Donald Trump’s dumb trade war just got much, much dumber

American agriculture is an obvious vulnerability if there are retaliation responses, but its service sector, in particular its large technological companies, should be nervous.

Trump always focuses on the commercial deficit of $ 1.2 trillion dollars ($ 1.9 trillion) that America has in goods, but never speaks of the surplus of over $ US1 trillions that it has in the services. It is inevitable that the services are listed within the responses of the European Union prepared in anticipation of an escalation in Trump’s commercial wars.

Trump rates will increase the revenue – the best hypothesis is about $ 600 billion per year – but, contrary to what constantly states (and falsely) that the revenues will not come from the countries where the rates have been imposed but by US companies and consumers.

The US rates are paid by the importer, on the soil of the United States and absorbed by the important company, transmitted to consumers or shared with each other. Historically, they were consumers who endured the weight of the impacts.

Trump says that his “beautiful” rates will force foreign companies to invest more in the United States to produce in America what they had previously exported from elsewhere.

While this could happen on the sidelines, there are several problems with this statement.

One is that, for many of the goods, the US imports, the United States do not have a significant production capacity and no substitute for imported goods.

It takes time, perhaps years, a lot of capital and a stable and predictable external environment to build an important production system in the United States and some form of competitive advantage.

Even if Trump could force foreign companies to invest in the ability of the United States – and, to be honest, some said they will do it (even if that test will be in the pudding) – there will be a break during which import prices will increase.

In addition, in the complex of global manufacturing ecosystem that the United States and its companies, mainly, have created over decades, the supply chains are so interdependent that it will be very difficult – for many impossible – for companies to go from their current supply provisions for their inputs to a purely American company.

The United States are not self -sufficient in some of the key inputs for production and do not have all the domestic resources that should be self -sufficient.

Trump, for example, has put a 25 % rate on aluminum imports, but internal production meets only about 50 % of aluminum demand. The prices of the United States in aluminum and the prices of the products downstream that include aluminum have already increased.

The United States have built the post -war global trading system and its companies are the most invoked in it. Trump is about to break down, with unknown but inevitably destructive consequences, not only for the United States but for the rest of the world.

It has put a similar rate on steel imports, which covers products with steel components. The prices of things bases such as screws and nails, which America does not produce in any significant volume, are picking.

The United States are a highly developed country with, compared to many countries in which they impose high-rates-such as Vietnam and its rate of 46 %-at the time of labor costs and non-tail.

US production wages are on average just over $ US100,000. Bangladesh exporters could, if they were to absorb the 37 % rate on their exports and still massively an American manufacturer. China, in front of a rate of 34 %, has wages of about a quarter of the United States. European production wages are also on average at least 25 % on average compared to those of America.

There are good reasons why America and other developed countries, including Australia, have been released with low added value and high -intensity sectors such as clothing industries, footwear and fabrics, instead importing low -cost products from low -cost development economies for mutual economic benefits.

Trump’s obsession for rates, his threats to use them again against anyone who takes revenge, the shadow of additional rates on multiple goods, such as copper, and his unpredictability and his chaotic approach to the politician-even Tuesday and his cabinet were still trying to decide which form the rates would have taken-he would take a volatile and uncertain environment for the decision-making process.

That level of uncertainty and the potential for its network of rates of being lapped by a future administration-o already from the medium-term elections next year, if the democrats can put together their act and exploit the decline approval rates of the Americans for Trump and Republicans-Executives-Finals will be the leaders of permanent permanent investments.

An increase in taxes of $ 600 billion and its inflationary impacts, alone, will be negative for the growth of the United States. Add the uncertainty about the impact of the commercial war of Trump – the manufacturing activity of the United States, the occupation and the orders were already reducing before the day of liberation, that the affairs mentioned the looming rates as a factor – and the results could be bad.

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Having received an economy that grows almost 3 %, with ultra-low unemployment and down the inflation, Trump’s love for rates (and the misunderstanding, or ill-founding how they work) could produce a self-inflicted recession in what was considered the strongest economy developed in the world.

The financial markets hoped that what Trump announced in Roseto would be the “kind” rates that he claimed to have ordered. Wall Street slightly closed on Tuesday afternoon.

Instead, they obtained this universal basic hybrid and punitive mutual rates on all the United States.

It is not surprising that, after the end of the trade, once the rates announced, the futures markets were a sea of ​​red. That reaction of the markets can be a president of what will come.

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