If Trump wants GM to re-open Lordstown, here’s what he needs to do.

March 19, 2019

https://www.usatoday.com/story/money/2019/03/17/president-trump-attacks-gm-uaw-over-plans-close-lordstown-plant/3195729002/

The above-linked article is just one of many stories about Trump’s anger directed toward General Motors over its decision to end production at the Lordstown, OH assembly plant.  He’s wasting his time.  GM isn’t going to operate a plant building cars that aren’t selling.  Why wasn’t the Chevy Cruze selling?  It’s not that it isn’t a really nice small car.  The problem is two-fold:  the market has shifted away from cars to SUVs and, more importantly, the market is absolutely saturated with foreign brands.

I recently heard an automotive industry analyst sum up the situation this way:  “GM has fourteen plants, but only needs twelve to meet demand.”  (I may not be remembering those numbers exactly right.)  More history was in order.  He should have said that “GM once had dozens of plants and is now down to fourteen, thanks to imports, needs to shrink further to twelve and, if nothing is done, will eventually have none.”  That’s a more thorough description of what the domestic auto industry has faced.

Trump needs to stop wasting his time chastising Mary Barra, GM’s CEO, and do the one thing that GM fears the most – impose a 25% tariff on all auto and parts imports.  Soon GM would find itself in need of restarting production at Lordstown and, beyond that, begin building many more assembly and parts plants around the U.S.

Then why does GM fear such a move, one that would likely double its sales volume in the U.S.?  Because China might retaliate by kicking U.S. automakers out of China, depriving them of access to that market.  With 1.2 billion people, four times the population of the U.S., GM and other global corporations think China is a market with the potential to be four times the size of the U.S.  It’s currently nowhere near that big and never will be, thanks to gross over-crowding in China, but GM doesn’t understand that just yet.  So they’re willing to cede a large portion of the U.S. market (and with it, U.S. manufacturing jobs) to foreign competition in order to preserve their access to the Chinese market.

Trump has been threatening to pull the trigger on auto tariffs for some time now.  What’s he waiting for?  The “Make America Great Again” initiative will remain stalled and more auto plants will close as long as he fails to act.

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Economist Ivanovitch Calls for China to “Get Out of its Huge U.S. Trade Problem”

March 18, 2019

https://www.cnbc.com/2019/03/18/china-should-quickly-get-out-of-its-huge-us-trade-problem-commentary.html

In the above-linked opinion piece, economist Dr. Michael Ivanovitch calls for China to “get out of its huge U.S. trade problem.”  It’s significant that economists of Dr. Ivanovitch’s ilk, a former economist for both the OECD (Organization for Economic Cooperation and Development) and the New York Federal Reserve, are beginning to recognize the unsustainability of China’s reliance on its massive trade surplus with the U.S. and the threat it could ulitmately pose to peace between the two nations.

Ivanovitch argues that China’s surplus with the U.S. is unsustainable and the longer it attempts to sustain it with endless talks and negotiations, the more it runs the risk of the U.S. seeing China as an existential threat for which it must prepare militarily.

Like all excesses, this one too can badly backfire on China. And it’s not clear what China’s economic and political interests are served as Beijing keeps deliberately pushing the U.S.-China trade relationship into a growing and unsustainable imbalance.

No, China should know that, at some point, the abused party wants out — sometimes violently.

It’s great that economists are beginning to see a danger here, but what they fail to understand is that reducing its surplus with the U.S. isn’t a choice China can make without devastating its economy.  China is no different than other badly overpopulated nations – like Japan, Germany, South Korea and many others – in that they either depend on manufacturing for export in order to sustain their bloated labor forces, or they are doomed to abject poverty.  Economists don’t recognize the inverse relationship between population density and per capita consumption, and the role it plays in driving up unemployment and poverty.  They don’t recognize it because they refuse to even ponder the ramifications of human population growth out of fear of being labeled “Malthusians,” a virtual death sentence for an economist’s career.

China may not understand it either, but they do understand how heavily dependent they are on the export market – especially the U.S. – and they understand that, for reasons that may escape them, it’s proving impossible to transform to an economy driven more by growth in their own domestic consumption.

China will never willingly cede any of its surplus with the U.S.  If the U.S. wants to move toward a balance of trade with China, it must take matters into its own hands, and the use of tariffs is the only tool at its disposal.  It’s time for Trump to stop being suckered by China’s willingness to engage in talks that drag out forever.  Lay down the law, slap 25% tariffs on all Chinese imports, and tell China they will only be reduced when a balance of trade has been established, and even then by just enough to assure that such a balance is maintained.


