Trump's Schizoprenic Policies Worrying Wall Street

This is from the Wall Street Journal editorial board today and it is apparent that the Predator in Chief's weaponizing of tariffs and his contradictory and at times, babbling tweets are continuing to destabilize the world economy and undermine the equilibrium that capital requires for profit making and as an inducement to invest; it's risky enough as it is for the investors, the poor souls. I put this on Facebook from the WSJ app but many may not have been able to open it. Methinks the WSJ editorial board is getting a little tired of the Madness of King Trump. As the author of the previous blog post pointed out with regard to the volatility that engulfs the world at the present, ".. there are years of further instability ahead..."  Who knows what will happen in 2020. One thing is certain, the end of the era of the Republican and Democratic Parties dominating US political life draws closer and the Democratic Party reveals through all of this that it cannot be called a party in opposition by any stamp. RM

Source: WSJ

Mount Tariff Erupts Again

Trump hurts his re-election chances with more trade uncertainty.

By

The Editorial Board

Dec. 2, 2019 7:01 pm ET

Just when you think President Trump has reached a moment of trade equilibrium, there he goes again. Mount Tariff erupted once more Monday morning in tweets announcing tariffs on Brazilian and Argentine steel that dampened hope for election-year economic calm.

“Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers,” the President tweeted. “Therefore, effective immediately, I will restore the Tariffs on all Steel Aluminum that is shipped into the U.S. from those countries.” Where to begin?



It’s hard to know exactly what motivated Mr. Trump’s tweets, and he didn’t say when the Section 232 tariffs would be restored. But he seems to think he can use tariffs as a two-fer to help struggling U.S. steel makers while punishing Argentina and Brazil for displacing U.S. farm exports to China. He’s wrong on every count.

The Argentine peso has plunged 37% this year amid hyperinflation and fears that the Peronists who won the recent election will devalue and walk away from their debt as they have so often. But since the October election, Argentina’s central bank has tightened capital controls and set a price floor under the peso.

The Brazilian real has slid somewhat this year amid broader tumult in emerging markets. But its central bank has intervened to shore up the exchange rate. President Jair Bolsonaro is trying to revive the economy with trade agreements, deregulation, and pension and tax reform. Mr. Trump’s new tariffs will undermine political support for those reforms.

Then there’s the question of Mr. Trump’s legal authority. The Trump Administration exempted Brazil and Argentina from his Section 232 steel tariffs in May 2018 after they agreed to export quotas. Then the U.S. Court of International Trade last month said the President lacks unlimited discretion to double tariffs on Turkish steel under Section 232.

A general need to increase tariffs “does not explain the singular imposition of a 50% tariff on Turkish steel articles,” the court ruled. “Although the statute grants the President great discretion in deciding what action to take, it [restricts] the President’s power both substantively, by requiring the action to eliminate threats to national security caused by imports, and procedurally, by setting the time in which to act.”

In other words, the President can’t use tariffs to punish any country for anything any time he’s in the political mood. Before slapping on new tariffs, his Administration would need to explain how steel imports from Argentina and Brazil are a national security threat. The President’s original Section 232 invocation to protect U.S. steel and aluminum manufacturers was legally dubious, and his new tariffs are more so.

Argentina makes up less than 1% of U.S. steel imports—hardly an economic threat to U.S. steel makers. Imports from Brazil have increased by nearly 50% this year, making up for lower imports from Turkey, Canada and other countries that were hit with the Section 232 tariffs. A weaker real isn’t the culprit.

In any case, the benefit of steel tariffs for U.S. metal manufacturers has largely been offset by the collapse of demand caused in large part by economic uncertainty that his protectionist polices have unleashed. Steel prices have plunged by nearly half since June 2018 amid a global manufacturing recession, ebbing trade flows and less capital investment.

U.S. Steel earlier this year laid off workers at plants in Gary, Indiana, and near Detroit due to weaker demand. Primary metal manufacturing jobs have fallen by 7,900 since January and are now 1,500 fewer than when the 232 tariffs were first imposed. Employment in aluminum production is the lowest since 2011. During the first nine months of this year, manufacturing employment fell by 5,600 in Michigan, 1,400 in Ohio, 8,400 in Pennsylvania and 7,200 in Wisconsin. The Institute for Supply Management reported Monday that its U.S. manufacturing index contracted again in November.

As he negotiates with China, the President should be building trade alliances with the rest of the world and reducing protectionist fears. Instead he uses tariffs as a coercive tool at any time for or any reason even against friends who have acted in good faith.

As usual Mr. Trump also sent out contradictory tweets taking credit for a strong U.S. economy while deploring a strong dollar. But the strong U.S. economy attracts capital from around the world, which lifts the dollar. The Fed has already cut interest rates three times this year. No amount of monetary easing is ever enough for Mr. Trump, and no amount of tariffs will satisfy U.S. steel makers.