This tariff increase is probably an example of what Trump will do in the face of any significant foreign currency devaluation:
I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!— Donald J. Trump (@realDonaldTrump) August 10, 2018
Which may cause feedback of further devaluation in the subject currency vs. USD as the foreign merchants will have to lower the prices of their product in USD terms even more if they want to compete on price in the US market (ie then Risk down/Non-risk up at the banks, etc...)
I'd think the process would eventually end when the foreign nation simply has no more financed inventory of product intended to be sold in USDs; which may be Trump's goal...
6 comments:
The bottom line is that the price of entry into the US market is US control of your country's entire policy.
The alternative its that countries can ally with Russia and China and face off with the US military.
That's empire and the extracting tribute in contemporary form.
WWIII on the way!
They could instead just balance the trade with the US...
Look at Russia... they probably consume 1m tons of aluminum and yet they build out RUSAL to produce 2m tons why?
No Business School doing science degrees would ever teach to do that...
And look at Turkey here the whole place is a shithole and looks like it’s ready to fall down any minute yet they wanna sell steel rebar to theUS for USDs why??? They could stand to use it themselves so they aren’t such a shithole...
Look at Russia... they probably consume 1m tons of aluminum and yet they build out RUSAL to produce 2m tons why?
No Business School doing science degrees would ever teach to do that...
Um, because they have a lot of Al in the ground and can mine and refine it cheaply and provide it at a lower price profitably than the some other countries, like the US can.
This is what the competitive advantage so beloved by conventional economists is about and how trade is supposed to work under capitalism.
Why is the trade so imbalanced? Maybe because US goods are too costly by comparison?
Of course, it is not a simple as that owing to socio-economic and political conditions that influence domestic policy in the various countries. So be it. Economist should just admit that this issue is not just economic or even chiefly economic in many cases.
“beloved by conventional economists”
Well no business school would recommend building out your industrial capacity to exceed your domestic market ... maybe 50% tops...
Emergent economies are export-led, and exports are generally extraction related.
This is simple comparative advantage, which is the basis of trade theory and the capitalist theory of free trade as mechanism for mercantilism.
The good old days of mercantilism and empire, national wealth was reckoned in metals obtained from trade, with undeveloped countries exporting materials and the developed countries manufacturing the resources into finished products, some of which were exchanged with the undeveloped countries for more material and the balance in metals.
Then the deal became exchanging energy for USD, with the USD no longer convertible into gold at a fixed rate.
With USD the reserve currency and the US being able to issue unlimited amounts, coupled with building the largest military on the planet, the US was label to build an empire of vassals and colonies from which it was been able to extract "tribute."
That is, until neoliberalism coupled with capitalism and trade theory resulted in US capital flowing abroad with the result that US manufacturing declined and with this decline came the decline in employment.
Then the global financial crisis hit owing to the implosion of finance capital. The world is still trying to recover from this debacle.
This is what the current economic kerfuffle is about.
Add to this the rise of China, the recalcitrance of Russia, the chutzpah of Israel, the US attempt to suppress socialism on one hand and rivals on the others, and here we are.
Hybrid warfare lead by regime change politically and sanctions as economic warfare.
“Under a higher level of tariffs, Turkey will continue to lose American customers, once its most important steel market. The new tariffs won’t put Turkish steelmakers out of business, but force them to find new markets, likely across North Africa or the Middle East, or displace other imports to Europe.”
https://www.bloomberg.com/news/articles/2018-08-10/trump-s-steel-war-on-turkey-dashes-hope-of-export-revival
TRY will decline vs USD only if Turk steel exporters lower their prices in USD in response.. which is obviously what they are doing trying to maintain their US market share...
It’s not the end of the world... shithole Africa could use some steel for sure... just sell it to them...
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