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Trump Tariff Reader Responses

Written by Jason Williams
Posted March 22, 2018 at 8:00PM

After receiving mountains of replies to my article on President Trump's proposed new tariffs, I decided to tackle some of the toughest this week.

The feedback ranged from approving comments to tirades about my patriotism. But some had real merit and deserved a reply. I've tried to fit as many of them as possible in this week's article.

Jason Williams self-serving article today, 'Trump Bump Turns to Slump' got under my skin, and I believe I'm done with Wealth Daily. With all the relentless/mindless Trump bashing 24/7 day in and day out in media, I'm sick of whiny losers sharing their 'political' opinions, especially when I didn't ask for it!  Mr. Williams doesn't deserve to shine POTUS's shoes.  For the first time in our lifetime, we actually have a Pres who is willing to play hardball on trade to get America not only better deals, but to protect our virtual existence (preserving the steel industry here). Mr. Williams is obviously a globalist interested in one thing...making money at any cost. As a patriot this article offended me at his ignorance and/or arrogance. So many people connected to Wall Street these days are nothing but whores. It's a sad state, but why subject myself to more crap from people I don't respect?  Oh yes, and I know more than likely you don't even give a rat's ass, but at least I let you know why I'm done w/ your 'service'. Goodbye!

— Robert J.

Robert, I hope you’re still reading Wealth Daily. Despite what you may think, I do “give a rat’s ass” about every single one of our readers. That’s why I come into work day in and day out researching the markets and looking for ways to help each of you secure your dreams of a wealthy and comfortable retirement.

I’m a little confused by your anger at my article, however. I make a concerted effort to keep any political opinions out of my articles. As you so eloquently put it, you didn’t ask for them, so why would I share them?

In my article about President Trump’s proposed tariffs, I kept everything factual and educational. I merely explained the economic principles underlying tariffs.

As I said in the article, I’m all for helping American industry survive and prosper. But I prefer to encourage those industries to become more efficient as opposed to giving them a crutch in the form of trade restrictions like tariffs.

Consider the U.S. National Parks, sometimes called America’s greatest idea. There are signs asking patrons not to feed the animals. The National Parks Service knows that if the animals receive handouts, they’ll lose the ability to fend for themselves.

That’s exactly what protectionist policies encourage with domestic business.

And you are right. I am a globalist. Now that the world is so closely connected — socially, economically, and politically — we can’t afford not to take a global view. Even companies that only operate within our borders are affected by global policies. Even people who never travel outside the U.S. are citizens of the world.

But I am also a patriot. I stand up for the principles upon which our nation was founded. One of those was freedom to speak out against policies with which we disagree. I’m simply exercising my constitutional rights. As a fellow patriot, I would hope you’d both approve and defend me for that.

And finally, ignorance is a lack of knowledge or information. It is what leads to endless debates on politics and policy. I had hoped to shine some light on this policy and remove the shroud of ignorance from the conversation.

But I’m not arrogant enough to think I can lead the conversation. I just wanted to get it started and provide some facts to discuss.

To Jason Williams:

As is typical with most experts, they provide consequences that can occur in a perfect scenario. The only problem is that between 30-40% of the time the perfect scenario doesn't exist, so what is expected doesn't happen.

I realize that we only import 3% of the steel from China. However, I find it unusual that something as heavy as steel can be transported thousands of miles over land and sea and still be cheaper than US made steel.  Maybe a little government support is occurring??? If that is the case then the zero-base scenario that experts start with didn't exist and that becomes a negotiating point.

If Mexico and Canada had been included, that would have been a mistake because of our trade volume both directions.  However, overseas countries try to keep out US products so their industries thrive.  The US should be doing the same up to a point.  If a foreign product costs less in the US than overseas, that's dumping and should be stopped. Korean cars that are $7000 less here comes to mind.

— Jack L.

Jack! This may be the best-written and most well-informed response I got. Thanks!

