Author Topic: S&P futures for tomorrow just fell off a cliff. Trumpy wants 100B in new tariff  (Read 16540 times)

Stachless

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Thinking of a tariff as a sales tax implies that the tariffs would be applied to all items evenly...which would defeat the point of the tariff.

A tariff on all imports uniformly is essentially a border adjustment tax: https://en.wikipedia.org/wiki/Border-adjustment_tax

This may be true, but is not at all what is actually happening:

At a legislative hearing today in Washington, the top US trade official, Robert Lighthizer, told US senators that Argentina, Australia, Brazil, South Korea, and the EU would be exempted from the 25% tariff on steel and the 10% duty on aluminum. Including Mexico and Canada, which were exempted from the start, a majority of the US foreign supply of foreign steel, iron, and aluminum now comes from the exempted group.

https://qz.com/1235803/trumps-steel-and-aluminum-tariffs-which-countries-are-exempt/

We are  only taxing the bad guys, so that we remove the economic incentive for tightwads like us to buy their cheap products.   

If you have a better suggestion as to how we can compete with countries that have state-owned industries (no profit motive) or use child labor or blatantly steal other's IP I would love to hear it!

maizeman

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Oh no, I wasn't trying to imply that we actually were getting a border adjustment tax. Just that there is a specific term for a tariff applied to all goods, and there is a reason a country would use one sometimes.

pecunia

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I guess all the rich software people who can retire early won't be affected by tariffs and I suppose the CPA / MBA / money gurus.

Last Summer, I visited electrical facilities adjacent to old plants in Northern Ohio.  These plants were steel plants and automotive plants.  Without the good jobs, the neighborhoods adjacent to these facilities were starting to run down.  Economists teach us this is a good thing.  They tell us to do the things we as a country are good at and let other countries do what they are good at and we will both be better off.  I used to believe that balderdash.

Now I believe in people.  I have this hunch that other countries may be better at keeping their facilities running even at a bit of a loss to keep people working.  It seems that some subsidy, whether approved by treaties or not, is cheaper than the pain and anguish of losing good jobs. If we make it here and sell it here, the money stays here.

If we have another conventional war, we will need manufacturing. 

If we keep doing stuff, we will learn new technologies.  If we let it go, it's gone folks and we will be further behind.  The future is now.

aspiringnomad

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I volunteer to accept payment to not work producing any color TVs in lieu of a tariff.

Seconded.

Apparently you can get paid a lot of money for not having sex with someone.*


*Offer only valid if you have had sex with the president. Sorry, back to tariffs.

Travis

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I guess all the rich software people who can retire early won't be affected by tariffs and I suppose the CPA / MBA / money gurus.

Last Summer, I visited electrical facilities adjacent to old plants in Northern Ohio.  These plants were steel plants and automotive plants.  Without the good jobs, the neighborhoods adjacent to these facilities were starting to run down.  Economists teach us this is a good thing.  They tell us to do the things we as a country are good at and let other countries do what they are good at and we will both be better off.  I used to believe that balderdash.

Now I believe in people.  I have this hunch that other countries may be better at keeping their facilities running even at a bit of a loss to keep people working.  It seems that some subsidy, whether approved by treaties or not, is cheaper than the pain and anguish of losing good jobs. If we make it here and sell it here, the money stays here.

If we have another conventional war, we will need manufacturing. 

If we keep doing stuff, we will learn new technologies.  If we let it go, it's gone folks and we will be further behind.  The future is now.

Do you have an upper limit to this belief?  You're advocating that an industry that isn't competitive should be propped up by the taxpayer.  To what end? How much of a loss are they allowed to run each year to stick to the rest of the country before the plug gets pulled? Is this for any industry or business? If not, how do you pick the lucky ones?

We have more tanks parked in depots than we have on active duty.  We've been building new vehicles and weapons to supply a war that has been going on steady for 16 years.  The days of putting raw steel in one end of the factory and spitting a tank or airplane out the other end in a day are over.  Our ships take years to build. Our tanks and aircraft take months.  Whatever war we get into in the future that is so large we might run out of equipment has to be fought with whatever we have on hand pretty much on day 1.  So what manufacturing are we missing that would change this dynamic?

ChpBstrd

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Part of the explanation for that closed plant is that we have been living in a world of easy lending for decades. Starting in the 1980's, it became the higher-ROE option to leverage a business to the hilt, make debt-funded acquisitions, and direct the earnings to a smaller set of shares. If the business goes bankrupt as a result, the bondholders eat most of the cost. But the bondholders don't even notice because they are in ETFs and similar funds, and/or have come to expect this behavior. Similarly, stockholders are so diversified they are not too concerned about any particular company's risky leverage.

Do a lookup of junk bonds and you'll find lots of companies that increased and increased their leverage over the years until their debt to equity reached 5-7x, at which point it becomes prohibitively expensive to raise more cash through either debt or equity offerings. The result is a zombie company that sheds assets and employees, like your local factory, just to make interest payments. Any competitor that is acquiring assets with earnings, conducting R&D, or investing in marketing or quality will eventually outmaneuver an indebted competitor who is more focused on making one more quarter of interest (or dividend) payments. When you have an entire economy full of zombie companies, other economies will naturally become the more efficient, more innovative producers. In walks China.

I bet if the US limited the tax deductability of interest expenses to, say, 80% of the interest expense, the whole incentive structure would be transformed. However this could never happen due to entrenched interests. I'd also like to see management have more skin in the game in terms of bond ownership, which would disincentivize the short-term stock boosterism that leads to long slow declines.

Travis

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Do a lookup of junk bonds and you'll find lots of companies that increased and increased their leverage over the years until their debt to equity reached 5-7x, at which point it becomes prohibitively expensive to raise more cash through either debt or equity offerings. The result is a zombie company that sheds assets and employees, like your local factory, just to make interest payments. Any competitor that is acquiring assets with earnings, conducting R&D, or investing in marketing or quality will eventually outmaneuver an indebted competitor who is more focused on making one more quarter of interest (or dividend) payments.

cough::Toys R Us::cough

aspiringnomad

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This NYT article illustrates a few of the real-world complications and unintended consequences that inevitably flow from tariffs:

https://nytimes.com/2018/04/10/business/economy/tariffs-steel.html

Edit: whoops, apparently you can't link to msn articles. Replaced with the direct link.
« Last Edit: April 11, 2018, 08:42:50 PM by aspiringnomad »

aspiringnomad

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WSJ: Trump Tells Advisors to Study Rejoining TPP

He's been reading my forum posts! TPP gonna be yuuuuge!

HBFIRE

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Read this too, but it looks like it would be a revised version if anything.

The new gold standard?  lol
« Last Edit: April 12, 2018, 01:03:11 PM by dustinst22 »

aspiringnomad

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Read this too, but it looks like it would be a revised version if anything.

The new gold standard?  lol

Is this irony yet?

Yes, it will now be called the GOLD STANDARD TRUMP PACIFIC PARTNERSHIP in yuuuuge gold letters :)

https://www.theguardian.com/world/2016/nov/20/trump-pacific-partnership-new-zealand-pms-idea-to-save-tpp


Mighty-Dollar

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I love watching these threads weeks later when the market is up. What are people going to do as unemployment is at its lowest point since 1969 and the economy is booming? Invest in bonds as the fed is talking about raising interest rates? Hell no!

China may talk tough but they want nothing to do with a trade war.