Trump's Tariffs and BRIC

[alhoon]

Trump threatens BRICS (9 emerging economies including India, Russia, China but also Iran and Brazil) with 100% Tariffs if they break from the USA dollar. Russia accuses Trump for "weaponizing the $".

My take: I strongly dislike Trump - and I am not a USA citizen.
That said, from an American perspective the threat that he would go for such tariffs to punish those upstart economies will make them think twice. And in my opinion, it will effectively break any budding support for such a move.
Trump, being an unpredictable madman that would not think far ahead to see how destructive such a thing as 100% tariffs on India/China/Russia/Brazil would be for his own people - nor he gives a crap for the hardships of the 'plebeians' - could do it. Or at least, there's a significant chance that he would do it. And that makes this threat work.
Thus, India, China, Brazil, South Africa would not risk it. Russia... perhaps would risk it but it is far less likely and there's always the chance the others would kick out Russia from BRICS just to make sure they don't poke the madman.

And since he may, any notion to move against the $ will be significantly impeded without Trump doing anything. The threat of the Tariffs would probably ensure that the Tariffs would not be needed.

Yes, it is bullying and it is weaponizing the USA dollar as Putin complained.
And that's in the interest of the USA people.

Trump is a bully and a butthole. But a butthole with some good ideas.
It really sucks for those economies to have part of their financial policy dictated by an obnoxious, self-serving bully. But I expect they will play ball and kiss the ring.
They cannot afford not to.

[RollingWave]

The US is free to do whatever tariff they want, I just think there's a lot of hubris and naivete on reactions and results. Both on the US side and other parties that think they are getting to benefit, when the more likely scenario is that they'll end up taxing places that's more beholden to them because they actually have more real leverage over them (say Europe and Japan / Korea / Taiwan etc.)

Also pointing out, for the non-American but generally American influenced educated people around the world, seeing the obvious hypocrisy that is just blasting off these days versus what we've been told since the 90s or even before that, it's going to have an reaction and results, that's fairly unpredictable in exactly how it'll manifest, but very few American especially higher up is going to like it.

Most likely, we'll treat the US no different from the PRC, and whatever has been said on how the average people in China actually think and will treat the regime in Beijing, is probably equally true now for the US.

[Coughdrop addict]

It's going to be a disaster. Trump is an idiot who doesn't know the first thing about economics. Mark my words, he will implement these tariffs, and the ones on Canada and Mexico, just to prove that he's a big strong man everyone should be afraid of. I'm guessing that his tariffs, combined with his mass deportations of a huge chuck of the labor force, could make inflation go as high as 25%.

[Legio_Italica]

Brazil currently puts import/shipping taxes or tariffs of 30-60% on most US goods. This is in addition to a 30% tax on foreign companies whose products do not contain at least 65% locally made components. Meanwhile, Brazilian exports enjoy Most Favored Nation status under US trade law, meaning they are subject to much lower tariffs around 10-14% or less. If this were increased to 100% it would approach parity with the surcharges, taxes and barriers Brazil already places on US imports.

It’s a similar story with most or all other BRICS countries, except Russia for obvious reasons. The rest of the world is so utterly reliant on the US consumer that the mere mention of reciprocity in trade relations is regarded as some kind of unprecedented betrayal. It is predictable albeit somewhat comical that the TDS crowd is suddenly concerned about hypothetical inflation due to tariffs that have not been implemented, but not about the 20% inflation and increased tariffs under Biden.

From those who fall into either of these categories, I’d be interested to learn how else the US should react to a concerted effort by export dependent countries to avoid using the dollars they need from us to buy their stuff.

[AqD]

It's going to be a disaster. Trump is an idiot who doesn't know the first thing about economics. Mark my words, he will implement these tariffs, and the ones on Canada and Mexico, just to prove that he's a big strong man everyone should be afraid of. I'm guessing that his tariffs, combined with his mass deportations of a huge chuck of the labor force, could make inflation go as high as 25%.

Wouldn't that be great to everyone? We don't need a representative of rednecks to succeed. It's our countries' best interest to support Trump in his quest of turning America into Latin America.

[Coughdrop addict]

It is predictable albeit somewhat comical that the TDS crowd is suddenly concerned about hypothetical inflation due to tariffs that have not been implemented, but not about the 20% inflation and increased tariffs under Biden.

