“When President Donald Trump imposed 10 percent tariffs on imported aluminum in March 2018, it was (predictably) American aluminum-consuming companies that suffered the most.
Companies like Whirlpool Corp., for example. The appliance manufacturer—which had previously been a cheerleader for Trump’s tariffs on imported washing machines—saw its sales and stock prices tumble in the months after Trump’s aluminum tariffs took effect, as the import taxes added to the company’s input costs. It takes a lot of aluminum to build a washing machine, after all.”
“Those tariffs had been lifted in 2019 as Trump sought to negotiate the United States–Mexico–Canada Agreement (USMCA), which officially took effect last month. But with the new trade deal in place, Trump has quickly returned to his old tricks. “Canada was taking advantage of us, as usual,” he said Thursday during a largely off-the-cuff speech at the plant. The new tariffs are slated to take effect on August 16.
Ostensibly, the justification for reimposing these tariffs is the claim that imports have increased dramatically in recent months. In reality, that’s a bunch of nonsense. The Aluminium Association says the claims of a surge in aluminum imports “are grossly exaggerated.” In fact, aluminum imports from Canada are below 2017 levels—the last year before Trump’s first round of tariffs took effect.
And even if aluminum imports were increasing, that’s not something to get upset about. The United States literally does not produce enough aluminum to meet its domestic needs, so imports are essential for supporting the 97 percent of American aluminum industry jobs that are in downstream production. And when more aluminum—or anything else—is traded back and forth between the United States and Canada, both countries benefit from the transaction. That’s how trade works.
It’s not exactly clear what Trump hopes the reinstated tariffs will accomplish, but the one thing that should be obvious is that American aluminum-consuming industries will once again be punished by the president’s trade policies.”
“According to the U.S. Bureau of Labor Statistics and McKinsey & Co., 70–80 percent of independent contractors prefer contract work to a traditional job and do not feel financially strapped. I fall into that category—but the crusaders behind laws such as A.B. 5 treat people like me as if we are invisible. Here in New Jersey, a July 2019 report from Gov. Phil Murphy’s Task Force on Misclassification was written by a group that included no independent contractors and drew on work by the National Employment Law Project, a think tank funded by the AFL-CIO and other unions. The report acknowledged that misclassification of workers as independent contractors was most prevalent in low-wage, labor-intensive sectors such as janitorial services. But the policy changes it recommended applied to independent contractors across the board.”
“The Coronavirus Aid, Relief, and Economic Stability Act, or CARES Act, signed into law by President Trump in March, was an unprecedented act of fiscal policy by the US government. It entailed measures that would have once seemed unthinkable, including an extra $600 in unemployment benefits, $1,200 stimulus checks to most Americans, and billions of dollars in forgivable loans to small businesses. As Vox’s Dylan Matthews recently laid out, the Covid-19 response was larger than the stimulus policies put in place in response to the Great Recession and, from a fiscal standpoint, bigger than the New Deal.
It made a difference. Personal incomes actually went up in April thanks in large part to unemployment insurance and stimulus checks. Poverty rates didn’t increase.”
“The stimulus bill had with it an underlying assumption that the economy would improve by the summer, and that was predicated on the country getting its outbreak under control. But the country didn’t — a series of public policy and leadership failures at the federal, state, and local levels have allowed the virus to thrive.”
“The annual budget deficit—the gap between government spending and tax revenues—would run about $900 billion in 2019, and it would push beyond $1 trillion every year starting in 2022. Debt as a percentage of the country’s total economy would rise steadily, reaching 93 percent of GDP by 2029, the highest level since the years directly following World War II.
Automatic spending on major entitlements would keep government spending high and make reductions difficult. Interest payments on the nation’s rising debt would become one of the country’s largest spending categories. The persistently high levels of debt and deficits, meanwhile, would serve as a drag on economic growth. Overall debt levels were on track to reach the highest levels in the nation’s history.