An Example of How Tariffs on China are Working

March 7, 2019

https://www.reuters.com/article/us-autoshow-geneva-bmw-trade/bmws-china-electric-car-export-plans-on-hold-amid-tariff-uncertainty-idUSKCN1QO215

The above-linked Reuters article is just one example of how the tariffs on China, and the potential for those tariffs to be raised further, is already paying dividends for the American economy.  Reuters reports that BMW has put on hold its plans to export EVs (electric vehicles) to the U.S. from China.

BMW has factories in Europe, China and the United States and plans to establish China, the world’s largest market for electric cars, as an export hub for such vehicles, given its lower labor costs and support for zero-emission cars.

But Washington and Beijing are locked in a trade dispute, with U.S. President Donald Trump threatening to increase tariffs to 25 percent from 10 percent on $200 billion of Chinese goods if the two sides can’t reach a deal.

The uncertainty is making it hard for BMW to take a decision about exports, chief executive Harald Krueger said.

Free trade globalists no doubt would cite this as an example of how the American consumer comes out the loser.  That’s nonsense.  American consumers already have two excellent choices of EVs from Tesla and Chevrolet (the Bolt), and more are on the way.  Both the Tesla and the Bolt are priced about the same, at around $35,000.  Both are struggling to be profitable, especially as government subsidies are phased out.  They need every sale in the U.S. in order to survive.  Truth be told, they actually need to sell a lot more than they’re selling now to be profitable and survive.

What would happen if a BMW EV from China were thrown into the mix?  First of all, BMW would price their EV the same as the Tesla and the Bolt in spite of it being cheaper to build in China.  Like all companies, BMW is in business to make a profit, and they’ll want as much profit as they can get.  If priced the same as the other two cars, BMW will quickly take one third of the EV market from Tesla and Chevy.  In that event, it’s likely that the Chevy Bolt would go out of production while Tesla would be bankrupted.  BMW would then have the market to itself.  Without competition, American consumers would be the losers, and approximately 50,000 Americans would be put out of work at Tesla and Chevrolet.

This is just one small example.  If Trump follows through with raising the tariffs on Chinese imports, and especially if he follows through with plans to put 25% tariffs on all auto imports, domestic auto production will explode along with employment and wages in the auto and parts industries.  American consumers of everything will be the winners when they go shopping with more money in their pockets.


No Progress on Cutting Trade Deficit

February 15, 2019

Last week, the Commerce Department released the trade data for the month of November.  It was expected that the data for November would be the first to show that the tariffs enacted by Trump are beginning to “bite,” after the data for the previous two months was supposedly skewed by importers loading up in advance of the tariffs.

Didn’t happen.  Although the trade deficit was down slightly, the drop was insignificant.  At $49.3 billion, the overall deficit tracked right in line with previous months.  More importantly, the deficit in the all-important category of manufactured products (where jobs are concentrated) dropped by $4.8 billion to $72.5 billion.  Nice that it dropped, but it’s still the fifth worst deficit ever recorded.  Here’s the chart:  Manf’d Goods Balance of Trade.  The deficit with China fell by only $2.8 billion to $35.4 billion – the fourth worst deficit ever recorded with China.

So far, all of the alarm raised by globalists about harm being done to the global economy has proven to be nothing more than fear-mongering.  The impact of the tariffs – 10% on half of Chinese imports and 10% on steel and aluminum – has been zilch, other than to slightly erode the profit margins of those exporting companies and adding a couple billion dollars per month to federal revenue.  And the whining by American farmers that China has stopped buying?  Exports of “foods, feeds and beverages” is running $9.0 billion ahead of the same time in 2017, led by a 20% increase in soybean exports.

In the meantime, though the economy has been booming since the enactment of the tax cut last year, the effect is beginning to fade, as does the effect of every stimulus plan enacted for decades.  Retail sales fell last month, as did industrial production, led downward by manufacturing, especially by auto production.  It’s no surprise.  Without significant measures aimed at restoring a balance of trade, the economy will be eroded as the trade deficit worsens, regardless of any economic stimuli.

The problem is that, although the tariffs implemented by Trump so far go far beyond what any president in modern times has been willing to do, it hasn’t been enough.  The tariffs are too small and too narrowly focused.  They need to include all imports from China and need to rise to 25%.  And we need the 25% tariff on autos that Trump has long threatened.

