Th3 Core

Why We Are Here => Economics & Investing => Topic started by: littleman on May 31, 2018, 06:44:41 PM

Title: trade war
Post by: littleman on May 31, 2018, 06:44:41 PM
I'm watching the Canadian response now.  Looks like an exact proportional measure.

https://www.youtube.com/watch?v=aHxzG-VdO_A

Title: Re: trade war
Post by: Torben on May 31, 2018, 07:26:28 PM
Noboddy wins a trade war
Title: Re: trade war
Post by: rcjordan on May 31, 2018, 09:02:01 PM
Yeah, but Trump is playing to his protectionist base.
Title: Re: trade war
Post by: littleman on May 31, 2018, 09:26:33 PM
There probably aren't two economies more intertwined than Canada and the USA.  I don't think the stock market is convinced this is going to happen yet.
Title: Re: trade war
Post by: Brad on May 31, 2018, 11:40:35 PM
Yeah, but Trump is playing to his protectionist base.

This.  He won't win, but he will say he tried more than anyone. 

The thing is "free trade" and a "level playing field" seems to benefit multinational corporations, investment bankers, politicians, lawyers and all the usual camp followers but somehow developed nations get screwed.
Title: Re: trade war
Post by: littleman on June 01, 2018, 04:46:27 AM
>developed nations get screwed

Quote
President Trump campaigned on going hard after China for ripping off the United States on trade. Yet a year and a half into his presidency, Trump has put more tariffs on longtime U.S. allies than he has on China, his supposed "bad guy" on trade. The Trump administration announced new tariffs Thursday on the European Union, Canada and Mexico.

https://www.washingtonpost.com/news/wonk/wp/2018/05/31/trump-has-officially-put-more-tariffs-on-u-s-allies-than-on-china/
Title: Re: trade war
Post by: Brad on June 01, 2018, 10:47:16 AM
Part of the problem here is there would be no populist, protectionist base for Trump to play to, if the American economy was going well.  It is for the big corporations but it is not going well for rank and file people.  I live in the Rust Belt, I've been watching this for 40 years.

The true lesson is this: at some point, for political stability, you have to keep people employed and reasonably content.  IF you don't people start looking for new leaders or even a new system.  Europe understands this because they have been through more hard times than US.  China understands this.

American elites, don't seem to understand this.  But the anger and fear with Trump's base is very real and it's not going away it's spreading, it's not just blue collar workers and farmers, it's now people with law degrees and massive student loans substitute teaching Middle School because they can't find work.  Trade war or not, you have to keep your people employed and with hope for a decent future or you are in deep trouble.

My contention is we have off shored too much, in return for fast profits.  I can buy an electric toothbrush that says "Made in Germany" all over it for $40.  Why doesn't that say Made in USA?  I look at that and think "we are not even trying".
Title: Re: trade war
Post by: grnidone on June 01, 2018, 07:43:21 PM
>I live in the Rust Belt, I've been watching this for 40 years.

Where do you live, Brad?

>Why doesn't that say Made in USA? 

One word:  shame.  It has become shameful to "work hard." 

"Go to college, get your degree," has been preached ad nauseum to a point where a degree is meaningless because it doesn't actually teach you how to work. 

I think we have shamed so many people that working in a factory is where "stupid" people go to work, instead of respecting them like the skilled tradespeople they are.
Title: Re: trade war
Post by: buckworks on June 01, 2018, 08:20:47 PM
Quote
"The society which scorns excellence in plumbing as a humble activity and tolerates shoddiness in philosophy because it is an exalted activity will have neither good plumbing nor good philosophy: neither its pipes nor its theories will hold water." -- John W. Gardner
Title: Re: trade war
Post by: Brad on June 01, 2018, 08:37:51 PM
>Where do you live, Brad?

Near Chicago. NW Indiana to be exact.  There is a steel mill about a mile away which used to employ 40,000 people, now about 5,000.  Years ago the state built a 4 lane highway to handle all the mill workers arriving and leaving at shift change, now that highway is only lightly used.  That's just one mill, they are all like that.  Many have closed down.  And the companies that serviced the mills, or fabricated steel have closed.

Pick a heavy industry and the story is the same - decline.

