The art of the tariff deal
Apparently, MAGA means empty shelves and fewer jobs:
“Trump’s tariffs on goods from China have disrupted trans-Pacific supply chains. U.S. officials are alarmed by companies’ dwindling inventories of critical raw-earth metals necessary for a range of economic activity; Beijing restricted the metals this month. In the three weeks since the tariffs took effect, ocean-container bookings from China to the U.S. are down by more than 60 percent, said Ryan Petersen, founder and CEO of Flexport, a global shipping company. Cargo carriers that bring Asian goods to the Port of Los Angeles, the nation’s main Pacific gateway, have canceled 20 port calls next month, more than three times as many as last month, according to port data.
“The consequence will be “empty shelves in U.S. stores in a few weeks and covid-like shortages for consumers and for firms using Chinese products as intermediate goods,” said Torsten Slok, chief economist for Apollo Global Management. Fewer goods reaching American shores will mean higher prices on the goods that are in stores — as well as less work for dockworkers and truck drivers. “Significant” layoffs in trucking, logistics and retail are likely as soon as May, Slok said.”
Look, tariffs are taxes on consumers, who are the engine driving the economy. Higher tariffs=higher taxes on consumption=less consumption. Add to that lower sales as goods become scarce and increased unemployment, which means less disposable income, less consumption. Lower sales tax receipts and lower FICA receipts. It’s already baked in for May.
Trump tariffs attacking US economy
Joel:
Thanks for posting a reminder to my earlier post. The shortages are on the way as fewer ships are in transit from China, etc. The tariffs are working. And we will not have much to buy as a new resource located in the US or other nations still has to be created.
Supporting evidence from the Executive Director of the Port of Los Angeles, as reported in the L.A. Times:
““It’s my prediction that in two weeks’ time, arrivals will drop by 35% as essentially all shipments out of China for major retailers and manufacturers have ceased, and cargo coming out of Southeast Asia locations is much softer than normal,” Seroka told the board.”
John:
I am aware of the coming issues. When you manufacture overseas there are many issues to face. Longer lead times from the time of manufacture to the time of being available to ship. One week on the dock in China, minimum of three weeks on the ocean, one -two weeks at LA, etc. to be unloaded and clear customs, and then shipping the container to you. You own the product once it boards a ship in China. A lot of inventory carrying costs there.
I added a Paul Krugman commentary to Anry Bear here: Cutting Trade with China and Asia
I am afraid that bringing back manufacturing is going to be like a nesting doll. Unless we use imported parts to build the factories before we build the factories to make the parts we needed to import.
@Jane,
Yeah, Trump’s propaganda about bringing jobs back shows he doesn’t understand manufacturing.
Joel:
Or he just does not care as he has never had to care. It was always someone else’s problem. You are right. He does not understand the years it took to get to now.