GM announces job cuts to offset higher steel and aluminum costs caused by Trump’s trade war

Donald Trump’s trade war keeps backfiring.

CNN: GM offers buyouts to 18,000 employees

General Motors is offering buyouts to more than a third of its white collar staff in the United States, as the company transitions to self-driving vehicles and other new technologies.

GM is also dealing with some higher costs associated with tariffs on imported steel and aluminum, which has raised its commodity costs by about $300 million in the third quarter, and could raise costs by $1 billion next year. There is also a threat that costs of auto parts could rise if the Trump administration goes ahead with plans it is weighing to put tariffs on imported vehicles and parts.

What else has Trump’s trade war been doing? Well, total U.S. exports slid 7% in the 3rd quarter, soybean exports are down 97% from a year ago, auto exports are down 56% from a year ago, auto manufacturers are moving production out of the United States, 3M reported $100 million in higher costs, Tesla warned of $50 million in higher costs, Harley Davidson reported $45 million in higher costs, Caterpillar reported $200 million in higher costs, Ford reported $1 billion in higher costs, Michigan soybean farmers have seen a 20% slide in prices in 5 months, North Dakota soybeans farmers have seen a 30% slide in prices, Wisconsin manufacturers reported $95 million in higher costs, and the United States trade deficit has increased for the 4th month in a row.

NY Times: Slumping Stock Market Enters Negative Territory for the Year

Instead of celebrating quarterly profit and sales numbers that have largely lived up to expectations, investors have zeroed in on potential risks to the economic and corporate profit outlook for the coming year. Rising commodity costs tied to tariffs on imports, expectations that the Federal Reserve will keep raising interest rates, and an economic slowdown in China could all start to bite.

Investor’s Business Daily: The Trump Economy’s Lousy Week: Dow Dives, Tariffs Bite, CapEx Slows

Winning The Trade War?

Goods exports slid 7% in the third quarter, the biggest drop since early 2015, Commerce Data show. That probably reflects at least some payback from strong export growth in the second quarter, when U.S. exporters sought to get ahead of the China trade war and its tit-for-tat tariffs that started hitting in July.

ProAg: U.S. Soybean Exports to China Down 97% for the Year

The 2018-19 marketing year has gotten off to an extremely slow start for U.S. soybean exports as China sits on large domestic stockpiles and the Brazilian harvest is only a few months away, according to USDA data compiled by the American Farm Bureau Federation.

The U.S. has shipped only 7.4 million bushels of soybeans to China in the first seven weeks of the new marketing year, which began Sept. 1, data from a recent Federal Grain Inspection Service report show.

That’s a 97 percent drop from the same time period last year when the U.S. shopped 239 million bushels.

Forbes: U.S. Car Exports To China Drop 56%

Motor vehicle exports bound for China, the second-largest market after Canada, fell $599.29 million from the previous August. Unlike with soybeans and oil, where the decline was more precipitous, the 55.65% drop in August was preceded by a $296.16 million, 46.69% drop in July, and a $506.30 million, 50.32% decline in June.

NY Times: Trump’s Trade War May Create New Auto Jobs. In China.

BMW, the largest exporter of cars from the United States, has already moved some production of its popular X3 sport utility vehicle — once made exclusively in Spartanburg, S.C. — to a factory in Shenyang, China. Analysts expect the German automaker to also move some production of its larger X5.

By shifting production, BMW can avoid China’s punitive tariffs on cars imported from the United States, which have ensnared foreign automakers with large American factories. It could also insulate BMW if Mr. Trump follows through on his threat to tax imported vehicles and parts, a move that would further increase the cost of building cars in the United States and selling them abroad.

Star Tribune: 3M shares drop sharply after Q3 profit misses expectations

During Tuesday’s conference call, Roman and Nick Gangestad, chief financial officer, also said the effect of trade tariffs, and what is expected to be slower growth in China, also affected the quarter.

Gangestad said that future trade “tariff headwinds” are expected to escalate 3M’s costs by about $100 million in 2019.

