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March 7, 2018 | Why Trump Will Lose His Trade War

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

GUALFIN, ARGENTINA – President Trump says he’s sticking to his guns on trade tariffs.

We’re glad to see it.

We’re tired of whiny, snively politicians – on this hand… on that hand… equivocating… backtracking… double-talking.

It’s good to see a man in office who is not afraid to stand by his positions, no matter how absurd and lunatic they are.

Meanwhile, word this morning is that crony insider Gary Cohn is leaving the White House… along with conservatives, free-traders, and the Old Republicans.

We’ll come back to that in a minute…

First, an update from the ranch.

 

 

Originario War

To fill in new readers, there’s a battle going on here in Argentina between property owners and people who claim to represent indigenous tribes – even some that may have disappeared before the conquistadors arrived.

They call themselves originarios… and claim the land is theirs because it was where their ancestors once lived.

There have been court fights and demonstrations… property has been seized… houses have been burnt… and there have even been a few murders.

We got an update on the local situation yesterday from our foreman, Gustavo.

“Everything is calm now,” he began. “We went up to fix the road, but they told us to stop. They didn’t want it fixed. So we let it go.

“[The ranch owner next-door] got into a real fight with the originarios on his place. They threw rocks at him. The police were up there for days. They barricaded the road to keep troublemakers out.

“But we haven’t had that kind of problem. The originarios here just seem to be pulling away from the rest of us. They don’t come to church anymore… or to our fiestas. They don’t even say hello. But we haven’t had any real trouble, either.”

 

We tried to make a deal with them last year. Gustavo and our lawyer rode up to try to work out a win-win deal.

“No, it just isn’t possible,” explained Gustavo. “You own this land. They think they own it. There’s no way to compromise on that.”

Yep… some deals are win-lose, Dear Reader. Nothing you can do about it.

“If you put sheep up in the high pasture, I think it will set them off,” Gustavo continued.

“Hmmm… maybe it’s best just to leave it alone,” we replied.

“Yes, but it’s the principle of the thing. They’ll think they can get away with stealing the land from us.”

“Well, maybe they can. Some battles are not worth fighting, especially when you’ll probably lose.”

Protection Racket

Meanwhile, Harley-Davidson came forward and explained to the president why a trade war is a losing proposition. Bloomberg:

The motorcycle maker is warning that Trump’s tariffs on steel and aluminum could drive up costs. European leaders’ threats of retaliation – which have specifically called out the iconic American company – also risk hurting sales overseas.

In other words, Trump’s trade tariffs will hurt the very heartland industries he pledged to help.

Harley-Davidson, and every other decent business, is forced to compete in a win-win world – by satisfying customers every day.

 

Nobody’s gotta buy a Harley. Raise the price, or simply do something that sours buyers on the American brand, and they stop buying. Already, Harley sales are falling all over the world.

Business leaders are neither heroes nor angels; like the rest of us, they are subject to influence. Give them the opportunity and they’d much prefer “protection” to competing honestly.

But protection is among the worst things you can give to a business; you may as well tell your children not to bother with their homework.

Legendary steel executive Ken Iverson explained it as follows:

As soon as prices began to rise so that the steel companies began to be profitable, they stopped modernizing. It’s only under intense competitive pressure – both internally from the mini-mills, and externally from the Japanese and the Koreans – that the big steel companies have been forced to modernize.

Unless you’re under intense competitive pressure, and it becomes a question of the survival of the business to do it, you’re just going to lapse back into your old ways. There’s no other answer.

But Mr. Trump thinks he has another answer. He spelled it out in his books. Hardly a single one of his tweets fails to mention it. He thinks you win by making someone else lose.

That’s certainly the way government works.

Only one person wins the Oval Office at a time. One party wins; the other loses. It’s either red or blue. One faction of Deep State insiders gains control of the government; others lose it.

But this win-lose programming doesn’t work for business, commerce, trade, marriage, family, or friendships.

In these things – and in most of life – you win by letting the other guy win, too.

Regards,

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Bill

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March 7th, 2018

Posted In: Bill Bonner's Diary

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