Monday Reads: Trump Breaks the Economy

Good Morning Sky Dancers!

Well, he finally broke the economy.  It was just a matter of time for those tarriffs to do their thing and now it appears we have a full out tit for tat trade war with China.  I guarantee you that China will win.  Even Lousy Larry Kudlow knows that it’s American households that will pay the full brunt of this tax on goods because that’s exactly what a tariff does.  The price increases are already showing up in so-called “intermediate goods” and will very shortly show up at the cash register.  

I’m going to get wonky on you but I will send you to the nontechnical briefing from this stellar NBER study that already shows the losses from 2018 from Trump’s Tariffs. That is the link to the full study.  Here’s the part that’s important and easier to read from NBER’s May Digest.

In 2018, the United States imposed tariffs on a variety of imported goods, and other countries responded with tariffs on imports from America. Two new NBER working papers analyze how this “trade war” has affected U.S. households and firms.

The recent tariffs, which represent the most comprehensive protectionist U.S. trade policy since the 1930 Smoot-Hawley Act and 1971 tariff actions, ranged from 10 to 50 percent on about $300 billion of U.S. imports — about 13 percent of the total. Other countries responded with similar tariffs on about $100 billion worth of U.S. exports.

In The Impact of the 2018 Trade War on U.S. Prices and Welfare (NBER Working Paper No. 25672), Mary Amiti, Stephen J. Redding, and David Weinstein find that the costs of the new tariff structure were largely passed through as increases in U.S. prices, affecting domestic consumers and producers who buy imported goods rather than foreign exporters. The researchers estimate that the tariffs reduced real incomes by about $1.4 billion per month. Due to reduced foreign competition, domestic producer prices also increased. The prices of manufactured goods rose by one percentage point relative to a no-trade-war scenario. The reduction in real incomes represents the welfare cost of higher consumer prices, less the government revenue collected by the tariffs and the additional income of domestic producers who were able to sell their products at higher prices.

The researchers note that continuation of the tariff policy could be especially costly for multinational companies that have made substantial sunk-cost investments in supply chains in other countries, for example by relying on facilities in China or other impacted countries. The study estimates that around $165 billion worth of trade has been rerouted to avoid them.

Pablo D. Fajgelbaum, Pinelopi K. Goldberg, Patrick J. Kennedy, and Amit K. Khandelwal adopt a different methodological approach to address the welfare effect of recent tariffs. They also find complete pass-through of U.S. tariffs to import prices. In The Return to Protectionism (NBER Working Paper No. 25638), they estimate that the new tariff regime reduced U.S. imports by 32 percent, and that retaliatory tariffs from other countries resulted in an 11 percent decline of U.S. exports. They use these responses to estimate import demand and export supply elasticities, and then apply these estimates to calibrate a general equilibrium model of the U.S. economy with detailed input-output linkages. They estimate that higher prices facing U.S. consumers and firms who purchased imported goods generated a welfare loss of $68.8 billion, which was substantially offset by the income gains to U.S. producers who were able to charge higher prices ($61 billion). The researchers estimate the resulting real income decline at about $7.8 billion per year, a value broadly comparable to the net income decline estimated in the previous study.

Well, China is retaliating. This isn’t going to be pretty at all.

China announced that it will increase tariffs imposed on about $60 billion of U.S. goods in retaliation for President Donald Trump’s latest escalation of the trade war.

The tariffs will take effect on June 1, according to a statement on the Ministry of Finance’s website on Monday. The charges will thereby be raised on most of the goods listed on a previous retaliation list effective last September.

The yearlong trade frictions between the world’s two biggest economies worsened last week when the Trump administration announced an extra 25% tariff on thousands of Chinese products worth about $200 billion. The U.S. is set to release a plan to levy a 25% additional tariff on all remaining imports from China later on Monday.

 

So, of course, we saw equity markets respond with big down in all the indices and a big sell off this morning. Say bye bye to your retirement funds.

The rapid-fire succession of stark economic news spooked financial markets. The Dow Jones industrial average and the Standard & Poor’s 500 index are both down sharply in morning trading. While many business executives and investors had hoped that tensions between the United States and China would be resolved easily, the recent developments show how much each country is digging in for a long fight.

“Over the past week, hopes for at least a partial and temporary cease-fire between the two sides have given way to the prospect of a rapidly escalating and broadening economic conflict between the two countries,” said Eswar Prasad, senior professor of trade policy at Cornell University

Amid signs that investors were questioning his adversarial approach, Trump attempted to assuage the public in a series of Twitter posts. But some of his tweets contained typos and misspellings, suggesting that his comments had not been thoroughly vetted by White House officials and might not represent fully planned-out policy initiatives.

