ALL THINGS BIG AND SMALL 2.0

 TRUMP’S TARIFFS ON CHINA MAY EVEN INCREASE US-CN TRADE DEFICIT The US has always had a big trade deficit with China. The 10-year chart below shows the wide gap between US Exports to China (Blue line)  and US Imports from China (Orange line). The reasons 1. The strong seasonal/cyclical character of US Imports from China which were obtained  by decomposing data into trend, seasonal/cyclical and residual components  (Orange line in chart below) indicates that these are intermediate goods that are the input for US manufacturing and demand and correlates with their inventory cycles. The US cannot do without such inputs for their manufacturing because Chinese goods are much cheap and of high quality. Chart below shows the strong seasonal/cyclical nature of US imports from China (Orange line). US Imports from China show a seasonality strength of 0.37 versus 0.26 for Exports to China.  2. Frankly, Chinese consumers and manufacturers  don’t want US goods...

The two charts above only tell the story up to 2023 from the Tariffs  imposed during Trump's first term together with those imposed by the Biden administration. And we have to wait till 1 August to see what Trump does-- TACO out again, or follow through on what he said, or make some adjustments. So far, as of today, the UK, Vietnam and Indonesia have 'caved in' to avoid the punishing Tariffs on them announced by Trump. Japan is particularly vulnerable due to its exports of automobiles, steel and machinery to the USA but is holding up strong to Trump. Germany's very high Trade/GDP ratio at first sight seems to suggest its very vulnerable. But it is part of the EU and has some relief and exemptions from trade Agreements negotiated between USA and EU. I am not sure why Indonesia bowed to Trump. Its Trade/GDP ratio is very low. Unless its all about Palm Oil which has a large market in the US , also President Prabowo is streetsmart and wily and knows to to pander to  Trump...