This column has addressed the tariff issue before it became the mainstream topic it is today. I will grant that the Smoot Hawley tariffs were across the board on near everything, so far President Trump has singled out steel (25%) and aluminum (10%). It is still not clear whether this applies to the raw metal, partially finished goods or a final product.
Apparently the Art of the Deal is emerging; there is a pattern here, as Stuart Varney observed on his television show this week. President Trump makes an out of the ballpark, far reaching announcement. The targets of the policy react in alarm. Then Trump retreats a bit, apparently gearing down for a more realistic compromise.
After announcing there would be no compromise, everyone would pay the tariffs, Trump promptly reversed course, exempting Canada and Mexico. But then The Treasury Secretary cautioned that would depend on whether the NAFTA negotiations were successfully concluded.
Some 109 Republicans signed a letter opposing the tariffs followed by a few dozen Democrats. Other countries are already planning ‘targeted tariffs to get the attention of Republican lawmakers. For example, rumor has it that countries may impose import duties on Harley Davidson motorcycles made in Paul Ryan’s home state of Wisconsin. Ditto for Kentucky bourbon from Mitch McConnell’s state.
The Man Behind Trump’s Tariffs, WSJ today
Now, Mr. Cohn has resigned. After lobbying by Mr. Navarro, the president on Thursday signed proclamations imposing heavy tariffs on steel and aluminum. White House officials say Mr. Navarro is in the running to replace Mr. Cohn, who fought against the tariffs. Next on the president’s trade agenda are possible sanctions on China for intellectual-property violations—a longtime goal of Mr. Navarro, who came to candidate Trump’s attention with his anti-Beijing books.
There is no question that China has completely disregarded intellectual property laws. Both music and movie discs are openly on display with no royalties paid to the U.S.. But with China only providing 2.2% of U.S. Steel, will a tariff get China’s attention?
And Trump at least has North Korea talking, which is what they do best rather than behaving. But we can at least be sure Trump will not have the same naivety that characterized past administrations. Attempts to bribe the North Koreans from their nuclear ambitions have all failed.
Meanwhile, former Texas Governor, now Energy Secretary Rick Perry, had his own announcements this week.
“Secretary of Energy Rick Perry announced a national energy policy that he dubbed “the new energy realism.” The tenets of this new approach, he said, were a belief in innovation rather than regulation and a warm embrace of the fossil fuels that scientists believe are responsible for climate change.”
Texas Monthly website reporting on Perry’s talk at the CERAWeek annual energy conference
The Obama administration ran away from fossil fuels, the Trump administration embraces them. Perry called the view pessimistic. He noted a billion people around the world still lack access to electricity. He said it was a moral responsibility for the USA to substantially reduce that number in the future.
He rejected the Paris Agreement as harmful to economic growth in developing countries. Instead he called for a global alliance which would embrace affordable fossil fuels. Actually the photographs of miserable air quality in China where citizens must wear face masks suggests the Chinese have done just that.
Perry has a unique alternative to walling off the Houston Ship channel from future hurricanes. Instead he suggested building refineries in Appalachia near the Marcellus and Utica formations. This would be in the heart of Trump country and a boost for the Rust Belt economy.
Oil prices are stuck in the low 60s still needing to surmount the previous $66-67 highs to regain a bull footing. Shares of Apache have tumbled to $34. The XES energy service ETF is a mere $2.50 above it 2009 low. Over the last two years it has double bottomed at $12.50 which was the 2009 low. We will report on any uptick in the moving averages that might suggest a recovery.
Follow Dennis at http://www.themarketperspective.com.