The dramatic escalation came last week after Trump imposed a 25 percent tariff on $200 billionof Chinese imports to the United States. He also told aides to begin plans to hit more than $300 billion in other Chinese goods. Trump has alleged that the Chinese government is ripping off American consumers and businesses by unfairly subsidizing Chinese companies, stealing intellectual property from U.S. firms and flooding global markets with cheap goods to put other companies out of business.

All of those issues were actually adressed in the TPP that Trump walked away from nearly immediately upon entering the White House.   I really don’t see how we’re going to get out of this given Trump’s doubling down continually on losing deals.

You may want to read this article in the Atlantic “An Oral History of Trump’s Bigotry. His racism and intolerance have always been in evidence; only slowly did he begin to understand how to use them to his advantage.”

In the years since then, Trump has assembled a long record of comment on issues involving African Americans as well as Mexicans, Hispanics more broadly, Native Americans, Muslims, Jews, immigrants, women, and people with disabilities. His statements have been reflected in his behavior—from public acts (placing ads calling for the execution of five young black and Latino men accused of rape, who were later shown to be innocent) to private preferences (“When Donald and Ivana came to the casino, the bosses would order all the black people off the floor,” a former employee of Trump’s Castle, in Atlantic City, New Jersey, told a writer for The New Yorker). Trump emerged as a political force owing to his full-throated embrace of “birtherism,” the false charge that the nation’s first black president, Barack Obama, was not born in the United States. His presidential campaign was fueled by nativist sentiment directed at nonwhite immigrants, and he proposed barring Muslims from entering the country. In 2016, Trump described himself to The Washington Post as “the least racist person that you’ve ever encountered.”

Instances of bigotry involving Donald Trump span more than four decades. The Atlantic interviewed a range of people with knowledge of several of those episodes. Their recollections have been edited for concision and clarity.

It’s pretty horrifying but I think it’s necessary to document just how racist this man is on top of all the other hateful things he brings to the table.

So, I wonder exactly how this is going to go: “House GOP focusing on women, minorities for 2020 challengers”

Finding women and minority candidates is an imperative for an overwhelmingly white GOP openly embarrassed that just 13 of its 197 House members are women. By contrast, 89 of the 235 House Democrats are women and nearly 90 are black or Hispanic.

But Republicans want challengers with other qualities too, following a 2018 election that saw the GOP lose 31 districts that President Donald Trump had won just two years earlier, many in moderate suburbs.

Desirable attributes include an ability to woo moderate GOP voters who’ve turned against Trump, whose name will be atop the ballot. In some districts they want political outsiders without voting records to attack, in others it’s political veterans with a proven ability to win votes. Enticing personal stories and an aptitude for raising money also help.

“You will see a party that’s reflective of the entire nation. That would mean from gender to race to others, but it will also show that we can compete in every single district,” said House Minority Leader Kevin McCarthy, R-Calif.

 

So, we’ll see but there seems to be a lot of emphasis right now on killing the rights of every one but white men and basically making the rest of us in servitude and “less than” human compared to them.

Finally, I’m really sorry to have to announce that we’ve lost Doris Day.  She lived a long full life and was one of the most important advocate for animals that I know.  She was also an important advocate for HIV/AIDS during a time when it was hard to get any one’s attention.

Actress and singer Doris Day made nearly three dozen films and more than 600 recordings. At the height of her career, she topped both the billboard and the box office charts. Day died of pneumonia on Monday at the age of 97.

Day remains one of the most successful female movie stars of all time. She embodied the “girl next door” even in her 40s, which is probably why her films with Rock Hudson were so successful. A scene from 1959’s Pillow Talk shows a split screen with Day and Hudson in their separate bathtubs, only it looks like they’re in the same one — with their feet touching. Kind of risqué for 1959.

That was Day at the height of her film success, but her career began as a big band “girl singer,” and with Les Brown’s big band she had one of the biggest hits of World War II: “A Sentimental Journey.” For many GIs, Doris Day represented the kind of girl you’d want to fight for and come home to.

The end of the war brought the end of the big band era and the beginning of Day’s film career. Alfred Hitchcock used Day’s voice as a plot device in The Man Who Knew Too Much, in which a distraught Day sings a distress signal, “Que Sera, Sera,” to her kidnapped son. It became her signature tune and went to the No. 2 spot on the charts.

So, what’s on your reading and blogging list today?

 


Memorial Day Reads

It’s the Memorial Day Holiday!

Sewell Chan writes for the NYT about the ‘unofficial’ history of Memorial Day. It is something we discovered and shared before but it bears repeating because it explains why the holiday still gets short shrift in here in the Deep South. It also explains why some Southern States still have a separate Confederate Memorial Day.  I still remain shocked that Mississippi refused to recognize it as a holiday until recently.

