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March 5, 2018
As Yogi Berra once said: It’s déjà vu all over again.
Last week, global stock markets took a bit of a dip after President Trump announced a 25 percent tariff on steel and a 10 percent tariff on aluminum. Tariffs are taxes on goods imported from other countries. In general, governments impose tariffs to enhance revenue and/or protect domestic industries from competition abroad.
Tariffs tend to spark fierce debate about protectionism and free trade. Proponents suggest tariffs may protect domestic companies and create jobs. Critics suggest tariffs may slow economic growth and drive prices higher.
Here’s the thing: tariffs don’t always produce the anticipated results. Let’s take a look at two examples while keeping in mind that World Trade Organization (WTO) rules do not allow countries to impose new tariffs unless they are ‘safeguards’ intended to protect a domestic industry.
In 2002, President George W. Bush imposed a tariff on steel. While the WTO was deliberating about the action, “…the European Union ended up hitting Bush where it hurt. The bloc planned tariffs on a wide range of products, including many produced in key swing states where job losses could hurt Bush’s chances of re-election,” reported Time. The WTO eventually decided the tariff was illegal. Eventually, in 2003, the tariff was removed.
In 2009, President Obama imposed a safeguard tariff on Chinese-made tires. China retaliated by restricting imports of American chicken feet (a culinary treat in China), reported The Economist. At the time, U.S. exports of chicken appendages were valued at about $278 million. Guess what happened?
Far fewer Chinese tires were exported to the United States. However, tire imports from South Korea, Thailand, and Indonesia doubled, more than offsetting the decline in Chinese-made tires, reported the Council on Foreign Affairs. On the other side of the tariff tiff, U.S. poultry exports to China fell, but U.S. poultry exports to Hong Kong rose. As they say, when one door closes, another door opens.
In the big picture, it’s unlikely U.S. tariffs on steel and aluminum will have significant impact on China, the reported target of the new steel tariffs. After all, China ranks eleventh on the list of nations sending steel to the United States, reported National Review. Most U.S. steel is imported from U.S. allies such as Canada, Mexico, and South Korea.
WHAT DOES YOUR STATE EXPORT? Every state has adopted official symbols that represent its culture and heritage. You can probably name your state’s official bird and flower. It’s likely you recognize your state’s flag and its seal. Can you name its highest value export?
The United States exported about $1.6 trillion worth of goods during 2017, according to The World Factbook. Here is a list of the states that export the most, along with their highest value exports:
1. Texas – fuel oil and light oil
2. California – civilian aircraft, engines, and parts
3. Washington – civilian aircraft, tanks, and armored vehicles
4. New York – diamonds and art
5. Illinois – light oil and soybeans
6. Michigan – trucks and passenger vehicles
7. Louisiana – fuel oil and soybeans
8. Florida – civilian aircraft and cellular phones
9. Ohio – civilian aircraft and soybeans
10. Pennsylvania – coal and medicine
11. Indiana – medicine and gear boxes
12. Georgia – civilian aircraft and gas turbines
13. New Jersey – fuel oil and jewelry
14. Tennessee – medical instruments and civilian aircraft
15. North Carolina – civilian aircraft and medicine
It’s interesting to note top-exporting states often are top-importing states. The top 10 states by import are: California, Texas, Michigan, Illinois, New York, New Jersey, Georgia, Pennsylvania, Tennessee, and Florida.
Weekly Focus – Think About It
“So, vision begins with the eyes, but it truly takes place in the brain.”
--Fei-Fei Li, Director of Stanford’s Artificial Intelligence Lab
Dustin Hall, MBA, CFP®, ChFC®
* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
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https://www.economist.com/news/business-and-finance/21737843-get-them-he-causing-chaos-president-donald-trump-wants-tariffs-steel-and (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-05-18...)