[Victoribus Spolia]

So the stock market plummeted in response to Trump's announcing tariffs on foreign steel and aluminium.

Thoughts?

Stocks fell on Thursday after President Donald Trump said the U.S. will implement tariffs on steel and aluminium imports next week.

The Dow Jones industrial average traded 488 points lower after rising more than 150 points earlier in the day. The 30-stock index fell as much as 586 points.

The S&P 500 declined 1.6 percent — erasing its year-to-date gains — with industrials as the worst-performing sector. The Nasdaq composite fell 1.5 percent and broke below its 50-day moving average, a key technical level.

The U.S. will set tariffs of 25 percent for steel and 10 percent for aluminium, the president said. It is unclear whether they will apply to all imports or only metals from certain countries

https://www.cnbc.com/2018/03/01/us-stoc ... trump.html

[Heisenberg]

The stock market =/= the economy is my main thought. I'm getting really tired of Trump using the Dow Jones index as evidence of his economic success, and I'm tired of his opponents trying to use it as evidence of his economic failure. The economy is far more complicated than how some cocaine-addled hedge fund bros feel about $NVDA today.

Also, is a 1.6% drop really "plummeting"?

[Victoribus Spolia]

The stock market =/= the economy is my main thought. I'm getting really tired of Trump using the Dow Jones index as evidence of his economic success, and I'm tired of his opponents trying to use it as evidence of his economic failure. The economy is far more complicated than how some cocaine-addled hedge fund bros feel about $NVDA today.

Also, is a 1.6% drop really "plummeting"?

What are your thoughts on the tariffs in general?

[colliric]

They are a useful tool in bringing more jobs back to a country. But as some commentators have noted, there could be limited impact due to automation technology.

Hope not though.

It will mean more jobs for Americans, but not sure if it will be a lot of jobs or just a few more.

[Godstud]

Adding tariffs will only cause the people the US trades with to do the same to American products. I think this will not help the US economy in ANY way.

I don't think this stock change is a big deal. Even my broker told me it's insignificant.

[Crantag]

The stock market =/= the economy is my main thought. I'm getting really tired of Trump using the Dow Jones index as evidence of his economic success, and I'm tired of his opponents trying to use it as evidence of his economic failure. The economy is far more complicated than how some cocaine-addled hedge fund bros feel about $NVDA today.

Also, is a 1.6% drop really "plummeting"?

There are actually clear correlations between Trump's policy and both the prevailing roided up stock market, as well as this specific instance.

The news yesterday was that with the end of February the stock market had capped off 2-days of losses by achieving the 'worst month' in two years. While I respect your sentiments, this is also an instance where there exists a direct relationship to the policy and the stock market.

Steel and aluminium are intermediate goods, so the policy will raise operation costs across industries. Meanwhile, I personally seriously doubt that a 10% increase in the cost of aluminium imports or 25% increase in the cost of steel imports will restore a competitive advantage to American smelters. It will simply increase costs, in exchange for a nominal flow of monopoly money to government coffers--tariffs are not a considerable source of government revenue for advanced economies.

The tariffs are clearly aimed at China. While it will have some complicating effects on Chinese economics, China has a lot more options for dealing with the general state of affairs than does the US. China has been diligently seeking to increase domestic consumption of Chinese goods, in large part to offset foreseeable declines in American consumption. If China was a strictly competitive capitalist economy this could present a shock, but the Chinese hybrid economy will probably whether the situation.

Debasing one's currency to effect increasing exports or slapping protections on particular industries, only works if the industries are competitive to begin with. The US hardly produces anymore. A cheap dollar will not effect American industries as it has been seen to do in Japan in the past/China/etc.

Take automobiles. A week Japanese yen can lead to a strong increase in demand for Japanese cars, for which a heavy secular demand exists all around the world. American cars, meanwhile, are fairly rare outside of America.

It's more simpleton economics from the idiotic criminal cabal that now controls the US government. I wonder of Russia put them up to it.

[colliric]

American cars, meanwhile, are fairly rare outside of America.

Not really. Ford and General Motors are still amoungst the biggest car companies in the world... Both are still headquartered in Michigan.

That they choose to be dickheads and not sell much specifically American Made cars in their foreign markets is their own fault.

Technically I drive an American Brand Car that was 100% made in Australia.

Depending on what you consider an American Car, American (Branded and Company HQ is in America) cars are still sold in high numbers worldwide.

Technically most Apple products are Asian by manufacturing, but everyone calls them American anyway because the company is American based in California.