My cousin farms his family farm in Iowa.  In the 1960's and 70's that farm supported a family of 4.  Now my cousin works in a factory full time and the farm is a 'hobby farm' (his words) which produces income to be sure but not enough to support his family.

My point is that not everybody can go to collage.  Not everybody can sell stuff, shuffle papers, program computers etc.  We as a nation, have to at least provide the hope that there will be a variety of decent paying jobs available. Jobs that aren't one quarter earnings report away from going under.  Hook or by crook you have to provide some hope for a decent future.

Other countries somehow manage to pay their workers a decent wage, have health, safety and environmental standards, have pensions and don't get called out for protectionism.  I go back to that German electric toothbrush example: somehow they make a good product, ship it from Germany to the US, sell it to me on Amazon for $40 and still make a profit.  We need to do that.  Here in the US. Hook or by crook.  Our corporations are not even trying to make those kind of jobs here anymore.

>tradespeople

I think the German's have done well with their apprentice programs.
Title: Re: trade war
Post by: littleman on June 01, 2018, 08:40:15 PM
Brad I agree with you.  One thing German has that the US doesn't is that all the major companies are partially owned by their employees.  This ensures that the decisions made have a more long term focus and that workers concerns actually get addressed. 

Quote
Codetermination in Germany is a concept that involves the right of workers to participate in management of the companies they work for.[1] Known as Mitbestimmung, the modern law on codetermination is found principally in the Mitbestimmungsgesetz of 1976. The law allows workers to elect representatives (usually trade union representatives) for almost half of the supervisory board of directors. The legislation is separate from the main German company law Act for public companies, the Aktiengesetz. It applies to public and private companies, so long as there are over 2,000 employees. For companies with 500–2,000 employees, one third of the supervisory board must be elected.

https://en.wikipedia.org/wiki/Codetermination_in_Germany

Grnidone, I think this is a bit of blaming the victim.  I know plenty of people who would have jumped at the chance of a stable factory job if they still existed.  Many of the people I went to school with had dads that lost their jobs in nearby factories.



Most of this is meaningless today.  Total manufacturing is actually up in the US, but total employment in manufacturing has not changed much.  Ten years from now we'll be wondering what China is going to do with their 300 million that no longer work in factories.
Title: Re: trade war
Post by: Chunkford on June 02, 2018, 10:14:06 AM
I have to laugh at this,
US increases levies on steel & aluminium, the EU hits back by increasing levies on Levi jeans and bourbon..... I mean really, is that going to make a difference?
http://www.bbc.co.uk/news/business-43285325
Title: Re: trade war
Post by: Brad on June 02, 2018, 11:21:44 AM
>bourbon

Heh, bourbon is serious business. :)

Back when this was all first proposed, China made a detailed list of all the things it would ban from the US.  It nowhere near matched the US ban dollarwise.  But each product chosen would have a major impact in a state where Trump support was highest. (ie soybeans = Iowa).  Every single product had been well thought out by the Chinese.  I had to admire the finesse.

I suspect the EU will do the same.

>Levis

Are they still made in the US?
Title: Re: trade war
Post by: Chunkford on June 02, 2018, 01:31:48 PM
Back when this was all first proposed, China made a detailed list of all the things it would ban from the US.  It nowhere near matched the US ban dollarwise.  But each product chosen would have a major impact in a state where Trump support was highest. (ie soybeans = Iowa).  Every single product had been well thought out by the Chinese.  I had to admire the finesse.

oooh, that's devious. Didn't think about it like that.
Title: Re: trade war
Post by: Rumbas on June 02, 2018, 03:54:15 PM
>I mean really, is that going to make a difference

Probably. We do buy A LOT of your sh!t like that. Most popular sports and fashion brands. However, IMO nothing that we can't live without.

When I grew up in the late 70's/80's ANYTHING from the US would be the most awesome thing to get your hands on. Recently, not so much and today, with Trump, nothing at all I'm affraid.
Title: Re: trade war
Post by: BoL on June 02, 2018, 06:13:39 PM
>80's ANYTHING from the US would be the most awesome thing

Definitely for me when growing up in the 80s in Scotland. Michael Jackson, WWF, hollywood... what wasn't to like.

