Categories: Base Metals / Energy / General Market Commentary / Precious Metals
Topics: General Base Metals / General Energy / General Market Commentary / General Precious Metals

The American Casualties of Donald Trump’s Trade War

The American Casualties of Donald Trump’s Trade War

by Jason Simpkins

In the first week of Donald Trump’s presidency, we’ve seen some splashy executive orders regarding his proposed border wall and Muslim ban.

I’m not going to get into the Muslim ban because I think that’s a social/religious/humanitarian issue that has nothing to do with finance.

As for the border wall, I addressed that months ago.

Simply put, it’s going to be a costly, inefficient eyesore. It, too, is a social issue, but unlike the Muslim ban, it has concrete financial consequences for every American.

I said back in November that there was no way Mexico would ever pay for what former Mexican President Vicente Fox called “that f#@%ing wall.”

The cost, estimated to be anywhere from $12 billion to $25 billion, will fall squarely on the shoulders of the American taxpayer.

Americans will pay the price one way or another. But alarmingly, the Trump administration is now floating the idea of a 20% tariff on Mexican goods.

This is an especially terrible idea.

The way it’s phrased, a tariff sounds like a tax on Mexican companies — but it’s not. It’s a tax on Americans who would be forced to spend 20% more on Mexican goods.

Mexico is our third-largest trading partner, sending $295 billion worth of goods our way in 2016. Given that, a 20% tariff would equate to $59 billion in added costs to the American consumer.

The largest U.S. import from Mexico is cars (totaling $74 billion in 2015).

Fords, Volkswagens, Hondas, Nissans, and others are manufactured in Mexico. If you aim to buy one at a cost of, say, $25,000, a 20% tariff would add $5,000 to the sticker price.

Such an added cost would surely dampen automobile sales, which would be unfortunate, since they’ve hit a record in each of the past two years.

Back in 2015, (again, a record year for sales) real spending on motor vehicles and parts fell a seasonally adjusted $5.2 billion in the fourth quarter. That wiped 0.58% off fourth-quarter GDP after robust sales added a full 1% to GDP over the first three quarters of the year.

To continue reading please click link http://www.outsiderclub.com/the-american-casualties-of-donald-trumps-trade-war/2206