Tags: trump | china | tariffs | eu | trade | wto | nafta

Trump to Squeeze More Tax Dollars Out of US Consumers With Tariffs

Trump to Squeeze More Tax Dollars Out of US Consumers With Tariffs

Friday, 31 August 2018 09:34 AM Current | Bio | Archive

President Donald Trump has been expressing considerable enthusiasm for piling yet more tariffs (or taxes) on the U.S. consumer as soon as possible.

There are multiple reports that $200 billion of tariffs on goods partially made in China will rise as soon as next week, which would mean that more than half of all Chinese imports would be subject to tariffs.

The tariffs could go into effect after the public-comment period ends on September 6.

When Trump announced the possibility of the tariffs on $200 billion worth of Chinese goods, Beijing responded by threatening tariffs on $60 billion worth of U.S. goods. If those measures go forward, almost all U.S. goods heading to China would be subject to tariffs.

This might seem an odd strategy so close to the midterm elections, but the reality is that tariffs (taxes) today will not actually start to hurt the U.S. consumer much before the end of the year.

Trump’s enthusiasm for squeezing taxes with tariffs from Americans was further in evidence with some hostile comments about European trade. Trump said the EU’s offer to scrap tariffs on cars is “not good enough” because European consumers’ “habits are to buy their cars, not to buy our cars.”

On Thursday, EU trade chief Cecilia Malmstr√∂m had told the European Parliament’s trade committee that Brussels is willing to scrap tariffs on all industrial products, including cars, in its trade talks with the U.S. “We are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” she said, adding that “it would be good for us economically, and for them.”

Finally, Trump muttered about leaving the World Trade Organization (WTO) saying: “If they don’t shape up, I would withdraw from the WTO,” adding that the agreement establishing the WTO “was the single worst trade deal ever made.”

Today is also the political deadline for Canada to sign up to the not-NAFTA deal. There are reports suggesting a preliminary deal could be signed today, which would then lead to further discussions.

A couple of people familiar with the discussions offered different views on progress. A couple said that a preliminary agreement appeared likely to be announced Friday. But others said too many issues remain unresolved to predict an outcome, even though there was positive momentum. One of the key issues, over dispute-settlement panels, is said to be unresolved.

All that sounds more and more like the Brexit negotiations.

Emerging Markets FX Troubles – Argentina – Turkey - Venezuela

The International Monetary Fund said it will consider Argentina’s request to speed up disbursements from a $50 billion credit line as the Argentine government seeks to restore investor confidence.

Notwithstanding that, the Argentine peso had another very bad day yesterday notwithstanding the Argentine central bank raised the cost of borrowing by 15 percentage points to 60 percent in an attempt to shore up the peso. The central bank said it would keep rates unchanged at 60 percent until at least December.

1 (one) dollar is now worth about more than 39 Argentine pesos (ARS), having been worth about 18 pesos at the start of the year.

The Turkish lira had also a bad day yesterday. The lira lost 2.8 percent on Thursday but recuperated 1.20 percent in early trading today but is still down 8.2 percent this week alone and is poised to close August with a fall of nearly 25 percent which will be by far the worst month since 2005.

The Turkish government created a tax advantage for holding Turkish lira as opposed to foreign currency, which went into effect overnight.

This is unlikely to prove a long-term solution to the problems of the Turkish lira, but it has given some temporary relief.

Meanwhile, in Venezuela, Nicolas Maduro, the president of Venezuela, has reportedly ordered banks to adopt the oil-backed state cryptocurrency, the ‘petro’, as a unit of account. Financial institutions will now be required to ensure that their financial information is reflected in the petro cryptocurrency besides the bolivar, the country’s fiat currency according to Agence France-Presse.

No, that is not a good thing…

Investors should do well keeping in mind that all these events remain “country specific” rather than “systemic.”

Countries that have pursued poor policies in the past are now paying the price for those past poor policy decisions.

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

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President Donald Trump has been expressing considerable enthusiasm for piling yet more tariffs (or taxes) on the U.S. consumer as soon as possible.
trump, china, tariffs, eu, trade, wto, nafta
Friday, 31 August 2018 09:34 AM
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