Eye rolls when Western leaders talk about the free world, though. Protectionism seems to rear its head now and again, pretty sure there were similar tariffs in the early 2000s by Bush.
Title: Re: trade war
Post by: littleman on June 02, 2018, 06:52:30 PM
>80's ANYTHING from the US would be the most awesome thing

I've been told the Polish still think we're cool (for now).
Title: Re: trade war
Post by: Mackin USA on June 04, 2018, 11:31:22 AM
The US has been in "discssions" on trade for decades.

It was time to move those discussions along.

The stock market doesn't seem too concerned:
https://www.marketwatch.com/investing/index/djia/charts
Title: Re: trade war
Post by: grnidone on June 04, 2018, 05:09:28 PM
Quote
>Grnidone, I think this is a bit of blaming the victim.  I know plenty of people who would have jumped at the chance of a stable factory job if they still existed.  Many of the people I went to school with had dads that lost their jobs in nearby factories.

Not blaming the victim at all, actually.  I find it shameful that people don't see these jobs as highly skilled trades.  I find it shameful that "trade school" is seen as "less than" college.  It's ridiculous.

My Dad went to college to learn Agriculture and farming (and still bitches about having to take "O-Chem" (Organic Chemistry).  These so called "trade-skills" are highly technical. 

But somewhere along the line, people started saying stuff like "Work smart, not hard" implying that trade jobs were "only for dummies."

Maybe this is where the US's attitude towards STEM started to wane?


Title: Re: trade war
Post by: grnidone on June 04, 2018, 05:11:57 PM
Regarding Levis:
http://allamericanreviews.com/levis/

Quote
For the large majority of their jeans, Levi’s are not made in the USA. More than 99% of their jeans are made in countries like China, Japan, Italy, and others. Levi’s does have a single collection of “Made in the USA” 501 jeans, sourced from a small denim mill called White Oak in Greensboro, NC.

If you want to get those Made in the USA Levi’s, it will definitely cost you. The price tag on the standard 501 jeans is typically seen at $178. However, their online shop right now shows no products available in this style.
Title: Re: trade war
Post by: grnidone on June 04, 2018, 05:13:08 PM
Quote
Now my cousin works in a factory full time and the farm is a 'hobby farm' (his words) which produces income to be sure but not enough to support his family.

It is *very* difficult to start in farming.  And, it shows:  the average age of a farmer has been going up for 20 years.  Now, it's 59.5. 
Title: Re: trade war
Post by: aaron on June 04, 2018, 07:07:07 PM
Noboddy wins a trade war
The middle class certainly could. They've been screwed for at least 3 to 4 decades with the trade policies.
https://www.youtube.com/watch?v=h3pf1qVrBz8
When visiting family in rural town in a southern state the local economy looked quite bombed out. There's a Wal-mart, but there are likely more choices/variation in payday loan providers in the town than in even fast food restaurants.

Many first world countries charge a VAT which ultimately ends up as a relative tax on imports, while the US does not charge one, which acts as a subsidy to foreign produced goods on a relative basis. And then the inefficient healthcare system chuck full of fraud is yet another tithing on domestic production.

There probably aren't two economies more intertwined than Canada and the USA.  I don't think the stock market is convinced this is going to happen yet.
The markets are absolutely ambivalent toward trade war risks though. If they were not then some of the corporate debt prices would look like a more extreme blow out of what happened in Italy recently.

A couple weeks ago when the media pitched that there will be no trade wars I thought that would have been a great time to buy a put option on some of the dollar store retailers. Stores like WalMart have resilient global supply chains where they can pick from numerous countries, but the smaller & fast-growth competitors would be hit far harder by a trade war.
Title: Re: trade war
Post by: Mackin USA on June 06, 2018, 02:32:15 PM
One month after the biggest plunge in the US trade deficit since the financial crisis - good news for Trump who has engaged in "trade war" with the rest of the world to boost US trader and exports - the good news continued in April, when according to the Census Bureau, the US deficit shrank again, down 2.1% from a revised $47.2BN to $46.2BN - the lowest since September 2017, and beating not only the $49BN consensus estimate, but also also the lowest Wall Street estimate of $46.2BN.

