Fiddling with Tinkertoys

George Will, a long-time conservative voice, penned an editorial called “Trade war shows the reality of ‘America First’ in action” that should be required reading. Three quotes from the article will give the gist of his concerns. The title of this post will reveal itself in the final quote.

“The Wall Street Journal reports that US farmers are purchasing fewer farm machines – (John) Deere’s profits from this business are down 24% from a year ago – partly because farmers’ incomes have suffered as a result of the tit-for-tat trade spat that Trump started with China…Some good news for John Deere might be ominous news for US farmers: Equipment sales to Brazil and Argentina are up, perhaps partly because China has increased purchases from those nations’ farmers, who are American farmers’ competitors.”

“The Financial Times recalls that ‘hundreds of US companies and trade associations said in a joint communique in June that the proposed duties would cause the loss of two million jobs and reduce US economic output by 1%.’ ….Hence, Trump’s tariffs make US goods more expensive, thereby dampening US consumer activity.”

The final quote contrasts the up and down tariffs to a similar fiddling in 1937-38 which caused a “recession within (the) Depression.” During that period, capital went on strike flinching from the unknown. Will notes the similarity to Trump’s trade war, “They fiddle with global supply chains, as though the world economy is a Tinkertoy that they can pull apart and reassemble with impunity.”

In short, when the supply and sales chains  are unsettled, companies find other avenues. Using the first quote as an example, China started buying product from farmers in other countries like Brazil and Argentina while “cancelling the purchase of almost 500,000 metric tons of soybeans from US farmers.”

Tariffs are unwieldy tools that have much greater consequences than intended. Using a tennis analogy, they are an unforced error. The tariffs have forced companies to find other options. And, when the tariffs are waived at some point, it is hard to put those Tinkertoys back in the same slots.

9 thoughts on “Fiddling with Tinkertoys

  1. Note to Readers: I read an article today that addressed the frustration of US farmers. It bubbled over when Secretary of Agriculture Sonny Perdue was booed at a recent town hall with farmers for a very tone-deaf joke about farmers whining. I had to read this twice, as it was such a poor move.

    • Thanks Susan. I read the other day, more investors are reacting to his economic tweets poorly as the tweets reveal someone trying to blow smoke at them. We should use conservative voices like Will’s to tell people it is not just Democrats and Independents saying these things. When I share concerns, people call me a Democrat. I am not. I just am concerned.

  2. Very astute observations, Keith. Trump does not understand the intricacies of global trade and how it is affected by other areas of international relations. He won’t listen to his advisors and most are ‘yes-men’ anyway. It’s almost as if he is intentionally trying to destroy this nation by dividing the people, pushing away our global allies, and this trade war.

    • Jill, thanks. We have been discussing for 1 1/2 years what Will articulated so well. What surprises me is how little appreciation Trump has for what it takes to plan and execute. This is not foreign to CEOs, but they usually are more familiar than the current president appears to be. When he makes pronouncements, companies have to plan and farmers have to plant and confirm buyers of their products. Trump likes to call things disasters, but his first travel ban was pulled after two days because it was a disaster, poorly vetted, poorly communicated, poorly planned and rushed. That is the best metaphor for the Trump presidency I can find. Keith

      • His base say he was a ‘successful’ businessman, but I see no evidence of it, not in his 6,000 bankruptcies, his multiple lawsuits, nor in the way he operates now. He is no leader, but he attempts to rule by trial and error. Sigh.

      • Jill, I think you mean six bankruptcies, but your point is valid. The fact US banks stopped lending to him and he had to get his loans from abroad is a key part to this story. Keith

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