All of this was reason to worry. “Such high and rising debt would have significant negative consequences, both for the economy and for the federal budget,” the report warned, with reduced national productivity and total wages plus an increased likelihood of a fiscal crisis. In an emergency scenario, policymakers might be more constrained from responding in the most effective way. Debt and deficits were a modest burden on the economy in good times. And the higher they ran, the more economic risk accumulated.
Again, this was the outlook in 2019, when the unemployment rate was below five percent, when the deficit was projected to run about $900 billion over a 12-month span, when daily viral death tolls and case-count heat maps weren’t posted on major news sites like especially grisly weather reports.
In June of this year, the federal deficit was $864 billion.”
“the United States is in uncharted waters in terms of both public finances and their effect on the economy. And no one really knows where we’ll go from here.”
“The controversy surrounding the PPP, which supports businesses with 500 employees or fewer, has a lot to do with a disconnect between the program’s design and how Americans think about business. The real goal of the PPP was to keep American workers on payroll, not to simply keep small businesses going. And so the majority of the money was disbursed to businesses with more employees, rather than to tiny ones with small staffs. That’s why a program widely perceived as being meant to boost the United States’ most vulnerable small businesses ended up prioritizing businesses that aren’t actually that small.”
“Decades of rising debt and deficits, even under thriving economic scenarios where persistently high deficit levels are unjustified, have left lawmakers across the aisle less willing or able to respond, exactly as budget-watchers have predicted. The debt is not just a drag on the economy. It’s a burden on crisis response, a limitation on the government’s ability to take action in a time of need.”
“When the Congressional Budget Office (CBO) examined the nation’s long-term fiscal state last year, it offered this dour assessment: Federal debt levels were on track to reach their highest levels since shortly after World War II. On the current trajectory, “growing budget deficits would boost federal debt drastically over the next 30 years,” pushing debt to levels that were “the highest in the nation’s history by far.” Interest payments were set to spike, tripling over the next several decades, and exceeding the total amount of all discretionary spending. Over time, debt service would essentially become its own massive federal program.”
“What the nonpartisan congressional budget analysts were saying, in their own carefully antiseptic language, was that even if things went pretty well for the economy, the continued growth of federal debt was going to be a big problem. A crisis was brewing, perhaps not immediately, but in the long term.
You may have noticed: Things have not gone well.
As COVID-19 spreads, the American economy is in the midst of the largest freefall in at least a generation, perhaps the most devastating since the Great Depression. Joblessness is at record highs, and financial analysts are predicting that the economy will end up shrinking by as much as 40 percent during the second quarter this year. A sharp drop in health care spending, as people delay elective surgeries and other non-emergency care, has alone managed to trim several points from the gross domestic product. No one has any clear sense of how or when this will end.
As the economy has tanked, Congress has responded with a series of aid packages totaling nearly $3 trillion, all of which have been deficit-financed. This year’s budget deficit is expected to come in somewhere around $4 trillion, nearly the size of last year’s entire federal budget. In April, the U.S. posted its highest monthly budget deficit ever, at $737.9 billion. In 2016, the final year of Barack Obama’s presidency, the annual deficit was $585 billion. In a single 30 day period, the U.S. government ran a bigger budget deficit than any one year outside of the Great Recession and its aftermath.
And this year isn’t over”
“there is at least a case to be made that this crisis, which is different in both scale and kind from previous economic upheavals, is one that actually justifies some amount of emergency deficit spending, if not the particular bills that Congress has passed: When governments are forcing businesses to close in response to an unforeseeable exogenous event, as well as forcing individuals to stay home from work, some form of recompense is probably justified. It is notable that the Committee for a Responsible Federal Budget, one of the organizations most single-mindedly focused on national debt reduction, has backed deficit spending in this instance.”
“the relief effort is running up against legislative skepticism—a political constraint imposed by the high debt and deficits that were already locked in before the crisis began.”
“the states that have reopened have seen anemic economic recoveries at best.
Slate’s Jordan Weissman, using data from the app Open Table, notes that restaurant reservations are down as much as 92 percent from last year in those states that have allowed dining rooms to reopen.
