Trump and Trade: Extreme Tactics in Search of a Point

https://www.nytimes.com/2017/01/31/business/economy/trump-and-trade-extreme-tactics-in-search-of-a-point.html?ref=economy

This article by Eduardo Porter tries to explain the possible reasoning behind and consequences of the President’s proposed tariff increase on Chinese imports into the United States.  President Trump has promised to increase tariffs on Chinese imports to a whopping 45%.  This not only upsets market equilibrium, but makes a potential enemy out of the world’s second-largest economy.  This will result in potentially destructive outcomes for both the world’s economy and security.  The so-called “rise” of China has been predictably peaceful, and many political scientists and economists find comfort in the deep economic interdependence between the United States and China as a preventative measure against actual war.  However, The author cites acclaimed political scientist John Mearsheimer who argues that the increase in tariffs, in addition to other provocative actions and policies is actually raising “...the risk of an actual shooting war…” (Porter).  Aside from the probable economic punishments, the consequences of a potentially nuclear war with China would be catastrophic, and Eduardo Porter suggests that the United States is inching closer and closer.  The article goes on to cite the renegotiation of NAFTA, WTO agreements, and the new immigrant ban as examples of the President altering alliances and agreements that have been in place since the end of WWII.  At the end of the day, President Trump is threatening to undermine economic and political rules of the game, both formal and informal.  Who knows what the fallout will be?

Eduardo Porter goes on to explain that President Trump sees economic relations as a “zero-sum competition” in which exporters win over importers and mutually beneficial policies do not exist. Douglas Irwin, a trade historian at Dartmouth College, notes that “The trade deficit is the number that determines for him who wins and loses” (Porter).  However, the author explains that the President’s macroeconomic strategy revolves around increased government spending combined with high interest rates is, in fact, going to strengthen the dollar and is therefore in opposition to his new trade policies.  One thing is for sure, President Trump is not acting with traditional rationality when it comes to economic policy or foreign relations.

How stricter rules for brokers will affect retirement savers?

This article mainly introduced that the "Fiduciary Rule", which will provide a stricter standard for brokers when they are recommending the "suitable" investment for their retirement savers, was delayed by Trump for 90 days for review. 
As mentioned in the article, too often, brokers tend to choose investment based on their own financial interests in stead of the clients. They tend to persuade the retirement savers to put their asset into variable annuities, real estate investment trusts or other investments that can be risky or otherwise not in the client’s best interest. The Obama administration said this rule would be able to save about $4 billion annually. 
On the contrast, people who against the rule said that the limiting choices would hurt the investors and the stricter requirements could limit many people’s access to financial guidance and retirement planning and their choice of investment products. 

https://www.washingtonpost.com/politics/federal_government/how-stricter-rules-for-brokers-will-affect-retirement-savers/2017/02/03/bfefc2a2-ea6d-11e6-903d-9b11ed7d8d2a_story.html?utm_term=.ccdd195d777a

Is the U.S. Economy Too Dynamic, or Not Dynamic Enough?

This article takes an interesting take on the divide between the promising economic data showing the U.S. to be in good spot and the public opinion that states the opposite. In polls, most people answered that the country is on the wrong track and saw the economy as getting worse. Since the election of Trump those polls have switched. The question is, what is so wrong in people's economic lives to make them see the economy so poorly despite the promising statistics that have come out. The author provides some possible explanations to answer this. Possibly, the economy is too volatile with the rise of globalization and automation. High levels of inequality mean that many people are not feeling the effects of growth. Technological growth often focuses on private profit rather than on social costs.
Another explanation provided by The Economic Innovation Group, asserts that maybe the economy is not dynamic enough. The job market is less fluid and the creation of new companies has become concentrated into only a couple of regions in the country. Whatever the cause of this separation in statistics and opinion, one thing stick out- the data is not representative of the experiences of many Americans.

https://www.nytimes.com/2017/02/04/upshot/is-the-us-economy-too-dynamic-or-not-dynamic-enough.html?ref=economy

Iran Sanctions May Affect Crucial Deal for the US as well as Thousands of Jobs Lost for Americans

After Iran's test missile launch last week, Donald Trump has been an advocate to impose further sanctions on the country which could be detrimental for the $8bi deal to sell 80 Boeing jets to Iran Air settled during the Obama administration.

