Trade, Tariffs, Globalization, Strategic Mercantilismm and Globalism itself

[ya]

The below might still occur.

1. Implementation of a Tiered Trade System
Miran’s vision includes a tiered system for global trade partners, where countries are categorized based on specific criteria:
Criteria for Tiers: Countries would be evaluated on:
Currency Behavior: Whether they manipulate their currencies to gain trade advantages (e.g., keeping their currency undervalued to boost exports).

Intellectual Property (IP) Protection: Their commitment to protecting U.S. intellectual property, a longstanding issue with countries like China.

Market Openness: The extent to which their markets are open to U.S. goods, services, and investments.

Security Alignment with the U.S.: Their geopolitical alignment, particularly in supporting U.S. security interests (e.g., military cooperation, support for U.S. foreign policy goals).

What to Expect:
Formal Tier Assignments: The U.S. might publicly classify countries into tiers, with each tier facing different tariff rates. For example, close allies like Canada or the UK, who align on security and IP protection, might be placed in a lower-tariff tier, while countries like China or those with poor IP records might face higher tariffs.

Negotiation Pressure: Countries in higher-tariff tiers would face economic pressure to meet U.S. conditions (e.g., cracking down on IP theft, opening markets) to move to a lower-tariff tier. This could lead to a wave of bilateral trade negotiations, with the U.S. leveraging its market access as a bargaining chip.

Global Realignment: Some countries might align more closely with the U.S. to secure better trade terms, while others might deepen ties with alternative powers like China, potentially leading to a more fragmented global trade system.

2. Escalation of Geopolitical Leverage Through Trade
Miran’s paper emphasizes using market access as a tool of foreign policy, tying economic benefits to security alignment. This could lead to:
"Fair Trade Umbrella" Enforcement:
Countries seeking U.S. military protection (e.g., NATO allies, partners in the Indo-Pacific) might be required to align economically with the U.S. For example, nations like Japan or South Korea, which rely on U.S. defense support against China or North Korea, might face pressure to adopt U.S.-friendly trade policies, such as reducing trade with China or joining U.S.-led tariff regimes.

This could manifest as formal agreements linking trade benefits to defense cooperation, such as requiring countries to sign onto U.S.-led anti-China trade blocs to maintain low tariffs.

Sanctions and Trade Restrictions:
Countries that refuse to align with U.S. interests might face not only higher tariffs but also secondary sanctions. For instance, nations that continue to trade heavily with China despite U.S. tariffs might be excluded from U.S. financial systems or face restrictions on dollar transactions.

This could lead to a broader use of economic coercion, where the U.S. uses its control over the dollar and its market to enforce compliance.

3. Measures to Depreciate the Dollar
Miran’s paper highlights the overvaluation of the dollar as a core problem for U.S. competitiveness and proposes unconventional measures to address it. While universal tariffs are a first step, the following might still be implemented:
Mar-a-Lago Accord:
Miran suggests a coordinated effort with trading partners to intervene in currency markets to weaken the dollar. This could involve a formal agreement—dubbed a "Mar-a-Lago Accord"—where countries like Japan, the EU, and others agree to sell dollars or buy their own currencies to reduce dollar appreciation.

What to Expect: High-level summits or negotiations where the U.S. pressures allies to participate in currency interventions. This might lead to tensions with countries that benefit from a strong dollar (e.g., those holding large dollar-denominated reserves).

User Fee on Foreign Holdings of U.S. Treasuries:
Miran proposes a "user fee" on foreign holdings of U.S. Treasuries to discourage excessive dollar hoarding, which contributes to dollar appreciation.

What to Expect: The U.S. Treasury might introduce a policy taxing foreign central banks or investors for holding U.S. Treasuries, potentially causing a sell-off of Treasuries and a decline in the dollar’s value. This could roil global financial markets, as countries like China (a major holder of U.S. debt) might retaliate by diversifying away from dollar assets.

Lengthening Treasury Maturities:
Miran suggests pressuring foreign governments to shift their Treasury holdings to longer maturities, reducing short-term demand for dollars.

What to Expect: Diplomatic efforts to convince countries like Saudi Arabia or Japan to buy longer-term U.S. bonds, potentially paired with incentives like tariff relief. This could lead to shifts in global bond markets and affect interest rates.

4. Further Isolation of China
Miran views China’s mercantilist policies as an existential threat, and his strategy aims to isolate China economically. While universal tariffs have already started, the following steps might follow:
Forcing a Binary Choice:
The U.S. might intensify pressure on third countries to choose between trading with the U.S. or China. For example, countries like Vietnam or Mexico, which have been used as conduits for Chinese goods to bypass U.S. tariffs, might face ultimatums to crack down on such practices or lose access to the U.S. market.

