‘He’ll End Up Shooting Us In The Foot’: Trump’s $100 Billion Tariff Gamble Is Going To Cost You At The Cash Register

Reuters goes on to note that while import substitution and alternative sourcing would be feasible for products like “clothing, pet food and lighting fixtures,” it’s not as simple as just looking at what products you could slap tariffs on that could conceivably be sourced from other countries where the cost of labor is low. China is so integrated into global supply chains that companies can’t simply flip a switch. Recall the following simple chart that shows you how important China has become to global trade:

ChartChinaImportance

The bottom line, as communicated to Reuters by Chad Bown, a senior fellow at the Peterson Institute for International Economics, is this:

You end up shooting yourself in the foot, shooting your allies in the foot, and maybe you wound China’s big toe.

Any questions?

For those who might have missed it, here’s what Goldman had to say about this:

The next list, if published, is likely to differ from the first round in at least two ways. First, we expect it to be less focused on imports related to the “Made in China 2025” strategy. Most of those were already targeted in the first list, though agricultural machinery and a few other categories were not and might show up on the next list. Second, and related to the first point, the next list looks likely to be more consumer-focused. The first list of $50 billion in goods was concentrated to a surprising extent on capital goods and included only a few important categories of consumer goods, like flat-screen TVs. We expect the next list to have a greater share of consumer products. If so, this would increase the impact on measured consumer price inflation compared with the first list. What might be on the list? When USTR released the first list of $50bn of goods subject to tariffs earlier this month, the announcement noted that “products were ranked according to the likely impact on U.S. consumers, based on available trade data involving alternative country sources for each product. The proposed list was then compiled by selecting products from the ranked list with lowest consumer impact.” We follow the same methodology described by USTR, ranking products based on the share that imports from China make up of total imports in each category. We do this at the 8-digit HTS level (there are roughly 21,000 different products at this level of granularity) and then aggregate up to broader categories, which are presented in Exhibit 1.

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Disclosure: None of what I write here is to be construed as advice to buy or sell any kind of asset. It is merely my personal and not my professional opinion. Any asset can go to zero.

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