I don’t know about you but I reckon the USA is no longer a reliable guarantor of our security with Donald Trump as President. The nuclear armed UK might be a much better choice at present if they would have us!
The way he has behaved since his second inauguration confirms this to me with idiocy like his lust to take over Greenland. Frankly the man has lost his marbles IMVHO.
This latest carry on with tariffs just confirms my view….
The three fatal flaws in Donald Trump’s tariff fantasy
6:31PM April 04, 2025
Bananas. It really is bananas. The US can barely grow them, while its biggest supplier, Guatemala, doesn’t do much else but pick and pack them. Abundantly.
Yet, Guatemala and its tropical neighbours have been slugged with tariffs on things like bananas, coffee and sugar as part of Donald Trump’s punishment for all their looting, pillaging, raping and plundering of the world’s biggest economy.
From next week, US consumers will pay 10 per cent more for Guatemala’s national yellow fruit. What’s their alternative on Walmart’s shelves? Nothing.
At last count, Hawaii produced less than $US6m ($9m) worth of bananas from a patchwork of small farms across its islands. The total crop size is just 128ha (318 acres) compared to Guatemala’s more than 106,800ha (264,000 acres).
The Hawaiian banana last year fetched on average US48c per kilo. It’s much smaller and lighter than the Guatemalan variety. The chances of Hawaii growing more, let alone building an industry of scale to match Guatemala’s $US1.1bn banana export machine, is next to zero.
This is one of the countless examples to show Trump’s fantasy of reversing decades of globalisation and bringing manufacturing or farming back on to US soil simply won’t hold. It really is bananas.
‘Coin-toss’
Global markets were hit dramatically by Trump’s worse-than-expected tariff plan – and that’s even before considering the ludicrous formula for determining his country-by-country punishment.
Australian shares on Friday hit correction territory, and are now tracking 10 per cent lower from their mid-February peak on worries about the outlook for China and tariff-slammed Asia.
Wall Street extended its correction, staging its biggest slump since Covid-19 hit, and Europe is preparing for losses. The odds of a US recession were sitting at about 20 per cent a month ago, that’s now shot up to 50 per cent.
“It’s a coin toss,” says Grace Su, global portfolio manager with $US190bn New York-based fund ClearBridge.
This rapidly changing investment world is all due to Trump’s promise of a golden age turning into an empty promise.
Markets have been trying to make sense of the implications of building a protectionist wall around the world’s most prosperous economy. For now they see better value elsewhere.
“Leading into all this, it was generally accepted that US exceptionalism was the best place to be. You had to be invested there. The US consumer was your friend, and that narrative was priced very expensively,” Su said.
“Now the obvious thing to me is you have to unwind some of that and actually there are so many other more interesting places to invest globally.”
Trump’s ideal of a self-reliant America is built on flawed, and even economically fatal, assumptions.
In fact, there are three: inflation, labour and (as the banana example shows) trade. They allow you to do things your economy can’t ordinarily do.
Even if this week’s announcements lead to an endless round of negotiations, the damage has been done. The world and capital flows will inevitably carry on and learn to trade without the United States and Trump.
Citi global rates strategist Ben Wiltshire sums it up. “We’re amid a tectonic shift in the foundations of global trade and economics,” he says.
He points out US inflation expectations are now rising while the outlook for interest rates across treasury yields were falling simultaneously. This is an ominous sign suggesting the reawakening of stagflation – a phenomenon of rising inflation and high unemployment – which is something the world hasn’t really dealt with since the oil crisis of the 1970s.
Trade and capital is fungible, and other nations with open economies will become wealthy trading with one another while leaving the US behind. Indeed, it could lead to a faster rising Asian middle class.
Big beef
Agriculture comes up with countless examples of doing things which can’t be done. Take US beef, which is Trump’s biggest beef with Australia.
The US cattle heard at the start of last year was 87 million head which was the smallest in more than six decades.
From a standing start, it takes up to three years to grow prime cattle from paddock to plate. That’s a long time to wait for a burger.