[zerohedge.com]
Title: Re: trade war
Post by: littleman on June 06, 2018, 06:24:05 PM
>April

I am not seeing the relevancy; these decisions will impacting future quarters/years.
Title: Re: trade war
Post by: aaron on June 06, 2018, 06:42:36 PM
>April

I am not seeing the relevancy; these decisions will impacting future quarters/years.
From an FX standpoint China may be letting their currency appreciate more than it otherwise would in order to show the great work they are doing in helping the global economy rebalance. $1 bought 6.96 RMB 18 months ago. Now it buys 6.41 RMB, which is about an 8% rise in value of the RMB or Yuan vs the Dollar from the December 2016 lows.
https://xe.com/currencycharts/?from=USD&to=CNY&view=2Y
The Dollar index appears to have moved a similar amount (102.95 to 93.66), so China allowed the Dollar to depreciate relative to the Yuan, rather than having a hard peg which pulled the domestic currency down with the Dollar.
https://www.marketwatch.com/investing/index/dxy

The relationship between trade balances and international capital accounts are largely mirror images for the US as imbalances in trade lead to capital inflows to bonds, stocks & other financial assets. An economist named Richard Duncan has a bunch of powerpoint video presentations on this sort of stuff on his site https://www.richardduncaneconomics.com/

related news article:
http://www.scmp.com/news/china/economy/article/2149385/yes-beijing-will-stick-us-government-bonds-no-matter-what-happens
Quote
In a sign that China’s international payment fundamentals are worsening, the first quarter gave China its first quarterly current account deficit since joining the World Trade Organisation in 2001, which means it now buys more goods and services than it sells to the rest of the world.

China’s bilateral trade surplus with the US is bigger than the country’s overall surplus. Thus China would have a trade deficit if US President Donald Trump’s demand for balanced US-China trade became a reality.
Title: Re: trade war
Post by: littleman on June 06, 2018, 08:16:05 PM
Thanks for the link to Richard Duncan's site.  I am going to watch some of his lectures.  China's economy is very interesting to me, I can't imagine it not having a major crisis in the near future with all the ghost towns of empty skyscrapers and other strange happenings over there.  There seems to be a strong push for wealthy Chinese to buy property outside China right now.  Locally most of the home buyers have been rich Chinese nationals looking for a place to drop some money -- the run up in prices is insane but fascinating to watch.
Title: Re: trade war
Post by: Mackin USA on June 07, 2018, 11:43:05 AM
China’s Economic Numbers Have a Credibility Problem
Suspicions that the country is cooking the books persist despite a government crackdown on cheating cadres.

https://www.bloomberg.com/news/articles/2018-04-19/china-s-economic-stats-have-a-credibility-problem
Title: Re: trade war
Post by: aaron on June 07, 2018, 06:36:21 PM
Thanks for the link to Richard Duncan's site.  I am going to watch some of his lectures.  China's economy is very interesting to me, I can't imagine it not having a major crisis in the near future with all the ghost towns of empty skyscrapers and other strange happenings over there.  There seems to be a strong push for wealthy Chinese to buy property outside China right now.  Locally most of the home buyers have been rich Chinese nationals looking for a place to drop some money -- the run up in prices is insane but fascinating to watch.
I should clarify that most of Richard Duncan's videos are about macroeconomics & the US impact in the global economy rather than being strictly about the Chinese economy, though he certainly has a few about China.

There is not a lot of trust in the domestic Chinese economy. Which is part of why there are some odd sounding regulations outside the mainland.
http://www.scmp.com/news/hong-kong/economy/article/2115384/lawmakers-district-councillors-rally-against-review-hong
http://www.info.gov.hk/gia/general/201607/26/P2016072600640.htm

the price in Shenzen for real estate was listed at $8,665/square meter
https://www.globalpropertyguide.com/Asia/China/Price-History
in desirable areas the price can even double from there
https://www.smh.com.au/world/beijing-shanghai-shenzhen-the-cities-where-house-prices-rose-by-30-to-40-per-cent-20161003-grtwe6.html
Quote
Prices in central Beijing conservatively start at 80,000 yuan [about $16,000] per square metre, making even a nondescript, 100-square-metre, two-bedroom, previously owned apartment $1.6 million.
the high prices even flow into micro-units
Quote
In Shenzhen, a manufacturing and tech hub in southern China, social media users were in uproar over the sale of outrageously expensive "micro-apartments". The six-square-metre "pigeon cage" apartments were snapped up swiftly, despite the price tag of 880,000 yuan being roughly 20 times the city's average annual per capita income.
6 square meters is 64.5835 square feet
880,000 yuan is $137,680.40
that is $2,131.82 per square foot, or nearly double the cost of San Francisco per square foot
https://sf.curbed.com/2017/9/29/16385146/san-francisco-price-per-square-foot