The current trade talks with China are a complete waste of time.  When the U.S. agreed to hold off on further tariffs in exchange for such talks, China had already won.  Any deal with China, no matter the terms, is a win for China because it puts them back in the driver’s seat.  All they have to do is make promises – the same thing they’ve always done.  When they fail to meet them, what will the U.S. do?  Engage them in more talks.  Trade deals in general are utterly pointless, since tariffs are the only thing that can influence other nations’ trading behavior in our favor.  It’s extremely disappointing that Trump doesn’t seem to fully grasp this.


MAGA: Is Trump Becoming a Liability?

January 28, 2019

In the wake of the government shutdown fiasco, you have to begin to wonder whether Trump is becoming a liability to the “Make America Great Again” movement.

It isn’t so much the fact that he reopened the government.  It’s the way he did it.  He caved in.  He totally capitulated to Democrats’ insistence on maintaining an open border, getting absolutely nothing in return.  What should he have done?  First of all, he should have followed through with his threat of declaring a national emergency.  Secondly, he should have withdrawn America from NAFTA and immediately put in place tariffs on all manufactured goods from Mexico, effectively making Mexico pay for the wall like he promised.   Finally, he should have immediately begun deporting the “deferred action” illegal aliens that he offered to protect.

The “deal” to reopen the government for three weeks, supposedly for the purpose of giving Trump and congress time to negotiate a deal on border security, is a farce.  Trump has given up all leverage that he had on the border wall issue and Democrats have made it crystal clear that they’ll never support a dime for securing the border in the only way that it can be secured – by building a barrier.  Either there’ll be an impasse again, or Trump will cave in a 2nd time and try to sell something less than a barrier – maybe more funding for border patrol agents and technology – as a win.

The problem goes far beyond the border wall issue to the half-hearted, inconsistent implementation of virtually every element of his “Make America Great Again” (or “MAGA”) program, a program consisting of three key elements:  a re-balancing of trade to bring manufacturing jobs back to the U.S.; putting an end to rampant, out-of-control immigration – both legal and illegal; and putting an end to the rest of the world behaving like a spoiled, entitled teenager treating the U.S. like a doting parent, providing everything it asks for and getting nothing but scorn in return.

We were promised a wall to virtually put an end to illegal immigration across our southern border, to be paid for by Mexico.  We were promised a prompt withdrawal from NAFTA, and tariffs on products from Mexico, which would have made fulfilling the border wall promise a snap.  We were promised tariffs on Chinese imports and on auto imports.

Soon after the inauguration, Trump invited Red China’s communist dictator to dinner at Mar A Lago and was quickly seduced into holding off on tariffs on China.  Then he caved in to pressure not to withdraw from NAFTA and instead got sucked into a ridiculously drawn out negotiation of a new agreement with Mexico and Canada that may or may not be any improvement at all, and that Congress seems in no hurry to take up.  Goodbye to any chance of getting Mexico to pay for the wall.  He did implement a small ten percent tariff on half of Chinese imports after it became clear that Chairman Xi’s promises were nothing more than a ploy, but caved in on further implementation once the global corporations began their pissing and moaning.  Now we’re sucked into the same kind of trade negotiations that the rest of the world has used for decades to stall America’s efforts to stand up for itself.

Then there’s North Korea.  Give Trump credit for using the toughest sanctions ever to forced them to agree to denuclearization, but Kim’s promises have proven hollow and North Korea seems to be off the hook once again.

I don’t blame Trump alone for all of this.  Everyone around him has been against him from the start – the Democrats who despise him and would never agree to anything he wanted, the media, global corporations, global organizations, his own staff and even members of his own family (globalists like Kushner and Ivanka) who have stonewalled his programs.

All of the backlash from the MAGA initiatives was to be expected.  I predicted as much in Five Short Blasts – a period of inflation caused by significant tariff-induced price increases, but eventually followed by explosive economic growth as manufacturing in America returned.  Trump needed to go all in with his program quickly, enduring withering criticism for a couple of years or so before having the last laugh when GDP began to explode as factories were rebuilt and as the manufacturing sector of the economy exploded.  It would have taken a lot of guts to be almost universally despised in the short term in order to have history remember him as an American hero in the long term.