David W. Blight, a historian at Yale, has a different account. He traces the holiday to a series of commemorations that freed black Americans held in the spring of 1865, after Union soldiers, including members of the 21st United States Colored Infantry, liberated the port city of Charleston, S.C.

Digging through an archive at Harvard, Dr. Blight found that the largest of these commemorations took place on May 1, 1865, at an old racecourse and jockey club where hundreds of captive Union prisoners had died of disease and been buried in a mass grave. The black residents exhumed the bodies and gave them proper burials, erected a fence around the cemetery, and built an archway over it with the words, “Martyrs of the Race Course.”

Some 10,000 black people then staged a procession of mourning, led by thousands of schoolchildren carrying roses and singing the Union anthem “John Brown’s Body.” Hundreds of black women followed with baskets of flowers, wreaths and crosses. Black men, including Union infantrymen, also marched. A children’s choir sang spirituals and patriotic songs, including “The Star-Spangled Banner.”

“The war was over, and Memorial Day had been founded by African-Americans in a ritual of remembrance and consecration,” Dr. Blight wrotein a 2011 essay for The New York Times. “The war, they had boldly announced, had been about the triumph of their emancipation over a slaveholders’ republic. They were themselves the true patriots.”

The African-American origins of the holiday were later suppressed, Dr. Blight found, by white Southerners who reclaimed power after the end of Reconstruction and interpreted Memorial Day as a holiday of reconciliation, marking sacrifices — by white Americans — on both sides. Black Americans were largely marginalized in this narrative.

“In the struggle over memory and meaning in any society, some stories just get lost while others attain mainstream recognition,” Dr. Blight wrote.

His claim is not universally accepted; the fact-checking website Snopes says of the 1865 remembrance: “Whether it was truly the first such ceremony, and what influence (if any) it might have had on later observances, are still matters of contention.”

Here is BostonBoomer’s blog from 2014 and Mink’s from 2012.  We remember the role of slaves freed by the sacrifice of Union Soldiers in our Civil War in celebrating that sacrifice.

I always remember Decoration Day because when I was very young we would do what my parents did as children.  We went to small cemeteries in Kansas and Missouri to make certain the family grave sites were attended and clean. We picnicked  and trimmed bushes then put peonies in jars on the graves of greats and cousins who died in war. For some reason, all of our family grave plots were resplendent with huge peony bushes.  My mother always beat them back and would announce loudly how much she hated them. Peony bushes were not allowed any where near home. They were left to the dead in my family and they bloomed profusely each Memorial Day.

In Caney Kansas, where my own grandparents are now buried, lays my Great Uncle Jack along side his mother, my Great Grandmother Anna.  He didn’t die in the battlefields of Europe during World War 1 but came home with complications from Mustard Gas. He died quite young on the family farm but it was of his wounds brought home as a dough boy fighting in a trench.  Many soldiers come home with wounds seen and unseen that eventually catch up to them. I never understood why I was told Dad’s Uncle Jack wasn’t quite included in the same way as those whose graves got the peonies properly but we gave him peonies because my Dad and Nana adored him and it felt right to me.  Some times our country has a short memory with a narrow focus. It doesn’t really remember all of the sacrifices of those who came before us including every single slave who died unfree.

Today, we also remember the sacrifice of every gold star family too. I hope Cadet Bonespurs plays golf and that his selfish, hateful face stays away from the one holiday he can truly sully with just his presence. Unfortunately, he left long enough to give a lofty speech at Arlington that should have been given by any better person.  But, take heart, he still had a way of making it all about him!

I read this article last night and even reviewed the variables and methodology of the original study.  It’s amazing to actually review the panel data and see which attributes are significant to the question at hand but the findings are not surprising. NBC shares “The Trump effect: New study connects white American intolerance and support for authoritarianism.”

A new study, however, suggests that the main threat to our democracy may not be the hardening of political ideology, but rather the hardening of one particular political ideology. Political scientists Steven V. Miller of Clemson and Nicholas T. Davis of Texas A&M have released a working paper titled “White Outgroup Intolerance and Declining Support for American Democracy.” Their study finds a correlation between white American’s intolerance, and support for authoritarian rule. In other words, when intolerant white people fear democracy may benefit marginalized people, they abandon their commitment to democracy.

Miller and Davis used information from the World Values Survey, a research project organized by a worldwide network of social scientists which polls individuals in numerous countries on a wide range of beliefs and values. Based on surveys from the United States, the authors found that white people who did not want to have immigrants or people of different races living next door to them were more likely to be supportive of authoritarianism. For instance, people who said they did not want to live next door to immigrants or to people of another race were more supportive Iof the idea of military rule, or of a strongman-type leader who could ignore legislatures and election results.