Business Insider: Tesla said it expects tariffs on Chinese parts to cost around $50 million during Q4

Tesla said on Wednesday in its third-quarter earnings letter that it expects tariffs on parts made in China to cost around $50 million during the fourth quarter of this year.

CNBC: Tariffs will cost Caterpillar $200 million, so it’s going to raise its prices

Big exporter Caterpillar gave a figure on how much tariffs will affect its bottom line.

In its second-quarter earnings statement, the Dow Jones Industrial Average member said Monday it expects recently imposed tariffs to shave off $100 million to $200 million from its bottom line in the second half of the year. The company also raised its full-year earnings forecast despite the increased costs.

Caterpillar’s announcement comes after the U.S. slapped tariffs on $34 billion of Chinese goods earlier this month. The U.S. has also implemented tariffs on steel and aluminum imports from Mexico, Canada and the European Union. They have retaliated against those levies with tariffs of their own.

Reuters: Trump metals tariffs will cost Ford $1 billion in profits, CEO says

Steel and aluminum tariffs imposed by the Trump administration have cost Ford Motor Co (F.N) about $1 billion in profits, its chief executive officer said on Wednesday, while Honda Motor Co (7267.T) said higher steel prices have brought “hundreds of millions of dollars” in new costs.

“From Ford’s perspective the metals tariffs took about $1 billion in profit from us,” CEO James Hackett said at a Bloomberg conference in New York, “The irony of which is we source most of that in the U.S. today anyway. If it goes on any longer, it will do more damage.”

Mlive: Michigan farmers say Chinese tariff hits state’s soybean crop

Keenan, who helps run his 114-year-old family farm, Keenan Farms, said that farmers are already seeing lower soybean prices.

The value of contracts for soybeans on May 29 was $10.60, which has declined to $8.48 as of 9 a.m. on Thursday, Oct. 25 – a 20 percent decline.

In April, North Dakota GOP Senate candidate called trade worries “hysteria” – North Dakota soybean prices have plummeted since then

The commodity has fallen about 17 percent in price on the decline in the soybean futures market since China announced the tariff. But because Midwest states are more diversified in terms of customers, the basis widening tends to be less pronounced than in the Dakotas.

On Monday, Arthur Cos in the Arthur, North Dakota, area had a cash bid for soybeans of $7.03 per bushel, according to data on AgWeb.com. That was 89 cents per bushel below, or about 11 percent less than, what Ramsey Grain in Rochester, Illinois, was paying for the commodity.

All told, for North Dakota, Trump’s trade war has caused soybean prices to plummet almost 30%.

JSOnline: Wisconsin companies step up complaints on tariffs and trade wars at town hall meeting

Trump administration tariffs cost Wisconsin companies an extra $54 million this summer. Products subject to Trump administration actions currently in place faced $58 million in tariffs from June through August, compared with just $3.8 million the previous year.

CNBC: US trade deficit in goods widens for fourth straight month, hits $76 billion

The U.S. trade deficit in goods widened for a fourth straight month in September, bringing it to $76 billion, according to the Census Bureau.

The data showed exports grew by 1.8 percent from August to September, from $138.4 billion to $140.95 billion. Imports, meanwhile, expanded by 1.5 percent to $217 billion from $213.9 billion on a month-over-month basis.

Wholesale inventories grew by 0.3 percent to $644.1 billion in September from $642 billion in August.

The overall trade deficit’s growth comes as the U.S. and China engage in a trade war. Both countries have slapped tariffs on billions of dollars worth of each other’s goods this year. The Trump administration is using tariffs to try to narrow its deficit between imports and exports.

Donald Trump has already put together a $12 billion taxpayer bailout for farmers hurt by his moronic trade war. What’s next? A bailout for 3M, Tesla, Caterpillar, BMW, Ford, GM, and every small to midsize manufacturing company in states like Wisconsin? Gonna take many, many more billions of taxpayer money to do that. All because Donald Trump has no idea how trade even works, and the Republicans who control Congress, who previously said the tariffs were a horrible idea, do not have the backbone to stand up to Donald Trump.

