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Shot Heard Around The World

Bill Ehrman profile picture
Bill Ehrman

Trump's "pre-empted" announcement of 25% steel and 10% aluminum tariffs underlined his "America First" message that the U.S. will no longer tolerate unfair, illegal trade practices from abroad. We would have preferred a more targeted approach to illegal dumping of aluminum and steel into the states and still hope that he will throttle it back next week allaying concerns from our closet allies, especially Canada.

Let's state a few facts: the U.S runs a $566 billion dollar trade deficit with the world, $375 billion with China alone, which penalizes our economic growth, jobs and balance of payments. The only trade area that we run surpluses in are services, which includes intellectual property currently under review as it is being pirated away from abroad, mainly China. Another fact is that the WTO is really ineffective, like the UN, in resolving conflicts.

So, what options were really left to do and be effective? Take unilateral action. But how much? We all want open and fair trade, not trade wars. The western world is comprised of capitalists with a profit motive. But some of our trade partners - socialists and/or communists - have different objectives, primarily to create jobs.

No one disputes that China and others are subsidizing many industries including steel and aluminum. No one disputes that China transships to other countries to circumvent rules. We all know that steel and aluminum made in China finds its way into many, many countries including Canada, Europe and Mexico with the U.S as its final destination point.

So what are we to do to end illegal dumping? Nothing tangible has ever happened as our trade deficit just grows and grows as abuses get more and more. Could it be done with a scalpel rather than a hammer? Perhaps. But, Trump's announcement was clearly a shot heard around the world. And

This article was written by

Bill Ehrman profile picture
Managing partner of Paix et Prosperite LLC, educator, mentor and consultant.  Former Senior partner and CIO at EGS Partners, Soros Fund Mgt and Century Capital Associates. Experience over 50 years  successfully managing money, investment banking, consulting and mentoring. He incorporates a top down global economic, financial and political view with bottoms up independent research industry by industry and company by company.

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Comments (39)

Bill Ehrman profile picture
I appreciate all comments....China ships into many countries that ship to other coutnries with the U.S as the end destination

Invest Accordingly!
JustAskin' profile picture
Nice job, as usual.

Regarding Trump tactics...let's just say it's part of "The Art of the Deal". Throw something out there to stir the pot, then begin the negotiation process.

Although China supplys the US with only 2+% of imported steel directly, how much comes to us from China via Canada, Mexico and the other 'friendly' leading importers? I say assess the 25% tariff on every country who deals with China in that way. Make it clear that as long as they are just funneling steel from China through their borders to us, they will pay the price of a stiff tarriff. But also let the world know the reasoning behind those tariffs on our 'friends' who occupy our borders.

Also, please expand on your "transship" comment. Apply as many of the 5 W's as you like, thanks. MAGA through fair and equal trade!
Hello Bill,
by being hard and not trusting anyone, I mean anyone !!, you cannot rely on good will, it does not exist in ASIA. For example I worked for one of the biggest drinks companies in the world, they formed a joint venture and let the Asia partner do the accounts !!!!!!! now that is plain stupidity ; no need to say what happened. In China they did the same, paid 4 million into the bank and the next day the partners took out 2 million, when asked why they simply said "we are equal partners", needless to say the Chinese now own that company. I was in business for myself in UK before coming here 24 years ago so I had good training. For the companies that have listened to me I have saved them thousands. I should write a book I guess.
Bill Ehrman profile picture
I appreciate all comments. I totally agree that there are cultural and philoisphical difference but if world trade is to be built of fairness, openesa and a level playing field, what are you to do if one side violates the rules and/or promises to change but does not

When is enough, enough!
Hello Bill,
the big problem is cultural differences. I have lived and worked in ASIA for the last 24 years and see the westerners come out here and get fleeced and it is pathetic to watch. Our Christian culture inculcates us into thinking we must obey certain moral laws (by and large). The eastern culture is that anything goes so long as the outcome is on their side. To give a specific example from my own 1st hand knowledge "a USA company comes to ASIA with an idea for cheap housing for the masses, They make a joint venture with a local company, that company immediately contacts the Asian company I was working for at the time and offered them all details and costings for the project obviously with a view to sharing the profits", I can repeat other incidents of a similar nature also from 1st hand knowledge. I have a made a few million whilst living and working here so I know what I am talking about, you have to accept the culture and work with it, I am now Buddhist with an Asian wife.
Bill Ehrman profile picture
I appreciate all comments...think as an owner, think as an investor

