Someone Should Ask The Wharton Grad To Explain Smoot-Hawley
I have a hunch that Trump’s second time in the White House will begin with a tremendous stock market buying opportunity. If you’re been thinking about investing in the market, hold off a bit. The market, which closed at 42,732 on Friday (up an historic 12,000 points since Biden became president), is very high right now— a time to sell, not to buy. It’s better to buy on a dip. I think Trump’s administration will start with a dip— or a crash— good time to buy.
The market isn’t going to go down just because people like or dislike Trump. My guess is that most people who buy stocks like Trump— or if not Trump, at least much of his agenda. But maybe not all of his agenda. Many people understand that trade wars are bad for business and cause economic downturns, sometimes very severe economic downturns. This morning Jeff Stein reported that Trump’s aides are putting the finishing touch on— depending how you look at it— the universal tariff plan or the high-flying Biden economy.
The new idea is to have tariffs on “critical imports” that apply to every country in the world— friend and for alike, “a key shift from his plans during the 2024 presidential campaign. If implemented, the emerging plans would pare back the most sweeping elements of Trump’s campaign plans but still would be likely to upend global trade and carry major consequences for the U.S. economy and consumers. As a candidate, Trump called for ‘universal’ tariffs of as high as 10 or 20 percent on everything imported into the United States. Many economists warned that such plans could cause price shocks, and many Republicans in Congress might have criticized them.
The potential change reflects a recognition that Trump’s initial plans— which would have been immediately noticeable in the price of food imports and cheap consumer electronics— could prove politically unpopular and disruptive. But consideration of universal tariffs of some kind still reflects the Trump team’s determination to implement measures that can’t be easily circumvented by having products shipped via a third country.
Exactly which imports or industries would face tariffs was not immediately clear. Preliminary discussions have largely focused on several key sectors that the Trump team wants to bring back to the United States, the people said. Those include the defense industrial supply chain (through tariffs on steel, iron, aluminum and copper); critical medical supplies (syringes, needles, vials and pharmaceutical materials); and energy production (batteries, rare earth minerals and even solar panels)…
It’s also unclear how these plans intersect with Trump’s stated intent to impose 25 percent tariffs on Mexico and Canada and an additional 10 percent tariff on China unless they take measures to reduce migration and drug trafficking. Many business leaders view those measures as unlikely to ever take effect, but some people familiar with the matter said they could be imposed along with universal tariffs on key sectors.
The narrower list of initial tariffs may also partially reflect growing fears about the persistence of inflation in the coming year. The Federal Reserve in December signaled that officials expect just two interest rate cuts for this year, as price increases remain stickier than initially forecast.
Among those leading the internal planning is Vince Haley, a top Trump campaign aide slated to run the White House Domestic Policy Council; Scott Bessent, tapped to be Trump’s treasury secretary; and Howard Lutnick, the commerce secretary pick, the people said.
…Even the revamped plans are strikingly aggressive. The Trump team’s plans would, if put into effect, amount to one of the biggest challenges in decades to the global trade order. Trump’s advisers view this effort as necessary to bring manufacturing jobs back to the U.S. economy, but it could invite retaliation from the rest of the world and drive prices up for consumers and businesses alike.
…Liberal and conservative critics say that even more-moderate versions of Trump’s campaign trade plans are still extreme, arguing that sweeping tariffs would drive up prices for U.S. consumers and manufacturers. Though Trump and protectionist allies say that these duties bolster domestic manufacturing by giving firms a financial incentive to invest here, economists of both parties say they can have the opposite effect by raising input costs.
“If you put tariffs on every country in the world, it’s not like we can import from Mars,” said Kimberly Clausing, who served as a top economist in President Joe Biden’s Treasury Department and is now at UCLA and the Peterson Institute for International Economics, a Washington-based think tank. Clausing said that a majority of U.S. imports are for intermediate goods in firms’ supply chains, not for finished products. “So we’d be making it much more expensive for a U.S. firm to compete with anyone else in the world, because our firms would have to pay much more for imports.”
…Trump in recent days has publicly reiterated his affinity for tariffs, which during the campaign he called “the most beautiful word in the dictionary.” On Wednesday, he posted on his social media platform Truth Social: “The Tariffs, and Tariffs alone, created this vast wealth for our Country … Tariffs will pay off our debt and, MAKE AMERICA WEALTHY AGAIN!”
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