Tariffs on Chips

[Octavious]

I quite like Bernie, in the sense that he seemed to offer real choice and a lot of his headline socialist policies are things that are quite normal in Europe and not something conservatives here would consider fighting against.

Having said that it's been a long while since I've looked at his policies so my memory may not be perfect. And it's something of a moot point as the powers that be in the Democrats would never have allowed him to stand, and even if they did he'd never get elected.

You know, it suspect it will come as a shock when you actually have a conversation with a Trump supporter. Still, if it makes you happy to continue to imagine me as a MAGA die hard, who am I to get in the way of your delusions?

And of course there will be negative impacts if Trump slaps a load of tariffs on things. Consider them acknowledged. The scale of the impacts and how they stand up against the benefits remains to be seen

[Octavious]

Damned Internet...

[Esquire Bertissimmo]

Trump's threat to impose higher tariffs on Canada and Mexico than the US currently imposes on China has been delayed again, one day before implementation. Good, I guess...but what the hell is going on?

Trump already said out loud his "strategy" is to just use the threat of trade actions to steal industrial capacity from neighbouring countries. But investment decisions won't be put off forever on the basis of non-credible tariff threats.

In the interim this rhetoric is disadvantaging the entire North American industrial base. Our adversaries are undoubtedly loving this.

[flash2015]

Where are you seeing they have been delayed?:

https://www.newsweek.com/stock-market-plunges-trump-tariffs-mexico-canada-china-2024502

It is nuts we are considering this. It isn't just the finished goods/agricultural goods/oil etc. it is all the integrated supply chains (e.g. Windsor-Detroit for cars). I am hoping there is some last minute deal with some token steps to claim that Mexico/Canada are clamping down on fentanyl.

[Esquire Bertissimmo]

It seems there was some midday confusion regarding a statement from the White House press secretary and, indeed, the tariffs are incoming tomorrow. And even though the tariffs ostensibly have something to do with border security or NATO financing, the White House has clarified there is nothing Canada or Mexico can do to prevent them. https://www.reuters.com/world/americas/north-america-braces-new-trump-tariffs-saturday-deadline-nears-2025-01-31/

[Octavious]

I'd be surprised if oil is included when the dust settles.

Give Trump his due. For something that half the people say is almost certainly a negotiation tactic, he's certainly done a good job making the threat believable.

I suspect we'll see things play out like they have been with the WHO. The threat will be enacted (to some extent, at least) and the negotiations will be about what is required to remove the tariffs. Much like the US is discussing what is required for them to rejoin the WHO.

[Esquire Bertissimmo]

It's all "wait-and-see" when asked to predict bad outcomes from tariffs, but "give Trump his due" when, based on not very much, you surmise this is a smart negotiating strategy. You can say you don't like this guy Oct but your thinking always skews in one direction.

[Octavious]

I'm highlighting the clear point, based on the evidence of the reactions here and the general media reaction, that the threat of tariffs is being taken seriously. Which, given that you yourself have pointed to Trump and his team at various points claiming it's just a negotiation tactic, is quite an achievement.

We're diplomacy players, Bert. Surely you can appreciate someone successfully projecting the narrative they wish to be projected? I've made too many threats in this game that were simply not believed despite them being 100% real.

[flash2015]

I had misunderstood the reasons for the tariffs. I thought Trump is implementing them to gain concessions on immigration/drug trafficking. Now I understand they are the excuse to justify breaking trade agreements. He is trying to use this 1977 law:

https://en.wikipedia.org/wiki/International_Emergency_Economic_Powers_Act

The real reason for these tariffs is the massive trade deficits with Canada/Mexico/China. Those deficits can't be reduced quickly. Unfortunately this means tariffs may be here for the long haul. Batten down the hatches

[flash2015]

OK, I was wrong. I thought they were actually going to happen.

[Octavious]

OK, I was wrong. I thought they were actually going to happen.

As I said, it's remarkable how effective Trump was in making the threat believable. Not just to the usual suspects, but also to the more reliable media sources and countless intelligent observers.

[Esquire Bertissimmo]

It's really not obvious what's going on in the White House.

