Economy

Trump Sets Up An Economic Time Bomb

JM Ashby
Written by JM Ashby

Confirming earlier reports, Trump announced that he would impose a 10 percent tariff on $200 billion worth of imports from China, rather than 25 percent, but that doesn't mean that tariffs can't be increased once they're on the books.

In fact, the Associated Press reports that Trump's tariffs will automatically increase to 25 percent on the first of the year if he does not raise them before then.

WASHINGTON (AP) — The Trump administration will impose tariffs on $200 billion more in Chinese goods starting next week, escalating a trade war between the world’s two biggest economies and potentially raising prices on goods ranging from handbags to bicycle tires.

The tariffs will start at 10 percent, beginning Monday of next week, and then rise to 25 percent on Jan. 1. [...]

The administration is targeting a bewildering variety of products — from sockeye salmon to baseball gloves to bamboo mats — forcing U.S. companies to scramble for suppliers outside China, absorb the import taxes or pass along the cost to their customers.

It's been reported that Trump's staff convinced him to impose a 10 rather than 25 percent tariff because 10 percent may not be passed down to consumers.

Even if you believe most companies will absorb the impact (I don't) of 10 percent, they almost certainly will not absorb a 25 percent tariff. They can't.

Meanwhile, China has followed through on their pledge retaliate and, for the first time, they're targeting America's natural gas industry.

Analysts and traders have said that although China is a huge buyer of LNG especially in the run-up to and during winter, it should easily find supplies from other large exporters such as Qatar and Australia. [...]

For U.S. companies developing LNG export terminals such as Cheniere Energy, Sempra and Kinder Morgan, the tariff casts doubt over their projects’ final investment decisions (FIDs), which trigger construction of facilities.

“It’s a problem for Cheniere as it makes their LNG uncompetitive in China,” Noel Tomnay, vice president for gas and LNG consulting at Wood Mackenzie, told Reuters on the sidelines of an industry event in Barcelona, Spain.

“But the biggest problem is for all those U.S. LNG projects trying to get FID. China would be the biggest market for all of them. While these tariffs last, it’s unlikely they can take off. That’s a potential opportunity for non-U.S. projects (e.g. Canada) to go ahead.”

Like soybeans and sorghum, China may just stop buying American gas.

I think it's only a matter of time before Republicans start talking about passing a stimulus package or a bigger version of Trump's bailout for farmers to offset his trade war.

  • muselet

    The headline on Kevin Drum‘s take on this story:

    Chinese Respond to Trump’s Response to Chinese Response to Trump’s Trade War

    This is absurd, tariffs on top of tariffs on top of tariffs, like a matryoshka doll imagined during an LSD trip.

    Also, since tariffs are effectively taxes, why is Grover Norquist not flinging his poo over these? Could it be he’s (*whisper it*) a partisan hack?

    –alopecia

    • Draxiar

      Norquist always has been. He wants all the benefits and none of the costs of civilization. For all of the bluster Republicans have about “welfare queens” and “takers” and “lazy, shiftless” and “living off of other people’s money” and “working hard to support people on welfare” they sure as shit do whatever they can to pay for nothing. Of course they’re pulling their smoke and mirrors tricks and blaming other people for what they’re actually doing. Norquist is no different.

  • katanahamon

    Yes, and these problems Rump is creating will magnify and escalate well beyond his tenure. America will learn the lesson that if you elect an incompetent fool as president, there will be terrible repercussions.

    • Aynwrong

      Some of America will learn the lesson that if you elect an incompetent fool…”

      Remember, we’ve been down this road before.

      • Scopedog

        Yes, we have. And you’re right–quite a few people never learned their lesson (we see you, Susan Sarandon).

        • Aynwrong

          And the vast majority of Republican voters.

  • It’s pure madness. Is there any line the GOP won’t let Trumpov cross?

    • Scopedog

      Methinks they’ll really let him shoot someone in the middle of Fifth Avenue….

  • Aynwrong

    If Republicans in Congress had an ounce of concern for the economy and how if affects the lives of their constituency they would do something to force Trump to stop this. Such as threatening to hold up or not even confirm his Supreme Court picks until he changed course. That concern is nonexistent so…