Jim Rickards: The Trade War Will Get Worse



By Jim Rickards from Daily Reckoning  | 16 September 2018

Chloé Brown Tuscon High-heel Calf Leather High-heel Tuscon Ankle Boots/Booties 853eed

Stuart Weitzman Charcoal Grey Highland Over-the Knee Boots/Booties,Derek Lam Blue and Black Carmen Boots/Booties,Frye Chestnut Military Safari Canvas Boots/Booties,Be&D Tannish Brown Fold Over with Chunky Heels. These Have Never Been Worn Boots/BootiesJimmy Choo Black Velvet “louella” Boots/Booties,Chico's Chocolate Brown Leather New Rosa Croc Embossed Boots/BootiesGianfranco Ferre Black Leather and Metal Boots/Booties,Arturo Chiang Black Leather Umbria Boots/Booties,Prada Black Military Mid Calf Strappy Leather Boots/BootiesZara Black Combat Faux Pearl Strap Ankle Boots/Booties,Christian Louboutin Black Leather Knee High Boots/Booties,Prada Brown Neoprene Knee-high (50705) Boots/Booties,Naturalizer Brown Harbor Wide Calf Riding 116 Banana / 38 Eu Boots/Booties,Saint Laurent Black Festival Rain Boots/BootiesTod's Black Leather Pointed Toe Gold Buckle Ankle Boots/Booties,Jimmy Choo Black 741216 Leather Zip 38.5 Boots/Booties,Tory Burch Black Selma Riding Tumbled Leather Boots/BootiesSaint Laurent Brown Suede 'new Sigaro' Boots/Booties,Christian Louboutin Black Lilli Ankle Boots/BootiesFiorentini + Baker Brown Tan Tall Leather Boots/Booties,Burberry Black Bamburgh 100 Pointy Toe Ankle Boots/BootiesVince Black Leather Almond Toe Ankle Boots/BootiesWhite House | Black Market Suede Over Knee Boots/Booties,Chocolate Brown Delano Boots/Booties,Prada Black Fume' Ribbon Calzature Donna Boots/Booties,Barneys New York Black Leather Boots/Booties,Tory Burch Black Junction Tumbled Leather Tall Riding Boots/Booties,Bottega Veneta Black Knee High Boots/Booties,J.Crew Brown Suede Knee High Boots/BootiesBlack Mr. Ed Cutout Boots/Booties,

It would simply be a replay of the sequence that prevailed from 1921–39 as the original currency war started by Weimar Germany morphed into trade wars started by the United States and finally shooting wars started by Japan in Asia and Germany in Europe.

The existing currency war started in 2010 with Obama’s National Export Initiative, which led directly to the cheapest dollar in history by August 2011.

The currency war evolved into a trade war by January 2018. Unfortunately, a shooting war cannot be ruled out given current developments in North Korea and the South China Sea.

The reasons the currency war and trade war today are repeating the 1921–39 sequence are not hard to discern. Countries resort to currency wars when they face a global situation of too much debt and not enough growth.


Light brown in color. Grained leather upper. Softly rounded toe. Stud-fastening silver metal cuff at ankle. Leather interior lining with lightly cushioned insole. Leather sole. Made in Italy. Please review pictures carefully before buying. There is darkening behind where the metal strap touches the leather. There are also marks on the boots. Soles have been refurbished. Fit true to size. Original box included.

Everyone is worse off and no one wins.

Once leaders realize the currency wars are not working, they pivot to trade wars. The dynamic is the same. One country imposes tariffs on imports from another country. The idea is to reduce imports and the trade deficit, which improves growth. But the end result is the same as a currency war. Trade partners retaliate and everyone is worse off as global trade shrinks.

The currency wars and trade wars can exist side by side as they do today. Eventually, both financial tactics fail and the original problem of debt and growth persists. At that point, shooting wars emerge. Shooting wars do solve the problem because the winning side increases production and the losing side has infrastructure destroyed that needs to be rebuilt after the war.