Invest Accordingly!
Thank You Mr. Bill Ehrman ! JD
BTW gun sales help lots of local business and big cooperations! We should continue to promote gun sales to the global and everyone will get benefits!
Bill Ehrman profile picture
I appreciate all comments....while Amazon may receive tax benefits to build a new headwuarters, I would like to be in that ciy as Amazon will boost irs economy, create thousands of direct and indirect jobs and will attact others to that area.
Econoimic growth is a necessity to finance all the social and entitlement programs...just look what stagenation did for Japan, its people and its bujild up in debt

Invest Accordingly!
11/hr amazon HIGH paid jobs.....it will take 10 years or so for the state to recover the tax benefits given to amazon. Yea boost the economy in what sense in what dollar sign?
Bill Ehrman profile picture
I appreciate all comments. there is a difference between lower labor costs and government subsidies so that plants operating at losses can still stay in business

a level playihg field deals with government subsidies....Chinese steel and aluminum comoanies are for the most part losing money and are poluting the country.

Invest accordingly!
All US corporations have all tax code benefits and now tax cut (famously amazon is going to build two HQ at a place massive tax benefits) thou all the money go to buyback CEO bonus....creating massive social issue down the road....US will enter an period of social unrest coz of irresponsible top 1% corruption and collusion leaving all the debt for the taxpayers to take on. Even WORST
Bill Ehrman profile picture
I appreciate all comments....there is nothing wrong wanting a level playing field for free and fair trade

do you think that Boeing would sit back and led France subsidize Air Bus

if Trump is so wrong on steel, why are the Europeans pushing for tariffs too?

steel and aluminum are test cases for more to come//////the real issue will be intelletual property

Invest Accordingly!
US ALWAYS wants to WIN and get benefits from everything. Well when your high labor cost 15/hr compared to the rest of the world, US is at a disadvantage. So US companies want everything cheap sell at the highest prices.....then no complaint? Example: Apple manufactures iPhone at china at cheapest labor cost while selling it at 1000/unit with highest margin.....ooops no one complaint!!!! Coz US accompanies benefit!!!!!! All US BSs
Calculus profile picture
The only one paying for these ridiculous announcements is the US taxpayer.

Certainly not a vote of confidence in wealth creation when "mr. billionaire president" says folks using steel and aluminum are "just getting that valuable product too cheap and have to pay more." talk about "you're fired" on a grand scale from the worst human ever to have existed in human history...Trump.

glad he slaps his dumb and useless name on everything.
Worthless, broke troll
jgrever621 profile picture
Trump often does the right thing in the wrong manner, BUT HE DOES IT. I can live with this better than living with no improvements at all.

We have seem weak talk, and NO action in recent presidents. While I hope Trump does some modification (mostly benefiting Canada, which has benefited way too much), this tariff should stick. Tracing shipments could really hurt China export of steel, but regardless, Trump is right to step on toes here.

Might well be other areas coming, as he has indicated there could be more.

Will this be disruptive to world trade? Shouldn't, as he is only addressing issues that have festered for many years.

We'll see, but I am on the Presidents side here.
Bill Ehrman profile picture
I appreciate all comments....While I don;t like the way that Trump is handling this, I am pleased that fiar trade has been elevated such that it is a priority and will be a focus finally of a President...it has been kicked down the road long enough

Invest accordingly!
Peter Angus profile picture
As a Canadian, I will point out the obvious. Given our status as the largest importer of American goods, if America takes measures that significantly hurt the Canadian economy you will not bolster America’s export business, affecting thousands of both Canadian and American jobs. Let’s hope for some mutually beneficial US policy decisions.
fishfryer profile picture
The Canadian trade issues will probably built into a unilateral agreement that replaces nafta. My guess it will treat both parties fairly. The trade imbalance currently is fairly small, under $20 billion per year, there is not much here to complain about from a U.S. point of view. I think our neighbor to the south should start losing sleep.
The trade war is a game changer, it will kill the economy and the stock market, then it will be blamed on Obama.
Where is the logic?
"Clearly buyers of dumped steel don't lile this"

As in corporations like Ford, Boeing, Campbell's Soup Company and Budweiser?