I always thought it was a cruel joke we couldn't get the Mustang in Australia till recently despite the fact Ford has been selling overseas cars here the longest of any car manufacturer.

[annatar1914]

Right now, this is more punitive than autarchic, although it will gradually come to that. Trump is testing the waters here with raising these particular tariffs. Again, President Trump is a war President, and this is the opening salvo for a country preparing for war, economic warfare at first.

[Crantag]

Adding tariffs will only cause the people the US trades with to do the same to American products. I think this will not help the US economy in ANY way.

I don't think this stock change is a big deal. Even my broker told me it's insignificant.

It's true that people should listen to their certified financial advisor more than they listen to the mad churpings of a stranger on the internet (i.e. me), but at the same time there is a conflict of interest in that the brokers have a strong vested interest in people keeping their money in the market. Therefore, there is always a ready-made explanation at hand for 'why leaving your money in the market is the right thing to do at this particular time', regardless of whatever facts might exist. You can here it all the time in the financial press (the commentators tend to go back and forth in a 'fairness doctrine-esque' sort of way, raising a particular point and then immediately contradicting it with the service of some quote they plucked from somewhere, or what have you).

The US has sold a tremendous amount of its industrial capacity off to China. It even sold off wholesale entire sectors, as well as numerous businesses. Recently, the SEC blocked China from purchasing the Chicago stock exchange. After the collapse of the US auto industry, which the government bailed out, the Hummer was sold to China--which is a military vehicle.

Now China is out-competing the US in the same industries which American industrialists sold off in the service of immediate gains. What a big surprise. So now, increasing the price for US industrialists of attaining essential input goods is suppose to somehow restore US competitiveness?

I am thinking that jacking up the cost of intermediate industrial goods like steel and aluminium will probably manifest with larger-than-in-kind increases in the price of finished products which utilize these goods. I.e., planes, trains and automobiles (that is, the effective retail price of the steel embodied in an automobile is likely to increase more than 25%. The alternative would be for the manufacturers to eat a loss. Not wholly impossible given the highly competitive nature of the auto industry, which includes a robust import sector, and by which prices are influenced).

This isn't a conventional situation, and my analysis is sort of speculative as a result.

[Crantag]

Not really. Ford and General Motors are still amoungst the biggest car companies in the world... Both are still headquartered in Michigan.

That they choose to be dickheads and not sell much specifically American Made cars in their foreign markets is their own fault.

Technically I drive an American Brand Car that was 100% made in Australia.

Depending on what you consider an American Car, American (Branded and Company HQ is in America) cars are still sold in high numbers worldwide.

Technically most Apple products are Asian by manufacturing, but everyone calls them American anyway because the company is American based in California.

I always thought it was a cruel joke we couldn't get the Mustang in Australia till recently despite the fact Ford has been selling overseas cars here the longest of any car manufacturer.

I've traveled around the world, and I can say American cars are relatively rare. In the US, American cars are a lot cheaper than foreign imports, and that's probably the only thing which keeps them competitive. The companies are some of the biggest in the world, which is mostly fueled by the domestic auto market in the US. US cars are not regarded as overly competitive on the world stage, and this has been a long-standing source of lamenting by American car manufacturers. The US is an auto-centric economy, so this fuels a huge consumer market for autos in the US, and market manipulation which inflates the price of imported cars assures demand for the cars. In America--with all its lack of public transportation--cars are almost like a utility, and a utility is a natural monopoly.

Any objective analyst can plainly see that American cars are not regarded on a par in terms of quality with their Japanese or German counterparts, and this is--I think--primarily what is behind the deficiency of demand for US cars worldwide.

Edit: Oh yeah, they are also not seen as on a par with say Korean cars in terms of cost. Increasing the cost of steel inputs isn't going to help that much, either. Indeed, competitiveness broadly will likely be adversely effected by this means.

[Torus34]

The tarif caper is President Donald Trump being Donald Trump. He is not averse to creating a problem and walking away from it without resolution. He's a businessman. That means that he's comfortable playing with someone else's money and walking away if things go south. He doesn't own steel mills nor aluminium refineries. He has no dog in this particular fight. Meanwhile, it sends the press, like a pack of dogs, baying after a scent other than the ongoing investigations of his staff, not to mention his other ethical problems.

And so it goes.

[Igor Antunov]

WTF as a leftist working class advocate I love caring about profit margins of billionaires now. I also believe that what's good for the corporations is good for working class. omg dat drumpf.

[Crantag]

WTF as a leftist working class advocate I love caring about profit margins of billionaires now. I also believe that what's good for the corporations is good for working class. omg dat drumpf.

