Trump Wins Trade War As Global Markets Plummet

It is early July, well before this article goes online, yet the landscape is pretty clear from where I stand. The U.S. and China both raised tariffs on $34 billion worth of goods Friday, July 6. This did not deter the S&P 500 from continuing its charge up to the January 26 all-time high. To boot, unemployment is historically low and the Fed is set to raise rates twice before the year ends – all this amidst a stealth discretionary spending recession.

So, how about that trade war? Let’s recap. Most folks would agree that the free trade of goods would be best for all concerned. Goods would be less expensive and those that could not compete on price would do so on quality, leading to a beneficial improvement of goods. All is well and good until protectionism and nationalism rear their ugly heads. Some nations have goods that find it difficult to compete on the basis of price and/or quality. Globally, world leaders of such nations are unapologetic in pursuing their nation’s interests at the expense of others. In trying to avoid the image of the ugly American, we have often placed ourselves at a disadvantage. Nowhere is this more evident than in trade were our trading partners often have a clear advantage.

U.S. Census Data shows that we have a trade deficit with every trading region except for South and Central America and Australia/Oceania. At only $33.14 and $14.38 billion, respectively, the last four years and a combined trade of $310.44 billion this pales in comparison with the deficit for the rest of the world, -$844.66 billion, whose combined trade is $3.578 trillion. Below are 2014-2017 averages for most of the world in billions:
Canada: -$20.01
European Union: -$149.61
Asia: -$547.49
Africa: -$2.60

China is a case in point. Aware of the huge financial benefit that comes with their 1.38 billion consumers, they extract huge concessions from their trading partners, including the U.S. When they have not barred certain U.S. business sectors, they restrict or regulate business, place tariffs on goods, or coerce intellectual property release. Note this goes one way; there is no intellectual property sharing.

These noncompetitive business practices are not fair, but until now, U.S. companies have accepted them without much push back as the cost of doing business there. That is until Trump. What Chinese leaders need to realize is that they are not in a good bargaining position and the longer they hold out the more harm will come to their economy.

Here is why. Leaders of the government-run economy are well aware of their history and realize the huge Chinese population is not going to put up with poor conditions forever. To keep discontent at bay, they have a policy of inflated economic growth. According to Trading Economics, they have averaged 11.7% GDP growth for the past 10 years but chinks in their armor are showing. From the 2010-2011 heyday, where GDP grew 19% and 24%, growth has dropped steadily and sometimes precipitously. It was 5.56% and 1.14% in 2015 and 2016, respectively. Little wonder that worried central government figures have made a big push since then for increasing their global exports, including those to the U.S., resulting in a resumption of GDP growth to 9.35% in 2017. The prospect of increased tariffs, which would make their goods less competitive, runs afoul of those plans. China’s economy is struggling and their stock market is testament to that. The smaller Shenzhen composite moved into bear market territory in February and the Shanghai composite closed in bear territory on Tuesday, June 27. The indexes went as low as -26.5% and -25.0 on July 5 but have recently recovered to -22.5 and -21.2%, respectively, as global markets have climbed in tandem with U.S. markets. That is still in bear market territory, which will curtail much need foreign investment. Meanwhile, U.S. GDP is growing steadily, the economy seems to be healthy, and the stock market is nearing new heights. Trump can ratchet up the tariff game longer knowing he has more economic wiggle room. Moreover, he can inflict more pain to the Chinese economy than they can to ours.

To see why, let’s look at the trade numbers. The trade deficit with China has averaged -$358.68 billion the last four years in a rising trend. While U.S. exports have vacillated between $110-129 billion since 2012, Chinese imports have steadily increased from $315 to 375 billion. Last year the deficit was -$375.58 billion, of which $129.89 billion were U.S. exports to China and $505.47 billion were U.S. Chinese imports. Not only is trade unbalanced, so are tariffs. Prior to this year, U.S. tariffs on Chinese agricultural and non-agricultural goods were 2.5% and 2.9%, respectively, while Chinese tariffs on U.S. goods were 9.7% and 5% for the same. True, these had been going down from a 14.1% average prior to 2001 when China joined the World Trade Organization but that was part of the price and tariffs are much higher for some industries.

In Today’s Commercialized World, Money Is Everything – The Rich Can Even Afford To Buy Better Genes

One afternoon, after a grueling math exam, Ayomah’s math teacher, the old and lean Mr. Jacksotto Tobacco, smoking a thin hand-rolled cigarette, sat them together to recount a news story he’d read from a newspaper. It was a heart-warming piece of news. Between puffs on his cigarette, he narrated to the class how, a thirty year-old woman gave birth to a baby free of her family’s curse of Alzheimer’s disease – thanks to the wonders of medical science. To his young mind, it was hard not to feel the joy of the baby’s family, or the hope of the many others who feel helpless by their genetic inheritance.

