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American tariffs and the global response to American tariffs


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#1 Mike K.

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Posted 25 July 2018 - 02:16 PM

The US announced today the European Union has agreed to massive concessions on energy, soybeans and tariffs.

 

The EU hopes to diversify its energy supply with increased imports of American LNG.


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#2 LJ

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Posted 25 July 2018 - 07:29 PM

So Canada puts tariffs on certain US farm products and then the US government promises $12B in aid to the farmers.

 

US puts tariffs on Canadian steel and aluminium and the Canadian government promises aid to help the producers of such.

 

What exactly is the point here?

 

You put tariffs on, we pay to bail them out, both ways. 

 

This just makes no sense.


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#3 sdwright.vic

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Posted 25 July 2018 - 07:53 PM

Then "we" borrow money from China to pay for these bailouts and have to pay them interest.... 🤔

Edited by sdwright.vic, 25 July 2018 - 07:54 PM.

Predictive text and a tiny keyboard are not my friends!

#4 Mike K.

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Posted 26 July 2018 - 06:12 AM

Trade imbalances are the precursor to these types of situations. Now the US is in a position to have nations or blocks agree to a more balanced exchange of goods and resources, and ultimately this is a good thing for countries like Canada as our trading partners will grow in relevance and our reliance on the US will decrease.

How did Export Canada and our upper echelons of government not foresee this? You can’t expect to have literally one trading partner and them not eventually exerting more control over your exports or prices, especially since our constantly weak dollar is used as a competitive advantage against US-based companies.

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#5 Jason-L

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Posted 26 July 2018 - 07:51 AM

Trade imbalances are the precursor to these types of situations. Now the US is in a position to have nations or blocks agree to a more balanced exchange of goods and resources, and ultimately this is a good thing for countries like Canada as our trading partners will grow in relevance and our reliance on the US will decrease.

How did Export Canada and our upper echelons of government not foresee this? You can’t expect to have literally one trading partner and them not eventually exerting more control over your exports or prices, especially since our constantly weak dollar is used as a competitive advantage against US-based companies.

Well, one suspects they expected the partners to act in accordance with existing trade agreements and general economic diplomatic processes inside the accepted framework of the last 20-30 years of a push for free trade and avoiding protectionism between Western G7 nations?



#6 Mike K.

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Posted 26 July 2018 - 07:57 AM

The US contends that some of its trading partners are manipulating their currencies in order to unfairly compete with American producers and companies.

 

In Canada's case our dollar is perpetually weak compared to the greenback, and the weaker our dollar is the more lucrative Canadian exports are for American firms.


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#7 nerka

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Posted 26 July 2018 - 09:16 AM

In Canada's case our dollar is perpetually weak compared to the greenback, and the weaker our dollar is the more lucrative Canadian exports are for American firms.

Canada is clearly not manipulating it's exchange rate down.  Up until recently we had higher interest rates than the US ever since the 2008 financial crisis. That actually had the effect of pushing up the Canadian dollar.

 

Purchasing power parity for the CAD would be about $0.80 US (according to the OECD 2017) so the Canadian dollar is a little bit undervalued relative to the US. Not enough that anyone should get their knickers in a knot.



#8 nerka

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Posted 26 July 2018 - 09:28 AM

Trade imbalances are the precursor to these types of situations. Now the US is in a position to have nations or blocks agree to a more balanced exchange of goods and resources, and ultimately this is a good thing for countries like Canada as our trading partners will grow in relevance and our reliance on the US will decrease.
 

Unless the US goes into recession the trade deficit is likely to increase not decrease.  Main reason - tax cuts and massive spending increases blowing up the budget deficit.



#9 Mike K.

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Posted 26 July 2018 - 09:46 AM

Canada is clearly not manipulating it's exchange rate down.  Up until recently we had higher interest rates than the US ever since the 2008 financial crisis. That actually had the effect of pushing up the Canadian dollar.

 

Purchasing power parity for the CAD would be about $0.80 US (according to the OECD 2017) so the Canadian dollar is a little bit undervalued relative to the US. Not enough that anyone should get their knickers in a knot.

 

Canadian industry absolutely has a vested interest in a low-valued Canadian dollar when nearly all production for non-domestic purposes is destined for the US while some of the largest industries in this country are heavily controlled by US interests in some way, shape or form which are investing into this country primarily because of the low dollar environment.

 

At $0.80 our competitiveness is on a precipice. At $0.85 our competitiveness is rapidly evaporating, and by $0.90 Canadian manufacturers are starting to hurt, layoffs occur and production is heavily restrained. The only way we can compete is with a 25% buffer, which is why our dollar has spent the last quarter century between $0.60 and $0.75 save for the short spurts of parity or near-parity that send total shockwaves through the economy.

 

That and the tourism industry is also heavily reliant on American visitors. There is a direct correlation between the exchange rate and visitors to Canada from the US.