I don't know if you are talking to me or something.

I'm first and foremost an analyst of economic phenomena and events. Just because I think the US is a decadent and politically corrupt shithole doesn't mean this must cloud my perspectives on systemic implications of particular happenings. That's called being objective.

At the same time, as a matter of fact policies which will probably increase the price of goods in an economy are not good policies for the working class. A 25% increase in the cost of steel imports will not automatically lead to the reopening of the smelters in Pittsburgh. Do you have any idea what it costs to establish a steel or aluminium smelter? Such costs are figured in the billions of dollars.

[4cal]

I'm asking here...

Lets say that Apple is making IPHONES in Singapore.
Trump slaps tarriffs on IPHONES from overseas

Apple either moves production to the US

of

Apple just pays the tariffs.

Lets say it works out to $8.00 per phone that is imported.

If I'm Apple, instead of investing in a new hundred million dollar factory, training thousands of workers, paying thousands of workers, providing thousands of workers benefits, etc... it seems more economical to pay the tariffs and either absorb the extra costs or pass them along to the consumers. Most consumers have their IPHONES through monthly plans with their carrier. Over a 24 month contract, if the extra costs to APPLE per unit is $8 due to the tariff and assuming that AT&T doesn't mark that up when you come into one of their showrooms, that works out to about $0.34 per month. Right?

[colliric]

The deficiency of demand for US cars worldwide.

Is primarily due to a long term terrible sales strategy of American Companies selling no actual American-Made Cars in their overseas markets, given the old idea that "Making cars in that country for that country in order to avoid import taxes and whatnot" took hold.

Toyota even did this too, but sold same or similar branded products. But even they're having to resort to "selling stuff from Kyoto again" and clearly brand themselves as Japanese.

The Mustang has sold extremely well in Australia now Ford has been forced to reverse this strategy and offer American Made products from an American company globally again.

https://www.wheelsmag.com.au/news/1706/ ... utside-usa

Stupid strategy and your car companies were punished for it.

That is the equivalent of McDonald's refusing to sell the Big Mac overseas and instead trying to come up with local varients with totally different names.

How can people demand a product when the company which is supposed to be selling it, isn't selling it in their market?

[Crantag]

Actually producing cars locally has a lot more to do with pretty straight forward economic considerations. Japanese auto makers initially undercut US-based American producers which manufactured cars with local components in Michigan by introducing a module production method which relied on 'just in time delivery of parts, much of which came from Mexico. This actually revolutionized production methods throughout the global auto industry.

[colliric]

At the same time the failure to sell and stock any American Made product internationally is now a problem for American car sellers competing against companies that have sold their "home country" models internationally, like Volkswagen.

Ford has taken some steps to remedy it by finally releasing the Mustang worldwide and ending alot of local manufacturing (including my beloved Ford Falcon!) but too little too late.

The American brands are still popular but cars actually made in America are not.

Part of me is glad the era of American Car Companies not offering their actual American models is over..... The Mustang has always been a more premium designed V6-V8 engine car than The Falcon was.....

[Crantag]

I'm asking here...

Lets say that Apple is making IPHONES in Singapore.
Trump slaps tarriffs on IPHONES from overseas

Apple either moves production to the US

of

Apple just pays the tariffs.

Lets say it works out to $8.00 per phone that is imported.

If I'm Apple, instead of investing in a new hundred million dollar factory, training thousands of workers, paying thousands of workers, providing thousands of workers benefits, etc... it seems more economical to pay the tariffs and either absorb the extra costs or pass them along to the consumers. Most consumers have their IPHONES through monthly plans with their carrier. Over a 24 month contract, if the extra costs to APPLE per unit is $8 due to the tariff and assuming that AT&T doesn't mark that up when you come into one of their showrooms, that works out to about $0.34 per month. Right?

You are right. This is because of inelasticity of demand for phones. Capital inputs like steel are also inelastic. However, probably not in the same way as iPhones are.

[Crantag]

This just in.

Source

Edit: Watch the DOW futures fall here.

[4cal]

You are right. This is because of inelasticity of demand for phones. Capital inputs like steel are also inelastic. However, probably not in the same way as iPhones are.

If I understand in-elasticity, you mean the demand doesn't rise and fall; it's pretty constant within a few thousand units per month, correct?

I don't know many people who would pass up on an IPHONE and switch to a Samsung or other smart phone if the difference in the price was the whole $8.00 per month...I mean if you're talking about $8.00 X 24 months, that is $184.00 over 2 years. Not exactly a deal breaker.