Jim Rickards: The Trade War Will Get Worse



By Jim Rickards from Daily Reckoning  | 16 September 2018

Opening Ceremony Black W/White Ankle Color Ankle W/White Boots/Booties 1084d1

Christian Louboutin Nude Round Toe Pumps,Tory Burch Flame Red Dale Flat Thong Sandals,Alexander Wang Black Strappy W Silver Ball Pumps,J.Crew Olive Multistrap 5m F1366 Sandals,Valentino Black ‘rockstud’ Double Ankle Strap Pointy FlatsJ.Crew India Blue Elsie Suede Pumps with Contrast Trim Flats,Lauren Lorraine Silver New Women's Liza Ankle Boots/Booties,Prada Gold Leather Drivers 38.5eu Flats,Lust For Life Black Snake Embossed Cutout Thigh High Boots/Booties,Chloé Teal Lauren Scalloped Ballet FlatsChristian Louboutin Blue Follies Spikes 100 Denim Lame Lux Silver Spike Pigalle Heel Pumps,Dolce&Gabbana Dolce & Gabbana Suede Crystals Bellucci Black PumpsFrench Sole Brown Zebra Print Flats,Christian Louboutin Black Red White Athletic Flats,Tory Burch Leopard Reva Print Flats,Lauren Ralph Lauren Nude 543461 Flats,Nine West Black Stretch Knee High Stiletto Boots/Booties,Sam Edelman Putty Freddie Medallion Flats,Tod's Nude Beige Gommino Espadrilles Flats,Alexander Wang Silver Kori Zip Boots/Booties,Tory Burch Tan and Pink Straps SandalsMarc Jacobs Nude/Red Patent Leather Flats,Tory Burch Island Turquoise Thora 2 Sandals,Eileen Fisher Black 'mellow' Leather Wedge Flats,Tory Burch Black Lowell Ballet 43070 Flats,Balenciaga Brown Arena Leather Stud Ballerina Ballet Flats,Christian Louboutin Gold Gloriana Glitter Leather Ballerina Sz. 36.5 Euro Flats,Dolce&Gabbana Dolce & Gabbana Crocodile Skin Sandals with Brooch Green Pumps,Via Spiga Rust New Deamdra Suede Flats,Prada Black Suede Pointed-toe Bow Mules Flats

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.


Only wore this once and realized they are half a size small on me. Love love these boots. They are super soft and the heel is comfy.

Soft Leather

leather, solid color, zip closure, round toeline, leather sole, square heel, no appliques, small sized

Boot length 7.02 inches, Boot width 10.92 inches, Heel height 3.9 inches

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.

Zara Black Printed Fabric Slides Sandals,Birkenstock Dark Brown Leather Arizona Sandals,Dior Brown Women's Stitched Leather Open Toe Heel Pumps,Thomas Pink Multi Coloured Of Jermyn Street Boots/BootiesTory Burch Nude Patent Leather Caroline FlatsJimmy Choo Black Patent 081 Flats,Miu Miu Denim Strapped Ballet Flats,Tory Burch Navy Emory Flip Flops Sandals,Free People New Leather Marlo Sandals,Christian Louboutin Mea Culpa 120 Suede PumpsEmilio Pucci Multi Colored Print Rubber Rain Boots/Booties,Calvin Klein Brown Suede Monogram Flats,Chloé Chloe Elastic Ankle Strap Ballet Flats,Tory Burch Black / Silver Reva Ballet / Style # 50008690 FlatsKelly & Katie Leopard Kkavert Flats,Dior Cognac Leather Lock Thong Sandals,Dolce&Gabbana New Baby Blue Dolce & Gabbana Pumps,Miu Miu Multi Colored 5up031 Pavone Snakeskin Platform Mid Calf Eur 36.5 Boots/BootiesFrench Sole Quilted Ballet In Black Flats,Vince Blue Robin Espadrille Fs70 Cobalt / 38 Eu Display FlatsPaul Green Navy Blue Suede Leather Chain Loafers Flats,Nine West Nyessa Buckle Loafer Flats,Emilio Pucci Multicolored Rubber Ora 793178 SandalsChristian Louboutin Black Pointed-toe Heels Pumps,Old Gringo Black and Gold Boots/Booties,Ann Taylor Orange Claya Suede Flats,Saint Laurent Pink Patent Pale Point Toe Flats,Christian Louboutin Black Mesh Square-toe Flats,Salvatore Ferragamo Black 19906 "Grace" Flats,Tory Burch White Style Number: 51148214 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

Tory Burch Tan Royal Reva Ballet Flats,

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.

Christian Louboutin New Laperouza Patent Crest Loafer Flats,