Trump: Negotiator or Scrooge?

No toys for you!

What happens if we start seeing empty shelves in the stores? Eighty percent of our toys are made in China. Walking through Walmart looking for a new jigsaw puzzle, I was amazed at all the toys. Walmart sells over 1,000 different brands of toys. What will the shelves look like in a couple of months? Will they be empty or will they just be higher priced? With tariffs on China over 100% how much of that price will Walmart pass on to its customers? Well the president in his infinite wisdom sees the empty shelves as a good thing. All US ports have seen a sharp drop in shipping volumes. Trump was ecstatic saying “That means we lose less money. When you say it (shipping traffic) slowed down, that’s a good thing.” Commenting on the deficit with China, the president said “Frankly if we didn’t do business we would’ve been better off.” 

Trump still loves tariffs and says “They’re a beautiful thing for us. It’s going to make us very rich. And we’ll be paying off debt, we’ll be lowering your taxes very substantially because so much money will be taken in that we’ll be able to lower your taxes even beyond the tax cut that you’re going to be getting.” Of course, he is delusional – but who with any input has the guts to tell him? Is this a Saturday Night Live skit or has Boris Badenov sprayed the president with goof gas?

Contrary to the president’s wishes, an electric bicycle company in California is putting the Trump tariff on its price tag. The owner is a republican but he says that he has to keep importing his bikes from China or else he is out of business. So on his floor, he has identical bikes priced differently. The one imported before the tariffs has a lower price tag.

Another bicycle shop – one that you have to pedal – buys components from China and assembles the bikes in the US. The owner said that he once made his own handlebars but the ones from China were just as good and were cheaper. He said that he could buy US made components but his bikes would cost $1,000 rather than $100.

The president just called Fed chair Jay Powell a “fool” for keeping the fed funds target rate steady rather than lowing it. Trump tweeted “Oil and Energy way down, almost all costs (groceries and ‘eggs’) down, virtually NO INFLATION, Tariff Money Pouring Into the U.S. — THE EXACT OPPOSITE OF ‘TOO LATE!’ ENJOY!.” However, inflation was 2.4%, still above the Fed’s target of 2 percent. Trump is miffed by the Brits lowering their bank rate and wants the Fed to follow suit. However, the president of the St Louis Fed, Alberto Musalem who is a member of the Fed’s Open Market Committee, put the blame back on the present saying that the Fed will commit to further interest rate cuts until it is clear whether the Trump’s tariffs lead to persistent inflation or a one-time adjustment in prices. So take that Mr President! Anyway, Trump is making it more difficult for the Fed to cut rates. If and when it does, it will appear to all that the Fed’s independence has been compromised and it is bowing to political pressures. My advice to the president is simple – stop tweeting!

Another impact of Trump’s tariffs is that American corporations are stopping hiring. Polaris says that it is now in recession mode. BTW I have a Polaris 570 ATV and it is a wonderful machine. Highly recommended. Polaris now also makes Indian motorcycles. I had an Indian Scout and loved it. I hated selling it when I went through my end-of-life crisis moving to a three wheel Can Am. Other companies are freezing hiring until the full impact of the tariffs are felt. I know much has been made about 177,000 jobs being added in April, but much of that was in healthcare and finance. Recruiters who help companies find job candidates say hiring has been falling at a steep rate for two months. One company’s revenue from hiring activities is down 50%.

All of this is ominous but Trump seemingly has blinders on. He insists that his 10% tariff is universal and permanent. No matter if we had a surplus with a country. No matter if their tariffs are lower than ours. All will have a 10% tariff. 

But what of the deals? Aren’t there supposed to be 75 or so countries wanting to make a deal? But didn’t Trump just pause his “reciprocal” tariffs for only 90 days? How he can “negotiate” that many deals in so few days will be impossible. Mark Carney, the new Canadian prime minister, just visited the White House and no deal was reached. The White House is doing high fives touting a tariff deal with the UK – a country with which we have a surplus – that amounts to a nothingburger. The 10% tariff is still in place. The Brits will allow the import of some American beef and chicken. But hormone-treated beef and chlorine-washed chicken are still not allowed. The Brits will no longer put a tariff on American ethanol up to 1.4 billion litres (British spelling). This is in effect a quota. The same is true for the US importing of British autos, with the tariff set at 10% until a quota of 100,000 vehicles is reached. This is beyond absurd. Now the tariff on British cars will be lower than the tariffs on American cars made in Canada and in Mexico. Maybe the Americans can shift manufacturing to England. 

Perhaps more importantly to the British is their trade deal with India which significantly lowers both country’s tariffs. Donald Trump is credited with prompting the agreement. In fact, the UK’s deal with India is its third biggest after its agreements with Australia and Japan. Now, the UK has signed trade deals and agreements in principle with about 70 countries and one with the EU. Trump unites the world!

But what about the “negotiations”? One observer says “But so far it is pretty clear that countries coming in and wanting a ‘normal’ trade negotiation with both sides making substantive concessions are being rebuffed.” Apparently the administration is not really negotiating. It seems more like a take it or leave it with the 10% tariff being non-negotiable. Also, can Trump be trusted? Didn’t he just violate his own trade agreement with Canada and Mexico?