Donald Trump tweets he will not impose tariffs on "the great nation of Australia"

Consider the below information lifted from the DFAT website and then consider that economic theory states that import tariffs will make your own industry noncompetitive economically with the rest of the world's industries. Also consider that Australia only exports $12m of goods to the USA per year (not much of it steel or aluminium) yet the USA exports $30m of goods to Australia. So armed with this information, who do you think will be hurting the most from a tariff war with the rest of the world and was probably reminded of this by other heads of state? A "Very Stable Genius", that's who. If back-pedaling was an Olympic sport he'd be in the running for gold.

I think you might have your figures wrong . $12000 Million equals $12 Billion . Quite a large amount of money

Bugger, I did put millions instead of billions and you're right its a large amount of money, but it's more about the effect of the difference of a factor of 2.5 that I'm trying to understand. A tariff war never ends up being one sided so if the tariffs equalize and end up going both ways I would have thought that the USA will simply lose more money on their exports and their industry returns back to the dark ages of being uncompetitive with the rest of the world and pretty much only producing for domestic consumption.

The effect on sales of Australian coal and iron ore to our much larger trading partners (ie China, Japan) who may then on-sell to the USA would be another unknown factor too.

The tariffs look a lot like chicken feed for the Trump base. The Business on ABC last night said that 60% of Al imports to the US come from Canada, so are exempt from the tariff. They also said that most of the US smelters have closed down in the past few years. I imagine it costs a hell of a lot to start them up again, and the owners might also be looking 3 years down the track to a new President who will reverse the decision so adding in the cost of shutting up shop again. It could easily be that the owners have no interest in opening up again, so Trump ends up looking as impotent as the Libs have over the Liddell power station closure

Wasn't that long ago Australia imposed tariffs on steel from just about every country in the world that exports steel to Australia except one (might have been Poland or somewhere, I can't recall now).

Tariffs because Australia judged that everyone was dumping, where they sell export at less than they sell domestically, so making Australian steel uncompetitive.

Didn't see too many complain then (except the Australian industries using imported steel to manufacture things, but nobody listened to them).

Can't find the details on google now, maybe in here somewhere (not sure how to historic info from this site) :

www.industry.gov.au/regulations-and-standards/anti-dumping-and-countervailing-system

But - I see certain types of steel and aluminium have recently be tariffed again by Australia. Anyone complain about that - or was it not imposed by Trump so doesn't make the news ?

You're right Carantoc, there are most definitely tariff's imposed by the Australian government on steel. The difference is that they are specifically targeting suppliers deemed to be dumping onto the Australian market rather than all steel suppliers to the Australian market.

However, I also reckon that if a commodity can be "dumped" onto the market then it is obviously being sold at its actual value to the market and the market has to adjust and yep, this is only done to temporarily protect Australian industry from the short term damage of dumping.

True, if it wasn't a blanket ban being imposed by a "very stable genius" who is now rolling it back to determine who he wants to be friends with and most importantly friends he can now hold to ransom for "diplomatic favours" then we probably wouldn't be talking about it.

"Dumping" is where it is sold cheaper than it's normal value to either drive others out of the market or limit losses due to over supply in a domestic market. "Dumping" is very much not selling things at their actual value. Dumping occurs at a short term loss to a producer, but often subsidised by government or designed to create a monopoly.


I am not supporting Trump. He is an idiot. The fact he communicates these things via twitter is reason enough to condemn the moron. Both as politically dumb and inanely childish. And I realise that is mainly the point you are making.

But -

The current US steel and aluminium tariff proposals have come about because of a US Dept. Of Commerce investigation into world-wide steel and aluminium dumping. The US dept. suggested three options to address the issues it found. Trump chose what would appear to be the simplest to implement. I don't see this as a Trump brain-fart as the media implies.

