The contradictions in Trump’s trade policies are on display

If exporting countries, in particular China, pay rates, why should it suspend them? Why not sit and take $ 350 billion over a year of extra revenue (about $ 100 billion from China)?

The reality of the rates that had imposed on consumer electronics is that it would have a price of companies such as Apple, which provided about 90 % of the phones that sells in the United States from the factories in China, outside the US market.

US consumers would have been (and could still be) if the cost of the rates presented themselves in the prices of Apple or if they had not been able to get their hands on new Apple smartphones. Apple and Microsoft and others presumably convinced the administration that would have lost enormous pieces of their revenues in the United States, and there would be a backlash from consumers/voters, if the rates were maintained.

The only Trump rates will increase the only entrances (and they will increase much less revenue because exporters will sell much less to the United States and consumers will buy much less than their products due to the increase in prices) comes from US companies and consumers.

Will foreign producers create a shop in America? It takes years, up to a decade according to its complexity, to build a new plant and reconfigure the supply chains that have been established to serve a global economy.

Trump rates also hit some of the key inputs for production, such as steel, aluminum and wood – and intermediate products made by them – which would have an impact on the economy of any new system.

Yes, there may be some commitments and perhaps some investments, but the potential for the change of regime and the withdrawal of rates by a future administration makes investments on a large scale in the United States – a much less competitive environment for global production than Asia or even Europe – risky.

Will rates attract foreign capital? For the moment, contrary to historical experience, they have the opposite effect, with the capital on the run from the United States.

Somehow, Trump has transformed the US bond market and the US dollar, historically paradises for capital every time the risks are high in the global financial system – even when these risks issue within the United States – in activities at risk.

The dollar was depicing and bond returns (which increase when the prices of the bonds fall), while the capital came out of the United States towards the European Union, Japan and Switzerland. It is extremely unusual to see the prices of the bonds collapse even if the dollar is depicing and the US sharemarkets are decreasing, but this is what happened last week.

There was a capital exodus that suggests that investors had lost confidence in the United States.

It’s a big problem. The dollar domain and the perceived security of the US bond market, for over half a century, have led to lower and standard interest rates higher for Americans.

If foreign capital should continue to be redirected elsewhere (Europe could be the largest beneficiary), the costs of US interest would increase throughout the economy even if its deficits and its debt, and the task of refinancing to them associated with them, continues to explode at levels that are only sustainable while America continues to enjoy the “exorbitant privilege”. The global dominance of the dollar has provided.

Trump also judged China’s ability to resist both pain and commercial war will undoubtedly inflict his export economy and his ability to take revenge in an asymmetrical way.

China replied to Trump’s decision last week to raise rates on its exports to 145 % by increasing its rates on imports from the United States to 125 %. In fact, the trade between the two was closed.

Having previously limited the access of the United States to some of the rare lands whose production and transformation dominates, China, on the weekend, suspended the exports of rare key lands and magnets of the rare lands, used in almost everything that requires an electric motor, while developing a new export license system. China produces about 90 % of the heavy magnets of the rare lands of the world.

In terms of dollars, the exports of those rare lands in the United States are not substantial, but play a vital role in US cars, in the aerospace industry, in the production of semiconductors and in military equipment. For very few costs for China, they can cause significant economic pain and interruptions in the United States.

Trump could think of being able to do business with the 90 odd countries which, separated from its 10 %universal tariff, have been affected by the rates now paused, not insensitively calculated, “mutual”.

This means little if the commercial war with China continues at current levels and it is unlikely that Xi Jinping does the first move to defuse the tensions. China could be affected more hard than the United States, but it is much less likely that it is influenced by domestic pressure.

It is instructive that, even with the break, the additional rate on Chinese exports raised the actual average rate of America, which was about 2.5 percent only a couple of weeks ago, from 26 % to 27 %.

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The discussion with the other commercial countries will be “interesting”, given that Trump has given his negotiators only 90 days to complete the offers that usually take years.

Some of these countries – generally the poorest – have little to negotiate because they do not have the wealth to buy products.

Those who have the resources to make concessions in the United States to avoid, or at least reduce mutual rates, according to the White House, make the line to make an agreement.

Scott Besent, secretary of the United States Treasury, Scott Beesent, declared last week to believe that the United States could reach an agreement with long -standing partners and allies such as Japan, South Korea, India and Vietnam (which were targeted with mutual rates).

“So we can get closer to China as a group,” he said.

Hmm. The United States had a commercial agreement, which deliberately excluded China, with most of those countries, together with Australia, Canada, New Zealand, Mexico, Malaysia and Singapore. The Trans-Pacific Partnership (TPP) was negotiated by Barack Obama and signed in 2016.

A few days after the intake of his first term, Trump withdrawn the United States from the TPP, which continues without it, and has been expanded and renamed as a global and progressive agreement for trans-Pacific Partnership (CPTPP), a free block in China has tried to join.

The Trump commercial block has rejected and declared a commercial war against-the Southeast Asia must face some of the highest tariff rates and even a close ally such as Australia, with which the United States have enjoyed commercial surpluses, is in the pistol-axoms a lot to the group that Beesent wants to create to tie on China.