Where to start? First, I’ve heard that 68% of statistics get made up on the spot. I’m guessing that’s where the “30–40% of the time” comes from.

Let’s be completely honest. When you’re using math to predict the real world, the perfect scenario practically never happens. That’s why we use several different scenarios to forecast any future economic activity.

As for the cost of Chinese steel, I can’t tell you all their expenses since I’m not involved in the Chinese steel industry. But I can tell you that workers in China get paid far less and receive far fewer benefits than American workers.

It’s one of the problems GM has always had. Before they even start producing a car, they’ve already spent thousands of dollars. That’s because of the pension and benefits plans they give current and retired workers. Chinese companies don’t have to deal with those expenses. Part of that is because their industries aren’t as old as ours, so they don’t have as many former employees in general. But another part is just the differences in our societies.

Environmental controls aren’t quite as strict in China, either. So those companies don’t have to spend as much money on that kind of compliance. And there’s OSHA — that doesn’t exist in China. Those companies don’t have to set aside cash to make sure they’re complying with American safety standards.

So, while the Chinese may be supporting that industry, it’s still possible that Chinese steelmakers are actually spending that much less to make the products.

As for dumping, well, your understanding is a tiny bit incomplete. Selling products for less in foreign markets than in domestic ones is a choice the company can make. Selling them for less than they actually cost to make is dumping.

But further to the point you make: “if they’re doing it, we should be too.” You’ll see a question my mother used to ask me when I said things like that in my next response. But the gist is that just because others are doing it doesn’t make it a good idea.

If we ever really want to see free trade across the globe, then someone must take the lead. The U.S. had no problems taking the lead promoting democracy over communism. We didn’t have a problem pushing for colonial empires to be dismantled. Why should we hesitate to take the lead on free trade, too? 

Hi Jason, unlike you I’m a far cry from an economist, however as simple as my mind is I seem to grasp that China puts tariffs on everything it imports and is one of the wealthiest nations on earth, and amazingly enough they hold the paper on most of the 21 Trillion dollars of debt we have.

— Anonymous

I appreciate both the honesty and candor of this response. I really wish you’d included your name so I could address you directly.

As for China and its tariffs, you are right. China adds many tariffs, especially on certain American products. The president cited a 25% tariff on imported cars from the U.S.

But whenever this defense of U.S. tariffs comes up, I remember something my extremely wise my mother used to ask me: “If everyone else were jumping off a bridge, would you do it, too?”

Typically, I’d come home from school and want to do something my friends were all doing — likely go to a party where there would be underage drinking. “Everyone else is going,” I’d say. “Everyone else is doing it.”

And she’d give me that typical mom response. I always had an argument, but as I got older, I understood.

I’m the only one of my close friends from high school who didn’t get a DUI or a citation for underage drinking at one of those parties.

One could say that China’s authoritarian, communist style of government has been pretty successful in fostering a growing economy. Does that mean we should scrap our republic and give communism a try? I must think you’d be appalled by that idea.

Really, what I’m saying is that just because other countries use tariffs doesn’t make them a good thing. And the best way to encourage others to drop their trade restrictions is to lead by example.

We need to ask others to “do what we do,” not just “do what we say.”

And finally, you are correct that China is a very wealthy country. And it does own a lot of U.S. government debt.

At the U.S. Treasury’s most recent tally, however, China owned a far cry from $21 trillion. The number is $1.24 trillion. That’s about 30% of the $4 trillion in U.S. debt held by foreign countries. And it’s about 10% of the total U.S. debt made up of Treasury bills, notes, and bonds.

Sir,

All of this hysteria about tariffs is overblown.  What is annoying is that you appear so eager to exploit the hysteria of the moment to sell your investment newsletter.  I understand your business strategy.  Your newsletter may very well be worth the investment, but your ad has turned me away from even trying a trial subscription.  Here is my opinion about your ad and the tariffs.