And it is nothing new. Last time the US did it they imposed 30%, not the 24% Trump is imposing. And Australia did similar recently much to the annoyance of many people in the Australian manufacturing sector. And I see Australia is doing similar again with certain steel products from certain countries - but not even a footnote on page 204 of the media news cycle about this yet Trump's tweets doing exactly the same thing make front page news everyday for a week.

Now, I am not saying it is good policy and, yes, Trump could have vetoed the Dept of Commerce's recommendations, but generally politicians go with these things otherwise what's the point of having apolitical smart people investigating such things and making recommendations ?

To me the interesting story here is about how Trump fails to get any sort of message across in a reasonable way due to his pathological need to stroke his own ego, and how the media looses all sense of anything sensible when reporting anything with Trump in the title.

I understand your angle Carantoc, and agree with it, there's a big media beat up with anything Trump and he plays the game too. I guess I'm trying to figure out what the gain is for the USA, is it purely global politics creating a perceived economic benefit at home rather than an actual long term benefit?

There are obviously some good things that come from specific tariffs, ie you might impose a tariff on a producer that uses an environmentally unsound method to produce a good so that equality is assured against a producer that produces the good responsibly. And obviously used to combat "dumping" tariffs make sense. I'm just not aware of any long term good coming from an across the board tariff on imports to support a domestic industry as eventually their production becomes inefficient and they collapse.

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Carantoc said..
"Dumping" is where it is sold cheaper than it's normal value to either drive others out of the market or limit losses due to over supply in a domestic market. "Dumping" is very much not selling things at their actual value. Dumping occurs at a short term loss to a producer, but often subsidised by government or designed to create a monopoly.

A friend described this to me that there are markets where it costs less to export it and sell it for a fraction of its cost than it is to physically dump it. So if they have an oversupply, they can just export it to us and sell it for the same or a little more than what it costs in transport costs to get it here.

It sounds like an unusual thing, unless you just happen to be selling a product where another low-cost market has an over-supply.

It never seems to happen with oil for some reason...

In my mind, dumping describes a predatory practice where you kill off your competitors by selling your goods well under the market price hoping to drive him out of business and then take over the market. Your description will still wreck the market, but doesn't have the intent of killing off the suppliers.

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Paddles B'mere said..
In my mind, dumping describes a predatory practice where you kill off your competitors by selling your goods well under the market price hoping to drive him out of business and then take over the market. Your description will still wreck the market, but doesn't have the intent of killing off the suppliers.

You are both right. Dumping is where you export your excess to a secondary market rather than increase supply (and therefore lower price and profit margins) in your primary market. Mostly happens with subsidised consumables where it would cost you more to store or depose of than to transport and sell at a loss. And it can be loss leading and does tend to outcompete local industries but that is usually a secondary impact as the intention is always to maximise profits.

e.g. You have bought or produced 100 units at $10 per and now the local market can only absorb 80 units at $15 per, if you increase supply to 100 units the local market price would fall say to $12 per unit and reduce your total profit margin. So you might prefer to absorb some additional costs and transfer 20 units to a secondary market where you sell at a loss of $2 per unit, still making an overall profit of $400-$40=$360.

Hydrocarbons, the fuel of the global economy, have two global prices Brent and West Texas Intermediate, the small price difference is essentially the calorific difference I.e. The energy content of the different blends. It never really makes economic sense to sell energy at a loss as there are other ways to manipulate supply and demand, e.g. you can to a certain degree just leave it in the ground.

So do you think that Mr Trump's proposed blanket tariff on all steel and aluminium imports into the USA is being motivated by:
- short term dumping of these commodities onto the US market by the rest of the world
- long term protection of the existing US metal processing industry
- "shoot from the hip" policy as used by the Trump "brand" since day dot to gain short term publicity and popularity till the next opportunity arises

What you are seeing is the USA and other Western democracy's finally standing up against the crazy idea of super low wage and or communist governments joining the 'free worlds markets and cheating the system to produce all the worlds manufactured goods then using the profits to buy our government and country out from under us

www.commerce.gov/section-232-investigation-effect-imports-aluminum-us-national-security

Mainly ensuring the US has a capable defence ability.

