Tariffs are not good for US domestic economy, macro strategist says | Capital Connection



maybe disaster is too strong a term but having said that economies historically have not moved towards prosperity on the back of protectionism there is ample evidence stretching back decades after decade that solidifies that particular conclusion so we've spoken for some time we being the the analysts of various banks and various commentators that ultimately the price of protectionism and higher tariffs is played by consumers it's paid by corporates and it eats into margins and it eats into disposable incomes so I'm not sure I would argue that the US economy is flirting with disaster but in in agreement with the commentator earlier tariffs are not good for the domestic economy and that's something that the Trump administration is either deliberately overlooking or it's playing its hand here in terms of you know arguing that this is a policy stance they can't reverse but it's it's not good for the domestic economy it's being paid for really by corporates and by households it can't be good for consumption going forward and certainly when you look at the impact on global confidence as well and decisions around investment the uncertainty that it creates that also translates negatively negatively into those factors as well the other reality is Trump's threats when it comes to tariffs are no longer just a negotiating tactic we're going to see those tariffs coming into effect what do you think that means for the Chinese economy Chinese equities and the yuan in the near term is this something you're looking at you know looking at this very closely because China is really bearing the brunt now in terms of a market reaction I think that we need to look at this in a more sort of holistic fashion to the extent that I do expect the next two days to be very crucial in terms of the us-china negotiation it's got the stage now where both or both China and the US have set their stall out and to reverse their stance from their current position would seem like backtracking I think the Chinese are looking very closely at the u.s. in terms of a potential market correction knowing very well how sensitive Trump is to weakness in the in the financial markets and Trump is probably betting on continued to slow down and continued concerns on the Chinese economy as the prompt does it were to push the Chinese towards some sort of negotiation so I think the next couple of days are going to be crucial as to where we springboard from here I do accept there is a strong probability that we don't get the tariffs over the next couple of days I think there will be enough negotiation and enough agreement over the next couple of days such that will ultimately get delayed again and that this has really been a tactic by Trump over the last couple of days really since the tweet on the weekend this has really been a tactic to play hardball with the Chinese once they actually sit down in Washington so I do expect this to mellow down somewhat at least I hope it does because if it doesn't then certainly Asian markets are really bearing the brunt of this when we look at how Asian currencies are moving when we look at Chinese equities what this risks again is capital outflows from Asia back towards safer Haitian havens Japan being one but also of course back towards more and more safe haven currencies more safe haven in terms of Treasuries and Bund so this risks capital outflows from the region hey everybody its Hadley gamble from our new CNBC Middle East Bureau in Abu Dhabi thanks for stopping by now to watch more you can try one of the videos that just popped up on your screen and don't forget to subscribe




Comments
  1. Trump's simplistic thinking that tariffs are easy to win. The cabal in Trump's cabinet is Peter Navarro (of dubious academic standing) with such neocon 'experts' as Michael Pillsbury, John Bolton, Bannon and the schemer of them all, Mike Pompeo planning a cabal to prevent China's rise as a superpower.
    Trump making America great is a Freudian slip revealing US declining power.
    To ignorantly claim that China pays for all the tariffs to enrich US coffer is Trump's grasp of tariffs – the US citizens pay taxes as tariffs on imports from China, without her having to fork out a single cent.
    It is blatantly disingenuous to present a metric that US exports much more than is the actual cost. When US imports, she presents a value that is the sum total of (cost of goods + freight + insurance) which is the CIF, whereas China's metric is the actual cost, that is, goods are shipped free on board (FOB). Thus we can see Trump's ignorance of trade that highly inflates US Import costs from China.
    Trump lack of bilateral trade mechanics makes him a ludicrous bumpkin.

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