The US president, Donald Trump, has a very clear idea: he will not give up.
He determinedly continues to unleash his own world war... in this case a commercial war
against the rest of the world.
Convinced that the United States is being harmed and even "robbed" in its trade relations,
in recent months Donald Trump has launched a tough protectionist policy and has multiplied
tariffs.
From now on, thousands and billions of dollars in products imported by the United States
will have to face the heavy tariffs this administration approved.
You know: buy American products...
Or else, you’re not a true patriot.
Welcome to 1930!
Well, the fact is that during July 2018 new tariffs will apply – of no less than 25%
- on products that the United States imports each year from China, worth 50 billion dollars.
Additionally, just a few months ago, the White House placed tariffs against steel, aluminum,
solar panels and even washing machine imports.
But, of course, that’s not all… at all.
Trump has already set plans on the table to implement many more tariffs soon.
The following will be at the end of August.
Check this out.
(“U.S. Unveils Additional Tariffs on $200 Billion More in Chinese Imports”.
WSJ)
Have you ever played Monopoly or Risk?
Well...
Let's say that in the eyes of the American president this whole thing is like a board
game… and my friends… he isn’t willing to lose.
Now... will it really be that simple?
Will the US president's plans be fulfilled and the economy strengthened by this type
of policy?
These are the key questions.
For now, we know that Donald Trump's speech is beginning to make many American multinationals
very nervous.
(“I don’t think this is going to get resolved easily and I think these tariffs are going
to hurt the U.S. economy.”
Rufus Yerxa, president of the National Foreign Trade Council, which represents multinationals
such as Coca-Cola, Ford and Microsoft.)
Because…
far from what was promised, the first victims are being the American people themselves.
Listen up.
(THE BROKEN DREAM?)
In the White House, they repeat that this new policy aims to boost US companies...
However, before Trump supporters begin to celebrate, wait a second, because there are
some things that the president isn’t taking into account.
The first is that the vast majority of tariffs are being applied on intermediate and capital
goods, that is, goods that companies import to manufacture their products in the United
States....
Therefore, one of two things are happening:
either you pay the tariff or start buying in other markets, even, assuming that it’s
possible, in the United States itself.
In any case, this implies a higher cost of production... which, evidently, reduces the
country's companies’ competitiveness.
This is, for example, the case of Mid-Continent Nail, a Missouri company that is the largest
producer of nails in the United States and that, after Trump approved tariffs on foreign
steel, has had to lay off 60 of its 500 employees and everything points to the fact that it
could be forced to close or transfer its entire production to Mexico.
A company that worked, that created employment, that was competitive in a free market and
that now due to Washington’s interference, is falling apart.
Then, the second question, I'm sure won’t surprise any of you, is that the rest of the
countries aren’t staying still.
(“In order to defend the core interests of the country and the interests of the people,
we are forced to retaliate”.
Statement of the Chinese Ministry of Commerce.)
(“The European Union, Canada and Mexico said that they will respond to new US tariffs
on steel and aluminum with punitive measures targeting American products worth billions
of dollars.”
CNN)
You’re setting tariffs…
Well I’ll do it too!
And so it goes on and on.
It shouldn’t have to be like that, but... it is.
The fact is that the consequences didn’t take long.
Harley Davidson, the popular motorcycle manufacturer, one of the US’s great icons and a national
pride of, check this out, Trump himself... has now announced that it will transfer part
of its production from his US factories to new factories in Europe.
See... when Trump punished the European Union with tariffs on steel and aluminum, they responded
with more tariffs... for example they increased the tariff on imports of motorcycles manufactured
in the United States from 6 to 31%.
What does this mean?
Well... approximately, on average, about $ 2,200 for each motorcycle.
A cost, which evidently European motorcycle manufacturers such as BMW won’t have to
face... and, thanks to a commercial agreement between the European Union and Japan, neither
will Yamaha, Kawasaki, Honda...
That is, Harley Davidson’s main competitors.
(“This is further proof of the harm from unilateral tariffs [...] The best way to help
American workers, consumers and manufacturers is to open new markets for them, not to raise
barriers to our own market.”
AshLee Strong, a spokeswoman for House Speaker Paul Ryan)
And as you can imagine taking Donald Trump’s character into account, this news made him
angry... and he even threatened the company itself, by Twitter, of course.
(“A Harley-Davidson should never be built in another country-never!
Their employees and customers are already very angry at them.
If they move, watch, it will be the beginning of the end - they surrendered, they quit!
The Aura will be gone and they will be taxed like never before!”.