What to Expect: A wave of trade disputes as countries caught in the middle (e.g., ASEAN nations) try to balance relations with both powers. Some might align with the U.S., while others might deepen ties with China, potentially leading to rival trade blocs.

Expansion of Tariffs and Trade Barriers:
Beyond universal tariffs, the U.S. might target specific Chinese industries (e.g., tech, clean energy) with additional restrictions, such as export controls or investment bans, to further limit China’s global economic influence.

What to Expect: Escalation of U.S.-China trade tensions, potentially leading to retaliatory measures from China, such as restrictions on rare earth exports or further decoupling of supply chains.

5. Rebuilding U.S. Industrial Capacity
A core goal of Miran’s plan is to reverse the hollowing out of the U.S. industrial base. While tariffs aim to protect domestic industries, additional steps might include:
Industrial Policy Initiatives:
The U.S. might implement subsidies, tax incentives, or direct investments to rebuild manufacturing in key sectors like steel, semiconductors, and clean energy technologies.

What to Expect: Legislation or executive actions to fund domestic production, such as expanding programs like the CHIPS Act for semiconductors or creating new initiatives for critical minerals (as suggested in the Carnegie Endowment web result, web ID: 3). This could lead to a resurgence of U.S. manufacturing but might also increase costs for consumers if domestic production is less efficient.

Supply Chain Realignment:
The U.S. might encourage "friendshoring" or "nearshoring," incentivizing companies to move supply chains to allied countries or back to the U.S. rather than relying on China.

What to Expect: Trade agreements with allies that include supply chain provisions, such as joint investments in critical minerals or manufacturing hubs in North America (e.g., with Canada and Mexico).

6. Global Trade Fragmentation
Miran’s shift from multilateralism to conditional bilateralism could lead to a more fragmented global trade system:
Decline of Multilateral Institutions:
The U.S. might further distance itself from organizations like the World Trade Organization (WTO), which Miran sees as ineffective in addressing modern trade challenges like China’s mercantilism.

What to Expect: A weakened WTO, with the U.S. focusing on bilateral deals or small coalitions (e.g., a U.S.-led trade bloc with allies). This could lead to competing trade systems, with China potentially leading an alternative bloc through initiatives like the Belt and Road.

Regional Trade Blocs:
Countries might form regional trade blocs to counter U.S. pressure. For example, the EU might deepen its own trade integration, while China could expand influence through agreements like the Regional Comprehensive Economic Partnership (RCEP).

What to Expect: A more polarized global economy, with increased trade barriers between blocs and potential disruptions to global supply chains.

7. Economic and Geopolitical Risks
While Miran’s plan aims to strengthen the U.S., its implementation could lead to unintended consequences:
Market Volatility:
Measures like a user fee on Treasuries or currency interventions could cause volatility in financial markets. A sudden drop in the dollar’s value might lead to inflation in the U.S. as imports become more expensive, or it could trigger capital flight from dollar-based assets.

What to Expect: Increased market uncertainty, potentially leading to stock market fluctuations or a rise in U.S. interest rates as investors demand higher yields on Treasuries.

Retaliation from Trading Partners:
Countries facing higher U.S. tariffs might retaliate with their own tariffs or trade barriers, as seen in past U.S.-China trade disputes (e.g., China targeting U.S. agricultural exports). The EU, Canada, or others might also push back if they feel unfairly targeted.

What to Expect: Trade wars that disrupt global commerce, potentially harming U.S. exporters (e.g., farmers, tech companies) and raising consumer prices.

Geopolitical Backlash:
Forcing countries to choose between the U.S. and China could alienate key partners, especially in the Global South, where nations might resent U.S. economic coercion. This could drive some countries closer to China or other powers like Russia.

What to Expect: A decline in U.S. soft power, with potential diplomatic fallout in international forums like the UN or G20.

Timeline and Triggers
Short Term (2025-2026): Expect the formal rollout of the tiered trade system, with the U.S. announcing tier assignments and negotiating with key partners. Measures to depreciate the dollar, like the Mar-a-Lago Accord or Treasury user fees, might also be introduced, potentially causing market turbulence.

Medium Term (2026-2028): The U.S. might intensify efforts to isolate China, with more countries forced to choose sides. Industrial policy initiatives to rebuild U.S. manufacturing could gain momentum, supported by government funding and incentives.

Long Term (2028 and Beyond): The global trade system might fully fragment into competing blocs, with the U.S. leading a coalition of aligned nations and China heading an alternative system. The success of Miran’s plan will depend on whether the U.S. can rebuild its industrial base and maintain global influence without triggering widespread economic or geopolitical instability.

Conclusion
Miran’s paper outlines a transformative agenda, and while universal tariffs have already begun, the full scope of his vision—tiered trade systems, dollar depreciation measures, and a reorientation of global trade around U.S. interests—has yet to unfold. These steps could strengthen the U.S. economically and geopolitically, but they also risk trade wars, market volatility, and global fragmentation. The coming years will likely see a mix of aggressive U.S. policy moves, international pushback, and significant shifts in the global economic order.

