Trade and Inflation

User Forum Topic
Submitted by FlyerInHi on June 9, 2018 - 11:01am

What do you think would happen if the US erects tariffs high enough to zero out the trade deficit?

Inflation
Job loses
Lower standards of living
Much lower trade turnover

Tariffs would need to be very high since our exports would drop precipitously thanks to a strong dollar (assuming that the USD remains the reserve currency).

I bet the environmentalists would support lower consumption levels.

The other idea Trump floated at G7 is to eliminate all tariffs. That would cause ot trade deficits to ballon way beyond what it is now. I don't understand how that would reduce the trade deficit (our losing billions upon billions in Trump parlance).

Submitted by FlyerInHi on June 15, 2018 - 11:22am.

Oh,oh, the threats of tariffs were not all talk as some have argued.
We are entering a trade war. Recession is coming!

Submitted by The-Shoveler on June 15, 2018 - 11:51am.

Meh

More worried about rising interest rates to be honest.

Although I do agree tariffs are not good,

The Chinese already had fairly stiff tariffs for tech, communication equipment etc.. prior to all this, many EU states had large subsidies for agricultural products etc.. prior as well.

Submitted by FlyerInHi on June 15, 2018 - 1:43pm.

Higher consumer prices due to tariffs will cause inflation and higher rates. But not necessarily wage inflation for many globalization reasons.

I think we will get a self induced recession.

Submitted by The-Shoveler on June 15, 2018 - 2:16pm.

Yes most likely as in most recessions (Fed induced recession).

Submitted by FlyerInHi on June 15, 2018 - 2:27pm.

Mexico is not the point (I was referring to your since deleted comment on how Mexico conducts trade).
Our economy is used to certain price levels. Sudden tariffs are like an immediate tax on consumers, especially at the lower income levels.

We depend so much on products from China for our daily lives. If consumers are no longer able to buy cheap products it will have a psychological/confidence effect as well.

Or maybe producers will move to Vietnam and Bangladesh so our total trade deficit will remain the same. I think China doesn’t mind too much because they will use this adversity to move up the value added chain and move their dirty industries elsewhere. Will American farmers be able to replace their Chinese customers, however?

Environmentally, trade wars are good to cut down on consumption and environmental degradation.

Submitted by flu on June 15, 2018 - 2:46pm.

I am looking forward to deregulation of lending again $$$o the market$$$$ go bonker$$$$ again.

It'$$$ coming....

And it'$$$ going to be a totally awe$$$$ome ride up and back down when it happen$$$$...e$$pecially that even before that happens$$$$ we are $$$$eeing above peek price$$$$ (albeit non inflation adjusted).

The va$$t majority of people will once again try to borrow their way to affordability.

Submitted by FlyerInHi on June 15, 2018 - 3:24pm.

flu wrote:

The va$$t majority of people will once again try to borrow their way to affordability.

A few days ago, I read an article by an economist who said exactly that.

Our trade deficit is not caused by China but by our own consumers, our low savings rate and the dollar’s status as a reserve currency. It’s structural.

Blaming China is like blaming Mexico for our drug problems. So much for personal responsibility.

BTW, tariffs aren’t bad. There should however be policies to address the structural problems and be a phase-in period so our economy can adapt.

All else being equal, I believe the trade deficit with China is also self induced. China is ready to buy our high value added items such as super computers, sophisticated tech and military hardware. If we refuse to sell them what we make best then... who’s problem it is? Sometimes national security doesn’t agree with capitalism.

Remember Adam Smith? Buy Porto from Portugal and export higher value products.

Submitted by The-Shoveler on June 16, 2018 - 6:48am.

From what I understand, your sneakers and jeans etc.. at Costco will not be tariff'ed, it is more industrial equipment some electronics and industrial robots etc..

Most consumer goods should not be affected that much, but we will see.

Maybe I am wrong but it seemed this last round of tariffs were aimed at high value added (industrial tech, robots etc...) (maybe stuff we would want to keep here).