Contrary to what the TDS (Trump Diaper Sniffer) crowd was told to believe, inflation never hit 20% under Biden. Far from it.

https://www.macrotrends.net/global-m...ation-rate-cpi

U.S. inflation rate for 2023 was 4.12%, a 3.89% decline from 2022. U.S. inflation rate for 2022 was 8.00%, a 3.3% increase from 2021. U.S. inflation rate for 2021 was 4.70%, a 3.46% increase from 2020. U.S. inflation rate for 2020 was 1.23%, a 0.58% decline from 2019.

[Legio_Italica]

Tell you what, add up the inflation figures you cite there from 2021 onwards, add ~3% for 2024, and let me know what you come up with. For comparison, it was ~8% during Trump’s term.

[Infidel144]

Tell you what, add up the inflation figures you cite there from 2021 onwards, add ~3% for 2024, and let me know what you come up with. For comparison, it was ~8% during Trump’s term.

I have a calculator handy:
2023 was 4.12%
2022 was 8.00%
2021 was 4.70%
______________
21-3 was 16.82%
2024 was ~3%
______________
= 19.82%

That is not 20%!!!!!
You see!!!

[PointOfViewGun]

Are you two seriously adding inflation percentages from different years to find the total inflation rate of that time interval?

[Legio_Italica]

No. Are you seriously confused by this? Maybe a picture will help.

Spoiler Alert, click show to read: 

[PointOfViewGun]

Tell you what, add up the inflation figures you cite there from 2021 onwards, add ~3% for 2024, and let me know what you come up with. For comparison, it was ~8% during Trump’s term.

I have a calculator handy:
2023 was 4.12%
2022 was 8.00%
2021 was 4.70%
______________
21-3 was 16.82%
2024 was ~3%
______________
= 19.82%

That is not 20%!!!!!
You see!!!

I'll just keep these quotes here in case they get edited.

[Legio_Italica]

I suppose you’re upset using the annual averages doesn’t account for compounding effects over time, but that would result in even higher cumulative inflation, not lower.

[Coughdrop addict]

Are you two seriously adding inflation percentages from different years to find the total inflation rate of that time interval?

Two reasons:

1: MAGAs aren't known for their economic literacy. See also: MAGAs buying Trump's overpriced, made in China crap and putting their entire savings into Trump's meme stock.

2: MAGAs enjoy being lied to by their media. Having been told that every day of the Biden presidency was like a combination of 9/11 and coming home to find their entire family murdered, they will do any amount of mental gymnastics to preserve the narrative. If they admitted that inflation was never at 20% per quarter, their entire worldview comes crashing down.

[Legio_Italica]

If inflation were 20% per quarter, cumulative inflation during Biden’s term would be much higher than 20%.

[alhoon]

I was going to comment that (in short) I don't believe Trump would do the Tariffs but the addition of inflation really broke me. I teach statistics people.
Do better.

[Alastor]

I don't believe Trump would do the Tariffs

I agree. 100% tariffs on who? Half the world providing a huge chunk of US imports? Sure, if he wants to torch the American economy in the process. The US is the most powerful country on the planet and that goes a long way to reinforce Trump's bluster, to arm it with teeth. But even the US has limits.

[Legio_Italica]

I was going to comment that (in short) I don't believe Trump would do the Tariffs but the addition of inflation really broke me. I teach statistics people.
Do better.

Ok. (1+rate) multiplied by each year’s, minus 1, comes out to ~21% from 2021-2024. Summing the annual averages to estimate cumulative inflation (rather than calculating the rate or factor) isn’t as precise but keeping it simple is the better way to go when there’s a struggle to grasp whether significant inflation happened at all.

Trump’s first term tariffs added ~1% to inflation and reduced GDP by ~0.2%. Biden added more on top. The economy wasn’t torched then and I don’t see what the panic is for now. If other countries are melting down over the possibility, they can always comply with US demands to avoid it.

[Alastor]

The economy wasn’t torched then and I don’t see what the panic is for now. If other countries are melting down over the possibility, they can always comply with US demands to avoid it.

Frankly, I don't think they will comply, not really that is. Even if Trump manages to get some concessions from the BRICS they will be short-lived. This won't reverse anything. The US is in decline relatively speaking on the world stage and attempts to bully everyone, amidst some crude divide and conquer scheme, is basically a reminder of that fact and extra incentive to de-dollarize. Also, to say the US economy wasn't torched last time, so why would it this time, ignores the gravity of the threat. What Trump is threatening to do now is rather more extreme than what he has done previously.

