Jim Rickards: The Trade War Will Get Worse



By Jim Rickards from Daily Reckoning  | 16 September 2018

Giuseppe Zanotti Black Slingback Crystal Sandals Sandals Crystal 720bd9

Saint Laurent Camouflage Light Brown Sandals,Tory Burch Red Nautical Miller Striped Patent Leather SandalsSaint Laurent Black Tribute New Ysl Platform Classic Heel 11 SandalsUnder Armour Maroon Clutch Fit Black/ Cleats New 15/ 33 Cm Sneakers,Tory Burch Multi Color Idalah Berber Stripe Slide Sandals,Manolo Blahnik Bronze Sequin Slingback Sandals,Christian Louboutin Multicolor Rocknbuckle Flat Gold White Black Sandals,Tory Burch Black Miller Patent Calf 9.5m Sandals,Jimmy Choo Black Juliet Satin Ankle Strap Wraparound Strappy Sandals,Valentino Black Rockstud T-strap Caged Sandals,Valentino Rose Gold Metallic Leather Rockstud T Strap Pointed Toe Pumps Sandals,Christian Louboutin Purple Sharpeta 100 Cutout Suede Pumps Sandals,Christian Louboutin Viveka 120 Ayers. Sandals,Sole Society White Python Print Calla SandalsTory Burch Vintage Vachetta Multi Miller Sandals,Tory Burch Fire Orange Eloise Mestico / Soft Patent Sandals,Christian Louboutin Pastel Pink New Malefissima 100mm Crisscross SandalsConverse Suede & Leather Oxfords Lo Ox Sneakers SneakersTory Burch Royal Navy Gabrielle Suede Wedge Sandals,ALDO White Tan Leather Heeled SandalsTory Burch Royal Navy Gabrielle Suede Wedge SandalsFendi Black Patent Leather Flowerland Slide Sandals,Max Studio Beige Snakeskin Elliot SandalsTory Burch Royal Tan Cassia Flat Thong In French Calf SandalsChristian Louboutin Version Doudou Kaleitop 85 Lame Sir/Vv/Met Pat/Met Heel SandalsTory Burch Black Melinda Flat Thong Sandals,Tory Burch Pink Orchid Ali Sandals,Prada Black Patent 85mm City Sandals,Jimmy Choo Black The Heel Has A Wood Vener and Acrylic Heel SandalsBurberry Black Tan Brown Cream Plaid Sandals,

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.


Never New, true to size

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.

Rainbow Sandals Tan Double Layer Classic Leather Narrow Strap Women's Sandals,Burberry Gray Flip Flops Nova Check House Check SandalsSaint Laurent Black Nu Pieds 05 Ysl Logo Flat 41 Sandals,Christian Louboutin Black Leather Wooden Heel Platform Sandals,Marc by Marc Jacobs Tan Chunky Sandals,Dolce&Gabbana Blue Crystal Embellished Majolica Printed Fabric Ankle Strap Sandals,Sergio Rossi Multi Color Boavista Leather Platform High Sandals,Tory Burch Magenta Terra Thong Flip Flops Leather Sandals,Tory Burch Tan and Gold Phoebe Leather Flat Sandals,Burberry Black House Check and Leather Flip Flops 37 Sandals,Giuseppe Zanotti Brown Haute Couture Leather Cage Strappy Sandals,Plenty by Tracy Reese Chocolate Brown W/Studs Strappy Sandals,Vince Camuto Dark Indigo Denim Jessamae – Platform Heeled Sandals,Valentino Black Bow Patent Leather SandalsL.K. Bennett White Naomi Flat Gladiator SandalsTory Burch Leopard "Thora" Flip Flops Sandals,Brunello Cucinelli Blue Women's Leather Anklewrap Sandals,Dior Brown Leather Round Toe Boot Wooden SandalsReiss Blush Cece Crossover Front Sandals,Saint Laurent Navy Blue Tribute Ysl Yves Patent Leather Pumps Sandals,Vince Camuto Ivory and Black Strappy Platform Sandals,Valentino Clear Charcoal Grey and Black Sandals,Tory Burch Black Gold Patent Leather Gold-tone Logo Sandals,Christian Louboutin Latte/Light Gold Simple Bille Ornament Slide In White Sandals,Salvatore Ferragamo Brown Women's Persy Snake-embossed Leather Platform Wedge Sandals,Dsquared2 Silver New Dsq2 Genuine Leather T-strap High Heel Slide-in SandalsTory Burch Yellow New Adonis' Women's Espadrille Wedge SandalsJustFab Black & Brown Strappy Platform 6" Stiletto Sandals,Tory Burch Electric Eel 22158564 Sandals,Tory Burch Metalic Gold Violet Sandals,

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

Jimmy Choo Lime Green Vamp Platform Sandals,

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.

Tory Burch Orange Breely Patent Leather Flower Sandals,