Trump tariffs to hurt US manufacturers - Bloomberg

Bloomberg Gadfly's David Fickling is out with a report on Trump's tariffs that were announced late Tuesday, and goes over how the tariffs that are meant to target China may very well end up harming the very industries they're supposed to be protecting.

Key quotes (source: Bloomberg Gadfly)

"The bill came due Tuesday, in the form of the latest front in the simmering U.S.-China trade war: A list of roughly a thousand separate products that U.S. Trade Representative Robert Lighthizer plans to subject to a 25 percent supplementary tariff.

In contrast to some of the initial skirmishes in this battle, the list appears to have been chosen with care. Officials started with all products felt to benefit from Chinese industrial policies, before removing those that were "likely to cause disruptions to the U.S. economy," those that would hit consumers' pockets hardest, and those that couldn't have levies for legal or administrative reasons."

"China has a substantial advantage in this trade war in that the majority of its biggest exports to the U.S. are consumer goods whose purchasers tend to be price-sensitive voters."

"By sparing consumers, Lighthizer is sending a strong signal he won't let this fight be lost because of discontent on the home front. That's why, while hundreds of product lines under tariff code 85 (electrical machinery and equipment and parts thereof) will be subject to a 25 percent impost, subsection 8517 -- mobile phones, which constitute about 40 percent of U.S. imports from China for that category -- won't suffer a cent."

"First is the fact that the plan will most likely hurt the parts of the economy it purports to help. Another way of looking at the $12.5 billion that will be levied is that it's essentially the government taking back about half of that roughly $26 billion-a-year tax cut it just delivered to manufacturers. Once you consider the ways domestic suppliers could raise prices in response to the reduced competition from China (as is already happening with steel and aluminum), the cost to end-product manufacturers will probably be higher. Producer prices in the sector are already rising at the fastest pace in almost six years; the squeeze to profits should intensify before it eases."

"The second point is related. The list at present isn't written in stone -- instead it will be put out to industry consultation for 60 days. That gives manufacturers ample time to make their complaints to Washington, and to get their carve-outs in return. The Trump administration isn't famed for its resistance to such influence: 195 of the executive branch's 2,684 appointees are former lobbyists, according to a database by journalism nonprofit ProPublica. Such pushback will probably be to the benefit of a U.S. economy that was doing perfectly well before the current skirmish came along. But it will weaken Washington's hand in the months ahead. The National Association of Manufacturers is already calling for a trade agreement, rather than the current path toward a conflict."