Category: Policies

Trump tweets that tariffs are making the US “richer than ever before.” They’re not.

Either President Donald Trump isn’t sure how tariffs work or he’s being deliberately misleading about them.

The president fired off an early-morning tweet on Thursday declaring that billions of dollars are “pouring into the coffers of the United States” because of the tariffs his administration has put on some $250 billion in Chinese imports.

“If companies don’t want to pay Tariffs, build in the U.S.A.,” Trump wrote. “Otherwise, lets just make our Country richer than ever before!”

But that’s not really how tariffs work: The US may be generating some revenue from tariffs, but billions of dollars aren’t pouring in. Moreover, a lot of the money that is made off of tariffs comes from US consumers — not Chinese companies.

“If you think about who’s actually paying the tax, it’s like a sales tax. It’s like saying, ‘I put a sales tax on producers, isn’t this great we’re getting all this money?’ And then consumers say, ‘Wait, that’s from my wallet,’” said Michael Klein, a professor of international economic affairs at the Fletcher School at Tufts University and founder of the nonpartisan economics publication Econofact. “It’s just another example of taking where there’s a tiny germ of truth and blowing it up to the point where it’s absurd, for his own political purposes.”

On Thursday, Trump will travel to Buenos Aires for the G20 summit, where, among other agenda items, he’s expected to meet with Chinese President Xi Jinping for a working dinner to discuss the countries’ relations, including trade. The sit-down is seen as high-stakes, given that the US has placed nearly $250 billion in tariffs on Chinese goods and China has levied retaliatory tariffs of its own. The escalating trade war poses a threat to both nations’ economies.

Tariffs don’t really work this way

The Trump administration has shown itself to be pretty into the idea of tariffs. It’s put tariffs on steel and aluminum imports from multiple countries as well as on several billion dollars of Chinese goods. The way tariffs work is that the goods marked for tariffs face a border tax when they’re imported into the US.

As Vox’s Matt Yglesias recently explained, the US government with its initial rounds of China tariffs was careful to make sure the products it targeted had foreign-made alternatives:

When that happens, US purchasers switch to non-Chinese alternatives, and then consumers from outside the US tend to switch around and start buying the Chinese products. The overall impact is slightly less efficient global supply chains, some real pain to Chinese firms that need to find new customers, and a limited impact on American prices.

In other words, thus far, things have been relatively tame. A recent study from EconPol Europe found that Trump’s first round of tariffs have increased the prices US buyers pay for Chinese-made goods by 4.5 percent and decreased the prices received by Chinese sellers of US-bound goods by 20.5 percent.

That means that thus far, the tariffs have been mostly, but not entirely, paid for by China, but it’s not going great for anyone. And if Trump’s meeting with Xi doesn’t go well and the trade war escalates, the economic effects of tensions could worsen.

And it’s not going to be making the US significantly richer, because the more tariffs, the less incentive to import the goods affected, and therefore the less money being collected.

“If the point of tariffs is to reduce what you’re buying, that means you’re not going to make that much money,” Klein said.

And much of the money that does come in will be from Americans themselves. Tariffs are often passed on to consumers, therefore driving up prices and, ultimately, inflation.

Trump, who is personally very wealthy, has been rather cavalier about the potential for prices going up. In an interview with the Wall Street Journal this week in which he appeared to float the idea of putting tariffs on iPhones and laptops, he said, “I mean, I can make it 10 percent, and people could stand that very easily.”

“Made in the USA” isn’t as easy as Trump makes it out to be

President Trump often makes the case that many of the United States’ trade and economic problems could be solved if companies would just do all of their manufacturing here. He’s attacked General Motors, Apple, and Harley-Davidson, among others, for having operations outside the US.

But “build in America” (which, by the way, many of Trump’s companies didn’t) isn’t as easy as it sounds. Supply chains are global, so even when Trump thinks he’s hitting back at China over, say, the iPhone, he’s missing the fact that the product is sourced from a lot of places, and its supply chain spans many countries.

In an Econofact analysis last year, Klein and Harvard political economist Marc Melitz estimated that each iPhone 7 imported to the US was recorded as a $225 import from China, but of that amount, only $5 represents work performed in China, largely assembly. The remaining $220 corresponds to other parts of Asia, Europe, and the Americas.

“It always sounds good when a president sounds tough on trade and issues protectionist policies,” Wayne Lam, a principal analyst at the information and analytics firm IHS Markit, told me when discussing the iPhone earlier this year. “We just don’t have the sheer workforce size nor skill set to be good at consumer electronics manufacturing.”

