Reader Bruce Hall writes:
Just noticed that steel prices have generally fallen over the past 6 months. https://www.marketwatch.com/investing/index/steel?countrycode=xx . …
Mr. Hall seemingly links to a stock price index, rather than the price of steel. No matter; here are two relevant series, as compiled by the St. Louis Fed.
Figure 1: PPI by Commodity for Metals and Metal Products: Iron and Steel (1982=100, blue, left scale); Import price index for iron and steel, harmonized system (2000=100, red, right scale), not seasonally adjusted. NBER defined recession dates. Orange denotes period during which Section 232 tariffs in effect (from March 23, 2018). Source: FRED.
So, indeed as theory suggests, steel prices (overall, import) have risen since the imposition of tariffs.
I will say it again: My supplier told me pre tariff that his price had gone up 30%. That is his price from the warehouse not the price to me.
No matter what, we all know that the Fred is Fake.
FRED is not fake but it might be slow. As in this global price of soybeans:
https://fred.stlouisfed.org/series/PSOYBUSDQ
Bruce Hall thinks the Chinese are paying much higher prices for soybeans but something tells me that much of the incidence of their tariff has hit US growers. Alas, the FRED series only goes through 2017Q2?!
If you look at the chart, steel prices have been rising since late 2015, stalled a bit in late 2017, and then started go up again after the tariff announcements. Prices were rising at 4.3% a month rate in May according to Bloomberg. https://www.bloomberg.com/news/articles/2018-06-13/steel-price-surge-highlights-fears-and-hopes-on-trump-s-tariffs.
Again, the point with tariffs is that consumers pay them, either directly if they buy the imported item, or a product made from imported commodities, or indirectly since domestic producers can raise their prices and not worry about being undercut from foreign producers (although if the trade-weighted value of the dollar rises, producers will find at least a portion of the benefit from the tariff lost to the exchange rate change.
Even this measure of steel prices notes they rose during 2016, stalled for a bit, and then rose even more:
https://fred.stlouisfed.org/series/WPU101
A lot of forces affect market prices for steel and the market was already increasing steel price before the Trump tariffs. So one can argue we did not need these tariffs despite all the whining from both Team Trump and the left wing Economic Policy Institute (talk about strange bedfellows). Of course the US steel sector wanted MORE and they got it from Trump and the Three Stooges. So prices rose even more!
I’m not certain if Menzie agrees with myself, when I say we have always strongly suspected, that FRED had strong links to the aliens and deep state conspiracy.
The sound in the link below was first mistaken for sounds emitting from Sarah Huckabee’s body after a meal at Chipotle. But after it was confirmed she had E-coli contaminants in her mouth long before the Chipotle trip, a team of rebel experts confirmed FRED has been sending alien messages embedded into Sarah Huckabee’s digestive system:
https://www.youtube.com/watch?v=l1EZJiLVw7w
Due to an unimaginable, and really, inconceivable, amount of obstruction in Sarah’s lower intestines, the aliens had thought they could keep this on “the low down”, but the smells were just too much for Huckabee’s stylist and cosmetics front end loader Katie Price.
Bruce Hall’s “evidence” that aluminum prices had risen was also an index of the stock price for U.S. aluminum companies. Of course they went up as that was the Trump agenda after all. Trump needs better trolls.
Switzerland launches WTO action over our tariffs on aluminum and steel???
https://www.reuters.com/article/us-usa-trade-switzerland/switzerland-launches-wto-action-over-u-s-steel-aluminum-tariffs-idUSKBN1K00PX
OK – did we import any of this from Switzerland? This shows $36 billion worth of total imports but only $30 million last year from this sector:
https://www.census.gov/foreign-trade/statistics/product/enduse/imports/c4419.html
Oh wait – maybe the multinationals who have long shifted profits to Swiss affiliates to evade corporate profit taxes were hoping to use the same affiliates to avoid U.S. customs duties! Or maybe the Swiss are just mad that they were eliminated from the World Cup by Sweden!
Krugman on why we will lose this trade war:
https://www.nytimes.com/2018/07/07/opinion/how-to-lose-a-trade-war.html?partner=rss&emc=rss
The key point is that the Navarro/Trump view, aside from its fixation on trade balances, also seems to imagine that the world still looks the way it did in the 1960s, when trade was overwhelmingly in final goods like wheat and cars. In that world, putting a tariff on imported cars would cause consumers to switch to domestic cars, adding auto industry jobs, end of story (except for the foreign retaliation.)
In the modern world economy, however, a large part of trade is in intermediate goods – not cars but car parts. Put a tariff on car parts, and even the first-round effect on jobs is uncertain: maybe domestic parts producers will add workers, but you’ve raised costs and reduced competitiveness for downstream producers, who will shrink their operations.
So in today’s world, smart trade warriors – if such people exist – would focus their tariffs on final goods, so as to avoid raising costs for downstream producers of domestic goods. True, this would amount to a more or less direct tax on consumers; but if you’re afraid to impose any burden on consumers, you really shouldn’t be getting into a trade war in the first place.
But almost none of the Trump tariffs are on consumer goods. Chad Bown and colleagues ** have a remarkable chart showing the distribution of the Trump China tariffs: an amazing 95 percent are either on intermediate goods or on capital goods like machinery that are also used in domestic production
Menzie, I appreciate you correcting my links to stock rather than commodity prices.
On the flip side, I was wondering if China was experiencing the same phenomenon of commodity price increases for soybeans since enacting the tariff on U.S. goods. If not, why? If so, are they punishing themselves as well as U.S. farmers?
Let’s see. Brazilian farmers are getting just over $10 a bushel. Guess who is buying their soybeans?
bruce, perhaps you should do the research and answer the questions yourself, rather than asking others to do the work while simultaneously implying certain outcomes in your questions. you are implying certain outcomes without any data to support those outcomes.
I would not trust Bruce’s research. After all – he is touting changes in the equity price of steel companies as evidence for movements the price of actual steel. Leave the research to the experts!
Honestly don’t know….. still trying to decide of chicks piling on to a shameful link error is good or not…….
https://www.youtube.com/watch?v=4l6KideRC5E
Bruce Hall: Soybean tariffs only in effect since July 6, don’t know if it’s shown up in cash prices on mainland. You can keep track of CNY prices going forward here. Of course, the CNY has appreciated since 7/6… Important to keep in mind China can manipulate its exchange rate to some extent to offset price impact.
Could this be right – soybean prices in China are down?!
“the CNY has appreciated since 7/6… Important to keep in mind China can manipulate its exchange rate to some extent to offset price impact.”
If anyone doubts this – they should check this graph!
https://fred.stlouisfed.org/series/DEXCHUS
I know, I know – dollar depreciation is supposed to help U.S. farmers. But with this trade war, it is the Brazilian farm sector that gets the benefits!
Bruce’s question here is a bit naïve as he needs to understand the Welfare Effects of a Tariff: Large Country –
http://internationalecon.com/Trade/Tch90/T90-8.php
Applied to soybeans – China is extracting a terms of trade effect on the US. It consumers pay a little more for soybeans but American farmers are getting a lot less.
pgl,
Your point is well taken: a large economy can extract “terms of trade” if it is China, but not if it’s the U.S.
Actually we could extract a terms of trade effect if we had intelligent policy makers. Alas we have Team Trump which is led by the 3 stooges – Kudlow, Ross, and Navarro.