ALL’S FAIR IN LOATHE AND WAR…

As readers know, the Author Rob follows John Mauldin’s “Frontline.” Mauldin’s newsletters are entertaining and informational.  And the newsletter contains great discussion of interest rates and interest rate directions. 

Mauldin has an associate that writes a letter called “Connect the Dots.” His name is Patrick Watson. This week he addressed the impending trump trade war.  Since trump cannot man up to Kim Jong-Un, trump wants to pick a little war that he can actually declare. But a war no one that knows much of anything wants. A war where the losers will be the ones that trump said he would look out for.  His twitter reading multitudes.

FIRST STEEL. THEN WHISKEY?

An anachronism from the Cold War, a relic as bankrupt and counter-productive as the Electoral College, gives the a president a large loophole to ignore trade agreements if the president determines that they “harm US national security.”  The law has been in place since 1962.

The claim that steel imports “harm US nation security” is not creditable.  China has been dumping steel in the US and Europe.  From CNN in May of this year:

The European Commission has announced new anti-dumping duties on pipes and tubes made from steel and iron in China, its latest attempt to stop the flow of cheap metal from the country. 

The duties of 29% to 55% were imposed after an investigation found that Chinese firms were dumping steel into Europe at unusually low prices that hurt local competitors. 

But steel dumping does not harm “US Security.” The military industrial complex is not putting steel wanted ads on billboards or posting on Craigslist.  Measured negotiations and an international approach can more effectively address the matter than firing off a trade war to generate activity and satisfy a few sycophants.

Trade wars are like dance parties. When the music is playing, countries have to dance. The trade war will not be limited to the US and China.  The European Union is already drawing the lines in the sand:

[European Union] officials have begun assembling a list of US goods including whiskey, orange juice and dairy products to target for retaliation over Donald Trump’s plans to invoke national security concerns to limit steel imports.

European Commission president Jean Claude Juncker told the Financial Times, “Our mood is increasingly combative.”

The good news is that the trade war will end. The bad news will be how much damage will be done to keep one campaign promise out of a hundred, and a very ill advised promise at that. Damage many thousands of American businesses for a handful of steel mills.  

How the market will react is a hot subject of discussion.  

WE WILL HOLD THE DISCUSSION FOR ANOTHER DAY IN THE DESERT OF THE REAL.