The Trump tax cuts were expected to add $100 to $150 billionin stimulus per year over the next 10 years. A 25% tariff on $150 billion in annual imports is $37.5 billion in lost revenue to importers plus any due to elasticity. If he is willing to spend all of the corporate tax cuts on import taxes, he could tariff $600 billion in imports at a 25% rate. The annualized monthly trade deficit is almost $700 billion.
Here are some “fun” questions to consider: In a trade war, is the affected country’s GDP more likely to go up or down? What would happen to tax revenues? Might declining tax revenues affect funding for the new huge spending bill? What if our former trading partners lose interest in buying our debt securities? Indeed, what if they decide cash is needed and dump U.S. debt securities? Could this create a cashflow problem for the U.S. Government? What would happen to the U.S. budget allocation for debt service and the budget deficit if cost of funds were to rise because of treasuries being sold? If the U.S. government defaulted on their sovereign debt obligations, would there be any point for other countries to still consider the U.S. dollar to be a reserve currency? How would losing reserve currency status effect the U.S? If the U.S. Government were forced to reduce spending, how would it effect the economy? Welcome to trade wars. It leads to questions that competent leaders don’t want to have to answer.
Effective corp tax rates went from 9 to 7%. It's fully baked into the market. NFP was 103K in the last survey. There is a housing boom into rising rates. We will see a revenue shortfall of $700B in 2018 calendar year. The Deficit will explode with a contraction in M1-M3. Fed will need to initiate QE* which will cause a crash (mkts will crash on announcement).
Jim Rogers knows markets, economics, history, & China like few do. Sounds like China will be looking to inflict as much pain as possible targeting the red states - Trumps supporters. This may be like having a chance to follow George Soro's on his famous pound short. Which there was a stock scan for 'red states'. Wallstreet Journal China is preparing to hit back with levies aimed at industries and states where Trump’s supporters are found, the Wall Street Journal reported, citing unidentified people familiar with the matter. Jim Rogers “The next bear market is going to be the worst in my lifetime -- just because of the debt -- but if we also have a trade war, it’s going to be worse than a disaster.” “You think the Chinese are just sitting around? China’s a huge buyer of American agriculture, so of course that’s the obvious place to hit back because that hurts Mr. Trump the worst. It’s not Americans, it’s Trump. Trump and his guys, those are the ones they have to hit.”
I seriously doubt U.S. crops will end up rotting in the field. People have to eat and the most likely thing is a change in agricultural customer lists of the various exporting countries.
With the exception of CA, the "blue states" don't really make much. It's a cute talking point from the media, and predictable. There isn't going to be a trade war. No tariffs have been implemented. The US has a strong negotiating position here and it's necessary to go to the mat if any real progress is to be made. The act of extrapolating potential tariffs against real data is just cannon fodder for the talking heads that have been cheering the burning of Trump Tower the last few days.