Is Trump using the mere threat of tariffs to extract concessions and/or encourage more US-based production? If so it's still an economically and diplomatically damaging strategy. Moreover, a strategy centered around bluffing can obviously only work for so long — what's the end game in this scenario?

Or maybe Trump is very genuinely interested in imposing these tariffs, but being convinced to delay on the advice of more economically literate members of his inner circle? The stock market dipped on his threat. There is much greater public awareness that blocking Canadian oil exports would cause at least a temporary increase in US gas prices. These and related issues might have caused him to indulge a pause without changing his fundamental preference for imposing tariffs.

In either case this whole episode is causing Canada to rapidly overcome longstanding domestic squabbles in order to reduce our exposure to the US. Interprovincial trade barriers are being torn down in mere months after years of economists banging on about how damaging these are. It looks like we'll build pipelines to the west and east coasts that were politically *impossible* before the Trump threat. These actions lessen America's domination over our economy. I expect similar decisions are being made in Mexico.

[Octavious]

I don't think he bluffs as such. At least not often. I think that he had in mind his preferred outcome, but also saw tariffs as preferable to the status quo and was willing to go along with them if things didn't go as he wanted.

[flash2015]

EU has blinked. They are offering to drop the import tax on US cars from 10% to 2.5%. This is inline with the tax on importing EU cars to the US:

https://www.ft.com/content/bed348ee-3e05-47f6-8a83-563286b8b99e

[Octavious]

If a lasting peace is achieved in Ukraine and Russia is restored to a nation we can do business with, we can expect a fall in energy prices and a resulting impact on inflation that goes with it. Has anyone seen any estimates of what this might be? It is entirely possible that Trump is factoring this in as a counter to the inflationary impact of tariffs, but I don't have a good enough feel for the figures to make anything like a solid judgement

[Esquire Bertissimmo]

Before the war, Russia accounted for about 10% of global oil exports. Despite the sanctions, Russia has continued to export a significant (but not perfectly knowable) share of its pre-invasion export volumes. While the West doesn't import Russian product directly, Russia's global supply continued to keep prices lower than they would have been if Russian oil had truly been shuttered.

Global oil prices fell ~3% on news of the peace talks. In very rough terms, that 3% = (How far the market thinks prices would fall if peace actually happens) × (How likely the market thinks peace actually is). Of course, the reality is more complex, as different market participants are making predictions about how impactful the sanctions have actually been, which potential peace scenarios are plausible (and on what timeline), as well as confounding factors such as the supply response of OPEC and other producers.

The Dallas Fed has estimated that a 10% change in global oil prices is associated with a 0.4% change (in the same direction) for US headline inflation.

There are a range of estimates for the inflationary impact of Trump's tariffs proposals (of which there are now many). I've seen estimates of 0.3% to more than 1% depending on the proposals.

So yes. If a peace deal is struck and it includes a normalization of Russia's oil exports, the resulting decrease in global energy prices might at least partly balance out the inflationary impact of Trump's tariffs plans (especially he opts for his less extreme proposals).

This is, however, a somewhat asinine way to view economic management. Trump shouldn't be trying to destroy the US economy just as much as peace might help it. One alternative - peace without tariffs - would yield an even bigger inflation reduction that is much needed at this point given the Fed's persisting difficulties to re-achieving its 2% inflation target. A peace dividend that is not watered down by tariff would make it likelier the Fed could cut interest rates, something that Trump is very eager to see happen.

[Esquire Bertissimmo]

Well Trump has done it.

He wasn't kidding.

Now there will be a US recession and a global recession based *entirely* on his administration's economic illiteracy. The formula used to determine "reciprocal" tariff rates was truly embarrassing.

The costs to the US itself are already so large it would take a submarine trip to the depths of the charitableness trench to expect a net benefit for Americans out of this.

[Jamiet99uk]

He's a fucking idiot.

Millions of stupid people elected this shitbag.

[Jamiet99uk]

Donald Trump is like a five year old boy who is unreasonably proud because he just did a really big poo.

[Jamiet99uk]

America would be the laughing stock of the world if this wasn't so serious. Who fucking voted for this clown and what are they going to do to fix things?