[Vox]

Trump might have renominated Yellen for Fed chair if she wasn’t so… short

President Donald Trump might have reappointed Janet Yellen to head the Federal Reserve if only she was a few inches taller.

A Washington Post report that quoted current and former officials said Trump on multiple occasions discussed giving Yellen another term at the central bank but was concerned over her height. He feared that at 5 feet and 3 inches she just wasn’t tall enough to get the job done.

The report said he expressed his misgivings to National Economic Council members and noted that Yellen “impressed [Trump] greatly” during their interview.

There have been some tongue-in-cheek comparisons made in the past to the height of Fed chairs and their propensity to raise rates, with 6-foot-9 Paul Volcker being the most aggressive. Powell is close to 6 feet tall.

Trump has been harshly critical of the Fed as its been run under Jerome Powell, whom he chose over Yellen. The president has objected to the interest rate increases under Powell, though Yellen also presided over hikes and the beginning of the reduction in the Fed’s balance sheet.

“Look, I took recommendations. I’m not blaming anybody,” Trump told the Post, despite reports that he blames Treasury Secretary Steven Mnuchin for recommending Powell.

[CNBC]

Trump leaves press pool behind at National Christmas Tree lighting

President Trump on Wednesday departed the National Christmas Tree lighting event without White House staff notifying a pool of reporters assigned to monitor the president’s movements of his whereabouts following a logistical mixup.

Members of the protective press pool – a group of reporters assigned to remain with the president and document his activities – indicated shortly after 6:30 p.m. that Trump had returned to the White House without any warning or comment from staffers.

Reporters were briefly held at the Ellipse outside the White House without any immediate indication of where the president had gone. They were later notified that Trump had returned to the White House via motorcade without the press pool in tow.

Members of the press pool protested the situation on Twitter.

[The Hill]

Trump suggests, without evidence, that Mueller is encouraging witnesses to lie in Russia probe

Donald Trump suggested without evidence on Wednesday that special counsel Robert Mueller and his team are bullying witnesses into lying about collusion in order to be spared punishment, marking the president’s latest attempt to discredit the Russia probe.

The president on Wednesday complained in a tweet that “While the disgusting Fake News is doing everything within their power not to report it that way, at least 3 major players are intimating that the Angry Mueller Gang of Dems is viciously telling witnesses to lie about facts & they will get relief.”

Though Trump did not specify to whom he was referring, Jerome Corsi, an associate of longtime Trump adviser Roger Stone, has been in the news in recent days for his refusal to agree to a plea deal with Mueller’s investigators.

Mueller’s team has investigated Corsi, who is known for his right-wing birther conspiracies, for possibly acting as a conduit between Stone and WikiLeaks founder Julian Assange. In a late-in-the-campaign bombshell, Assange published the emails of Clinton campaign chairman John Podesta that were determined to be stolen by Russian hackers.

Corsi said the special counsel’s team sought to strike a deal on one count of perjury, but Corsi has insisted that he hasn’t lied to investigators and suggested that Mueller’s prosecutors were attempting to coerce him into a plea deal.

Another major player in the Russia investigation, former Trump campaign chairman Paul Manafort, saw his plea deal put in danger this week after Mueller’s team accused him of lying to investigators. Manafort had entered into the deal and agreed to become a government witness following his first trial, but his subsequent lack of cooperation with investigators has renewed murmurs of a possible pardon from Trump.

There is no hard evidence that Trump’s claims are accurate and he neglected to provide proof of his accusations. But he invoked in his tweet the time period when Americans were falsely accused and investigated without evidence of being communists, calling this moment “our Joseph McCarthy Era!”

[Politico]

Trump Shares Image Calling For Mueller and Attorney General Rosenstein to Be Tried For ‘Treason’

President Donald Trump went on an extensive tweetstorm on Wednesday, which included retweeting a meme calling for his political opponents — and current attorney general — to be thrown in jail.

 

As you can see, the image shows former president Barack Obama, former FBI Director James Comey, the Clinton family, and several other Trump enemies behind bars after supposedly being tried for “treason.” Interestingly enough, the image also shows special counsel Robert Mueller and Deputy Attorney General Rod Rosenstein in prison as well.

Trump has ripped into Mueller several times this week, and today, he compared the Russia special counsel investigation to the Joe McCarthy-era Red Scare.

