J: Protective tariffs; bad idea, or REALLY bad idea?
G: “As the currency continues to weaken, it makes U.S. dollar-denominated assets cheaper for foreigners.”
John, I don’t really understand…well, a bit, yeah…but the article is basically saying that trade deficits aren’t really a problem, especially when the US Dollar is the standard. I am thinking you agree, and I would appreciate your thoughts (although I may regret it).
J: The problem with trade deficits is that Trump thinks of trade (and most everything else, actually) as a zero-sum game. He thinks that if the US has a $100 billion trade deficit with China, China is winning and the US is losing. Of course, that’s not the way trade works, but that’s how Trump thinks. I’m also sure that he doesn’t know that the US has an enormous trade surplus in services ($280 billion annually.)
J: OK, tariffs. President Trump is proposing new tariffs on imported steel, aluminum and imported cars. I think this is a REALLY bad idea. It’s bad for American consumers, as the tariff will be passed along by the manufacturers, and it’s bad for exporters because the target countries will retaliate by imposing their own tariffs on American imports. The only sector it’s good for is the American steel industry, which is a MUCH smaller portion of the economy than the industries that USE steel and aluminum.
G: Dave Barrett, who was the Premier of BC in the early 70s, upon assuming power increased taxes on foreign companies extracting natural resources from the province. His defense against the hand wringing fears of these companies leaving BC: “They can leave, but they can’t take the fishes out of the rivers, they can’t take the minerals out of the earth, they can’t take the trees out of the forests.” Paraphrasing, yes. but that was the gist.
The Peanut Gallery