In 2015, the P5+1 (the group of world powers representing the permanent members of the United Nations Security Council - US, UK, Russia, France, and China, plus Germany) together with the European Union, came into agreement with the Republic of Iran to craft a nuclear deal plan (the Iran Nuclear Deal) aiming to have the Islamic nation "redesign, convert, and reduce its nuclear facilities [...] in order to lift all nuclear-related economical sanctions [...]."

Due to the agreement, however, Boeing was able to go through with the implementation of the accord. It has not been secured, but details had been sorted out and it was only a matter of time. Nevertheless, things might derail under the order of U.S.'s 45th president. Donald Trump has expressed severe criticism over the Iran nuclear deal and his latest "feat" regarding the immigration travel ban imposed on seven Muslim-majority countries - Iran being one of them - could be a good enough reason for the middle-eastern nation to cancel the arrangement. If not enough, after last week's nuclear tests, the president-elect is willing to impose further sanctions on the country, which can complicate the performance of the transaction. These aren't a definite formula for failure in regards to the Boeing deal, but Iran will be faced with more motivations to not go through with it.

In turn, this would mean a significant loss for the US manufacturing jobs; Boeing and its main suppliers, GE and UTX, are "major US employers". The aerospace company has said, at the time the $8bi deal was proposed, that it would lead to 100,000 employments given the order size. Even though the association is heavily relied upon and that new purchases can come about regularly at any point in time, it has proposed a "trimming" of jobs in 2017 due to fierce competition from their main rival, Airbus. and a drop in orders.

The European company, Airbus, has a similar deal with Iran, projecting a sale of $10bi for 100 Airbus jets to be sent to the country. This arrangement could also be hurt if Trump proceeds with these new sanctions because Airbus relies on mostly US manufactured parts - meaning US's approval is required for the sale.

In conclusion, this decision will create a snowball effect: further imposed sanctions will demotivate Iran on going through with the deal, it will increase their difficulties in utilizing western banks to finance the purchase, European Airbus will rely less on American manufactured parts, and all of this would lead to a harmful impact on the manufacturing jobs of people who rely on these transactions and even more on these companies.


http://money.cnn.com/2017/02/03/news/companies/trump-iran-boeing-sale/index.html?iid=Lead

https://en.wikipedia.org/wiki/Iran_nuclear_deal_framework

Trump's Economic Plan for America

       With the election of Donald Trump over and the impending approval of new cabinet members, it's interesting to note that, particularly within the realm of economic policy, there exists significant uncertainty moving forward. Specifically, the economic team that Trump is assembling would consist of both free-trade advocates like Steve Mnuchin (Secretary of the Treasury) and Gary Cohen (head of the National Economic Council and would-be Chief Economic Advisor), but also economic nationalists such as Peter Navarro (head of the National Trade Council) and Wilbur Ross (Secretary of Commerce.) As a former member of Goldman Sachs, Mnuchin will be tasked with Trump’s tax plan which is anticipated to reduce the current seven tax brackets to three, repeal the head-of-household tax filing category, reduce the corporate tax rate from 35% to 15%, and eliminate the federal estate tax. At the same time, Navarro and Ross will likely be pushing for protectionist trade measures such as tariffs on goods imported from countries like China.

           In theory, this policy division could mean an administration in which tax cuts for higher-income individuals (an estimate from the nonpartisan Tax Policy Center indicates that the top 1 percent would get about half of the benefits of the proposed tax cuts with a millionaire receiving an average tax cut of $317,000) are combined with protectionist trade policies that pass on higher prices to everyday consumers. Though a reduced corporate tax rate could lead to significant economic growth as some companies move their operations back to the U.S. and others use their newfound tax benefits to foster research/development as well as hire new workers, it’s also possible they would simply hold onto their earnings rewarding excess profits to their shareholders. Moving forward what do you think the economic policy balance will be between free-trade and protectionism in the coming years? Will Trump’s economic policies help the “forgotten men and women of this country” as he was fond of saying on the campaign trail?

http://www.npr.org/2016/11/13/501739277/who-benefits-from-donald-trumps-tax-plan

Obama on protests: American values are at stake

The policies that President Trump recently enforced on immigration has created widespread debate and protests across the nation. Many popular figures have spoken, but none more so than former President Barack Obama.  

