Tags: investors | trade | tensions | trump

Trump Tariffs Likely Will Hurt Lower-Income Americans the Most

Trump Tariffs Likely Will Hurt Lower-Income Americans the Most
(Mike Clegg/Dreamstime)

By    |   Monday, 10 September 2018 09:07 AM

President Donald Trump has been sounding quite anti-China on the Trump Twitter feed. The focus would seem to be back on trade again following comments threatening to tax any American citizen who consumes something "partially made in China."

The war on tech companies continuous with criticism of Apple for "partially making things in China." 

The president on Saturday tweeted: “Apple prices may increase because of the massive Tariffs we may be imposing on China - but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting! 10:45 AM - 8 Sep 2018”

Most of the price paid for an Apple product will arise from its U.S. input. It’s only the final and cheaper stages of production that take place in China. These contribute a tiny part of the total price, but of course the risk is that the whole price, including the dominant U.S. component, will be subject to U.S. consumer taxes.

Despite the tariffs or taxation so far, China’s trade surplus with the United States widened to a record in August even as the country’s export growth slowed slightly. The politically sensitive surplus hit $31.05 billion in August, up from $28.09 billion in July, customs data showed on Saturday, surpassing the previous record set in June. Over the first eight months of the year, China’s surplus with The U.S., its largest export market, has risen nearly 15 percent.

U.S. Trade Representative Robert Lighthizer and Commerce Secretary Wilbur Ross will be in Brussels this week to discuss the fragile TransAtlantic truce. Despite a so-called détente reached in July, when the proposed car tariffs were kept at bay, the heat seems to come back on.

The flurry of Twitter activity does suggest that taxing U.S. consumers is likely to be high on the market risk-list this week.

Trade protection tends to hurt lower-income people more than higher-income people in the U.S. and if there is an escalation of tariffs or taxes, the living standards of lower income Americans are likely to be disproportionally hurt.

U.S.-Canada Trade Talks Drag On

U.S.-Canada trade talks look set to drag on. Trump, speaking Friday in North Dakota, said he believes Canada is ripping off the U.S. and repeated that, if a deal can’t be reached, he’ll apply a 20 percent tariff on cars.

Swedish General Election

The Swedish general election has seen the "center-left" and the "center-right" win almost exactly the same number of seats. Neither the Social Democrat-led coalition of Prime Minister Stefan Lofven nor the opposition Alliance bloc won enough votes to form majority governments, as a nationalist group that has talked of dragging Sweden out of the European Union (EU) drew in almost a fifth of the electorate. The "anti-party," the anti-immigration Sweden Democrats saw the largest increase in vote. Sweden may face weeks or even months of political horse-trading after an inconclusive election, echoing electoral gridlock in Germany, Italy, the Netherlands and Spain.

For investors, it might be helpful to keep this European situation on their radar screens.

A period of uncertainty about government is never calculated to be a positive event for financial markets, but this was expected as an outcome.

The fact that the ‘Swedish democrats’ did not perform as well as predicted, may be something that is overinterpreted. Investors are generally nervous about the damage that ‘anti-parties’ can do to the global economy.

Japan GDP in Q2

Japan's economy in Q2 grew at the fastest pace since 2016, with the rate revised well above the preliminary figure thanks to increased corporate investment in industries like logistics and electronics.

GDP growth hit an annualized rate of 3% in Q2, compared with an initial reading of 1.9%. The last time GDP expanded 3% or more was in Q1 of 2016.

Average Hourly Earnings and Wage Gains

Wage gains for lower income earners have not been especially strong and this is why average hourly earnings tell us next to nothing about wage growth. U.S. average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $ 27.16, or 0.4 percent, in August. Over the year, average hourly earnings have increased by 77 cents, or 2.9 percent, the largest increase since June 2009, from 2.7 percent in July.

Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $ 22.73 in August.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Trade protection tends to hurt lower-income people more than higher-income people in the U.S. and if there is an escalation of tariffs or taxes, the living standards of lower income Americans are likely to be hurt.
investors, trade, tensions, trump
Monday, 10 September 2018 09:07 AM
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