Trade wars.

Posted by Pointman on June 17, 2018 · 18 Comments 

There’s a way in politics of appearing to say yes, when what you’re actually thinking is there’s no way will you let that happen. It’s a combination of techniques; prevarication, filibustering, devil in the detail tedious scrutiny of the terms of the deal you’re supposed to be all up for making and of course some outright lies.

It’s as old as politics itself and the usual outcome is whoever it was you’d agreed to do whatever for, through sheer exhaustion with the whole protracted process, loses interest and simply goes away. Problem solved. While that’s an accepted and understood activity in political centres, it rarely works outside of that domain, especially in a business context.

Business is all about deliverables, with an end of year test called the bottom line in the accounts. They’re brutally simple numbers; you’ve either delivered a profit, minimal growth or in the worst case possible, a loss. In the case of the latter, it’s about then your career dissipation light goes off. Watching Trump scissor through the assembled throng at last week’s G7 in Canada was a sparkling example of that technique failing catastrophically.

It was all about trade, and various plans had been plotted to basically fuck Trump over, and he cutthroat razored his way through the lot of them. Looked at from a business prospect, it was actually about the EU versus the rest of the world, and with Trump acting as their spokesman, as is blindingly obvious from the picture heading up this piece. Merkel, Macron and Trudeau tried a gang up attack, and he just stared it down.

Everybody outside America is hyperventilating about Trump saying he’s going to impose retaliatory tariffs on goods coming into America from countries that already have tariffs in place against imports of American goods. The facts are simple and straight forward. For instance, everything being exported into the EU by a country outside it attracts a baseline import tariff of 8%, and there’s a choice selection of goods that get hit with even much higher tariffs.

Canadian dairy products get tariff free access to the vast American consumer market, yet anything dairy going northwards from America gets pranged with a 270% surcharge. As Trump rightly said in the aftermath of G7, everybody has been using America as a piggy bank and he was putting them on notice those days are over. America is a huge consumer market with a sheer mass that makes it questionable whether it actually needs to export goods, though if there’s a level playing field, it would obviously be desirable.

He means exactly what he says and is quite prepared to slam the door on all EU goods entering America. If there was ever any doubt about that, him slapping tariffs on over 900 goods imported from China a few days ago should have dispelled it. The Chinese thought making some token reductions in tariffs against imported American goods would be enough to see off the threat. That proved to be a serious miscalculation on their part.

His contempt for them and their dumb but deep state politics was transparently complete, with him reportedly turning up late to a breakfast discussion about gender equality and skipped sessions on climate change, clean energy and protecting the oceans, all of which enraged the liberal fake news industry. To add insult to injury, he left the summit early, leaving orders behind with his emissaries that America would not be endorsing any closing statement. He seemed to be crazily fixated on pulling the nuclear fangs of the North Korean dictator who had been threatening a few months ago to nuke the island of Guam.

When he was safely out of sight, Trudeau decided it was safe to give his own closing press conference where he said one or two very impolitic things, which I think will turn out to be a very expensive indulgence for Canadian imports into America. Trump has a certain track record for not being good in the forgive and forget area.

The bottom line is Trump can impose tariffs on any goods entering the huge marketplace that is America. If someone inside there has a massive craving for let’s say a now prohibitively expensive Camembert cheese, there’ll almost certainly be a dairy farmer who’ll start catering for that want, just as long as there’s a market for the product.

But the real long-term danger for exporters getting shut out of a huge marketplace like America, is that it’s notoriously difficult to get back in a few years down the line after everyone has finally decided to kiss and make up. By that stage, someone homegrown has already taken your market share of whatever product you’re trying to sell.

©Pointman

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Filed under Article · Tagged with Tariffs, Trade wars