the doors off the hinges bubble craze in China
https://twitter.com/CGTNOfficial/status/780225811584389120
makes most of the rest of the world look cheap by comparison
Title: Re: trade war
Post by: Mackin USA on June 14, 2018, 01:04:45 PM
As part of Draghi's prepared remarks, the ECB head released the central bank's quarterly forecasts. Here one surprise was the big drop in 2018 GDP from 2.4% to 2.1%, while 2019 and 2020 were kept unchanged:

    2018 cut to 2.1% from 2.4%
    2019 unchanged at 1.9%
    2020 unchanged at 1.7%


 AND
https://www.zerohedge.com/news/2018-06-14/eur-bund-yields-tumble-after-draghi-signals-end-qe
Title: Re: trade war
Post by: Mackin USA on June 24, 2018, 11:15:48 AM
The simple rules of thumb—sell China, sell Korea, sell emerging markets, prefer smaller to larger U.S. stocks and buy the safe-haven dollar and bonds—have been working better than detailed analysis so far, in part because the prospects for a trade war are still so uncertain. If it becomes clear that new trade barriers are here to stay, understanding both the details of which companies will be hit and the knock-on effects on the economy will matter more.

https://www.wsj.com/articles/how-to-trade-a-trade-war-1529595543?mod=e2fb
Title: Re: trade war
Post by: aaron on June 24, 2018, 05:51:28 PM
The simple rules of thumb—sell China, sell Korea, sell emerging markets, prefer smaller to larger U.S. stocks and buy the safe-haven dollar and bonds—have been working better than detailed analysis so far, in part because the prospects for a trade war are still so uncertain. If it becomes clear that new trade barriers are here to stay, understanding both the details of which companies will be hit and the knock-on effects on the economy will matter more.

Back in January (when the Dollar was widely heated) a guy named Brent Johnson from Santiago CApital put out a video stating he thought the Federal Reserve going from QE to QT would cause capital flight into the US as the rate differentials had the US sucking the QE milkshake of other central banks.
https://www.youtube.com/watch?v=m6RZIbUvTXU

Tariffs from the US are leading to China preemptively easing their monetary policy  (https://www.wsj.com/articles/china-releasing-more-than-100-billion-to-boost-lending-1529835634)
Quote
Under the reserve cut, some 500 billion yuan ($76.86 billion) will be released for 17 large banks, including the Big Five state-owned banks, the central bank said. It said the banks are to use the freed-up funds by converting bad loans into equity in companies that default on their debts. ... Following the reduction in banks’ reserve-requirement ratio, analysts expect more loosening, including increasing lending quotas for banks, relaxing mortgage restrictions for home buyers in some cities and easing limits on local governments to borrow.
China is trying to use Yuan denominated bilateral trade deals and launch exchanges for key commodities like oil to set commodity prices in something other than Dollars.
https://www.reuters.com/article/us-china-oil-futures/shanghai-crude-futures-roar-into-action-as-global-merchants-dominate-trade-idUSKBN1H207T

They've also used debt to weigh down many smaller neighboring countries...debt trap diplomacy
http://www.atimes.com/article/sri-lanka-latest-victim-chinas-debt-trap-diplomacy/
http://www.businessinsider.com/chinas-debt-trap-diplomacy-hits-philippines-with-exorbitant-loans-2018-3
https://www.afr.com/news/politics/world/us-secret-report-china-debt-trap-on-australias-doorstep-20180513-h0zzwd
Title: Re: trade war
Post by: littleman on September 18, 2018, 05:56:25 PM
Trump Hits China With Tariffs on $200 Billion in Goods, Escalating Trade War (https://www.nytimes.com/2018/09/17/us/politics/trump-china-tariffs-trade.html)

Quote
The tariffs on $200 billion worth of products comes on top of the $50 billion worth already taxed earlier this year, meaning nearly half of all Chinese imports into the United States will soon face levies. The next wave of tariffs, which are scheduled to go into effect on Sept. 24, will start at 10 percent before climbing to 25 percent on Jan. 1. The timing of the staggered increase will partially reduce the toll of price increases for holiday shoppers buying Chinese imports in the coming months.