Trump’s trade war is not working – Yet, GOP Congressional leaders who once opposed his trade war continue to do nothing to stop it

Here’s the thing, though, Donald Trump has no idea what he is talking about when it comes to trade. To quote James Mattis, he has a fifth grader’s understanding of things.

The United States has a trade deficit because the United States is the wealthiest country in the world. We use that wealth to buy stuff. The trade deficit exists because we buy more than other countries buy. Bringing down the trade deficit would be an indication that we are getting less wealthy with relation to the rest of the world. To further betray his complete lack of knowledge about a subject he has made a defining issue of his Presidency is this completely ridiculous statement from that same rally:

You know, if I get the trade deficits down they never tell you this, if I get the trade deficits down, bring them down. If I bring the trade deficits down, we could pick up three and four points in GDP. Nobody says that, nobody says that.

Do you know why nobody says that? Because it is not remotely true. Here is what people who actually know about economics say:

AEI: The ‘mercantilist-in-chief’ still suffers from upside-down thinking about imports, exports, and trade deficits (‘stuff surpluses’)

As Milton Friedman explained back in the 1970s (italics added):

In the international trade area, the language is almost always about how we must export, and what’s really good is an industry that produces exports, and if we buy from abroad and import, that’s bad. But surely that’s upside-down. What we send abroad, we can’t eat, we can’t wear, we can’t use for our houses. The goods and services we send abroad, are goods and services not available to us. On the other hand, the goods and services we import, they provide us with TV sets we can watch, with automobiles we can drive, with all sorts of nice things for us to use.

The gain from foreign trade is what we import. What we export is a cost of getting those imports. And the proper objective for a nation as Adam Smith put it, is to arrange things so that we get as large a volume of imports as possible, for as small a volume of exports as possible.

This carries over to the terminology we use. When people talk about a favorable balance of trade, what is that term taken to mean? It’s taken to mean that we export more than we import. But from the point of our well-being, that’s an unfavorable balance. That means we’re sending out more goods and getting fewer in. Each of you in your private household would know better than that. You don’t regard it as a favorable balance when you have to send out more goods to get fewer coming in. It’s favorable when you can get more by sending out less.

Trade deficits are not a bad thing. They simply mean we are getting more stuff by sending out less stuff. They are a sign of a wealthy country.

The other ridiculous aspect of all of this is that Donald Trump’s proposed solution to the non-existent problem of trade deficits is a trade war that will do nothing about the trade deficit. All it will do is reduce the amount of overall trade. We may import less, but we will also export less. In fact, so far, Trump’s trade war has only increased the trade deficit he keeps griping about.

Time: Things Are Not Going to Plan in Trump’s U.S. Trade Deficit Wars

New data out Wednesday showed the U.S. trade deficit in July widening at its fastest rate since 2015 as monthly deficits with China and the European Union both hit new records. In the year so far, the U.S.’s overall goods and services deficit is up by $22 billion, or 7 percent, versus the same period last year.

So, Trump’s trade war is actually widening the trade deficit he wants to decrease (for no good reason). And, back to his comment about increasing GDP: it is set to do the exact opposite. Because the one thing that trade wars do is reduce the amount of overall trade, which is not good for any economy involved in the trade war.

Andrew Hunter of Capital Economics said the trade data released on Wednesday indicated that after boosting GDP figures in the second quarter, net exports would subtract from it in the second half. In the third quarter, he predicted, net trade would subtract more than a percentage point from GDP growth while the recent surge in the dollar suggested that trade could be a “modest drag” in the fourth quarter too, even before the impact of tariffs starts to take hold.

Not only is the trade war going to reduce GDP, it is also causing inflation.

Bloomberg: Inflation Is Coming Thanks to Trump’s Tariffs

Steel prices are up more than 40 percent since Trump said on March 1 that he planned to impose a 25 percent tariff on steel imports and a 10 percent levy on aluminum. That is a significant increase that has yet to be passed through to consumers. But it will, and when that happens, potential risks to both the stock market and the economy increase dramatically.