[Body-by-Guinness]

Trump's advisor Miran, has laid out the plan all along. You can plug this pdf into an AI engine to get the bullet points as to whats still to come.

https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf

Ye gods, Ya, what a comprehensive and revealing piece!

[Crafty_Dog]

The Trade Secret of Intellectual Trumpism
The goal of all these tariffs for avowed protectionists is to make Americans less able to purchase things.
Joseph C. Sternberg
April 10, 2025 2:28 pm ET

President Trump’s sudden reversal this week is unlikely to mark the beginning of the end of his adventures in tariff-land, alas. Two details about this month’s trade fiasco argue for pessimism: Mr. Trump insists on maintaining a 10% base tariff globally despite the “pause” he announced Wednesday. And the administration seems unconcerned about the costs these policies will impose on American households. Both are clues to the true magnitude of Mr. Trump’s trade ambitions.

It’s time to dig into the intellectual version of Trumpism—and yes, there is such a thing. Mr. Trump’s justifications and objectives for his trade policies keep shifting. But it’s becoming clearer that tariffs for him aren’t simply a matter of negotiating leverage, or revenue raising, or protecting a few strategic industries. The policy that’s coming into effect manifests the views of a circle of economists whose understanding of U.S. trading relationships is systematic but unconventional and whose policy prescriptions will come as an unpleasant surprise to many Americans.

The core of Intellectual Trumpism runs as follows: The global economy is characterized by large, policy-induced imbalances in both trade and capital flows. These are caused at root by the decisions of some large economies—Germany, Japan and especially China are the usual suspects—to subsidize production by suppressing consumption in their domestic economies. This creates “surplus” output that they foist on the U.S.

This view isn’t wrong, so far as it goes. Those economies and others historically deployed a range of policy tools to boost exports. In China, the most egregious manifestations are direct subsidies for exporting companies. Less visible to foreign eyes is the financial repression: the deliberate suppression of domestic interest rates and political control of credit to subsidize businesses (which benefit from cheap borrowing) at the expense of consumers (who receive less income from their saving and investment). Such policies can take many forms. In Germany, extensive subsidies shield large companies—meaning exporters—from the worst energy-price consequences of Berlin’s dumb net-zero climate policies. Households pay full freight for electricity.

The net effect of all these policies is a massive transfer of resources in these countries from households to producers, in the expectation that the U.S. will absorb all the products that domestic consumers can’t.

Trump-adjacent economists say we gobble up those products because we must. This is the core argument of Michael Pettis, a Beijing-based finance professor (who has contributed to these pages) whose work popularizing various earlier trade theories appears to have become influential in Mr. Trump’s circle. Because other economies underconsume, the argument runs, they accumulate excess savings. They recycle these savings into the U.S., where we transform foreign claims (in the form of equity investments or purchases of American debt) into consumption of the foreign country’s excess production. Hey presto, a trade deficit.

An oddity of this argument is how little agency the U.S. is said to exercise. Once Washington had made the first mistake of opening our economy via tariff reductions and the free flow of capital, it was off to the races.

The truth is much more complex, and politically challenging: While some other economies suppress domestic consumption and subsidize export production, Americans choose to do almost exactly the opposite. Through political choices such as suppressing energy production and distribution, or permitting red tape and the like, or any number of other policy foibles, we make it much harder than it otherwise would be to produce things in the U.S. Meanwhile, you can’t take a step in America without tripping over a consumption subsidy.

To cite a few: Fannie Mae and Freddie Mac stimulate overconsumption of housing. Subsidized student loans stimulate overconsumption of higher education (which, given the poor lifetime earnings prospects of many degrees, should indeed be understood as consumption rather than as an investment in human capital). The earned-income tax credit creates complex distortions that at the margin subsidize consumption while discouraging additional productive work.

Most glaring, though, are our entitlements. Social Security, Medicare and Medicaid, not to mention a raft of other benefit programs, funnel vast quantities of money into consumption. The trick here is that we’re able to finance these via chronic fiscal deficits funded by foreign investors, meaning at the margin Americans borrow from the rest of the world at ultralow interest rates and funnel the cash into consumption at home.

In this sense, the U.S. trade deficit is a policy choice—and a popular one, for obvious reasons. This explains better than globalist-corporatist conspiracy fantasies why this state of affairs has persisted for so long. The root-causes solution to the perceived problem of the trade deficit would be to rebalance the American economy away from such heavy consumption subsidies and such steep penalties for production.

