E Macro Market Wrap Up - Monday, March 4

I’m going to admit ahead of time that this is a real toldja so moment. Several times in the past I’ve written and posted videos regarding trade wars and the major issues that tariffs will cause.  Not with China or other trade partners, but rather, on the American people.  Most notably I said that Chinese producers will view a tariff as a cost of doing business with America, and therefore, that cost will be passed on to the end user of all Chinese products.  Americans would suffer with a higher cost of living, and most notably I said that would weigh heavily on retail, on housing, on anything bought on credit, really that it would just put a damper on all parts of the American economy.

Today I saw an article posted on Bloomberg which confirms what I have said about tariffs.  In a nutshell, it punishes the people who can least afford to pay the higher cost of living, which are the poor and middle class. And this is all in contradistinction to what President Trump is always saying about trade deals and trade wars, which like everything else, “we’re winning, it’s the best ever, we’re bigly on top,” etc.

There were two important studies that were referenced in the article.  The first article was published jointly by the New York Fed, Princeton University, and Columbia University.  Normally, anything coming from the government, I'm skeptical.  Very skeptical.  But in conjunction with two Ivy League universities whose reputations are on the line, I am willing to accept what they say.

They concluded that the tariffs were costing $3 billion per month in taxes as well as $1.4 billion to companies in what they called deadweight losses. Additionally, they said that companies reorganizing their supply chains would suffer a whopping $165 billion in losses because of the tariffs.  The combined total is in excess of $217 billion annually.  The authors contradict the president by saying that consumers are bearing the brunt of these costs, not the Chinese. And they said that it would be difficult to understand how much capital investment has been put on hold, though they are now studying this as well to try to quantify losses to the economy.

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