[Mediaite]

Trump floats new auto tariffs in response to GM layoffs

President Trump on Wednesday hinted he may support new tariffs on auto imports as his latest response to General Motors’ decision to shutter U.S. factories and lay off workers.

In a series of tweets, Trump argued that a longstanding 25 percent tariff on light trucks has boosted U.S. auto manufacturers and that the same approach could work for cars.

”If we did that with cars coming in, many more cars would be built here and G.M. would not be closing their plants in Ohio, Michigan & Maryland. Get smart Congress,” Trump wrote.

The president said major auto exporting countries “have taken advantage of the U.S. for decades” and warned “that the president has great power on this issue.”

”Because of the G.M. event, it is being studied now!” he wrote.

The comments follow a report in the German media that Trump is considering slapping a 25 percent tariff on car imports from all countries aside from Mexico and Canada. Trump previously decided to put off auto tariffs on Europe in exchange for the European Union agreeing to purchase more American soybeans.

General Motors’ announcement this week angered Trump, who views the U.S. economy as a reflection of his presidency. The plant closures and layoffs, combined with a sputtering stock market and rising interests rates, appear to have sparked fears of an economic downturn and prompted Trump to lash out.

Trump blamed Federal Reserve Chairman Jerome Powell for the stock-market slide and the GM layoffs, citing his decision to raise interest rates. The president said he also spoke to GM CEO Mary Barra to relay his unhappiness with the decision and threatened to end GM’s federal tax credit for electric vehicles.

GM has said slow demand for cars in the U.S. market, combined with tariffs on Chinese steel and aluminum, have hurt sales and forced the company to shutter plants in Lordstown, Ohio; Detroit-Hamtramck, Mich.; and White Marsh, Md.

The U.S. imposed a 25 percent tariff on imported light trucks in 1964 after France and West Germany imposed tariffs on U.S. chicken, hence the name ”chicken tax.”

[The Hill]

Trump Says Pardon for Paul Manafort is ‘Not Off the Table’

President Donald Trump declined in a new interview to rule out the possibility that he could pardon Paul Manafort, his former campaign chairman.

“It was never discussed, but I wouldn’t take it off the table. Why would I take it off the table?” Trump told the New York Post.

The President’s comments come following special counsel Robert Mueller’s accusation that Manafort violated his plea agreement and lied to Mueller’s team after being found guilty on eight counts of financial crimes in August.

[CNN]

Trump blasts Fed chair over stock market slide, GM layoffs

President Trump on Tuesday blamed Federal Reserve Chairman Jerome Powell for a string of negative economic developments, including the stock market’s recent slide and General Motors’s plan to shutter U.S. factories and lay off thousands of workers.
“I’m doing deals and I’m not being accommodated by the Fed,” Trump said in an interview with The Washington Post. “They’re making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.”
The comments mark an escalation of Trump’s criticism of Powell, whom he nominated last year to lead the central bank, over rising interest rates. They also indicate the president does not believe he bears responsibility for the negative economic news this week.

“So far, I’m not even a little bit happy with my selection of Jay,” Trump told the Post. “Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing.”
Trump has blasted Powell frequently since July for continuing a series of Fed interest rate hikes that began in December 2015. The Fed has raised rates eight times since the end of 2015, six times during Trump’s term and three times since Powell took over the central bank in February.
Trump is one of few Republican politicians and right-leaning officials opposed to the Fed’s efforts to bring interest rates back toward historically neutral levels. The president says he believes the Fed should keep interest rates low to stimulate the already-strong economy.
Interest rate hikes also suppress stock market gains — Trump’s preferred economic scorecard — by raising the price of borrowing and narrowing corporate profit margins.
U.S. stocks have erased their 2018 gains amid a Wall Street sell-off triggered in part by rising rates, along with fading economic growth and the mounting costs of Trump’s tariffs.
The president, however, expressed confidence that the U.S. economy would not enter a recession.
The president has repeatedly pointed to strong economic growth as evidence his policies, such as tax cuts and deregulation, are working.
GM’s announcement this week that it plans to cut 15 percent of its North American workforce could pose a political threat to Trump heading into the 2020 elections. Two plants it plans to shutter are located in Ohio and Michigan, two states Trump won in 2016.

Sarah Sanders: Climate change report ‘not based on facts’

White House press secretary Sarah Huckabee Sanders on Tuesday dismissed the findings of a government report that warned of the impending consequences of climate change, claiming it’s “not based on facts.”

“The president’s certainly leading on what matters most in this process, and that’s on having clean air, clean water,” Sanders told reporters at a press briefing. “In fact, the United States continues to be a leader on that front.”