The World Values Survey data used is from the period 1995 to 2011 — well before Donald Trump’s 2016 run for president. It suggests, though, that Trump’s bigotry and his authoritarianism are not separate problems, but are intertwined. When Trump calls Mexicans “rapists,” and when he praises authoritarian leaders, he is appealing to the same voters.

The Chinese Trade Wars are showing winners and losers already. Winners include Trump himself–and now, Ivanka– plus Chinese Companies including ones that threaten US National Security. The losers are US companies.  We seem completely unable to stop this.

Ivanka Trump’s brand continues to win foreign trademarks in China and the Philippines, adding to questions about conflicts of interest at the White House, The Associated Press has found.

On Sunday, China granted the first daughter’s company final approval for its 13th trademark in the last three months, trademark office records show. Over the same period, the Chinese government has granted Ivanka Trump’s company provisional approval for another eight trademark s, which can be finalized if no objections are raised during a three-month comment period.

Taken together, the trademarks could allow her brand to market a lifetime’s worth of products in China, from baby blankets to coffins, and a host of things in between, including perfume, make-up, bowls, mirrors, furniture, books, coffee, chocolate and honey. Ivanka Trump stepped back from management of her brand and placed its assets in a family-run trust, but she continues to profit from the business.

“Ivanka Trump’s refusal to divest from her business is especially troubling as the Ivanka brand continues to expand its business in foreign countries,” Noah Bookbinder, executive director of Citizens for Responsibility and Ethics in Washington, said in an email Monday. “It raises significant questions about corruption, as it invites the possibility that she could be benefiting financially from her position and her father’s presidency or that she could be influenced in her policy work by countries’ treatment of her business.”

As Ivanka Trump and her father have built their global brands, largely through licensing deals, they have pursued trademarks in dozens of countries. Those global trademarks have drawn the attention of ethics lawyers because they are granted by foreign governments and can confer enormous value. Concerns about political influence have been especially sharp in China, where the courts and bureaucracy are designed to reflect the will of the ruling Communist Party.

Chinese officials have emphasized that all trademark applications are handled in accordance with the law.

More approvals are likely to come. Online records from China’s trademark office indicate that Ivanka Trump’s company last applied for trademarks — 17 of them — on March 28, 2017, the day before she took on a formal role at the White House. Those records on Monday showed at least 25 Ivanka Trump trademarks pending review, 36 active marks and eight with provisional approval.

Don’t forget!  Trump’s Indonesia project has been financial enhanced by the Chinese Government after he announced he would help with ZTE.   China is definitely on the winning side with the Trumps.  However, what about US Businesses?  

As Washington and Beijing try to resolve their trade disputes, several big companies are caught in the middle.

One is Qualcomm (QCOM), an American chipmaker whose $44 billion purchase of NXP Semiconductors (NXPI), a Dutch company, has been waiting for Chinese regulators’ approval.

Far more controversial is the case of ZTE (ZTCOF), the Chinese phone and telecom equipment maker that was crippled by a US export ban issued last monthin punishment for what the US said were violations of its sanctions against North Korea and Iran.

Easing penalties on ZTE is a key priority for Chinese President Xi Jinping, and Trump has indicated he’s willing to yield in order to move ahead with further trade discussions.

But members of Congress from both parties, many increasingly wary of China’s trade practices, believe such leniency would be a mistake. A growing number of senatorshave drawn a red line on ZTE, and have been vocal in recent days about their opposition to restoring the company.

Are we winning yet?

Meanwhile, TrumpsterFires continue to break out as white men go after our national “enemies” like young men from China attending school  here.  This must be an additional feature to calling the police because black people are going about their lives in clear view!

California police say they thwarted a vigilante deportation attempt last week – in which a pilot allegedly kidnapped a foreign student, took him to an airport and tried to send him “back to China.”

Jonathan McConkey, a pilot and certified flight instructor, is accused of orchestrating the kidnapping with his assistant, Kelsi Hoser, a ground instructor. Both reportedly worked at the IASCO flight training school in Redding, California.

Among IASCO’s students were dozens of Chinese nationals with student visas, according to court records. KRCR News 7 reported that the school contracted with China’s civil aviation authority to train its new pilots, one of whom was apparently Tianshu Shi.

Shi told reporters that he had been in the United States for about seven months – living with several other IASCO trainees at an apartment in Redding. It was there, police said, that McConkey and Hoser came for the student.

Some interesting stats from Axios you can review.  Which part of our country has lost the most on the battlefield since 9/11?

Today is the 17th Memorial Day since 9/11. Since then, 6,940 U.S. military service members have died for America.

Why it matters: Every part of the country has lost soldiers to the wars in Iraq and Afghanistan. All were Americans — someone’s neighbor, child, parent, mentor, buddy. Their average age was between 26 and 27 years old.

Have a great day and be safe if you’re in the path of all that weather on the East coast and the panhandle of Florida!.