Obama confirmed in his farewell address that he refused to remain silent on topics he felt strongly about and immigration being one of the topics the former president championed in his last days in office. He said on countless occasions that we cannot give into fear and create widespread hate across the nations against those of a particular race or religion affiliation. 

Former President Barack Obama indicated that he is not going to just fade away or stay silent even though he’s no longer in the Oval Office. His office released a statement Monday praising anti-Trump protesters and saying that Obama “fundamentally disagrees” with Trump’s executive order on immigration and refugees.

Do you think Obama should follow former presidents and remain silent on presidential policies? Could his criticism be seen as undermining President Trump in any way?  

Pressure From Trump May Delay a Factory’s Exit, but It Won’t Stop It

This article discusses how President Trump's policy threats to manufacturing firms who plan to relocate some of their factories overseas affect the economy both short-term and long-term. Trump's policy might appear to be working at first; since it makes some chief executives manufacturing firms decide not to put their production lines overseas to prevent the harsh judgment from President Trump. That could create and maintain more jobs, in the long run. However, as soon as President Trump leaves the White House, these firms will move their production lines to overseas if that's what it takes to maximize profit. The seemingly positive effects of President Trump's policies are temporary, which will not impact the economy fundamentally.     

If manufacturing firms cannot move their production lines overseas, that will show up on their balance sheets -- the lack of improvement in their profits. Meanwhile, producing domestically where expenses are higher, will result in higher prices for consumers. If these firms make bad decisions following President Trump's "advice", they could be sued by their shareholders. Capitalism is based on that "Invisible Hand", with many participants, moving in various directions; but in the long run, the market is what it is. I failed to recognize the benefits of Trump's policy intended to prevent manufacturing firms moving overseas.



Link to article: https://www.nytimes.com/2017/01/27/upshot/donald-trump-offshoring-factory.html?ref=business

America, China and the risk of a trade war

On the campaign trail, Mr Trump deplored China’s currency manipulation, accused it of flouting global trade rules and threatened a 45% tariff on its exports. The White House website, without naming China, promises “to use every tool at the federal government’s disposal” to end trade abuses.

However, the article also points out that ramping up tensions would risks Chinese retaliation. In 2009, when America imposed tariffs on imports of Chinese tyres, China started importing goods from other countries instead of America to fight back.

Mr Obama used to craft a multilateral trade agreement, called Trans-Pacific Partnership, to protect American workers against “unfair” competition. But Mr Trump scrapped it recently. We don't know what would happen next but as long as Mr Trump fights China on WTO rules, the world should avoid a trade war.

http://www.economist.com/news/finance-and-economics/21715656-trade-tensions-will-mount-destructive-trade-war-can-still-be

Brexit poses a threat to Ireland’s aircraft-leasing business

The Irish economy has been a source of concern for the EU since 2008 banking crisis. Though they are still struggling, they did manage to bring in significant revenue in with the enactment of low corporate tax rates (12.5%) which led lots of foreign corporations to place their headquarters in Dublin, some major ones being Facebook, Apple, etc.

This article takes a look at how Brexit might affect the Irish economy by explaining the potential impact it could have on Ireland's largest industry: aircraft finance. Ireland is a prominent hub for aircraft leasing and financing, and this industry accounted for majority (approx. 76%) of the 26% growth that Ireland saw in 2015. They are currently leasing 40% of their fleet. Ireland had always been attractive to corporations due to their low corporate tax rates (12.5%) and their proximity to London.  If the world corporate centers start moving away from London to Hong Kong or Singapore this may have an adverse effect on the aircraft finance industry. The EU has been trying to push for more leveled taxes for a while now but Britain had always been a negotiating voice in regards to Ireland and their taxing policies, and without Britain they may not be able to continue to keep such low corporate tax rates.

When Dan O'Brien, the Irish Chief Economist from the Institute of International and European Affairs came to visit last year he spoke expansively about Brexit and touched on how the Irish economy was dependent on Britain being a part of the EU. He talked about how without Britain in the EU, it will become very German dominated and given how Britain was the closest US ally, this will weaken transatlantic ties as well. The majority of Irish exports go to the US (as presented by the The Irish Times graph) and any weakening of those ties may be fatal to their economy.

