Economics

So Who Gets Hurt in Trump’s Trade War?

Hint: Don’t just look overseas, America.

President Donald Trump.

Photographer: Chip Somodevilla/Getty Images North America

Today's Agenda

Oh what a glorious war.
Photographer: Bill Pugliano/Getty Images North America

Trade War Casualties Mount

The trade wars are still young, but already people are talking about nuclear winter — or, at least, an Ice Age.

The Trump administration Tuesday night threatened tariffs on $200 billion worth of Chinese imports. The long list includes several imports that don’t exist, such as live trout and tape players for cars. It also includes many more I didn’t realized existed but am definitely glad I know about now, including bull semen and badger hair

But the list also includes stuff American consumers actually buy, including TVs, handbags and digital cameras. This is somewhat politically risky, as tariffs could take effect at the end of August, just ahead of the midterms. And China has already proven it knows how to target retaliation at places where Trump voters live.

But U.S. companies will feel most of the pain, writes David Fickling. If fully enacted, the tariffs would erase about a quarter of the benefits of the corporate tax cuts. And that’s before China launches some of its unconventional weapons, including raising new roadblocks to U.S. businesses. Of course, this assumes China is willing to fight back for much longer — Christopher Balding argues President Donald Trump’s latest escalation could cut the legs out from under China’s manufacturing economy. (It’s bad enough that Asian countries are starting to balk at its ambitious Belt and Road Initiative, as Mihir Sharma writes.)

Still, if you weren’t already, it’s a good time to take more seriously the idea that Trump is willing to sacrifice the health of the U.S. economy to his beef with China, writes Dan Moss. The stock market sporadically seems to care about this, as it did today, with the S&P 500 falling nearly 1 percent. The economy and corporate profits have been hot enough lately to seemingly insulate America from the trade war’s chill. That security blanket gets thinner the longer this carries on.

NATO’s Not Feeling Neato

NATO’s Brussels summit kicked off with Trump berating allies for not spending more on defense and pointing out, in a nice-country-shame-if-something-should-happen-to-it kind of way, Germany’s need for Russian natural gas. Leonid Bershidsky notes Trump is incorrect about German energy sources and that he’s making it harder politically for Angela Merkel to bend to U.S. demands. 

Eli Lake writes Trump is a noisy distraction from NATO’s more pressing problem — Turkey’s steady drift into Vladimir Putin’s orbit: “There is no mechanism for kicking a member out of the alliance, but Turkey should at least begin to feel some pain and pressure for its drift toward Russia. Trump has not availed himself of that opportunity.”

Another topic on the agenda in Brussels is the long, long war in Afghanistan. Trump’s antagonism of NATO allies might eventually inspire them to abandon that mission — but then again, Trump may not stay fully committed to the war himself, writes Hal Brands.

And even after Trump is gone, the changes he’s wrought to these alliances (and free trade, and many other things) may linger on, warns Tyler Cowen.

Musk’s Tunnel Vision

Elon Musk’s plan to build a transit link from Chicago to O’Hare International Airport so far sounds a lot like his plans for other things — a little too optimistic and fuzzy on the details. Still, there’s nothing wrong with getting more eyeballs on America’s crumbling mass transit, write Bloomberg’s editors.

The Productivity Puzzle

“Baumol’s disease” isn’t a rare scalp condition, but what economists call an affliction of industries so reliant on humans that technology can’t make them more productive. It may help solve the mystery of why productivity has been falling even as technological advancement marches on, writes Peter Orszag, citing new research by Adair Turner. It seems people are using the extra cash generated by fancy new technologies to spend on services such as pedicures and food delivery, which can’t be automated so easily. 

How Comcast Can Beat Disney By Losing

Comcast Corp. is trying to outbid The Walt Disney Co. for some shiny prizes: Twenty-First Century Fox Inc.’s entertainment assets and part of British broadcaster Sky PLC. It really can’t afford these deals, but Comcast’s CEO Brian Roberts wills it to be so! Tara Lachapelle points out he could still win simply by making Disney pay a lot.

Chart Attack 

The Treasury yield curve — the gap between long- and short-term Treasury yields — is about to invert, typically a strong recession signal. The Fed could stop this from happening — but it doesn’t seem to care, writes Brian Chappatta.

General Electric Co. had to break up because it was “too complicated to succeed,” writes Brooke Sutherland.  It’s not alone. Brooke finds a bunch of mini-GEs out there that need to slim down. But she notes it won’t be as easy for them as it was for GE, as their smaller scale makes it harder to attract buyers for their parts.

Speed Reading

Bitcoin looks more like gold than a currency — and not in a good way. — Noah Smith

Europe criticizes Silicon Valley monopolies, but it’s not so great at trustbusting either. — Ferdinando Giugliano

Welcome to China, Tesla. It's going to cost you. — Anjani Trivedi

Your raise should be coming soon. — Barry Ritholtz

We’re making some advances in the war on antibiotic-resistant bacteria. — Faye Flam

Trump says he got Pfizer Inc. to cut drug prices. Not really. — Max Nisen

ICYMI

Papa John’s International Inc.’s founder allegedly said some more racial stuff. Twitter is cracking down on fake accounts. Rich people may be able to use the new low corporate tax rate.

Kickers

The PR campaign for Sacha Baron Cohen’s new show got a lift from Sarah Palin.

A giant, mysterious black coffin has been found in Egypt. I’m sure it’s fine to open it.

Tools found in China suggest human ancestors left Africa earlier than we think.

Humanity may not have arisen from a single point, but all over Africa.

Coincidences happen all the time — but are they meaningful?

Note: Please send flint tools, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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