Last November, when all the hype over tariffs and trade wars shifted into high gear, we wrote about how the trade deficit arguments were bogus.
(Read; “Should You Worry About the Trade Deficit” HERE)
Now, six months later, we’re convinced that Trump’s trade war with China is WRONG.
You must understand that we don’t blindly agree with Trump’s actions simply because he’s our President.
Unfortunately, he’s living in an old-world view of trade.
To begin with, the numbers aren’t accurate (see article above).
In the past, China needed the US market to sell products to provide employment for its people. The business between the two nations formed a check on U.S.-China affairs. However, as Trump escalates his trade dispute, he is playing with fire.
The Asian culture is all about saving face.
You can’t negotiate in a confrontational posture that leaves the opponent weak in appearance.
Regardless if it works or not, for China it becomes a matter of principle.
Here’s the downside: This policy has actually encouraged the relationship between Russia and China even if it wasn’t intentional.
Trump’s decision to declare some auto sector imports a national security threat has incensed the Japanese.
Toyota has criticized Trump saying his stance sends a message that Japan’s largest carmaker isn’t welcome in the United States.
Toyota and BMW have opened numerous plants in the USA and assemble many of their cars here as well.
Claiming there is a threat to national security is really a stretch.
We need a complete overhaul of how world trade is actually calculated.
If we allocate trade by the flag a company flies then the US would have a huge trade surplus.
Be sure to read our June newsletter where we show how a government overhaul is needed to avoid a global melt-down.