Your ad presentation, at a minimum, is grossly naive (my knew-jerk reaction upon reading it was BS!).  A long-winded lecture on Economics 101 unnecessarily belabors the obvious.  You completely ignore the real purpose of the tariffs.

We have been in a trade war for some time.  Certain other countries are cheating on fair trade agreements.  These other countries, especially communist controlled China, subsidize their industries (think state-owned industries) to be able to dump their products on our markets at below the real cost to produce them.  Their objective is to capture our markets.  The artificially cheap foreign products will not make our industries more efficient.  They will drive them out of business making us dependent on foreign sources for everything, not to mention pushing more jobs overseas resulting in more unemployment and welfare payments motivating the politicians to raise income tax rates to pay for it all.  The increased tax rates will depress our economy—that is what taxes do.  After those countries capture our markets, they will have monopolistic control for them to raise their prices.  We will ultimately be paying higher prices, and our local industries will be gone.  Is that ultimately the situation you are looking for?

From a security perspective, do you think that total dependency on foreign sources for strategic materials (say steel and aluminum) is ultimately a good idea?  Many strategic metals are mined in countries that are not friendly or are unstable.  Some countries also apply barriers to prevent our industries from competing in their markets.  In reality, those other countries need our markets more than we need theirs, hence they cheat hoping no one is paying attention.  And, previous administrations apparently have been doing just that—ignoring it all.  Trump has decided that enough is enough.  So, what if those countries try to retaliate with tariffs?  They will only hurt themselves.  There will not be a trade war as you describe it.  What we will ultimately get from these other countries is FAIR PLAY in the trade business.  Fair competition will force our industries to become more efficient, as well as theirs.  Would that not be good for everyone?

The President can apply and remove tariffs.  Tariffs can be adjusted.  Very flexible.  Trump says we can win this “trade war.”  He is right.  Dispense with the propaganda and give your readers the total story!

— Mr. C. Leslie

Mr. C. Leslie, I’ve heard that people who go by a first initial have something to hide. Just kidding — I have heard that, but I don’t believe it for a second. Thanks for your response.

First, yes, there are ads in our free e-letters. It costs money to produce all the content we offer at no cost here. To keep those emails coming and keep the lights on, we also offer paid subscriptions to premium investment and trading services. Mine, The Wealth Advisory, is one of them. But if you’ll notice, there were no additional ads for my service in the copy of last week’s article. I wasn’t trying to sell you anything. I merely hoped to shed some light on the true nature of tariffs.

But to your points about the tariffs: I noted the exact “real purpose” of the tariffs in my article. They are a tit-for-tat to get back at countries we feel are treating our exports unfairly. If they are protecting the American steel industry, then they are doing it at the expense of hundreds of other American companies that use steel in their production process.

We have not been in a trade war since before the global recession of the late 2000s. Back then, George W. Bush was president. And he hit imported steel with tariffs ranging from 8% to 30%. The European Union — one of our biggest trade partners — retaliated with tariffs of its own. And the U.S. stock market fell about 30%. That’s what happens in a trade war. We haven’t seen anything like it in this bull market. But we will if these protectionist policies continue.

And those countries you claim are “cheating” fair trade agreements are not in any with us. Our partners in NAFTA — Canada and Mexico — do not cheat us. They engage in open trade. If we were involved in the TPP (Trans-Pacific Partnership), our partners in that free trade agreement would not cheat us. But we’re not in any trade agreements with China, the country that seems to be the target of much protectionist policy. Perhaps we should be.

And, yes, other countries do support domestic industries. But again, I ask, “Just because others do something, does that make it right?” No. It doesn’t. And if we truly hope to see fair and free trade across borders, then we should lead the charge. And even if tariffs, as you suggest, would lead to an equal playing field, it is a field with a massive chunk taken out of it by the deadweight loss the tariffs caused. Wouldn’t we be better off without the loss?