Then, there’s need to build capacity in the supply chains from feedlots to slaughterhouses and cold storage. The upfront investment needed on this one just product line is immense.
The US is now largely a service economy and the inability to do things isn’t just in agriculture.
Canada’s vast lakes and hydro-electric systems gives it access to low-cost electricity on the east coast. This has been the staple in building a complex Canadian manufacturing industry to deliver low-cost components, cars and the like for US consumption. Canada even exports its vast cheap power into the US. For now.
Take the symbol of US tech power, the iPhone. It’s about to be crushed by tariffs on China of up to 54 per cent. Designed in California, but using a highly sophisticated global supply chain, it is made from components across dozens of countries. Apple’s contract manufacturer, Foxconn, then assembles millions of iPhones from its massive Zhengzhou plant in China.
This hi-tech factory employs more than 200,000 people. Where in the United States is Apple or its partners going to find that many low-paid Americans willing to work on the line while US unemployment is hovering around multi-decade lows?
Apple shares this week crashed more than 9 per cent as part of the Wall Street slump.
The sheer costs of replicating a plant like Foxconn’s in labour-constrained US would also be stupefying. The massive uncertainty over Trump’s policy outlook and to what extent these tariffs are flimsy negotiating tactics would hold boards back from seriously shifting their entire business back home.
It’s not just Apple, it’s everything. Televisions, cars, shoes, laptops, aircraft components and plastics – are all labour intensive – and that’s one thing the US doesn’t have too much of without spurring on wage-led inflation.
“Jobs and factories will come roaring back into our country,” Trump declared. “Ultimately, more production at home will mean stronger competition and lower prices for consumers.”
This is wrong. Tariffs make companies lazy and less competitive, and ultimately cause prices to rise.
Nike’s nightmare
The re-shoring dream risks the US shifting from a high-productive, value-adding nation into one of lower wealth. This reallocates the potential pool of productive workers away from skilled things like software coding, construction and rocket building into lower-value jobs, like making sneakers or socks.
Shares in Nike crashed 14.4 per cent and the sneaker maker now faces a stark choice: increase its prices and lose market share or absorb the tariff through its profit margin.
Nike has been twice hit now. In recent years it shifted much of its manufacturing from China to the emerging hub of Vietnam as a hedge against Trump’s first-term tariffs. This week Vietnam was slugged with a 46 per cent tariff, compared with China’s 54 per cent.
The Bob Woodward book, Fear, which documents Trump’s first term is largely centred around his former economic adviser, Gary Cohn.
The one-time Goldman Sachs chief operating officer regularly pushed back against the President, including over his first-term shot at steel tariffs.
One passage has Cohn telling Trump plainly that even with tariffs, manufacturing is never coming back to the US, which is now built around being a service economy. Trump responds by saying if it doesn’t work, they can just roll them back.
“That’s not what you do with the US economy,” Cohn is quoted as saying. “You do something when you’re 100 per cent certain it will work, and then you pray like hell you’re right. You don’t do 50-50 with the US economy.”
There is one little-known but important purpose about trade deficits which has so riled Trump. While they are a sign of a nation spending more than it produces, deficits also offer an important pressure value for economies.
Booming, consumption-led economies generally have bigger trade deficits, because confident businesses and consumers are spending up big.
Close this release value by throttling trade and watch inflation steadily build until the financial bubble really bursts.
Deal or no deal. That’s what’s really coming for the American consumer. Just bananas.
eric.johnston@news.com.au
Here is the link:
At almost 80 years old I believe he is dangerously past his prime and really should be retired back to a penthouse in the Trump Tower to see out his remaining days. The prospect of almost 4 more years of Trump frankly fills me with dread!
Sadly JD Vance is hardly a fit replacement IMVHO and I believe we are facing a pretty dangerous time in the immediate future… It is not clear to me what might happen if the US faces a serious crisis at present – so let’s hope we can avoid one!
Any clever ideas on a way out other that just ‘Keeping calm and carrying on!”?
Sorry for pointing out the sickeningly obvious….
David.
1 comment:
The short answer is “no” the long answer is “hell no”
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