US VS G7

[Remius]

That's why credit rating agencies like Moody are taken very seriously by various governments.

Well most governments.  The McGuinty/Wynne government being one exception.

 

[Altair]

Well most governments.  The McGuinty/Wynne government being one exception.

their debt was still "affordable"

Its currently around 37 percent debt to GDP. Quebec got up 54 percent before it cried uncle

 

[a_majoor]

What happened to the Libertarian in you?

The Libertarian in me still feels reducing State power is the best way to go, but the realist sees the world is overrun by rent seekers. It is hard to advocate for voluntary cooperation when your hand is extended over a tank of piranhas.

I am trying to see the "trade war" through the lens of President Trump's negotiations with the DPRK, the main problem with any analysis of a global trade war is there are so many different players and so many different variables (including temporal variables: many effects will become apparent over different time frames so what may seem like a success or failure could really be part of the longer term shaking out process). China may have a strong hand against the United States financially, but imports calories and raw materials in order to survive, any smaller player like Australia could make a move there for their own advantage, and upset China's position against the United States.

This is why I think the calls for a "United Front" will fail, and this is where the United States has the ultimate advantage. Provoking a global trade war pits the different players against each other, rather than the United States attempting to subdue them one by one. I even see the hand of Secretary Mattis at work here. This process will change the way alliances, regional trade groups and even internal organizations relate to each other, perhaps one of the effects will be to limit the ability of the more bellicose players on the international scene to make long term plans of their own.

As for me, I'm settling in with a big bag of popcorn and casting over my bookshelf for good historical periods to study. Margaret MacMillan, Barbara W. Tuchman, and Naill Ferguson's studies of the period prior to WWI seems a good place to start.

 

[Remius]

So I found this article.

https://www.nytimes.com/2018/06/22/us/politics/trump-tariff-waivers.html

I was not aware of waivers.

But if this article is to be believed then some 20,000 US companies have filed for waivers (some might be the same company with multiple waiver requests I think though).

 

[Altair]

So I found this article.

https://www.nytimes.com/2018/06/22/us/politics/trump-tariff-waivers.html

I was not aware of waivers.

But if this article is to be believed then some 20,000 US companies have filed for waivers (some might be the same company with multiple waiver requests I think though).

Because the president is starting to rattle the business class.

They probably loved the tax cuts,  which they have been using to buy back stock and make themselves rich,  but this is going to cut into growth and expansion,  which will cost them in the long run.

 

[Altair]

The Libertarian in me still feels reducing State power is the best way to go, but the realist sees the world is overrun by rent seekers. It is hard to advocate for voluntary cooperation when your hand is extended over a tank of piranhas.

I am trying to see the "trade war" through the lens of President Trump's negotiations with the DPRK, the main problem with any analysis of a global trade war is there are so many different players and so many different variables (including temporal variables: many effects will become apparent over different time frames so what may seem like a success or failure could really be part of the longer term shaking out process). China may have a strong hand against the United States financially, but imports calories and raw materials in order to survive, any smaller player like Australia could make a move there for their own advantage, and upset China's position against the United States.

This is why I think the calls for a "United Front" will fail, and this is where the United States has the ultimate advantage. Provoking a global trade war pits the different players against each other, rather than the United States attempting to subdue them one by one. I even see the hand of Secretary Mattis at work here. This process will change the way alliances, regional trade groups and even internal organizations relate to each other, perhaps one of the effects will be to limit the ability of the more bellicose players on the international scene to make long term plans of their own.

As for me, I'm settling in with a big bag of popcorn and casting over my bookshelf for good historical periods to study. Margaret MacMillan, Barbara W. Tuchman, and Naill Ferguson's studies of the period prior to WWI seems a good place to start.

It sure will.

Probably not a good thibg in the case of america. If america is seen as untrustworthy, people will simply work without it as best they can.

Europe and china working together on trade.

France calling for a G6

Europe creating its own unified military organization, with the goal of working independently from NATO,  aka, the USA.