The Commerce Dept. report found that the US has lost all aluminium manufacturing capacity except one plant that can produce material for aircraft, including military aircraft. And due mainly to subsidised aluminium being dumped on the US market. Steel was the same.

If you watch the film "Our Darkest Hour" at the outbreak of WWII Germany had an army of 3 million men. The UK 300,000. Following WWI history would suggest this was a massive failing of UK policy (to both allow Germany to gain so much and the UK to loose so much). The war was (arguably) not lost because of the UK airforce and their aluminium bodied spitfires.

Go forward 75 years and what would history say if the US lost air dominance, in part by their inability to manufacture planes when somebody takes out their last aluminium facility with one missile ?

I'm not arguing the policy and the decision is right or wrong, or that the US should or should not have a strong military.

All I am saying is that the media reporting suggests the whole thing is some sort of (and I quote) shoot from the hip" policy as used by the Trump "brand" since day dot to gain short term publicity and popularity till the next opportunity arises

It certainly isn't that. Although, in somewhat of a defence of the media (- although it is no excuse), Trump seems incapable of selling a message that it is anything else.

The price of freedom ( a world in which seabreeze forums and the internet is not censored) is unfortunately measured by the western worlds military power . MAD Mutually ashored destruction has keep the peace in an over populated world for 70 years now but our luck could run out with rouge states and individuals gaining access to the super powers chess pieces

I'm not yet convinced of the defence angle. For instance, if you had billions to spend on defence materiel, and you wanted to make sure that the local industry supplied all the metals and stayed afloat, then you'd simply write it into the contract where the aluminium or steel was to be sourced from and support the local metals industry that way. There's no need to risk a worldwide diplomatic catastrophe and a trade war with the rest of the world by imposing blanket tariffs.

I'm not reading too much into any of the media articles, because I would rather try to understand it based on my basic knowledge of economics and commerce. To me, everything still points towards a "shoot from the hip" attempt to stay popular and repay the people that got him across the line in the election ....... working class Americans doing it tough. There's not too many economists or people in finance/business applauding the plan or even offering a suitable explanation for it. Another plausible alternative may be simply an attempt to have a go at Chinese industry and force western allies like Australia to rethink our relationship with China (our biggest trading partner by a long shot)

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Paddles B'mere said..
So do you think that Mr Trump's proposed blanket tariff on all steel and aluminium imports into the USA is being motivated by:
- short term dumping of these commodities onto the US market by the rest of the world
- long term protection of the existing US metal processing industry
- "shoot from the hip" policy as used by the Trump "brand" since day dot to gain short term publicity and popularity till the next opportunity arises

He's just appealing to his base. It makes no economic sense to the US but it makes the dumb arses that voted for him all warm inside and beligerent outside.

" USA number1, USA number 1!!!"

When Australia can export a product to China cheaper than China can produce it for themselves (even legitimately) China acts to protect China. Either imposing tariffs or providing state support for local industry.

So why is anyone outraged that anyone else would do the same ? Back in 2015 Australia was complaining about what Trump's administration is complaining about now :

Mr Calderon said China had saved itself about $US250 billion over recent years by flooding the aluminium market with supply and duly dragging down prices for the lightweight metal.That process forced many marginal aluminium smelters around the world, including in Australia, to be closed, and Mr Calderon said Australia's iron ore sector could endure a similar experience.

www.smh.com.au/business/companies/chinas-iron-ore-tax-cut-puts-heat-on-australian-miners-20150409-1mh4pm.html


I can't find reference now but back in about 2009 Australia imposed import tariffs on steel from everywhere. You could argue how does that make sense ? Australia is the largest exporter of iron ore, so how can doing anything to reduce demand for steel help iron ore exports ?

Who complained then ? Who even knew ? The tariffs came and went and nobody noticed, except those in the industry.

