The flip side of a trade war

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I don’t pretend to be an economist, not even to have a passing knowledge of what goes on in that arcane field of study.  To me, it seems to rank right there with the medieval study of alchemy.

So what I am about to share can be taken with a very large grain of salt and only represents the musings and research of an interested party. In addition to my ignorance of the study of economics, I have an equally shallow knowledge of the rights and wrongs or the legalities that have prompted this action. All I know is that the United States has started and found itself in an economic war with most of the rest of the first world. 

I am certain that for some academics, elected officials, and media representatives the details of the reasons, the justification or lack thereof, and the effects are extremely important.  But to me, I am primarily concerned about the effects that this has on me, my family, and the country as a whole, as we go through what may be a protracted period of time.

“A tit-for-tat trade war has erupted and American families are caught in the middle,” Matthew Shay, the president and CEO of the National Retail Federation, said in a statement. Shay also called tariffs “taxes on consumers.” The Office of the U.S. Trade Representative released a list of products that will be subject to additional tariffs. Here are some of the consumer-related goods on the list:

  • Dishwashers
  • Water filters
  • Parts and accessories of printers
  • Copying machines
  • LEDs for backlighting of LCDs
  • Radio receivers

The tariffs on aluminum and steel will also affect our price of jet engines, robotics, cars and machinery to name a few.

Okay, I admit that I’m not in the market for a dishwasher or jet engine as well as most of the above, so again I wonder what is the effect on me and others like me?

Well, if you or a loved one work in an industry that uses aluminum, steel, or farm products, your job is in jeopardy.  If you want to purchase a new car this year, the price will be higher. In general, prices for imported products will increase right away.

One benefit the trade war could give is a competitive advantage to domestic producers of a product that is now imported. With a tariff on their imported competition, their prices would be lower by comparison. As a result, they would, hopefully, receive more orders from local customers. If this occurs, as their businesses grew, they would add jobs.

On the flip side, domestic manufacturers that rely on imported raw materials or parts would see higher costs. It would cut into their profitability. They would either have to raise prices, slash jobs, or both. 

Many U.S. industries were affected soon after Trump announced the tariffs. Mid-Continent Nail in Missouri announced layoffs because steel prices are now too high for them to remain profitable. Harley-Davidson announced it would move some production abroad to avoid retaliatory EU tariffs. The Maine lobster industry will suffer from Chinese retaliatory tariffs on U.S. seafood. California cheese makers are already seeing their markets in China and Mexico disappear due to retaliatory tariffs. Wisconsin auto parts manufacturers and the U.S. bourbon industry are other industries being punished.

Over time, trade wars weaken the protected domestic industry. Without foreign competition, companies within the industry don’t need to innovate. Eventually, the local product would decline in quality compared to foreign-made goods.”

Source: https://www.thebalance.com/trade-wars-definition-how-it-affects-you-4159973

It appears to this layman, that this trade war could have disastrous consequences for me, for my country, and for the targets of this war. One certainty I am confident of is that as companies find themselves having to pay more for imported materials, that increase of cost in manufacture of their product will be passed on to the purchasers of that product.  In other words, you and me.

I pray for a quick resolution of the issues involved. 

For more detailed information:

https://www.cnbc.com/2018/06/27/how-a-trade-war-impacts-you.html 

http://growthcrossings.economist.com/article/unintended-consequences-impact-trade-wars-consumer-markets/ 

https://www.independent.co.uk/news/business/analysis-and-features/trade-war-explained-tariffs-donald-trump-us-china-imports-exports-a8434626.html 

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