American Consequences - September 2018


Scott Garliss

ASK AN EXPERT Re: The Certain Loser in November’s Congressional Elections February issue of American Consequences Ever since President Trump has brought up the matter of tariffs, I have been wondering what the disparity in tariffs are and where the problem exists. Can you enlighten? – Mahalo, John A.

However, today, the tide has turned. Unemployment has dropped as low 3.8% in May and underemployment has fallen to 7.6%. Recent GDP growth indicated domestic economic growth of 4.1%. That is the best quarterly data we’ve seen since 2014. If that type of number were to play out for the entire year, you’d have to go back to 2000. The White House sees the pick-up in economic growth. Administration officials realize last year’s tax cuts are likely stimulating this growth. They also see that the rest of the world is not experiencing the same acceleration. They feel they can strike better bargain dealing from a position of strength today. As an adage on Wall Street puts it, “ Sell when you can, not when you have to .” There are three main negotiations taking place – China, the European Union (EU), and the North American Free Trade Agreement (NAFTA). NAFTA is straightforward. The deal went into effect in January 1994. The administration feels it’s time to refresh the terms of the deal.

P.J. O’Rourke comment: Nope. I’m dumb as a box of rocks on the subject. If you don’t mind, John, let me bring an expert in to answer your question – Scott Garliss, who you may know from our What Moved the Market section each month... Scott Garliss comment: John, I wish the answer were simple... Let’s think about the angle the president is coming from. He believes deals with foreign entities were struck during times when the U.S. was not dealing from a position of strength. He’s focusing on the period coming out of the Great Recession 10 years ago. His concern is that the administration at the time was more of the mindset that they would do any deal for the sake of a deal and the economy. And at that time, we needed to keep the lights on and the capital flowing. The unemployment rate got as high as 10% and the underemployment rate (total unemployed plus people neither working nor seeking work) reached as high as 17.1% at the end of 2009.

18 September 2018

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