Archive | August 2018

What Happened To That Easily Winnable Trade War? – Ignorance, hypocrisy, incompetence and incoherence do not make “policy”

If you have some issues with your closest and oldest business partners, do you try to discretely discuss the issues with them? Or, do you publically insult them, slap them with unilaterally determined fines, and say, “Now, negotiate with me on my terms”? Further, if you have a track record of multiple bankruptcies, including failing a casino (think on that), stiffing your partners, having difficulties securing bank loans, retaining competent lawyers, etc., then, by definition, you are not a successful businessman. Can someone with such a background make deals on the international stage, without any considerations of, nor desire to learn about, the usual geopolitical morass? Would you trust buying/selling a house with such a person as your realtor? Would you hire such an individual as your CEO? Why would some people believe that Mr. Trump, representing USA, has some kind of master plan of using tariffs to motivate other countries to sell their products here? – or to stop selling their products here?

If anyone thinks that in 21st century we can build a successful closed economic system, just look at Cuba and North Korea. Sheer madness.

 

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The nature of any multiple-partners trade treaty is that no one will be totally satisfied, and every player will have some features to complain about. Creating and maintaining these treaties is a balancing act. By upsetting the balance, there are predictable chain effects. Throwing a temper tantrum in a china shop is bound to break things. We may not predict which pieces will be broken, but breaks there will be. We may think we’re invulnerable to the consequences of breakage, but history teaches otherwise.

Do Trump supporters recall his justification for making some of his products in China, such as the MGMA hats and Trump ties, that he was responsible to his investors and family? So why is Harley-Davidson, using the same justification to move some of its manufacturing operations overseas to fend off the tariffs from the “shoot-your-own-foot” trade war, accused of betrayal?

Trump’s trade advisor, Peter Navarro, a Harvard professor no less, seems to have caught the “making no sense” virus. Navarro claims that China’s bad-faith trade practice is responsible for “stealing” millions of jobs from US. When our unemployment rate is at all time low, a trend started by the Obama administration’s efforts in rescuing us from the 2008 economic Recession, where did these stolen jobs go? Further, the illegal immigrants are also have “stolen” millions of jobs from us. You’d think our unemployment rate would approach 8% owing to a lack of jobs, with so many millions having been stolen. Nonsense is ok now that ideology trumps everything.

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New York Times columnist Bret Stephens sums it up well: “It’s fair to say that the U.S. could use its leverage to negotiate more advantageous trade deals. It isn’t fair to insist on politically untenable trade concessions he [Trump] knows other countries won’t make — a sunset clause for NAFTA, for example — in order to destroy these agreements permanently while blaming the other side… America First is America Feared. But it is also America hated, and hated with justification. Where’s the upside in that?” But Trump supporters confuse “being hated/feared” with “being respected.” Nuances are lost on Trump, and nuances are lost on his supporters.

Just look at the TPP, Trans Pacific Partner Agreement; it is about opening markets as it is about intellectual property. It is a way by which to contain some of China’s egregious “intellectual theft” acts. It shouldn’t be a big surprise to anyone that the treaty is not perfect, but it’s a mechanism that carries some weight. However, Mr. Trump and his lieutenants simply pulled the US out of the agreement, for what? Spite? Ignorance? Campaign promises? Which are probably the same in Trump’s case. The resulting hole made by American’s departure has given China a golden opportunity to step in and assume the leading position, which means that they now can ignore international intellectual property laws (i.e. treaties) with impunity. And if that was not bad enough, Trump then started adding tariffs willy nilly. Tariffs are about goods, and so will not themselves resolve issues of intellectual property theft. By all historical and economic perspectives, tariffs generally hurt the economy more than boosting it.

People least able to afford the extra costs resulting from tariffs will be affected the most. Since most of these affected are farmers overwhelmingly voted for Trump, he offers them $12 billion in aid. But this is only the latest. As the toll from other tariffs grows into additional sectors, are we going to keep bailing them out as well? So, in addition to paying higher prices for imported goods due to the trade war, we will now incur additional taxpayers’ money to compensate for the lost revenue for our exported goods. Wouldn’t buying votes be cheaper? Illegal? Since when would that bother Mr. Trump and his supporters?

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I share two readers’ poignant observations: “Remember when we had a President interested in solving problems he didn’t make, instead of making problems he is incompetent to solve?”

And to tie back to my opening critique on (the lack of) business acumen in negotiation, I thought the following list is very revealing, don’t you?

Bankruptcy = 6 times
Trump University = Failed
Trump Fragrance = Failed
Trump Coffee = Failed
Trump Shoes = Failed
Trump Home Mattresses = Failed
Trump Urine Test = Failed
Trump Airways = Failed
Trump Steaks = Failed
GoTrump.com = Failed
Trump Plaza Casino and Hotel = Failed
Trump Vodka = Failed
Trump Mortgage = Failed
Trump Marina Hotel Casino = Failed
Trump the Game = Laughably Failed
Trump Magazine = Failed
Trump Taj Mahal = Failed
Trump Ice = Failed
New Jersey Generals Football team = Failed
Tour de Trump = Failed
Trump on the Oceans Resorts = Failed
The Trump Network = Failed
Trump! Radio Network = Failed
Trump Pillows = Failed
Trump New Media = Failed
Trump Ice spring water = Failed
Trump International Hotel and Tower (Dubai) = Failed
Trump tower Baku = Could be the worst failure

Given such a background, why does Mr. Trump still have so many faithful followers? Once again, that “cult personality” comes to mind. So, is it America first? Or Trump first?

Till next time,

Staying Sane and Charging Ahead

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