth. What we have may be the best among worse options but it does not make sense to have a single international currency in a world that is becoming more multi-polar.
The outcome is still unclear but it's hard to see the light at the end of the tunnel when the hole is getting deeper.

meiroy

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #664 on: May 29, 2020, 06:47:36 AM »

Discipline in the sense of lack of discipline due to greed and such?

Cigarbutt

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #665 on: May 29, 2020, 07:16:18 AM »
Discipline in the sense of lack of discipline due to greed and such?
Hi meiroy. You should probably skip my posts as i have no formal economic or financial education. The balance aspect described does not entail a paternalistic or ideologic component, it's based on a high school biology concept: homeostatsis.
https://en.wikipedia.org/wiki/Homeostasis
Personal experience in the field reveals that humans have become quite good at maintained deviations from homeostasis with great long term consequences (with immediate pleasure however).

The Gold Standard system was strong conceptually from the homeostatic point of view but could not survive a fixed exchange rate pattern in the 30s after global trade contracted 60%.
After the clearing mechanism (war), the world was filled with a sense confidence and promise (that became clear over time as doubt disappeared). The US was a surplus country and a willing international creditor. Bretton Woods, initially, relied on the ultimate convertibility which was eliminated in 1971, leaving only residual goodwill or trust as the tool. Human nature being what is is, a crisis will be needed to reestablish some kind of anchor with effective regulatory mechanisms and to reestablish some kind of balance. A fascinating aspect is how efficient some actors are at allowing the persistence of worsening deviations. Macro is a slow but grinding march and greed is the icing on the cake?

D33pV4lue

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #666 on: May 29, 2020, 12:29:19 PM »
Do you know if steel and aluminum are major imports for the U.S.? I believe I read/heard that it isn't a very big import, and it becomes a convenient way to act tough on trade in some ways.

33% of steel is imported.
https://www.trade.gov/steel/countries/pdfs/imports-us.pdf

90% of aluminum is imported.
https://www.reuters.com/article/usa-trade-steel-aluminium-ahome/column-which-sledgehammer-will-trump-use-on-u-s-aluminium-imports-andy-home-idUSL8N1QA3W1

Canada is the #1 exporter of steel and aluminum. Maybe he is trying to use tariffs as a leverage in NAFTA negotiations.

I know I am a little late to this party but I was reading the thread and since I didn't see anyone mention this. I think it is important to note. The tariff on steel (Raw Material) is not the problem. It is the lack of Tariffs on downstream products. Section 232 decimated the US steel industry because the finished product can be imported without tariffs and sold at a significantly lower price. Steel producers that make PC strand or other steel derivatives are competing with imported finish products and selling for around break-even or even at a loss to maintain market share. This is not the first time this has happened, every time we have implemented steel tariffs administrations have neglected to expand the provisions to include downstream products. 

Read the Footnotes

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #667 on: May 29, 2020, 12:35:15 PM »
Do you know if steel and aluminum are major imports for the U.S.? I believe I read/heard that it isn't a very big import, and it becomes a convenient way to act tough on trade in some ways.

33% of steel is imported.
https://www.trade.gov/steel/countries/pdfs/imports-us.pdf

90% of aluminum is imported.
https://www.reuters.com/article/usa-trade-steel-aluminium-ahome/column-which-sledgehammer-will-trump-use-on-u-s-aluminium-imports-andy-home-idUSL8N1QA3W1

Canada is the #1 exporter of steel and aluminum. Maybe he is trying to use tariffs as a leverage in NAFTA negotiations.

I know I am a little late to this party but I was reading the thread and since I didn't see anyone mention this. I think it is important to note. The tariff on steel (Raw Material) is not the problem. It is the lack of Tariffs on downstream products. Section 232 decimated the US steel industry because the finished product can be imported without tariffs and sold at a significantly lower price. Steel producers that make PC strand or other steel derivatives are competing with imported finish products and selling for around break-even or even at a loss to maintain market share. This is not the first time this has happened, every time we have implemented steel tariffs administrations have neglected to expand the provisions to include downstream products.
Now is really time to bring back the Smoot-Hawley Tariff Act. It worked great last time.

Cigarbutt

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminum
« Reply #668 on: September 06, 2020, 05:52:38 AM »
The topic of the day now is if people should get a vaccine form an individual perspective(?). Sorry to occupy some useful place here but there are certain aspects of collective behaviors related to international trade which are truly amazing at this point.


The specific goal of this post is related to the following, when it was suggested (July 2020, on the website of a leader of one of the 'regional' Federal Reserve Banks) that the US should not rely on foreign savings:
""Unlike in prior recessions, remarkably, the personal savings rate has soared to 20 percent from around 8 percent in January. Because we are saving more, we have the resources to support those who have been laid off. Typically, when the government runs deficits, it must rely on foreign investors to buy the debt because Americans arenít generating enough savings to fund it. But we can finance the added deficits for COVID-19 relief from our own domestic savings. Those savings end up funding investment in the economy. Thatís why traditional concerns about racking up too much government debt do not apply in this situation. It is much safer for a country to fund its deficits domestically than from abroad."   (my bolds)

Am i the only one seeing this QE-related subterfuge?
@wabuffo, in the unlikely scenario that you read this, i get it that it's the Treasury that's issuing the paper and there are many willing participants but who's doing the smoke and mirrors part?
 

Spekulatius

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Re: Mr. Trump to Impose Stiff Tariffs on Steel and Aluminums
« Reply #669 on: September 06, 2020, 10:29:08 AM »
Isnít the high personal savings rate just a consequence of the Public deficit spending?  These towns directly connected.n Also, recently the saving rate has gone down from a peak of almost 20% To now 10%l,as the UI benefits have been Reduced and the stimulus checks havenít been repeated.


As regards to the trade balances, it seems like the Trade war is basically over. This doesnít fit the narrative, but thatís what the numbers are implying.
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