However, I see a real danger in what’s happening here.  Trump’s incomplete implementation of these policies will yield only the pain without achieving the benefits that would eventually come, and will be deemed complete failures.  They’ll be forever labeled as “Trumpian” policies that no one will ever dare to attempt again.  America will be forever doomed to massive trade deficits and budget deficits, and will eventually collapse under the weight of gross overpopulation and a national debt that the rest of the world can no longer sustain.

It’s not too late for Trump, but it’s getting pretty darn close.  He needs to immediately begin ignoring all of globalist noise and whining and go all in with what he knows needs to be done.  Declare an emergency.  Build the wall.  Withdraw from NAFTA and slap tariffs on Mexico, and tell congress that if they don’t like it, then they can pass the new agreement he negotiated.  Slap tariffs on all Chinese exports and raise them to 25% or higher.  Slap 25% tariffs on all auto imports.  Tell the rest of the world that we’re willing to buy from them only as much as they buy from us.  Sure, the globalist outcry will be almost unbearable, but so what?  Continue down the path you’re on and history will remember you as a complete failure.  So what is there to lose?


“Collusion?” Where was the FBI when we needed them?

January 13, 2019

The news that broke yesterday about the FBI launching a counter-intelligence investigation of President Trump after he fired former FBI director James Comey got me thinking.  Where was the FBI when real collusion took place that has nearly destroyed the United States? Past presidents have colluded with other world leaders for decades to transfer all of the wealth of the United States to the rest of the world through a grand scheme of globalization that transformed America’s economy into a comatose host to be fed upon by hordes of parasitic nations.

Where was the FBI after World War II when Truman colluded with European leaders to establish the World Bank and the International Monetary fund, along with signing the Global Agreement on Tariffs and Trade, unilaterally dismantling America’s protections against predatory trade partners?  Where was the FBI when George H. W. Bush colluded with world leaders to establish the World Trade Organization, surrendering America’s trade policy?    Where was the FBI when Clinton colluded with Mexico to pass NAFTA, or when he colluded with Chinese leaders to grant China “Most Favored Nation” status?  Where was the FBI when Obama colluded with South Korea to worsen our balance of trade with them?  Or when he tried to ramrod the Trans Pacific Partnership deal down our throats?

The result of all of the above is that the United States is a shell of its former self.  We are now nearly $22 trillion in debt to the rest of the world.  Stand on a rooftop and take a look around.  Everything you see – as far as you can see – is owned by foreign governments or corporations.  You think you own your house or, if you have a mortgage and are honest with yourself, that at least your bank owns your house?  Think again.  All such debt has been bundled up and sold to foreign interests.  The same is true of virtually all U.S. property, whether “owned” by private individuals, small companies, corporations, or even your local government, state government or the federal government.  They own us lock, stock and barrel.  And with ownership comes control.  Don’t think that it doesn’t.   Incredibly, past presidents have colluded to make a communist country led by a dictator-for-life the biggest benefactor of all.  How in the hell did all of this happen?  Where was the FBI?

Where was the FBI when these past presidents colluded with the rest of the world to unleash a relentless campaign of fake news and false propaganda to brainwash and assure Americans that all of this was done in their best interest?  “Trade deficits don’t matter.”  “Everyone wins in free trade.”  “We’ll retrain you to get an even better job.”

Where was the FBI while past presidents rendered America subservient to “The New World Order?”  They never uttered a peep of protest.  They never launched an investigation.  Some have likened Trump to the “Manchurian Candidate,” an old movie about a communist attempt to get a brainwashed traitor elected president.  Given all of the above, one has to wonder who was the real “Manchurian Candidate?”  Was it Trump, or was it the string of presidents who preceded him?  Is Trump now faced with fighting an entire system that they’ve created, including the media and all of the government’s bureaucracies?  Is the FBI now part of a “Manchurian” conspiracy?  Should Trump have gone beyond Comey and fired all of the FBI’s senior leadership?

OK, I know, I’ve veered way off the road into the weeds of conspiracy theory.  But seriously, don’t you find it just a wee bit ironic that we finally have a president who is trying to extricate America from domination by world organizations and he finds himself under attack by the same FBI that was perfectly happy with America’s subjugation to foreign interests through the process of “globalization?”


What Trump Needs to Do to Survive

December 17, 2018

Donald Trump was never a very likable person -arrogant, obnoxious, inconsiderate, demeaning, a womanizer and narcissistic.  The list could go on.  He’s not eloquent, not inspiring and not a role model unless, that is, you fancy yourself an entrepreneur like him.  There’s no arguing his success as such.  What he lacked in the aforementioned qualities he made up for with ruthless ambition and a keen sense for business.  So it’s not surprising that his reality TV show, The Aprentice, was a hit at a time when millions of workers were falling victim to globalization and were left with few options but to try their hands as entrepreneurs.  Even if you didn’t like Trump, it was entertaining to watch contestants get a heavy dose of reality about what it took to make it as a businessperson.

