Author Archives: Menzie Chinn

The CBO on Trade Policy Uncertainty

The CBO’s Budget and Economic Outlook is a must read. In addition to the widening budget deficit (no supply side miracle here), and the downward revision in projected 2018 growth, there is this commentary in the section blandly titled “Some Uncertainties in the Economic Outlook” (page 14 onward):

A sizable uncertainty in the U.S. trade and inflation forecast stems from recent changes to U.S. import tariffs and the retaliation of the country’s key trading partners.

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Treatment of Nations Implementing Measures Not Consistent with the WTO

Statement yesterday, as reported by Washington Examiner:

“[That country] really needs to make up its mind” … “Do they want to be in the community of nations, do they want to be part of the WTO and just behave like everybody else, or don’t they?”

“And if they don’t, then we, the community of nations, are going to have to think about what are we going to do about that?”… “Are we going to let them stay in the WTO?”

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Guest Contribution: “Trump’s Trade Policy Uncertainty Deters Investment”

Today, we are fortunate to be able to present a guest contribution written by Steven J. Davis, William H. Abbot Distinguished Service Professor of International Business and Economics at the University of Chicago Booth School of Business and Senior Fellow at the Hoover Institution.

Donald Trump has upended U.S. trade policy. The particulars include a U.S. pullout from the Trans-Pacific Partnership (TPP), threats to jettison the North American Free Trade Agreement, a refusal to affirm new WTO judges, tariff hikes on steel and other goods, frequent rhetorical attacks on major trading partners, and a wrong-headed obsession with bilateral trade deficits.

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等待果陀? – Soybean Farmer Edition

(Translation: “Waiting for Godot”) Many observers have noted that the Chinese must eventually come to the US for some of their soybean needs, as the supply of Argentine and Brazilian soybeans are depleted and American soybeans are harvested. Current futures for November 2018 do not indicate a price recovery to pre-Trump tariff war levels, even if they do come. As of today:

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A Time Series Approach to Estimating Excess Mortality Rates in Puerto Rico, Post-Maria

One of the aspects of previous formal studies of excess deaths in Puerto Rico in the aftermath of Hurricane Maria is that the population decline in the years preceding the hurricane strike, while acknowledged, is not accounted for (Santos-Lozada and Howard, 2017, Rivera and Rolke, 2018, Kishore et al., 2018, Santos-Lozada and Howard, 2018). This factor is potentially important because the “normal” number of deaths per month is a function of population size. Ignoring that fact, when taking an average over several years to infer the normal rate will bias up the estimated normal rate and bias down the implied number of excess fatalities.

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Predictions With and Without Confidence Intervals: Puerto Rico Post-Maria

Compare this assessment (5/31/2018):

Thus, the data suggests that the hurricane accelerated the deaths of ill and dying people, rather than killing them outright. I would expect the excess deaths at a year horizon (through, say, Oct. 1, 2018) to total perhaps 200-400. Still a notable number, but certainly not 4,600.

With a contemporaneous prediction:

From the survey data, we estimated a mortality rate of 14.3 deaths (95% confidence interval [CI], 9.8 to 18.9) per 1000 persons from September 20 through December 31, 2017. This rate yielded a total of 4645 excess deaths during this period (95% CI, 793 to 8498), equivalent to a 62% increase in the mortality rate as compared with the same period in 2016.

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When Storage Does Not Save One from Low Commodity Prices

When prices are low for a storable commodity, agents (farmers or intermediaries) can wait for higher prices to sell. Of course, there is a carrying cost to storage for many commodities, like soybeans (deterioration of stock, direct storage costs, opportunity cost of capital tied up in commodity). Hence, while storage can mitigate losses, it does not necessarily eliminate economic losses that arise from persistent tariffs.

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