All this is showing is the USA losing influence in global affairs.  Yay change!

 

[Remius]

A CBC take on how the retaliatory tariffs could impact Canadians.

http://www.cbc.ca/news/business/tariffs-u-s-steel-consumer-goods-surtax-1.4723277

Glad I recently bought some appliances. 

 

[Cloud Cover]

Ian Bremmers group publishes a weekly called Signal (yikes!): Anyway it is usually pretty light and always interesting to read. part of this mornings edition is based on the escalating trade war with China, with some interesting background:

"While the Treasury Department had been widely expected to announce new investment restrictions this week, it now looks like Congress might take the lead, with less certainty around timing. Either way, the result will be a new form of pressure on China.

Here’s what makes this next phase of the US-China spat different:

The future matters more than the past. The Trump administration’s technology tariffs (see graphic below) are meant to compensate for what the US considers to be China’s long history of technology theft and unfair trade practices. By nature, they’re backward-looking. The new investment regime, in contrast – which encompasses both new limits on Chinese investment in the US and potentially heightened government scrutiny of US high-tech exports – is aimed at stopping future transfers of “industrially significant technology” from the US to China. Even if the Washington and Beijing can reach a truce on tariffs, the investment restrictions are likely to linger. They may even become permanent.

Concentrated pain. The new investment regime will target high-tech industries that Chinese President Xi Jinping considers vital to cementing his country’s power and prestige in the 21st century. Beijing will look to retaliate by making life harder for US companies in China, but China’s dependence on the US for key components like cutting-edge semiconductors mean it will feel real, unavoidable pain.

The big picture: This is an irresistible-force-meets-immovable-object situation, where both sides will be reluctant to cave, and the global tech sector risks getting caught in the middle.


This is the real trade war that will tank everything else. If the US tightens trade with tariffs on its closest allied trading partners, and shutters out it largest creditor and main non-North American trading partner who also happens to be the main adversary, the entire global economy will shift.

 

[Altair]

Ian Bremmers group publishes a weekly called Signal (yikes!): Anyway it is usually pretty light and always interesting to read. part of this mornings edition is based on the escalating trade war with China, with some interesting background:

"While the Treasury Department had been widely expected to announce new investment restrictions this week, it now looks like Congress might take the lead, with less certainty around timing. Either way, the result will be a new form of pressure on China.

Here’s what makes this next phase of the US-China spat different:

The future matters more than the past. The Trump administration’s technology tariffs (see graphic below) are meant to compensate for what the US considers to be China’s long history of technology theft and unfair trade practices. By nature, they’re backward-looking. The new investment regime, in contrast – which encompasses both new limits on Chinese investment in the US and potentially heightened government scrutiny of US high-tech exports – is aimed at stopping future transfers of “industrially significant technology” from the US to China. Even if the Washington and Beijing can reach a truce on tariffs, the investment restrictions are likely to linger. They may even become permanent.

Concentrated pain. The new investment regime will target high-tech industries that Chinese President Xi Jinping considers vital to cementing his country’s power and prestige in the 21st century. Beijing will look to retaliate by making life harder for US companies in China, but China’s dependence on the US for key components like cutting-edge semiconductors mean it will feel real, unavoidable pain.

The big picture: This is an irresistible-force-meets-immovable-object situation, where both sides will be reluctant to cave, and the global tech sector risks getting caught in the middle.


This is the real trade war that will tank everything else. If the US tightens trade with tariffs on its closest allied trading partners, and shutters out it largest creditor and main non-North American trading partner who also happens to be the main adversary, the entire global economy will shift.

Yeah, pretty much. Watch for the rest of the world to ignore US patents as well, and have China start pumping out US products with cheap labour. That round of the fight will be fun as well, especially if the US has trouble exporting due to having tariffs placed on them.

Speaking of

Donald J. Trump
@realDonaldTrump
Harley-Davidson should stay 100% in America, with the people that got you your success. I’ve done so much for you, and then this. Other companies are coming back where they belong! We won’t forget, and neither will your customers or your now very HAPPY competitors!