But Trump as president?  I scoffed at the idea.  No way could such an unlikable person get enough people to vote for him.  I never would have.  When he announced his candidacy, I just assumed that a businessman like him would, of course, be another globalist.  People often said that we needed a businessman to run the government more like a business.  I always replied that what would really happen is that the government would be run for the benefit of business, to the detriment of everyone else.  But he got my attention when he started talking about “making America great again” and what that meant – tearing up bad trade deals, bringing jobs back home and reining in out-of-control immigration – especially illegal immigration.  These were all the things I’d been writing about for years.

So I turned a blind eye to all of his onerous qualities and took a chance.  Why not?  It wasn’t as though I hadn’t voted for populist losers before.  To my amazement, the “silent majority,” who’d been getting their asses kicked by globalization for decades, had had enough of it and voted for him too.  Like me, they were willing to overlook his many flaws and take a chance.  It’s not as though we didn’t know what we were getting.  The Access Hollywood tape had long since been made public.  News about his affairs with “Stormy” McDaniels and Karen McDougall had already come out.

I’ve been pleased with the results – with his policy decisions – but not ecstatic.  He’s been tough on illegal immigration, but where’s the badly-needed border wall?  Making Mexico pay for it would have been easy.  Just tear up NAFTA and slap tariffs on Mexican imports.  Instead, he became mired in a year-long renegotiation of a trade deal with Mexico, which still isn’t signed and is questionable as to whether or not it represents any improvement at all for the U.S.  The tariffs on steel and aluminum were a great first step, followed by the small tariffs on half of Chinese imports.

But now his agenda is stalled, thanks to caving into to the Chinese when they promised reforms at the G20 meeting in Argentina.  We all know how that’ll go.  There’ll be promises from the Chinese that’ll never be kept, but they’ll be enough to win them more concessions from Trump.  The long-talked-about tariffs on auto imports have never happened.  The problem with all of this is that, while what Trump has done so far has been a good start toward an overhaul of trade policy, it hasn’t been enough yet to achieve the desired effect – a migration of manufacturing back to the U.S.  Our trade imbalance is now worse than ever.  Trump has ceded the podium to the hand-wringing globalists who scare the hell out of markets with their daily dire warnings of a trade war or worse.  Now they’re conjuring up images on a new Great Depression, worse they say than 1929.  It’s ridiculous, of course, but it’s having an effect as people turn negative on the economy.  And companies clearly aren’t yet taking this new trade policy seriously, as GM recently announced plans to close plants in the U.S. and move more production to Mexico, and as Boeing just announced that they’re moving some assembly to China.

Given this past week’s news about the conviction of former Trump attorney Michael Cohen on felony charges of campaign finance law violations, it seems inevitable that Trump will face impeachment.  Never mind the fact that the hush money payments were already old news when Trump won the election, indicating that those events weren’t enough to dissuade voters from desperately seeking a change in direction for the country.  Trump won’t stand a chance of re-election with impeachment hanging over his head.  And you can be sure that the House Democrats are smart enough to bring it to a head just as the election draws near.

There’s only one chance for Trump to survive.  The economy has to be going gangbusters when the next election rolls around.  The only way that happens is if he aggressively resumes his implementation of tariffs.  That means that as soon as the 90-day “truce” agreed to at the G20 ends on March 1st, he must immediately raise the tariffs on Chinese imports to 25% as originally promised, and must extend them across the board to all Chinese imports.  Secondly, he needs to immediately implement the long-promised 25% tariffs on all imported autos.  Finally, he must make it clear that the tariffs will remain in place regardless of any promised concessions from China or any auto exporters.  Tariffs cannot be negotiated away.  Lowering the tariffs can only be considered when a balance of trade has been restored, and then only incrementally.  Trump needs to immediately change the conversation, refocusing news coverage on changing trade policy and away from his legal predicaments.  If he does all of this – and the economy is doing great – voters will be willing to overlook an impeachment just as they overlooked his many flaws two years ago.

Anything short of that and Trump will be gone in two years, replaced by globalists who will undo everything he did.  And history will judge his presidency a failure.