Sanders disputed the report’s findings, claiming it’s “not based on facts” and arguing that modeling the climate “is never exact.” She did not indicate that Trump would call on world leaders at this week’s Group of 20 summit to address the report’s findings.

“We think that this is the most extreme version and it’s not based on facts,” she said. “It’s not data driven. We’d like to see something that is more data driven. It’s based on modeling, which is extremely hard to do when you’re talking about the climate.”

The report was developed by multiple federal agencies. A version of it is mandated to be released every four years under the National Climate Assessment from the multiagency Global Change Research Program.

The hundreds of government and external scientists involved in the research concluded that climate change could cost the United States billions of dollars annually within decades if greenhouse gases aren’t dramatically reduced, and could worsen environmental disasters like wildfires and flooding. Its findings aligned with those of the broader scientific community.

Trump downplayed the report’s findings, telling reporters on Monday’s that he doesn’t “believe” its warnings about the economic impacts of climate change.

The president has long voiced skepticism about the existence of climate change.

Democrats criticized that the report was released on Black Friday, the day after Thanksgiving, saying the timing was meant to bury it. They renewed calls for the use of renewable energy sources and other policies that could mitigate the effects of climate change.

Republican lawmakers have largely acknowledged that the climate is changing but have offered few concrete solutions to address the problem. Some lawmakers have emphasized the need to find innovations that would not adversely affect the economy.

[The Hill]

Trump threatens to cut federal incentives for GM’s electric car

President Trump on Tuesday threatened to end General Motors’s federal tax credit for electric vehicles in retaliation for the company’s planned layoffs.

Trump tweeted that he is “very disappointed” with the company’s plans to close up to five manufacturing plants — four of them in the United States, one in Canada — and lay off about 15 percent of its workforce.

“We are now looking at cutting all @GM subsidies, including … for electric cars,” he wrote.

GM’s share price fell on the New York Stock Exchange in the minutes after Trump’s tweet, reaching as low as 3.8 percent below Monday’s closing price.

In a statement on Tuesday afternoon, the automaker said it appreciates “the actions this administration has taken on behalf of industry to improve the overall competitiveness of U.S. manufacturing” and that “many of the U.S. workers impacted” by Monday’s layoff announcement “will have the opportunity to shift to other GM plants.”

“GM is committed to maintaining a strong manufacturing presence in the U.S., as evidenced by our more than $22 billion investments in U.S. operations since 2009. Yesterday’s announcements support our ability to invest for future growth and position the company for long-term success and maintain and grow American jobs,” the company said.

Trump has blasted GM and its CEO, Mary Barra, since the Monday morning layoff announcements and has pledged to take action to prevent the job losses.

It’s unclear what other subsidies might be targeted by Trump, whether he would focus only on GM or end the tax credit altogether. Ending the subsidy would require Congress to pass a new law.

The federal government provides a $7,500 tax break to U.S. consumers who buy electric vehicles. Two GM vehicles qualify for the incentive: the all-electric Chevrolet Bolt and the plug-in hybrid Chevrolet Volt.

Larry Kudlow, Trump’s top economic adviser, on Tuesday also mentioned potentially targeting the electric vehicle credit.

“We are going to be looking at certain subsidies regarding electric cars and others, whether they should apply or not. I can’t say anything final about that, but we’re looking into it,” Kudlow told reporters in a White House briefing before Trump’s tweet.

“Again, that reflects the president’s own disappointment regarding these actions,” he said of the plant closings.

At the same briefing, White House press secretary Sarah Huckabee Sanders was noncommittal on when Trump might make good on his threat.
“I don’t know that there’s a specific timeline,” she said.
“As he said, he’s looking into what those options might look like,” she added. “The president wants to see American companies build cars here in America, not build them overseas, and he is hopeful that GM will continue to do that here.”

As of the third quarter of 2018, GM was less than 4,000 vehicles away from hitting the point at which federal tax credits start to phase out. The phase-out starts when a manufacturer sells 200,000 electric cars.

GM and other automakers are lobbying Congress to lift the 200,000-vehicle limit. Bills in both the House and Senate have been introduced but neither chamber has passed one of the measures.

Support for the tax credit generally falls along party lines, with Democrats in strong support and Republicans opposed. Nonetheless, Sen. Dean Heller (R-Nev.), who lost his reelection fight earlier this month, is the lead sponsor on one bill to lift the cap on the credit.

[The Hill]

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