[Legio_Italica]

BRICS has been around for years. Dedollarization is a rhetorical cope and even if it were successful in practice someday, would have little if any net impact on the relative status of the US economy. It may reduce FDI by negating some of the advantages of holding US assets, but it would also make US producers more competitive globally thanks in part to a weaker dollar.

The significance is this outcome would help rather than hinder the protectionism favored by Trump and Biden anyway. The incoming Trump Admin has acknowledged any period of adjustment associated with these gradual changes may result in higher prices for US consumers in the short term. The longer term benefit is to strengthen US domestic production which will in turn create sustainable job and wage growth that has been gutted by decades of globalization.

In reality though, the liquidity and depth of US capital markets is too entrenched for the rest of the world to escape USD, unless they’re willing to be poorer and more economically isolated to achieve it. All the tariffs in the world won’t change that, and Trump is well aware. The biggest barrier to the BRICS project isn’t even the US, it’s the members themselves. Nobody wants to hold rubles, rupees or reals when you can have dollars instead.

Even for those who can’t have dollars because they are naughty, members manipulate and distort the value of their own currencies too much for any combination of them to be used as a reliable medium of exchange. The Euro is the only hypothetical alternative, but the EU project is circling the drain and European capital markets don’t have anywhere near enough liquidity to replace the US.

Spoiler Alert, click show to read: 

Moscow is currently accumulating $1 billion in rupee assets each month that remain stranded outside the country, primarily due to the lopsided trade relationship, a Bloomberg report has claimed.

To find an alternative, the two nations have gone back to the drawing board. One of the ways out is to establish various payment mechanisms, including investments in India’s capital markets by Russian entities.
However, the solution is still not simple as Russia cannot use the entire tranche as India has restrictions over capital flows by foreign investors.

The other option is to use currencies of a third country such as China's yuan or UAE's dirham. Though an agreement on such a solution is highly unlikely.

https://www.wionews.com/world/russia...amassed-599540

Russia is playing an important role in supporting China’s de-dollarization efforts. It wants buyers of its crude oil to pay in yuan or rubles instead of dollars. This move is part of a broader strategy to promote local currencies for trade within the SCO.

India fears that China is using the SCO 2024 summit to advance its de-dollarization agenda and strengthen its economy. The Modi administration wants to avoid the yuan and maintain the dollar’s prominence in trade settlements.

https://www.cryptopolitan.com/brics-...lar-with-yuan/

Chinese banks are rejecting and returning about 80% of Russian payments made in Chinese yuan, the Russian state-controlled media outlet Kommersant reported on July 29, citing sources.

Russian businesses and individuals attempting to make the payments then lose money on commission and conversion fees and are unable to complete the transaction.

Russian companies doing business in China have increasingly had to rely on intermediary services that help facilitate the transfer of money and goods, which can add anywhere from 3-10% of commission-related expenses.

A source told Kommersant that such intermediary businesses account for up to 30% of payments to China.

https://www.yahoo.com/news/chinese-b...082131174.html

Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits.

"We cannot lend in yuan because we have nothing to cover our foreign currency positions with," said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market.

https://www.reuters.com/markets/curr...on-2024-09-05/

Tl;dr - reject dollars, embrace the barter system. Glhf.

[PointOfViewGun]

Inflation argument here, even if calculated properly does not paint the full picture. Thankfully, some of us are aware that USA does not exist in a vacuum. A proper comparison of term specific accumulated inflation comparison can be made with other countries. I used 2021-2023 interval with Biden for consistency and its enough to paint a picture.

Trump 2017-2020 presidency inflation - 7.83%
Same interval Germany inflation - 4.91%
Same interval France inflation - 4.54%
Same interval UK inflation - 7.79%
Same interval Canada inflation - 6.70%
Same interval Sweden inflation - 6.15%

Biden 2021-2023 presidency inflation - 17.73%
Same interval Germany inflation - 16.70%
Same interval France inflation - 12.16%
Same interval UK inflation - 18.15%
Same interval Canada inflation - 14.72%
Same interval Sweden inflation - 20.18%

Doesn't exactly paint the same picture, does it?