Title: Re: trade war
Post by: rcjordan on September 18, 2018, 06:33:28 PM
Commerce Secretary Wilbur Ross Speaks With CNBC's "Squawk Box" Today

https://www.valuewalk.com/2018/09/commerce-secretary-wilbur-ross-cnbc/

Personally, I dislike the trade war but am undecided as to whether it will be effective.

Debbie says it'll be cathartic.
Title: Re: trade war
Post by: ergophobe on September 18, 2018, 08:37:25 PM
Quote
The timing of the staggered increase will partially reduce the toll of price increases for holiday shoppers buying Chinese imports in the coming months.

That is to say, the timing of the staggered increase was calculated so that the effects would not be known in time to be an issue for the 2018 elections. Which, frankly, if I was an incumbent worried that the tariffs might turn out bad for likely donors to my party's candidates, that's how I would time it.
Title: Re: trade war
Post by: aaron on September 18, 2018, 10:15:17 PM
Quote
That is to say, the timing of the staggered increase was calculated so that the effects would not be known in time to be an issue for the 2018 elections. Which, frankly, if I was an incumbent worried that the tariffs might turn out bad for likely donors to my party's candidates, that's how I would time it.
I think the reason they left more stages was so they left more layers of uncertainty & had more in the bottle of pain to leverage later.

They could have waited an extra month from now and started with 25%, but by doing things in smaller stages they have better control of the narrative.

The lobbying flows pre-date the passage of anything significant.  Even rumor of a scent of potential costs or regulations drive intense spending on the GET THE FACTS styled political (dis)information campaign front.

It is already over half-way through September. Elections are November 6th. That is a 50-day window.

If the tariffs came through full right away, much of them likely would not have been passed onto consumers that quickly. Retailers can show margin pressures so long as they show e-commerce growth (or spin the cause as being associated with heavy investment in growing ecommerce), but retailers can't show low margins, declining sales & limited ecommerce growth. Until Amazon's stock price seriously heads south (which might not happen anytime soon) retailers will do anything to hype their ecommerce growth, cross claim sales that touch a computer in any way as being ecommerce, lose money to keep volumes up at least until the holiday shopping season is through, etc.
Title: Re: trade war
Post by: Mackin USA on September 19, 2018, 10:38:10 AM
"Debbie says it'll be cathartic."

Short term pain for long term gain.
Title: Re: trade war
Post by: aaron on September 20, 2018, 06:11:17 PM
So much for the trade war destroying the capital markets (at least not happening in the short run). US stock market back on fire again yesterday and today.

Tilray longs and shorts are both smoking very large bowls throughout the trading day
https://www.cnbc.com/2018/09/20/pot-stock-tilray-set-to-open-higher-after-more-wild-trading-overnight.html
CPG companies should trade in tandem with Tilray as shareholders get rich & cash in a bit to buy some munchies.  Couple more strong weeks by Tilray and they'll be able to buy out the (then lower valued) FANG players in stock for stock transactions. :D

Dollar General (import cheap stuff from China retailer without the diversified supply chains a Walmart has) is within 3% of their all-time high.

Even the Chinese internet-related companies have jumped.

Baidu $217 to $231
Alibaba $156 to $166
JD.com $25.75 to $27.15
Tencent ADR $41 to $42

And even some bland/boring/cathartic value stocks have been going up in spite of the 10-Year rising to a 4 month high
https://www.marketwatch.com/story/10-year-treasury-yield-inch-toward-7-year-high-2018-09-19

I was hoping for a downdraft as political ugliness leading into midterms couples with trade war narrative & rising bond yields to whack the stock market, but it keeps going from strength to strength. Maybe political outrage fatigue has simply made the media a bit impotent with all the doommongering stuff.