June 17, 2019

DONALD V. THE ECONOMY:

A war is brewing between Trump and corporate America (Rick Newman, 6/04/19, Yahoo Finance)

[h]e hasn't been bluffing about his tariffs on imports from China and other countries, which so far are taking about $106 billion out of the economy on an annual basis, costing the typical household $813 per year, according to the New York Federal Reserve. Bank of America recently cut its profit forecast for big companies on account of the Trump tariffs, and warned that stock prices still aren't pricing in the possible damage, despite the recent swoon.

Some companies importing products from China are now switching to other countries not subject to the new Trump tariffs, such as Vietnam, Taiwan and Korea, according to Capital Economics. But that still entails relocation costs and new sources of production that might not be as cheap as China.

Some U.S. importers, such as camera maker GoPro, have shifted production from China to Mexico--and now face a double-whammy from Trump's surprise announcement of the Mexican tariffs. Other U.S. firms seem to be targets of Chinese retaliation. The Chinese government, for instance, is investigating FedEx for misrouting two packages meant for the offices of tech giant Huawei in China. Yes, that Huawei--the one Trump wants to shut off from U.S. suppliers as part of his trade crusade. We can play that game, too, China seems to be saying.

The tax cuts companies cheered last year contributed to a modest bump in business investment in 2018. But that has trailed off, and manufacturing activity has now slumped to the lowest level since late 2016. That implies weak economic growth of just 1.5%, according to Capital Economics. Morgan Stanley warned recently that if Trump imposes additional tariffs on Chinese imports, as he has threatened, the result could be a recession early next year.

Posted by at June 17, 2019 6:23 PM

  

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