The breakthrough, according to Mr. Tobacco, occurred when doctors in Chicago, in the US, applied genetic tests to batches of human eggs, helping the woman to have a baby free of her family’s early Alzheimer’s disease. According to him, without such intervention, the baby would have had a 50-50 odds of becoming senile by the time she was 40. But he had a terrible feeling as he thought about the implication of this seemingly wonderful evolution of medical engineering. Before long, the rich will be able to buy not only better education for their kids but also better genes! This thought was especially troubling for someone who didn’t know his father’s whereabouts, and who was being raised by a struggling single parent.

As a child, Ayomah was taught this in school: given a chance between being rich and being smart one should always choose the latter, for smart people will always be able to find a way to get rich and foolish people could easily lose the wealth someone else had worked so hard to accumulate on their behalf. This simple proposition was powerful for those of us growing up with less and whose hopes were derived from the knowledge that if even poor, talented individuals will have a shot in an otherwise unequal world. But after listening to Mr. Tobacco’s story, it turned out that money will buy smarts, too! After the class was over, Ayomah left home thinking that, the prospects for his family, which was already daunting, will, in the future, become almost hopeless. He couldn’t have narrated what he heard from Mr. Tobacco to his Mama. She would be crestfallen.

Ayomah had a great story to tell, he decided to put it in the form of a book. He failed to publish it because he was restricted by money. Later on, he managed to get some money, published the book but yet another challenge – he is unable to advertise it. He is again restricted by money. He thinks of abandoning the whole idea of writing altogether and start a business. Here too, he was restricted by money. He finally decided to go back to school to acquire marketable skills. Hoping that after his graduation he will be able to find a good job. Here too, he was required to first pay some tuition in order to be accepted into that institution. He got restricted again by money.

The Last Days Of America

In studying American history one can conclude that during the darkest hours of the American Revolution there had to have been Divine intervention that guided General Washington to persevere and eventually triumph in securing victory for the United States. In many instances when all hope seemed to be lost the revolution was saved not only by the shrewd and calculating determination of Washington but a higher power that enabled the United States to overcome adversity under fire.

In the ensuing years much has changed since our humble beginning. That Divine intervention that steadied the hands of our Founding Fathers has been cast aside by the greed of man. One has to wonder though about human nature. Is it human nature once people are in a position of power to try and gain more control of that power? And, does power always corrupt the individual in authority considering the times of today? Sad to say in too many instances for over 45 years we have been witness to unparallel corruption in our governmental officials. The Divine guidance has been lost in obscurity and this nation continues to flounder in troubled waters.

The integrity and unselfish character of Washington helped forge what America became. Other men like Thomas Jefferson, Ben Franklin and John Adams embodied the true greatness of a new nation. As we near the end of the second decade of the 21st century Americas greatness has withered on that vine of lost opportunities. From the last 148 years of disingenuous policies and without the slightest concern for the American public the erosion of Americas greatness is almost complete. The blindness of too many to see and the willingness to accept what is continues to accelerate the U.S. departure from greatness to mediocrity.

We have forsaken this nation. Too many of our rights have been stripped away. They have been turned into privileges that we always have to pay. This nation has truly lost it’s way. The individuals we choose to represent us too many times we have chosen unwisely. And, too many times those that could make a difference have always been denied the opportunity to do so.

By all indications have pointed to the fact that the last days of America are upon us. When we have an Administration and too many members of Congress incapable of altering the course of this nation is the reality we face today. Gone are the character and integrity that typified the moral compass this nation had over 200 years ago.

Like all great nations through-out history they have never lasted. A striking parallel between the great power of Ancient Rome is the fact that for a long time Rome was a Democracy, that is up until the time of Julius Caesar. It was Julius Caesar though that established a prime example of political rule of a charismatic strongman whose rationale is the need to rule by force, establishing a violent social order and have a regime involving a strong military role in government. We can see a distinct correlation between Julius Caesar and one Donald Trump. When Julius Caesar came into power was the start of the decline of the Roman Empire.

The similarities between both men is too apparent to ignore. And if Trump remains in power the hand writing is on the wall, sort of speaking, that the last days of America are all readily upon us. We the people have to understand that history does repeat with outcomes very similar to the past. That is unless we have the courage to recognize how we can change the course this nation is on. There is a way to do so. But, the resolve to put in play the reforms to alter the course this nation is on has yet to be displayed.