US Tariff Wall

I've been thinking about the effects resulting from the US wall of tariffs, and the following are the three most important points, in my opinion.

1. Wealth Transfer

Surely the brains in the White House must realise that industries such as garment and shoe manufacturing, shipbuilding, and even mid-size earthmoving equipment manufacturing are not going to be revived by the imposition of tariffs. The simple reasoning - who will work in these revived industries?

It just isn't going to happen.

The reason behind the tariffs must be something else; so how about wealth transfer? The peasants will pay higher prices resulting from the tariffs, and the Wall Street elites will carve off greater profits for themselves and receive windfalls from tax cuts and subsidies.

2. Competitors Benefit

With the US hiding behind a wall, competitors learn to change and diversify. Many suppliers to the US will have become complacent and will have just been doing business because of past practice or habit. Now, shaken from their slumber, they'll examine and reevaluate all supply arrangements and this may mean the US gets jettisoned. This would mean exporters not even bothering to price for US markets, and when it comes to their own inputs, not even bothering to give US companies a call. Likewise, governments may rewrite regulations to effectively shut out US products.

This process will make other countries leaner, more agile and ultimately move ahead of US operators.

3. Countries Trading Amongst One Another & De-Dollarization 

BRICS and other moves will accelerate whereby countries move away from using the US dollar as the default currency used to conduct trade. China has developed a system for direct country-to-country transactions, and this will gather pace. 

If we look at Brazil, they're the world's biggest beef exporter by far. Increasingly, they'll look for other countries to supply their equipment needs while continuing to export their protein worldwide. Also, China has moved away from buying Soy from the US, instead, they now prefer Brazil, Argentina and Australia. The tariff wall incentivises cutting out the US, in both the physical trade of goods and through the payments system.

Conclusion: The US leadership appear unaware of these effects or they don't care, as their own pockets will benefit.

Troubling times ahead indeed.