Let me be perfectly frank: Those countries do not need our markets more than we need theirs. There are six countries with higher per-capita income than the U.S. There are hundreds more that want to buy goods from outside their borders. Yes, losing the American consumer would sting. But it would be a momentary pain that would quickly subside. America needs the world just as much if not more than the world needs us. Think about it like this: If one rich family leaves town, does the town die? Or does it adapt and fill the void left?

Now, my final thought on your response: If inefficient American industries are driven out of business — as has happened countless times throughout our history — will the Americans who worked in those industries just give up, as you also suggest? Or will they learn new skills, go back into the workforce, and pull themselves up by the bootstraps like so many generations of great Americans before them? I like to believe it’ll be the latter.

I haven’t given up on Americans yet. I hope you haven’t, either.

Man, you talk a lot of (BULLSHIT) don't you. Where do you get your stats from?  A cracker jack box you got at a store. 

— Stefanich M.

Wow, Stef. Just wow. You are correct. I am quite the BS-er when I get around my buddies from high school and college. But when it comes to my work, I take pride in only representing facts.

I wish you’d made clearer the statistics to which you’re referring. It would make it a little easier to direct you to the correct sources.

But since you didn’t, I’ll try to list a source for every stat in the article here:

I hope that satisfies your curiosity as to where I got my stats. Unfortunately, they didn’t come with a prize at the bottom of the box.

Hey you all:  This is really an excellent email.  It is so hard to find anybody who is not just guessing.  I have a million-dollar portfolio.  I really can't figure out what to do with it.  Don't get me wrong, I am a retired attorney and pretty damn smart but this investment climate almost requires a soothsayer.  Anyhow, what do you recommend I do?  Follow your advice or what? Thank you.  

— Bill B.

Thanks, Bill. It’s nice to see that at least one person appreciated the article. My goal is to share knowledge I’ve gained throughout my career on Wall Street and my studies in school.

I know not everyone has the privilege to get an inside view of the Street. And I know more people studied something other than finance and economics than those who did. I wouldn’t go to my mechanic to get a physical. And I’m glad you come to us for investment advice. It’s our forte.

As for what to do with your portfolio, first, let me just congratulate you on your current savings. Not knowing what to do with your millions is a pretty good problem to have.

I had an adjunct professor in business school who ran an investment fund. He always said doctors and lawyers were his favorite customers. They’re smart, they make good money, and they know well enough to find an expert when they look for advice investing. That last part probably has to do with the fact that they’re experts in their respective fields, too.

Now, I can’t give personal investment advice here. We’re not licensed to do that, and I’m not trying to tangle with the SEC. But I can tell you if you want to watch your millions grow steadily over time, plus have the added benefit of extra income to reinvest now and to live on in retirement, then my investment advisory service, The Wealth Advisory, is for you. I co-run it with my partner, Briton Ryle. And together we’ve got over three decades of experience helping retail investors grow their wealth.

We look for great companies that are being ignored by the rest of the market. We investigate developing trends that have long-term staying power. And we invest in the stocks that are poised to benefit the most as those trends take hold and flourish.

We’ve got an average gain around 45% on investments in companies like Bank of America, Starbucks, and First Solar. And we just recommended an up-and-coming legal cannabis investment with a valuation that would make Benjamin Graham jump for joy.

My personal recommendation (albeit a little biased) is to give The Wealth Advisory a try. We’ll help you set aside some of your savings for speculative investments that have the potential to explode. And we’ll show you how to get the bulk of your money invested in income-generating stocks that still have the potential to double and triple in value over time.

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Even for someone without a million-dollar portfolio, it’s a tiny investment to secure a comfortable future.

That's all I could fit into one email. Thanks to everyone for caring enough to write in with your opinions and questions. Keep the feedback coming. 

To your wealth,

jason-williams-signature-transparent

Jason Williams

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After graduating Cum Laude in finance and economics, Jason analyzed complex projects and budgets for the U.S. Army. Then, at Morgan Stanley, he led the assistants' team for the North American repo sales desk, responsible for hundreds of multibillion-dollar trades every day. Jason is the assistant editor for The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.

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