Trade Wars Set To Go Nuclear: US Considering Broad Curbs On Chinese Imports

First thing this morning, when the market was surging and inexplicably rejoicing in the certainty that Trump would back down on tariffs, a nagging feeling that this was all wrong prompted us to ask "What If Trump Does Not Back Down", and to follow it up with a troubling rumor from Strategas, namely that this is all about China, and would involve a massive amount of tariffs, to wit:

Trump himself has also said that the trade wars have one major target: Beijing, with the rest of the world negotiable collateral damage. Just yesterday, the US trade rep made it clear that both Mexico and Canada would get an exemption from the tariffs once they agreed to a "fair" renegotiation of Nafta.

And beyond the already announced aluminum and steel tariffs, there is another far more troubling aspect, or rather number, to Trump's protectionist push noted by Strategas. The number is $1 trillion. Here is Strategas:

The Chinese steel sanctions demonstrate Trump’s genius as a negotiator.
Steel is a high stakes, high profile strategic industry all over the world

Our Steel industry has been hard hit by foreign competition but it is becoming more competitive and Trump wants to rebuild our steel infrastructure.

We also have a huge trade problem with China that needs to be addressed.

Steel is a major area where China is engaged in the classic process of Dumping highly government subsidized products on the US market at below market prices. China is also fraudulently using Canada and Mexico to launder their steel and aluminum products for sale under NAFTA for massive trade breaks.

The kicker is that China is using the prices of Dumping in the classic Dumping strategy to increase it’s market share by selling metals well below market price.

Of course, once China has wiped out American steel makers ( just like they have wiped out so many American industries) they will rise prices in the same predatory fashion that they have in other markets where they have wiped out American domestic competition

The kicker here is that China currently only has a tiny 2% share of the US market - a problem they are trying to remedy via the classic predatory Dumping gambit.

Therein lies the genius of Donald Trump as both a negotiator and strategic thinker.

Trump slapped a huge 233% punitive tariff on Chinese steel and he did it at a point in time where China’s overall market share was tiny - less than 2%.

With this Trump accomplishes a huge number of goals

First - he is protecting a vital American Industry from Chinese Dumping before the Chinese have a chance to wipe it out with predatory trade polices like China has to so many American industries.

Second - President Trump addresses the issue while China has such an insignificant market share of the American market that the tariff will have virtually no impact on either the American or Chinese markets.

Unlike other American Presidents, Trump is taking action against China’s predatory Dumping both before it has a change to devastate our steel industry and Trump also takes action before China has stolen so much market share that tariffs against China have a huge negative economic impact on our economy.

Third - Trump sets himself up for future hard ball Trade negotiations with China on a host of other items where China does have a huge and dominant American market share and where being forced to use tariffs enthuse market segments will cause very real market pain for America.

China desperately wants and needs access to the American market for steel, aluminum and other emerging Chinese industries which gives Trump negotiating leverage in market segments already wiped out where we have less leverage. This also ensures that any trade deal going forward in these emerging areas ensures free and fair trade as opposed to China’s past history of predatory government subsidized dumping

The truth is that America has been sold out by 30 years of trade deals where American negotiators have focused on foreign countries economic development subsidized and at the expense of the American economy.

Fourth - Except for America, the rest of the worlds steel industries, as highly critical and strategic economic infrastructure, are highly subsidized by the their respective national governments - especially in the more socialistic countries like Europe and Scandinavia.

All depend highly on the American export markets to keep their steel industries variable and at the cutting edge and all are engaged in at least taking advantage of their highly subsidized to obtain a huge competitive advantage against American steel makers.

All these foreign steel exporters do not want to face similar tariffs so they will be much less aggressive in exploiting their subsidized price advantage unfairly in the US market.

Fifth and most important of all - the entire world is entering into a major phase of re investment in next generation technology that will define the economic future of the world in the 21st century. It is critical to the economic future of our country that our US steel makers invest in this next generation technology here in America.

American steel makers cannot and will not be able make these critical investments in high tech, next generation production plants off they are faced with being wiped out by China’s predatory trade being used to make sure THEY are the ones who dominate the worlds steel economy and that China is the one who gets to make the massive investments investments in new, high tech plants to secure their economic futures.

Regardless of what you hear from the Free Trade purists and zealots, this is the high stakes game Trump is playing and our economic future is on the line.

So far, Trump is doing everything he can and making all the right moves to secure our economic future help keep America at the forefront of the worlds rapidly changing economy

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