Ireland will have to deal with a lot of uncertainty over the next two years and their performance will affect the EU as a whole, they will have to adapt to the changing geopolitical situations to maintain stability.

Silicon Valley Fights Back

Silicon Valley leaders are at the forefront of the "corporate resistance" to President Trump's immigration ban. As an industry that thrives on the efforts put forth by immigrants it is not surprising that they are fighting back. Tech giants, startups, and the industry's power players have pledged their support for ACLU, which has filed a lawsuit against this appalling executive order. Some also took part in protests that occurred earlier at international airports across the country. Immigrants have played a key role in finding some of the American economy's most successful companies in the tech industry which include Apple, Google, eBay and many others. They did a much better job of speaking out against this muslim ban (calling it like it really is) as opposed to key players in other industries. Companies such as Apple and Google have offered legal aid to their employees that have been affected by this order. Airbnb has offered to house refugees and immigrants for free while Lyft founders have pledged to donate $1 million to ACLU in their efforts to revoke this ban.

Immigrants make up the tech industry's backbone. Elon Musk and Travis Kalanick have said that they would voice industry concerns to Trump's business advisory council. However, I agree that it will not be enough to sway Washington's stance on the ban. Immigrants have contributed to the American economy and that is a fact many in favor of the ban refuse to acknowledge. They make approximately 18% of the labor force and many are business owners. Their share of small businesses is higher than U.S born workers.

http://www.cnbc.com/2017/01/10/silicon-valley-fighting-trump-travel-ban.html

The Multinational Company is in Trouble

The rise of multinational corporations in the 1990’s created a beneficial system that many less developed countries flourished on. Multinational corporations were giving money to countries in exchange for cheap labor and low costs. Trade boomed and consumer choice of products became the norm. Companies such as McDonalds, Ford and IBM led the way to a global society where MNC’s do about 50% of trade.

President Trump has recently announced through executive orders, higher tariffs and the abolition of trade agreements in favor of a more protectionist stance. MNC’s have earned a reputation of cutting corners to increase profits and are not favorable by the new administration. However, this is not necessarily the case within the last 5 years. According to the article, profits have decreased by 25% and returns on capital are the lowest in 20 years which, is a significant decrease. 

Consumers have long benefited from price and consumer choice of multinational corporations. With the protectionist stance taken by the new Trump Administration, there is going to be even more profound effects on the market and multinational corporation profits further. The article believes that with the protectionist stance taken, there will be fewer firms in competition, higher prices and slow innovation which, would hurt not only the firm but also the consumer. 



http://www.economist.com/news/leaders/21715660-global-firms-are-surprisingly-vulnerable-attack-multinational-company-trouble

Ukraine's Economy: The Other War

Ukraine's conflict with Russia has continued on since Russia annexed Crimea in 2014. During the 2013 protests in Independence Square, then-President Victor Yanukovych received a $3 billion bond from Russia to deal with the pro-EU protesters' demands. Even after Russia and Ukraine's conflict, the money was never paid back.

The bond was issued under English law, and Russia has taken legal action against Ukraine in London courts. Issues facing Ukraine's repayment of the bond has come from Russian aggression and resistance. In 2015, Russia refused to partake in a group of creditors' attempt to restructure the debt; the annexation of Crimea and war in the Donbas region has made repayment to Russia extremely difficult; furthermore, Russia has put sanctions on Ukrainian importation and has slowed gas supply to Ukraine. Because of these Russia actions, the GDP in Ukraine has fallen by 15%, and the hyvnia has fallen from 8:1 USD in 2013, to 25:1 USD.

On the bright side, there has a been a resurgence recently as the hyvnia has fallen, making exportation more favorable. Ukrainian citizens are viewing the recession's end, and markets are beginning to flourish (regardless of pro-Russia Trump's election).

Pressure on the hyvnia will begin again with the repayment of the bond, as well as anger Ukrainian citizens. In order to repay the bond, Ukraine will have to pay approximately $15 billion, equivalent to their current reserves of foreign exchange.