A ranking of state jobless claims released yesterday by the personal finance website Wallethub finds that the number of people applying for unemployment is especially high in Connecticut, which had a bad COVID-19 outbreaks and a strict shutdown order, but also in Georgia and South Dakota. The former is lifting its shutdown order, and the latter never imposed one.
This matches with new research showing that economic activity declined at similar rates regardless of when states issued formal lockdown orders. Individuals, not the government, shut the economy down. They’ll also decide when, or if, it reopens.”
“if we can’t expect much of the pre-pandemic economic activity to return, that dramatically weakens the case for propping up businesses as Jayapal and Hawley want to do, or paying workers to stay jobless like the HEROES Act does. Both policies stymie markets’ ability to adjust to COVID-19 while shifting resources from those parts of the economy that can be productive during a pandemic to those that can’t. If there’s no demand for air travel, we’d be better off seeing baggage handlers shift to being warehouse workers or grocery delivery drivers. We want cooks and cashiers to move to restaurants that can figure out a way to stay profitable without dining service.
That doesn’t mean the government can’t provide relief. Even if we allow those readjustments to happen, we’ll still probably have a less productive economy for a while, and the negative effects of that will be concentrated on people who aren’t in a position to adapt. So there’s a reasonable case for cash transfers targeting the poorest Americans. But they shouldn’t be conditioned on staying at their current jobs, and—unlike unemployment benefits—they shouldn’t be conditioned on staying out of the labor force altogether.”
“Major factors in the sharp economic decline include government corruption, a horrific drought, and rampant inflation and cash shortages after the reintroduction of a Zimbabwean dollar (ZWL, colloquially called “bond”) following almost a decade under a multi-currency system.”
“The first Zimbabwean dollar originated in 1980 after the country, then called Southern Rhodesia, fought and won a guerrilla war for independence against its British colonizers. As white settlers made up 1 percent of the population but controlled the majority of arable land, former freedom fighter and new government leader Mugabe put into place a moderately successful “resettlement” program, which compensated landholders and redistributed their property to black Zimbabwean farmers. In 2000, Mugabe’s party amended the constitution to allow the legal seizure of farmland without compensation. The mismanagement of that program contributed to severe famine, according to a report by the U.K.’s Africa All-Party Parliamentary Group. The food instability in Zimbabwe today is an ongoing symptom of this.
During the global recession of 2008, the Zimbabwean dollar saw inflation hit 500 billion percent before it was abandoned in favor of the multi-currency system. In its original incarnation, Zimbabwean bill denominations reached 100 trillion—not even enough to buy a loaf of bread. (Ironically, those bills are now sold on eBay for around $40 U.S.)
“The light at the end of the tunnel in 2008–9 was dollarisation,” wrote University of Zimbabwe economist Tony Hawkins in the Zimbabwe Independent last year. “Inflation came to a shuddering halt, the economy returned to positive growth for the first time in a decade and a financial sector, ravaged by hyperinflation, recovered strongly.”
A national shortage of the U.S. dollar starting in 2015 prompted the government to mint “bond,” a substitute currency that acted as a placeholder for foreign cash, according to Al Jazeera. When bond devalued swiftly, thanks to the black market, the government attempted to integrate it into a new Zimbabwean dollar and banned most use of foreign currencies.
“De-dollarisation in 2019 has turned the clock back towards hyperinflation without achieving its basic objective of providing a viable alternative to the United States dollar, trusted by the community,””
” The quashing of political dissent has been more profuse under Mnangagwa’s government than even under the iron-fisted Mugabe, according to Roselyn Hanzi, director of the group Zimbabwe Lawyers for Human Rights. In 2019, during protests over a government-imposed fuel price hike of more than 100 percent, more than 1,000 protesters were arrested within two weeks. Some were dragged out of their homes by police after the fact, tortured, and prosecuted without legal representation. “That has never happened [on this scale], as far as I can remember,” Hanzi says. “Every other day [activists are] getting attacked by the police…brutally and arbitrarily.””
“The easiest way to win a trade war? Don’t be one of the countries involved.