Tory Burch Brown Rivington Coconut Boots/BootiesCole Haan Medium Brown Craftsmanship Boots/Booties,Christian Louboutin Brown Ruched Ankle Boots/BootiesTory Burch Brown Astoria 85mm Equestrian Calf Retails Boots/Booties,Isabel Marant Brown Leather Dicker Ankle Boots/BootiesPrada Brown | Suede Wedge | Ankle Boots/Booties,Christian Louboutin Brown Miss Tack/ Boots/Booties,Tory Burch Brown Fulton Leather Knee-high Boots/BootiesSalvatore Ferragamo Brown Boutique Italy Leather Zipper Ankle Boots/Booties,Alexander Wang Brown Kirby Animal Print Ankle Boots/Booties,Donald J. Pliner Brown Leather with Stretch Gussets Pants Mato Boots/Booties,Sergio Rossi Brown Sexy Leather Platform Boots/Booties,Brunello Cucinelli Brown Monili Ankle Strap Boots/BootiesRebecca Minkoff Dark Brown La Roux Boots/Booties,Tory Burch Brown 22138520 Brita 86mm Boots/BootiesChristian Louboutin Chocolate Trottinette 140mm Boots/Booties,Rag & Bone Brown Wax Suede Newbury Boots/Booties,Rag & Bone Brown Leather Harrow Boots/Booties,Cole Haan Chestnut Brown Suede Sale Cora Wedge Boots/Booties,Giuseppe Zanotti Red Burnt Orange Blue and Brown Boots/Booties,Manolo Blahnik Black and Brown Leather and Pony Hair Boots/Booties,Frye Brown Suede Tassel Myra Boots/Booties,Stuart Weitzman Brown Walnut Urban Over The Knee Suede Women's Boots/Booties,Donald J. Pliner Rustic Brown Knee High Stretch Leather High Women's Classic Designer Fashion For Country Or By Boots/Booties,Maiyet Brown Leather Fringe Ankle Boots/Booties,Manolo Blahnik Tan and Brown Workboots Boots/BootiesVince Camuto Chocolate Chip Ankle Bootie/ Adinah Collection Boots/BootiesStuart Weitzman Dark Brown Suede Hybrid Boots/Booties,Stuart Weitzman Brown Chestnut Thighland Highland Like Otk Over The Knee Suede Boots/BootiesFree People Brown Joe Over-the-knee Boots/Booties,

What most surprised me about the new trade war was not that it started, but that the mainstream financial media denied it was happening. It’s possible to date the trade war from January 2018 when Trump announced tariffs on solar panels and appliances mostly from China.

A deeper analysis would look back to 2001 when China joined the World Trade Organization (WTO) and immediately began to break the rules, or 2008 when China cheapened its currency to prop up exports during the global financial crisis. But January 2018 is a more formal date because the Trump tariffs were explicit and not indirect as China’s tactics had been.

The media have consistently denied the impact of this trade war. Early headlines said that Trump was bluffing and would not follow through on the tariffs. He did. Later headlines said that China was just trying to save face and would not retaliate. They did.

Today the story line is that the trade war will not have a large impact on macroeconomic growth. It will. The mainstream media have been wrong in their analysis at every stage of this trade war. The trade war is here, it’s highly impactful and it will get worse. The sooner investors and policymakers internalize that reality, the better off they’ll be.

The easiest way to understand the trade war dynamics is to take Trump at his word. Trump is not posturing or bluffing. He will agree to trade deals, but only on terms that improve the outlook for jobs and growth in the U.S. Trump is not a globalist; he’s a nationalist. That may not be popular among the elites, but that’s how he sets policy. Keeping that in mind will help with trade war analysis and predictions.

Trump is entirely focused on the U.S. trade deficit. He does not care about global supply chains or least-cost production. He cares about U.S. growth, and one way to increase growth is to reduce the trade deficit. That makes Trump’s trade policy a simple numbers game rather than a complicated multilateral puzzle palace.