Still more worried about the fed raising interest rates.

Submitted by spdrun on June 16, 2018 - 8:18pm.

I'm not *worried* about the Fed raising interest rates. I'm *rooting* for it to do so. Let the Trump supporters eat their words...

Submitted by flu on June 16, 2018 - 8:38am.

I'm more worried each month that I have more available funds than anticipated, I am running out of ideas of what to do with them besides sticking them into a CD. I didn't think tech would have lasted as well as it has. I guess it's pretty difficult to get a work visa these days to fill a lot of unmet demand, lol.

Also, rent has been good. I had folks move out because they were impacted by the QC layoff, but they were filled right back up, again with newer recent hired QC guys. There were also folks looking to rent from Intel, Illumina, random biotech startups,etc. The bulk of the applicants didn't make less than $90k/year and didn't have a credit score less than 750. The problem was trying to close on a lease with tenant prospects during the week of the QC layoff. Two people signed a lease and then backed out because the found out the next week that they were impacted. I should have waited for the dust to settle.

Has anyone noticed the freeway traffic?It's starting to look like L.A. traffic in some parts. I'm super excited about the trolley lines going all the way to UTC/Genessee.

On a side note, I predict by the same time next year the new dimsum place Fung Fung Yuen in Mira Mesa will be closed. Their business sucks. In other news, Pearl in RB has reopened under new management. Supposedly some korean restauranter that does a lot of BBQ places... And the food is pretty good there again...

Submitted by FlyerInHi on June 16, 2018 - 9:07am.

The tariffs will costs $210 per family and 45,000 to 150,000 job losses depending on the predictions. The situation is evolving and uncertainty is never good for business.
https://www.washingtonpost.com/news/wonk...

I love the trolley coming to UTC. But it’s so slow! Still better than nothing.

Submitted by henrysd on June 16, 2018 - 10:42pm.

I am worried that the market hasn't priced in several down side risks. I originally thought Trump just use trade war as strategy to force some concession from other countries, but now it more likely he is really into a trade war. Yes we all will eventually feel higher inflation from trade protection as it protects high-priced inefficient domestic producers. The market can be spooked again if trump engages a trade war with rest of world.

The Fed made even more hawkish guidance last Wednesday, upped total 2018 hikes from 3 to 4 but stock market completely ignored the hawkish change:
https://www.federalreserve.gov/monetaryp...

I am still a long-term stock market bull, but I need to be prepared with more turbulence next a few years.

Submitted by spdrun on June 17, 2018 - 11:40am.

Good. We need a 2018-20 recession to get the Pumpkin Haired Clown out of office.

Submitted by flyer on June 17, 2018 - 6:08pm.

Agree, flu. Our rentals have been performing very well, and also had the same issue concerning allocation of extra funds, so, after selling several commercial properties we had in the past, we jumped back into CRE a few years ago in different locations, which are also doing well at this point.

Wouldn't want to recommend anything or give any advice in that regard, as there is definitely more risk involved, but just throwing the idea out there as an option.

Submitted by flu on June 17, 2018 - 7:05pm.

flyer wrote:
Agree, flu. Our rentals have been performing very well, and also had the same issue concerning allocation of extra funds, so, after selling several commercial properties we had in the past, we jumped back into CRE a few years ago in different locations, which are also doing well at this point.

Wouldn't want to recommend anything or give any advice in that regard, as there is definitely more risk involved, but just throwing the idea out there as an option.

.

I need to find a new butler. So do you have any recommendations on that? And where's cheapest place I can buy grey poupon? My stash is running low.

Submitted by flyer on June 17, 2018 - 10:10pm.

Sorry, flu, those items are way beyond my scope, but since you mentioned, "I'm more worried each month that I have more available funds than anticipated, I am running out of ideas of what to do with them besides sticking them into a CD. I didn't think tech would have lasted as well as it has," just thought I'd mention (not advise) the CRE option, but hope all goes well whatever you decide to do.

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