When the United States slapped tariffs on steel, aluminum, and billions of dollars of Chinese imports in the summer of 2018, China and other U.S. trading partners retaliated by targeting American agricultural exports. By the time a series of tit for tat increases in tariffs by the U.S. and China came to a halt with a December 2019 partial trade agreement—one that left most of the higher tariffs in place on both sides—the average foreign tariff for American farm goods had jumped from 8.3 to 26.8 percent
As a result, U.S. farm exports suffered. Carter and Steinbach calculate that U.S. farmers lost more than $15.6 billion in trade with countries that hiked tariffs in response to the Trump administration’s trade war. Soybeans, pork products, and grains were the products most affected.
Some of those losses were offset by trade with other nations—for example, when China stopped purchasing U.S.-grown soybeans, growers had to find other buyers for their products. That was the goal of a July 2018 deal struck by President Donald Trump and European Commission President Jean-Claude Juncker that the White House touted as a vehicle for sending more American soybeans to Europe.
As Reason noted at the time, Europe’s annual consumption of soybeans was less than 25 percent of China’s (and it already had access to tariff-free imports of U.S. soybeans), so “unless Juncker and Trump plan to start jamming soybeans down European throats, foie gras-style, there’s simply no way that Europe can consume enough soybeans to make up for the loss of China as an American export market.”
“Nearly two years later, Carter and Steinbach calculate that so-called “deflected trade” in agricultural goods boosted U.S. exports by about $1.2 billion during the trade war—leaving American farms only $14 billion in the red.”
“countries that the two researchers identify as “non-retaliatory countries”—that is, places that did not hike tariffs in response to U.S. tariffs on steel, aluminum, and other goods—gained more than $13.5 billion by increasing trade to places, like China, that took steps to reduce imports of U.S. farm goods.”
“soybean farmers are worried about how the trade war might permanently reshape the global soybean trade, to the detriment of American growers.”
“In March 2018, after Trump announced his intention to hike tariffs on steel and aluminum, Peter Navarro, the director of the White House’s National Trade Council, was asked about the potential consequences of retaliation aimed at American farm exports.
“I don’t believe any country in the world is going to retaliate,” he said. “They know they’re cheating us, and we’re just trying to stand up for ourselves.”
Navarro and Trump were wrong. American farmers have lost $14 billion because of their mistake.”
“When you think of the U.S. manufacturing sector, you likely think of General Motors and U.S. Steel, faceless megaliths with armies of disciplined workers. But it’s more like Yellowstone National Park, an intricate ecosystem of small and specialized players, their fates closely intertwined. “If you look at anyone who is a node in a supply chain—a manufacturer, or sub-manufacturer, or raw materials extractor—each of those entities may be partnering with many different customers, as well as many different sub-suppliers beneath them,” says Karen Donohue, an expert on supply chains at the University of Minnesota’s Carlson School of Management. “Their solvency is potentially dependent on the weakest link in both of those networks. And that’s what makes prediction difficult.” A 2018 survey by the consultancy Deloitte found that 65 percent of more than 500 procurement leaders from 39 countries had a hazy view, at best, of their supply chains beyond their most important suppliers.”
“Professional Instruments’ primary customer is a small company in New Hampshire whose ultraprecision machine tools are crucial for manufacturing in the medical device, defense, consumer electronics, and automotive fields. “It’s almost impossible for someone to anticipate the knock-on effects of some businesses being closed down because they’re deemed nonessential, because they’re suppliers for companies that are deemed essential,” says the company’s recently retired former CEO, who requested anonymity to discuss sensitive business matters. “You build a quarter-million-dollar machine, but if you can’t get one $150 component off the shelf, you can’t put it into production.””
“Zoom out further, and the pandemic’s global nature becomes palpable. The future of the New Hampshire company is also uncertain, thanks in part to closures abroad. It has representatives in several countries (including South Korea, Japan, and Taiwan, all of which have implemented lockdown measures) and customers in many more. “Representatives might need to come from the U.S. to help install the machines,” says the former CEO. “But with global travel being affected, how are you going to get that equipment installed? You still need those people to travel. These machines don’t install themselves.” In March the company opened a training center in China, but “whether that center will be utilized for some time remains to be seen.””