So, you think Trump’s intention to place tariffs of up to 25% on steel and aluminum imports won’t matter to you? You’ve skimmed the headlines, shrugged your shoulders, and moved on to the juicier news surrounding Jared, Ivanka, Hope Hicks, Donnie and others in the chaotic White House? Well guess what … it will matter to you, and in more ways than one.
First, how much did you pay for that last clothes dryer you bought? Around $400? Well, if you have to replace it, look for your next one to cost around $600. The imported beer/wine you like from France/Italy? Add 30% or so to the price a month from now. And a new car? Don’t even think about it.
Long story short, Trump has decided, against the advice of many in his administration, including Gary Cohn, Director of the National Economic Council and Trump’s chief financial advisor, to assess tariffs of up to 25% on steel and aluminum imported from … everywhere. What happens when Maytag needs to buy more steel to manufacture clothes dryers? It costs them 25% more. Do they pass this cost on to you? Of course, but not before increasing the total cost by an additional 10% – 15%, for their overhead is based on a calculation as a percentage of raw materials. So now your clothes dryer is 35% more than the last one, and that does not even factor in normal price increases due to inflation.
Trump’s idea is that companies like Maytag, in the above example, will stop buying exported steel and buy steel made in the U.S. Well, guess what? There isn’t enough of it to go around.
Next scenario. U.S. companies export goods to all over the world. Next time Le Bon Marché of Paris or Harrods of London are deciding what brand of jeans to carry, guess what? They may well pass over U.S.-made Levi-Strauss jeans, for the EU will have imposed a 25% import tariff on that brand, which makes it cost prohibitive, for shoppers will only pay so much for a pair of Levis. European Commission President Jean-Claude Juncker said the bloc is prepared to respond forcefully by targeting imports of Harley-Davidson Inc. motorbikes, Levi Strauss & Co. jeans and bourbon whiskey from the U.S. So, now Levi-Strauss is losing overseas business, thus must raise their prices to domestic buyers to cover the shortfall. So, next time you want to buy your kids Levis for back-to-school, don’t be surprised that they cost more.
There are long-term and long-range consequences to the action of imposing hefty tariffs on imports that Donald Trump has not considered, in part because he doesn’t understand international trade. His more intelligent, economy-savvy advisors have tried to explain it to him, to talk him out of such a foolish move, but with no luck, because when Trump decides he wants to do something, he will do it, come hell or high water. But … there is more to this story than meets the eye.
Carl Icahn … name ring a bell? He is said to be the 26th wealthiest person in the world, with a net worth of $16.9 billion. He is the founder and ‘controlling shareholder’ of Icahn Enterprises. The man knows how to make money, just not always in an honest, ethical or moral manner. He is what is known as a corporate raider. Funny, but just a few days before Trump’s decision to impose the steel tariffs, Carl Icahn sold $31.3 million worth of shares in the crane and lifting equipment supplier Manitowoc Company – a company heavily reliant on … guess … imported steel. The value of the shares he sold has since dropped by around $6 million. Coincidence? I think not. Oh … by the way … Icahn is also a former Trump ‘special advisor’.
Earlier today, after announcing that he would defy logic and move forward with his tariff plan, Trump said, “Trade wars are good, and easy to win.” Another of his many lies … there are no winners in a trade war, only losers. And it is a reverse equation, for the poorer you are, the more you will lose. The rich, like Carl Icahn and Donald Trump, will lose very little, if anything. You and I, my friends, stand only to lose. Republican Senator Ben Sasse hit the nail on the head when he said …
“Trade wars are never won. Trade wars are lost by both sides. Kooky 18th century protectionism will jack up prices on American families — and will prompt retaliation from other countries. Make no mistake: If the President goes through with this, it will kill American jobs — that’s what every trade war ultimately does. So much losing.”
There is much more to say on this topic, but for now, you get the idea of why you shouldn’t pass over the news of the day, for it is another foolish Trumpian move that will cost you … bigly.
You can follow Jill Dennison at her webpage Filosofa’s