If the U.S. can gain jobs at the expense of Korea or Vietnam, then Trump will do it; too bad for Korea and Vietnam.

From there, the next step is to consider what’s causing the U.S. trade deficit. This chart tells the story. It shows the composite U.S. trade deficit broken down by specific trading partners:

The Gap in Trade

Frye Dark Brown Leather Victoria Ankle Boots/Booties,

The problem quickly becomes obvious. The U.S. trade deficit is due almost entirely to four trading partners: China, Mexico, Japan and Germany. Of those, China is 64% of the total. President Trump just concluded a new trade deal with Mexico that benefits both countries and will lead to a reduced trade deficit as Mexico buys more U.S. soybeans.

The U.S. has good relations with Japan and much U.S.-Japanese trade is already governed by agreements acceptable to both sides.

This means the U.S. trade deficit problem is confined to China and Germany (often referred to euphemistically as “Europe” or the “EU”). The atmosphere between the U.S. and the EU has been improving lately and Germany knows it needs to make concessions in order to avoid punitive tariffs on EU exports to the U.S.

Therefore, the global trade war is not global at all but really a slugfest between the U.S. and China, the world’s two largest economies. This reality and the gravity of the situation are beginning to sink in even to the most Pollyanna-ish rookie journalists. Seasoned market-maker and stock specialist Stephen “Sarge” Guilfoyle offered this insightful analysis in his blog for Aug. 31, 2018:

Part of the problem with market reaction to trade news is that keyword-reading algorithms react ahead of human response to any news item. Every time. Price discovery has become perverse. This is now part of the complex, changing environment. Just this week, we have already seen a tremendous effort to renegotiate a NAFTA deal that has the backing of both the United States and Mexico. A deadline for bringing Canada on board looms today…

Less than two weeks ago, the president threatened to pull the United States out of the WTO (World Trade Organization). The president has complained in the past that the WTO does not always side with the U.S. and sometimes infringes on rights of self-determination.

While President Trump rattles that cage, the comment period for U.S. plans to impose a 25% tariff on another $200 billion worth of annual Chinese imports is due to expire. This is an extension of the U.S./China trade war that the Chinese side will be unable to match dollar for dollar without getting creative…

The president also rejected a European Union offer to scrap automobile tariffs, citing European consumer habits that lead to a greater appetite across that continent for vehicles manufactured on the continent. “Almost as bad as China,” I believe is what President Trump said…

Guess what? In the realm of global trade, the United States is an extremely desirable customer. In fact, for most, we are their best customer.

Think the still export-based Chinese economy can afford to sell significantly less manufactured goods across borders? Think that same Chinese economy can allow for a significant devaluation of U.S. sovereign debt? That’s their book, gang.

Think EU manufacturers can afford to sell substantially fewer vehicles inside U.S. borders? Of course not. The winner, as always in tense negotiation, will be the one that the other side believes will walk.

Even China is slowly coming to the realization that the trade war is real and here to stay. Senior Chinese policymakers are beginning to refer to the trade war as part of a larger strategy of containment of Chinese ambitions that may lead to a new Cold War. They’re right.

Unlike in other policy arenas, Trump enjoys bipartisan support in Congress. The Republicans are backing Trump from a national security perspective and the Democrats are backing him from a pro-labor perspective. China sees the handwriting on the wall.

This trade war will not end soon, because it’s part of something bigger and much more difficult to resolve. This is a struggle for hegemony in the 21st century. The trade war will be good for U.S. jobs but bad for global output. The stock market is just waking up to this reality. The currency wars and trade wars are set to get worse.

Investors should prepare now.


Jim Rickards
for The Daily Reckoning

This article by Jim Rickards was originally published at Daily Reckoning.

Prada Brown Fume' Ribbon Calzature Donna Boots/Booties,