Donald Trump)
A president threatening and damaging the image of a large American company simply for making
decisions?
Welcome to Trump's America.
Now, a question we can ask is, does the mythical motorcycle company really need to transfer
part of its production to Europe?
Listen up.
(DOES HARLEY DAVIDSON NEED TO LOOK AT THE WORLD?)
American companies have enough challenges and problems to overcome as to also have to
deal with the White House’s great ideas, or its nonsense.
See, Trump’s trade war has had a strong impact on companies like Harley-Davidson:
On the one hand, their costs have increased due to steel and aluminum tariffs – only
for the motorcycle company this has meant 20 million dollars per year.
On the other...
American multinationals now face the risk of seeing their markets close.
(Increasing international production to alleviate the EU tariff burden is not the company’s
preference, but represents the only sustainable option to make its motorcycles accessible
to customers in the EU and maintain a viable business in Europe.
Europe is a critical market for Harley-Davidson.
Statement of Harley-Davidson)
Because this crisis has hurt the mythical motorcycle company at a time where it was
already pretty weak.
Check out, for example, how its stock market evolved in the last 4 years.
But...
why did this huge 40% drop occur in years in which the US stock market has risen like
a rocket?
Well... the main explanation, dear viewers, is in the changing times…
There was a time when this type of bikes, huge, powerful, noisy and manufactured at
home were a dream come true for almost most of Americans.
However, due to the price – they are very expensive – and changing tastes, today's
generations aren’t as attracted by this type of motorcycle…
In fact, the average age of Harley owners in the United States is over 50.
And all this, as you can imagine, translates perfectly into the number of sales and profits:
only in the last 3 years the company's sales have decreased by 10% and profits by almost
40%.
And in 2018 things are going even worse…
So my friends, this is the reason why this company needs to look abroad... both in Europe
and Asia...
And if there’s no commercial freedom and there are tariffs... production will have
to go to other places.
Because, NO.
Harley-Davidson’s decision has nothing to do with politics and of course it isn’t
a "betrayal".
It’s simply an economic, understandable and logical decision made by a company that
has to compete....
something that by the way isn’t being easy, as now they have to face the consequences
of the commercial war Washington has unleashed.
But...
You know what?
This isn’t an isolated case.
Listen up.
(MULTINATIONALS)
Trump's policies harm American companies and by extension the American economy.
And of course the further the war goes, the greater the consequences will be.
At the moment American multinationals – some of which had supported Trump or had put themselves
in the forefront – are getting very, very nervous about all this.
General Motors itself has said that if the president finally approves tariffs on vehicle
importations, something that the White House raised recently, the consequences would be
less investment, fewer jobs and fewer wages for General Motors workers in the United States.
Take for example, the case of another US icon…. the Ford Mustang... which, of course, is assembled
in the United States and exported from there to the rest of the world.
Well, about 48% of the Mustang’s parts, of its components, come from outside the United
States...
So if all those imports are punished with tariffs...
The result is a more expensive car both for American consumers and for exports.
One moment, the Harley-Davidsons and the Ford Mustang, two of the US’s great icons, are
being affected by Trump's policies?
Quite successful, right?
And then also companies from other countries that have factories in the United States such
as Toyota, Fiat-Chrysler, Daimler or BMW are warning of the dangers of this war.
(“Mercedes-Benz´s parent company Daimler warned that dueling tariffs between the US.
and China, will hit its earnings - specifically, from SUVs made in Alabama”.
Al.com)
But... a detail, this isn’t only affecting the automotive industry, it is affecting virtually
all sectors.
Because yes, it’s true, the United States is the largest economy on the planet, but
don’t forget that 85% of its GDP and most of its growth happens outside its borders.
Closing up is bad for business.
Lifting barriers goes, precisely, against the interests of a country that currently
has a lot of employment, is hitting record numbers in terms of workers and has the largest
industrial production in its history.
Yes I know, Donald Trump talks a lot about the trade deficit... and there really is one…
but not due to the reason that the President states.
See, the United States doesn’t have a trade deficit because it’s being robbed, not at
all, but because it has an economy that consumes more than it produces.
If Donald Trump wants to reduce the deficit he can, for example, stop the immense public
spending that is causing so many problems, as we saw in this video; he can promote savings
and investment so that companies are more productive, among many other things.
But of course...
the trade war is bad for everyone.
But now it’s your turn: Do you support this trade war?
Leave your answer in the comments as well as in the survey.
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Also, don’t forget to check out our friends at the Reconsider Media Podcast - they provided
the vocals in this episode that were not mine!
And as always, thanks for watching!