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#10 Wayne

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Posted 26 July 2018 - 09:57 AM

http://www.msn.com/e...p5&ocid=DELLDHP

 

When Canada puts tariffs on US products it is "economic terrorism Wisconsin Rep. Sean Duffy said".



#11 Mike K.

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Posted 26 July 2018 - 10:03 AM

That's absolute nonsense and the guy knows it. It's all about image and we're likely to see even more fireworks from him and his ilk.


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#12 Rob Randall

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Posted 26 July 2018 - 12:07 PM

Department of Irony:

 

At the Jiahao Flag Co Ltd in Anhui province, women operate sewing machines to hem the edges of “Trump 2020” flags the size of beach towels, while others fold and bundle them for delivery.

 

The factory has turned out about 90,000 banners since March, said manager Yao Yuanyuan, an unusually large number for what is normally the low season, and Yao believed the China-U.S. trade war was the reason.

 

“It’s closely related,” she said. “They are preparing in advance, they are taking advantage of the fact that the tariffs haven’t gone up yet, with lower prices now.”

 

https://www.reuters....s-idUSKBN1KF1D6


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#13 nerka

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Posted 26 July 2018 - 12:23 PM

At $0.80 our competitiveness is on a precipice. At $0.85 our competitiveness is rapidly evaporating, and by $0.90 Canadian manufacturers are starting to hurt, layoffs occur and production is heavily restrained. The only way we can compete is with a 25% buffer, which is why our dollar has spent the last quarter century between $0.60 and $0.75 save for the short spurts of parity or near-parity that send total shockwaves through the economy.

 

That precisely illustrates my point. At purchasing power parity (roughly 80 cents) is exactly where you'd expect a changeover from Canada being more competitive to less competitive (based on currency valuation alone). Of course it is more complicated than that as some factors of production are cheaper here, some there.

 

Don't focus on the number in judging a currency's "strength". The CAD is strong/overvalued above 80 cents and weak/undervalued below 80 cents. The CAD at $0.80 US is not "weak" simply because 0.80<1

 

Your final point is incorrect. Since 1993 the CAD has been above 0.75 more than it has been below. It's actually averaged nearly 80 cents over that time period.


Edited by nerka, 26 July 2018 - 12:25 PM.


#14 nerka

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Posted 26 July 2018 - 12:29 PM

For a lighthearted take on the concept of purchasing power parity:

 

https://www.economis...e-big-mac-index

 

According to this index the US$ is overvalued relative to most of its trading partners.  Canada is actually quite close to fair value



#15 Mike K.

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Posted 26 July 2018 - 01:49 PM

Your final point is incorrect. Since 1993 the CAD has been above 0.75 more than it has been below. It's actually averaged nearly 80 cents over that time period.

 

The CAD spent 1993-2005 at $.75 or lower, and again between 2015-present (give or take a couple of blips above $0.75 over the last three years).

 

Over that period of time it spent 1993-2006 at or below $0.80 and again in 2009, and 2014-ish to present.

 

It was above $0.80 between roughly 2006-2009, and 2010-2015.

 

It is in the interest of Canadian producers and manufacturers to keep the dollar low. Now it doesn't have to be kept ridiculously low, but just enough where several percentage points make or break the profit margins. The federal government has a vested interest in Canadian producers producing, obviously, so on it goes.

 

The feds are further motivated to keep the dollar low as a high dollar wreaks havoc on Canadian retailers and transportation companies who see their consumers overwhelmingly pursuing US-sold goods, food, travel options and energy.

 

CAD-USD.jpg


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#16 LJ

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Posted 28 July 2018 - 07:37 PM

Canada not included....

 

https://business.fin...da-not-included


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#17 Rob Randall

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Posted 07 August 2018 - 02:45 PM

News Item: TV-maker Element Electronics said it will close its Winnsboro, SC plant in response to tariffs imposed by Trump. 126 jobs will be lost.

 

News Item 2: I just found out that until today,TVs were still being made in the US.


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#18 Matt R.

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Posted 08 August 2018 - 01:24 AM

Got my letter from PepsiCo today, 355mL cans of product will be going up $0.01 per unit due to the tarrifs imposed on imported product. I think the product is actually canned here, but maybe the syrup is imported?

Anyways, I’ll save the price bump for another time. ;)

Matt.

#19 Rob Randall

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Posted 08 August 2018 - 06:32 AM

^I think it's the metal tariff. I heard the cost of an empty can is 21 cents so I guess the tariffs are a rounded-up penny. 

 

But the big players like Pepsi have the buying power to acquire all the cans they need at any price. It'll be the smaller operators like our local craft breweries that are going to be scrambling.


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#20 Mike K.

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Posted 08 August 2018 - 08:29 AM

Isn't Canada one of the largest producers of aluminum?


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