I love how the president doesn't acknowledge his role in all of this.

Harley Davidson is just the public face of what is going on across america right now. Tariffs making things more expensive coming in, tariffs making things harder to export. The squeeze is on, which is why you see the President of the United States twitter raging against an American icon.

 

[a_majoor]

Evidently the idea that individuals, individual interest groups, nations and even coalitions might have competing interests seems lost in the rush to bash the US.

Europe and China cooperating on trade seems great on the surface, but how closely are the EU and the Sinosphere actually aligned? The EU's bureaucracy is infamous for things like nitpicking over the definition of a banana, or at one point only allowing Japanese electronics entry through one port in Southern France. China builds cars which have exact panel lines to existing Buick products (you can fit a door or window or any other body part without any modifications whatsoever) but insists these are indigenous designs, and BTW, GM still does not get to sell cars in China....I see a great relationship between the two already.

So the reality is everyone is scrambling, interests are going to be knocked very hard against competing interests and the current status quo is going to be overturned regardless of what the chattering classes or the various national and subnational players desire. How to keep from being swept up in the vortex is really the name of the game, now.

As another aside, I had coffee with Professor Salim Mansour (former Sun columnist) and his take on this for Canada is that we now have to decide once and for all if we are going to be a "North American" nation, or attempt to be a "European" nation. His view is Canada needs to decide where our actual long term interests are aligned, and realistically our national interests are largely aligned with those of the United States. This is not to say we cannot partake of agreements and deals with other nations and organizations, but the primary interest should always be to protect and enhance our national interests and natural alignments. Trying to become a "European" nation is not going to be a good fit, and the odds that the interests of the EU or even individual European nations will be aligned with those of Canada really does not pass the sniff test.

 

[Altair]

Evidently the idea that individuals, individual interest groups, nations and even coalitions might have competing interests seems lost in the rush to bash the US.

Europe and China cooperating on trade seems great on the surface, but how closely are the EU and the Sinosphere actually aligned? The EU's bureaucracy is infamous for things like nitpicking over the definition of a banana, or at one point only allowing Japanese electronics entry through one port in Southern France. China builds cars which have exact panel lines to existing Buick products (you can fit a door or window or any other body part without any modifications whatsoever) but insists these are indigenous designs, and BTW, GM still does not get to sell cars in China....I see a great relationship between the two already.

So the reality is everyone is scrambling, interests are going to be knocked very hard against competing interests and the current status quo is going to be overturned regardless of what the chattering classes or the various national and subnational players desire. How to keep from being swept up in the vortex is really the name of the game, now.

As another aside, I had coffee with Professor Salim Mansour (former Sun columnist) and his take on this for Canada is that we now have to decide once and for all if we are going to be a "North American" nation, or attempt to be a "European" nation. His view is Canada needs to decide where our actual long term interests are aligned, and realistically our national interests are largely aligned with those of the United States. This is not to say we cannot partake of agreements and deals with other nations and organizations, but the primary interest should always be to protect and enhance our national interests and natural alignments. Trying to become a "European" nation is not going to be a good fit, and the odds that the interests of the EU or even individual European nations will be aligned with those of Canada really does not pass the sniff test.

Canada should be neither of those things.

Canada is in an ideal position, with a presence on both coasts, and connected to the USA.

CETA is a good trade deal, allowing Canada to access the European Market, with a seperate free trade deal probably in place after Brexit.

TPP is a good trade deal allowing us to enter the south american market and increase trade with Asian.

At some point both China and Canada will get serious about a trade deal there, maybe with trade barriers going up around America, that will speed things up.

NAFTA would be nice to round things out, but considering the fact that it's not yet dead, and would need to go through congress to kill it, maybe we Canadians can afford to wait it out until America gets more friendly management.

 

[daftandbarmy]

Canada should be neither of those things.

Canada is in an ideal position, with a presence on both coasts, and connected to the USA.

CETA is a good trade deal, allowing Canada to access the European Market, with a seperate free trade deal probably in place after Brexit.