Which country doesn't impose tariffs on all sorts of imports ? When has this never occurred ? When has this been the biggest story of the year ?

So why does Trump suddenly get the medias attention on the subject ? Is it because he is Trump ?


Will it make much difference to anything ? Its been going on everywhere for the last 200 years so I doubt it. Blink here and there but not much else.

The endless printing of US dollars and China's refusal to float its currency in an endless race to devalue to make themselves more internationally competitive are probably infinitely bigger issues for the world economy and world trade than this beat-up storm in a teacup.

History will probably show the US having done nothing to stop China hoarding so much US treasury bonds and US cash for the last 30 years as the biggest mistake of the WWII to WWIII period. Trump's steel trade war will not even make a footnote in the English translation of the official world Wiki entry.

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Carantoc said..
The war was (arguably) not lost because of the UK airforce and their aluminium bodied spitfires.

Go forward 75 years and what would history say if the US lost air dominance, in part by their inability to manufacture planes when somebody takes out their last aluminium facility with one missile ?

And the Brit's had a real problem with the supply of aluminium back then too - they had to resort to the public donating scrap aluminium and any aluminium pots and pans or similar they could do without.
The quality of the British aluminium was pretty crook - later, when the USA aircraft were arriving in ever increasing quantities, the RAF [and our RAAF] aircrews who were on daylight operations were impressed with the look of the polished aluminium the American aircraft displayed.

It is on record that several RAF and RAAF crews in both the European and Pacific theatres stripped the paint from their Brit. and Aussie manufactured aircraft for the "go-faster" look - but were appalled at the dodgy patchwork appearance of the most likely recycled aluminium panels, so they slapped the paint back on real fast.

Back in the early WW2 days, we in Australia could barely make a motorcycle, but before long we were churning out mosquito bombers, beaufighters, wirraways, boomerangs and several other types of aircraft, as well as over hauling and repairing all the imports.

Now - we cant even make a car.....

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Paddles B'mere said..
I'm not yet convinced of the defence angle. For instance, if you had billions to spend on defence materiel, and you wanted to make sure that the local industry supplied all the metals and stayed afloat, then you'd simply write it into the contract where the aluminium or steel was to be sourced from and support the local metals industry that way.

The defence industry is just another "Big Business" where profits are the king.
If they can make defence materiel cheaper and therefore generate more profit - that is how it will be done.
"Big Business" only pushes the patriotism angle when it suits them [low profits = start another war someplace]

^^^ Absolutely sn, number two rule in economics is that people and business will respond to economic incentives ie most profit. Unfortunately for Mr Trump, rule number one is that the people/business making a decision will act rationally.

For those that think tariffs are the only economic answer to an inefficient industry, you should check out the "theory of comparative advantage" that basically says to specialize in what you can be most efficient at and then trade that commodity for what you're not efficient at.

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log man said..He's just appealing to his base. It makes no economic sense to the US but it makes the dumb arses that voted for him all warm inside and beligerent outside.

" USA number1, USA number 1!!!"

Unlike when Obama imposed tariffs on Chinese tires and solar panels, yes?

That's a specific target on import of Chinese tyres and Chinese solar panels, not a blanket tariff on all traders for tyre and solar panel imports. Without knowing the reasons behind it, I reckon that subtle difference can mean a large difference economically.

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Flouro1 said..
What you are seeing is the USA and other Western democracy's finally standing up against the crazy idea of super low wage and or communist governments joining the 'free worlds markets and cheating the system to produce all the worlds manufactured goods then using the profits to buy our government and country out from under us

So what Trump ultimately proposes is bringing jobs back to the U.S. via tariffs?

Great.

So now the U.S. will either have:

A) $10,000 iPhones or
B) Jobs paying $0.25 an hour.

Who wants a ****ing Chinese job?

Trump colludes with Russians, CNN says so

Where does this conspiracy end .........................