As steel prices rise, it makes major appliances, machinery, trucks and cars, and construction more expensive. Guess what that does to the price of eggs, bacon, milk, orange juice and coffee? Aluminum is in everything from transportation to packaging to cooking utensils. When steel and aluminum prices rise, so too do the prices of refrigerators, dishwashers, stoves — and the cost of your lunch.

And that inflation is eroding any minimal gains that are being made in wages.

Chicago Tribune: Inflation hits 6-year high, wiping out wage gains for the average American

Prices rose at their highest clip since 2012 over the past year, the Labor Department reported Thursday.

The 2.9 percent inflation for the 12-month period ending in June is a sign of a growing economy, but it’s also a painful development for workers, whose tepid wage gains have failed to keep pace with the rising prices.

The cost of food, shelter and gas have all risen significantly in the past year. Gas skyrocketed more than 24 percent, rent for a primary residence jumped 3.6 percent and meals at restaurants and cafeterias rose 2.8 percent.

Prices have risen roughly at the same rate as wages, erasing any gains workers may have hoped to realize via bigger paychecks.

Not to mention the damage the trade war has already done to farmers, necessitating an expensive taxpayer bailout.

Al Jazeera: Trump to give $12bn bailout for farmers hurt by trade war

The Trump Administration has announced a multi-billion dollar aid package for US farmers.

It is being seen as an admission that Americans are being hurt by the president’s protectionist policies.

What’s even more exasperating about all of this is that GOP leadership knew how stupid Trump’s trade war idea was to begin with.

Here’s Kevin McCarthy, Republican House Majority Leader, speaking in December of 2016 about the subject:

Business Insider: Top Republican says he won’t back Trump’s plan for huge tariffs

“I don’t want to get into some type of trade war,” McCarthy said.

“I think there are other ways to achieve what the president-elect is talking about,” McCarthy said, “but the only way you can do any of this is you’ve got to do tax reform. And that’s why I think that will be a cornerstone of what we do.”

“Tax cuts and deregulation will make the American economy great again, but tariffs and trade wars will make it tank again,” he continued.

Here’s Paul Ryan, in March of 2018:

WCPO: Ryan, other conservatives fear trade war from Trump’s tariffs

“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan.”

Here’s Mitch McConnell, on June 3, 2018:

WCPO: McConnell warns that Trump’s tariffs could hurt Kentucky

“I don’t think anything good will come out of a trade war,” McConnell said during an appearance Friday before Greater Louisville Inc., the metro chamber of commerce. “And I hope we pull back from the brink here. Because these tariffs will not be good for the economy.”

So, these guys know the truth about Trump’s trade war. Why aren’t they doing anything about it? The constitution gave Congress the power over tariffs, not the President.

Thenewamerican.com: Method Matters: Was Trump’s Institution of Tariffs Unconstitutional?

Now, on tariffs the Constitution is crystal clear, stating, “The Congress shall have the Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.”

Congress is a co-equal branch of government. They should not be allowing a moron President to be usurping one of their duties in a manner that is detrimental to the country.

Yet, here is Mitch McConnell, on June 6, 2018, 3 days after he said tariffs will not be good for the economy, shooting down an attempt to reign in our moron President:

The Hill: McConnell: Bill reining in Trump’s tariff powers ‘an exercise in futility’

Senate Majority Leader Mitch McConnell (R-Ky.) signaled on Wednesday that he will not support legislation reining in President Trump‘s tariff authority and that the president will not sign such a bill.

“Yeah, I don’t think we need to be trying to rein in the president through legislation. No. 1, it would be an exercise in futility because he wouldn’t sign it,” McConnell told SiriusXM when asked if he opposed the bill. 

McConnell was asked about legislation, spearheaded by GOP Sen. Bob Corker (Tenn.), that would require Trump to get congressional approval for any tariffs invoked under the national security sections of the trade law, known as Section 232. 
What good is GOP leadership? They simply refuse to stand up to Donald Trump.

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