TPP is a good trade deal allowing us to enter the south american market and increase trade with Asian.

At some point both China and Canada will get serious about a trade deal there, maybe with trade barriers going up around America, that will speed things up.

NAFTA would be nice to round things out, but considering the fact that it's not yet dead, and would need to go through congress to kill it, maybe we Canadians can afford to wait it out until America gets more friendly management.

Or we just artificially price all our natural resource products at rock bottom prices, and corner the market globally for everything the world needs to run modern economies e.g., EFF YOU UNCLE SAM et al

 

[Colin Parkinson]

I doubt very much China is going to "open" it's markets to use, for them free trade is full access for them and a little bit for us. Sort of like the US, but worse.

 

[Altair]

http://www.businessinsider.com/trump-trade-war-destroy-100000-us-jobs-oxford-economics-2018-6

The trade conflict sparked by President Donald Trump could cause 100,000 Americans to lose their jobs next year, a new report argues.

The report, published by the research house Oxford Economics, says in a worst-case scenario Trump's tariffs would knock 0.1 percentage points off US gross domestic product in 2019 and cost a significant number of jobs. This scenario would include substantial tariffs on the European automotive sector — something Trump has threatened but so far has not enacted.

Pleasant news for sure.

https://www.cnbc.com/2018/06/27/how-a-trade-war-impacts-you.html

On the flip side, U.S. companies dependent on imported aluminum and steel — say for the production of cars, appliances and canned food or drinks, like soda and beer — will have to absorb the higher costs somehow, which could also mean layoffs or price hikes on finished products down the road, according to Michael Salerno, lead director of global banking at First National Bank of Omaha.

There will be some lag time, Salerno said, as companies grapple with the challenge, but it could translate into “higher prices at the register around the holiday season.”

One estimate puts the effects of this trade conflict at 250,000 in lost jobs and $210 in higher costs for an average family.

And just so everyone remembers, this is the effect from the opening round of a trade war. The more everyone goes down the downwards spiral of counter tariffs on top of counter tariffs, the more the USA will be hurting.

 

[Altair]

https://www.independent.co.uk/news/business/analysis-and-features/trump-trade-war-us-car-factory-volvo-south-carolina-tariffs-a8417061.html

The south will one day be the ground zero for US auto manufacturing,” predicts Kevin Graham, the Volvo plant’s director of assembly, in a cheeky warning to the “motor city” of Detroit.

Yet Ridgeville could also be ground zero for collateral damage from Donald Trump’s kamikaze trade war.

The US president fired up Twitter last Friday by going public with a new threat to impose 20 per cent tariffs on European Union cars and car part imports to the US.

Volvo will import a great deal of its parts for Ridgeville, including engines from Sweden and (possibly for a while) batteries from China. A 20 per cent tariff would inflict serious economic damage on the new Ridgeville plant.

But that’s not all. Volvo intends to export around half of the cars it manufactures in South Carolina. If the EU or China hike tariffs in response to Trump’s, this European-Chinese company could get doubly walloped.

“Good thing they built it before the threats, because they may not have come otherwise” says Frank Hefner, an economist at the College of Charleston.

It's absolutely incredible the amount of collateral damage that is going to occur from this trade conflict between supposed allies.

Absolutely incredible and sad.

 

[Humphrey Bogart]

Canada should be neither of those things.

Canada is in an ideal position, with a presence on both coasts, and connected to the USA.

CETA is a good trade deal, allowing Canada to access the European Market, with a seperate free trade deal probably in place after Brexit.

TPP is a good trade deal allowing us to enter the south american market and increase trade with Asian.

At some point both China and Canada will get serious about a trade deal there, maybe with trade barriers going up around America, that will speed things up.

NAFTA would be nice to round things out, but considering the fact that it's not yet dead, and would need to go through congress to kill it, maybe we Canadians can afford to wait it out until America gets more friendly management.

