What's The Deal With This Whole Trade Thing? (Pt 3)

If you're going to launch a trade missile that has the potential to create a "trade war" the best possible time to do so would be right after you've dramatically reduced the cost of doing business in the United States. This next question is so easy that even the people who theoretically teach economics will be able to understand it. Why has it been cheaper for solar panels, steel and aluminum to be produced outside of the United States? The cost of doing business of course! But over the last year cost\benefit of doing business has dramatically improved. With over 8,000 regulations eliminated and a reduction in corporate tax rates from 35% to 21% - it's exponentially better to do business in the US than just a year ago. This takes us to the risk/reward - best/worst conversation over these tariffs.   

  • What's the best case? Foreign producers of these products that want to continue to remain competitive selling into the world's top economy (US), will actually open new facilities in the United States to avoid the imposed tariffs.  

  • What's the worst case? Foreign governments respond with like tariffs and slow the sale of various goods to foreign countries by American companies.  

This is where it's important to come full circle with this story. Who benefits the most from trading with the US? Other countries, right? So, who has the most to lose? They do of course. Has anyone wondered why the solar tariffs on Asian solar hasn't been met with retaliation by China? They get that they stand to lose the most if they did. Ditto all related countries regarding steel and aluminum. In fact, what's happened in the wake of the solar tariff? You guessed it (or you heard my story on it about a month ago), the largest Chinese solar producer announced plans to spend $410 million opening a solar plant in Jacksonville, Florida employing 800 to start. So not only has the solar tariff not hurt the US. It's already providing economic benefit. There's a good chance there's more of the same on the way with the metals. 

Our trade relationships are a little like this when we're running deficits like the $566 billion deficit from last year. Thanks for doing business with us and by the way as a thank you we want to gift you Disney ($155 billion), Coca-Cola ($186 billion) & Wal-Mart ($276 billion). That's kind of dumb don't you think? So, does the President. 

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