Ultimately, Russian aggression and insistence to have control over its sphere of influence in Eastern Europe comes as their power diminishes: its removal from the G8, EU sanctions causing a tank in the economy, and the United States' beginning self-reliance on gas, which is Russia's largest export, has caused gas prices to fall dramatically. With this, and a need to exert power and nationalist sentiment in Russians living outside of Russia as NATO and the EU continues to expand, it is not surprising that Russia is being seen as the bad guy- this has always been their foreign policy.

As for Ukraine, the stretch of the looming debts that need to be repayed is daunting. The market for agriculture was supposed to be expanded by foreign investment, but has fallen through. Per capita GDP is one-tenth of the United States', and like many other countries under the sphere of influence of Russia, the 2019 election will have a loud populist voice, following the worldwide trend of embedded liberalism's demise.

"Ukraine's Economy: The Other War." The Economist. The Economist Newspaper, 21 January 2017.

IMF Warns Eurogroup Loan Measures Not Enough for Greek Debt

It's been a year and a half since the Greek debt crisis was making headline international news. However, the EU and other international organizations' difficulty with administering aid has not gone away. Economic forecasters have estimated that the debt will rise as high as 275 percent of the Greek GDP by 2060. On February 6th the IMF will meet and discuss the issue facing the Greek economy and how laws that the Greek government can implement might make creditors more comfortable with taking on this burden. The IMF and creditors to Greece suggest that the country should implement austerity measures. However, this has not been received well by Greek officials.What policies could Greece put forth to make the country more welcoming to creditors?

It seems as though austerity measures in Greece might help make Greek debt more sustainable in the short term, but if Greece want's to improve their stagnating economy shouldn't the government spend more? Also, if increasing taxes could be a part of these austerity measures would this make a difference if the Greek people are already struggling to pay the taxes they already have?

Taxing the poor: Making protectionism unpopular again

This article discusses the growing popularity in tariffs. Originally, these tariffs were considered stomach taxes because tariffs affected imported goods that made products like bread. These tariffs increased the price; the rich didn’t feel this price as significantly as the poor thus dubbing these tariffs as poor tax or “stomach tax”. Taxing products coming in, is protectionist. It protects products made within the US, but taxes what once were cheaper foreign made goods. This article argues that protectionist policies will not help rebuild American manufacturing jobs; in fact the protectionist policies will greatly affect consumers. Partially, because consumers are not aware of how many purchased goods are imported. The impact of tariffs on just China and Mexico “would hit poor Americans the hardest: A tariff of 45% on imports from China and Japan and 35% on Mexican imports would cost US households in the lowest 10% of income up to 18% of their (mean) after-tax income or $4,670 over 5 years.”  A worldwide tariff would “[cost] households in the lowest decile 53% of their annual income, while it would cost households in the highest decile 7% of their incomes”. Protectionist policies have a much wider affect than previously thought. This article does not even cover the potential affect our protectionist policies would have on the American international trade relationships. It seems unlikely that normal trading partners won’t create their own tariffs against American exported goods, creating a more negative impact on US manufacturing. 

Link: http://www.economist.com/blogs/buttonwood/2017/01/taxing-poor

Trump executive order: White House stands firm over travel ban

Throughout his campaign Trump mentioned a temporary ban on Muslims entering the U.S. He signed an executive order on Friday to ban people from 7 countries (Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen). Trump's administration said that the seven countries were chosen because they had been identified by Congress and the Obama administration as the most likely to have terrorists.

Even though there have been many court rulings throughout the country against this executive order, expect most Republicans and the White House to continue to support the 120 day ban.

In response to the executive order there have been many demonstrations at airports across the country and there will most likely continue to be more including one in front of the White House potentially. A lot of criticism of the ban has come from outside the United States as well. It will be interesting to see other nations and people with ties back to those 7 countries react to it.

How much the border wall will really cost

This article is interesting to me regarding the estimated $10 billion dollar operation to build a will to slow immigration from Mexico.  It stuck out to me that the article mentions that the funding going towards the construction of the wall, could easily construct a road that could span from Seattle to Miami.  This stuck out to me because of Trump's campaign for the construction of roads and highways that he has made so clear.  So I am left questioning where all the funding will come from to fulfill both promises of construction.  I am eager to watch how soon this plan is put into action and how it will effect the American people in the future.

http://money.cnn.com/2017/01/25/news/economy/trump-mexico-border-wall-cost/index.html?iid=hp-stack-dom