Why should they like it? There are six and a half MILLION American workers working with steel products in fine companies all over the country. Meanwhile there are only 170 THOUSAND American workers working processing the two metals.

And of course, there are also 330 MILLION American consumers who just saw their household costs go up by a huge margin.

This is a stupid decision, make no mistake. And the pro-Trump propaganda tone here is not very helpful on an investment site.
fishfryer profile picture
How much did their household costs go up? A huge margin? What do you estimate that to be?
Exf, you bring interesting points and no one can dispute your claims. I find it interesting that when I go to the store that certain times of year that a 6 pack of beer can be all over the place. It can be as cheap as $4-$5 or it can jump to $6. I am not deterred in purchasing that beer even though I am aware of the waffeling in price, I still pickup the beer and will pick up a half rack or even a case if cheap enough and invite my buddies over and do the providing. My beer fluctuates $.25/can throughout the year. I have already accepted that. The price increase doesn't even add up to $.05 a 6 pack. If you believe that price increase will effect a beer drinkers decision then I believe you are sadly mistaken. We already will pay an extra $1.50 per 6 pack when it comes to beer. Soda drinkers are even more rabid. They will not stop and soda price fluctuations gyrate even more. Ford Chevy and Dodge aren't afraid to increase their vehicle pricing. In 1989 a 1 ton crew cab Ford was in the low $20,000 range, by 1998 it was low $30,000 and now? Low $50,000 with the most expensive F series pickup is a F450 that is in excess of $100,000 list price. Do you think that anyone purchasing a pick up for $50,000 or more will be deterred in any way over $200 increase in steel content? I appreciate your point of view, but main street wants price increases, I know as I am a business owner. When prices rise, it allows my customers to see the value I am providing and eventually I get to raise my prices which in turn gives me the funds to reinvest into a newer truck to do my business with, newer equipment so I can be more reliable in providing my service, and to look at expanding my business by offering a job to someone which in turn means I need to purchase another setup of equipment and purchase an additional pickup to manage my expanding business. Because I am making money and have good workers that I can pay a living wage then I love to say 'Thank You' to those guys by purchasing a 6 pack of beer for them and I ill upgrade to a 'Rum and Coke' myself. Job well done!!
Bill Ehrman profile picture
I appreciate all comments...I want to be clear...I believe that there was a better way to handle this BUT I am pleased that finally a President was willing to eleviate dumping and our huge trade deficit to new heights

Clearly buyers of dumped steel don't lile this...how would they react if their competitors unfairly priced their product below cost....

We want FAIR and OPEN trade where there is accountability

Invest Accordingly!
LOL FAIR and OPEN——laughable. What is not fair and open when there is a buyer and there is seller....if sellers dump shits at cheap price, buyers still want to buy shit at this price THIS IS FAIR AND OPEN. What about AMAZON....sell shits without TAX and below margin even at a loss after shipping to KILL all the small business....is that called FAIR? Ooo give me a break.
fishfryer profile picture
Thanks Bill,

You'll get a bunch of anti-trump trolls all stirred up with this one. But the Chinese have been operating outside international law for decades.

The $375 billion per year is reason enough to have a few tariffs on the Chinese.

The industrial espionage by the Chinese government costs our country hundreds of billions of dollars http://cbsn.ws/2F9ldAT

The Chinese support North Korea http://bit.ly/2FUcbsU

Human rights violations, http://bit.ly/2FMn3cj

The Chinese grabbing islands from our ally Japan and creating new military islands in the South China Sea that is clearly in violation of international law.

environmental pollution that reaches the U.S.

Threats to Taiwan.

A few tariffs is nothing, China will sit back and pay, they still get the better end of the deal.
Taiwan is a "renegede province".
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