Altair, this bottom bit is one of the best things I've seen written on here.  We know that the US President has a limited life expectancy, at most another 6 1/2 years.  The next election is 2 1/2 years away and Trump has a very limited window of time over the next six months to a year before he will need to start campaigning again. 

Time is our greatest asset in this disagreement.  I wasn't upset with Trudeau because he disagreed with President Trump, I was upset with the way he went about it.  Trudeau used the crisis to get a few sound bites in for a short term political boost.  The problem I have is that by doing so, he hurt Canadians.  I have very little respect for Trudeau as a statesman, he is another version of a Trump painted in a different colour.  A cheesy Canadian Pop Icon.

We should have hard disagreements with the Americans but it should be kept behind closed doors. 

 

[Infanteer]

Altair, this bottom bit is one of the best things I've seen written on here.

Yes, and it sounds like something that was said about six pages ago....

Lol.  The usual refrain is that democratic governments aren't good at statecraft and working the international system because they only see things in 4 (or 5) year cycles.  Good statecraft requires looking beyond electoral cycles.

Some of you here aren't even looking past the next news cycle.  Look to the long game - the Canadian-American relationship has survived worse (look how Nixon and Trudeau Sr. got on) and is greater than the politik between election cycles.

 

[Altair]

Altair, this bottom bit is one of the best things I've seen written on here.  We know that the US President has a limited life expectancy, at most another 6 1/2 years.  The next election is 2 1/2 years away and Trump has a very limited window of time over the next six months to a year before he will need to start campaigning again. 

Time is our greatest asset in this disagreement.  I wasn't upset with Trudeau because he disagreed with President Trump, I was upset with the way he went about it.  Trudeau used the crisis to get a few sound bites in for a short term political boost.  The problem I have is that by doing so, he hurt Canadians.  I have very little respect for Trudeau as a statesman, he is another version of a Trump painted in a different colour.  A cheesy Canadian Pop Icon.

We should have hard disagreements with the Americans but it should be kept behind closed doors.

It's a delicate dance that any prime minister must undertake, for his domestic audience will want to know the governments position on tariffs and what they intend to do about it, all the while without poking the bear.

It's telling however, that Trudeau, by in large, kept to the same talking points that he did before the American President blew up on twitter.

https://www.cbc.ca/news/politics/u-s-tariffs-canada-insulting-trudeau-1.4689819

As tariff battles commence and a new NAFTA deal has yet to take shape, Canada's limits as the kind neighbour are being tested, the prime minister said.

"We step up when we need to. We're going to be polite, but we're also not going to be pushed around," Trudeau said.

This article is dated june 3rd, before the G7 conference.

http://thehill.com/policy/international/372147-trudeau-warns-us-that-canada-will-not-be-pushed-around-on-nafta

Canadian Prime Minister Justin Trudeau warned the United States on Friday that Canada "will not be pushed around" on trade negotiations as the two countries, along with Mexico, seek to renegotiate the North American Free Trade Agreement (NAFTA).

This is dated February 3rd.

This was a consistent message from the Prime Minister, I he was asked about it and this was his standard response. Now maybe the American President didn't notice it the other times he said it, and only noticed it now, but in all honesty, how could Trudeau know that the same standard response he has been using for months would blow up that one time?

This speaks more to the unpredictability of the US president and his lack of any sort of diplomacy than it does to the Canadian response to NAFTA and tariffs.

 

[Altair]

Yes, and it sounds like something that was said about six pages ago....

Not quite, as my statement was limited to NAFTA negotiations.

NAFTA cannot die without congressional approval, so if we stall out on negotiations until a new president is chosen in either 2 or 6 years, the current deal wont die.

 

[SeaKingTacco]

The problem with all of this is, once the spiral of tariff/counter-tariff takes off and the economic damage begins to mount, positions will harden, not weaken.

No political leader on either side is going to be the one to admit that his tariff resulted in job loses on his own side- it is always going to be the other guy's fault.

It becomes a real war, where climb down becomes impossible.

If something doesn't change, this summer will be remembered as the start of the Great Depression of 2018 (at least).  I am not kidding.