Some elements of such an agenda can be popular, as Mr. Trump is discovering with his deregulation and cheaper-energy drives. But the entitlement half is a minefield. Republicans are reluctant even about dialing back Medicaid benefits for able-bodied working-age people. The last time anyone tried to reform Social Security, President George W. Bush backed allowing a portion of payroll tax payments to flow into individual investment accounts. The existing system creates a consumption subsidy by transforming tax payments into transfers to recipients; the reform would have created a form of investment subsidy. That bit of good sense degenerated into a traumatic political fiasco for the GOP.

It’s easier instead to fall back on the notion that the U.S. is a victim of foreigners’ decisions to distort their own economies. This opens the door to tariffs as a more politically plausible solution. The U.S. can deploy protectionism to thwart foreign attempts to force us to absorb Chinese, German or Japanese overproduction. Maybe we can even create our own excess production, protectionists hope, if tariffs transfer money from households to companies (in the form of higher prices) and companies use that windfall to expand production.

Note that the end result is in one way the same as entitlement reform: less U.S. consumption, only via the demand suppression of higher import prices. But beyond that, the two policies diverge—and not to Intellectual Trumpism’s advantage. Among many other problems, protectionism risks depressing domestic production, a warning emerging from industries across America whose supply chains are imperiled by tariffs. It certainly doesn’t help domestic productivity. Entitlement reform, by contrast, tends to be an enormous supply-side spur to future economic growth that benefits households as inflation-adjusted wages rise.

This explains the recent startling admission from Trump trade adviser Peter Navarro that tariffs could cost the U.S. economy $6 trillion over 10 years, and the more startling fact that he wasn’t apologetic about this. The Trump bet is that trimming American consumption via higher prices is a more politically palatable way to rebalance U.S. trade than paring back entitlements would be. Hundreds of millions of American voter-consumers will decide in coming months whether they agree.

[Crafty_Dog]

second

April 11, 2025
                                               
                                       Southeast Asia Heeds Trade Warnings
                                       Though the tariff delay was a welcome surprise, regional states know they need to diversify trade partners.
                                                  By: Victoria Herczegh
                                       
                                          
When they were first announced, U.S. President Donald Trump’s “Liberation Day” tariffs brought panic and confusion to markets all around the world, perhaps nowhere more so than in Southeast Asia. Those hardest hit – Cambodia, Laos, Vietnam and Myanmar – have close economic and diplomatic ties with China, which itself is facing monumental tariffs, but none were spared. Though Trump has since announced a 90-day pause in tariffs to allow countries to plan and negotiate, many regional countries, including the poorer ones already reeling from the cuts to the United States Agency for International Development, are convinced that the U.S. is withdrawing from the region, and that they are increasingly left to their own devices.

It’s unclear what they’ll do in America’s absence. Beijing may seem like a more reliable partner, and indeed, closer cooperation seems to serve the interests of both sides. But there are obstacles that will prevent Southeast Asian nations from meaningfully pivoting to China in the long term.

(click to enlarge)
Though the Association of Southeast Asian Nations, which comprises most of the major economies in the region, may be one bloc, its members have different levels of exposure to the U.S., and even the blanket 10 percent tariffs planned by Trump hold risks for everyone. Even the Philippines, which is less exposed than most, is compromised. Though U.S. exports accounted for just 2.6 percent of its gross domestic product last year, some 40 percent of Philippine textile exports end up in America. But Manila at least has some room to maneuver. For one thing, its trade relationship with the U.S. is more symmetrical than those of its neighbors; U.S. imports from the Philippines were valued at $14.2 billion in 2024, up 7 percent from 2023. The Philippines can – and will – reduce tariffs on its main export products in exchange for a similar move by the United States. Moreover, the Philippines can take advantage of its membership in the Regional Comprehensive Economic Partnership, a trade agreement that removes at least 90 percent of export tariffs for member states, including ASEAN, Australia, China, Japan, South Korea and New Zealand. Additional trade within the bloc could help alleviate economic stress in certain sectors brought on by U.S. tariffs. Manila is meanwhile considering renewing negotiations for a free trade agreement with the EU, which, if completed, will also blunt potential tariff damage.

Indonesia is in slightly worse shape. It has a comparatively larger domestic consumer market, and its export-to-GDP ratio is close to 25 percent, about 9 percent of which is due to U.S. exports. The country has had an annual trade surplus with the U.S. since 2019, peaking at $18.9 billion in 2022 and falling to about $16.8 billion last year. Some sectors are about to be hit hard. Roughly one-third of the respective labor forces of Nike and Adidas, for example, are stationed in Indonesia, putting the apparel and shoe industry in peril. Indonesia’s crucial furniture industry, which exports about 50 percent of its products to the U.S., is also highly likely to suffer a downturn. Electronics and electrical equipment, its top export to the U.S. at $4.8 billion, will also feel the effects of tariffs. Accordingly, Jakarta is prioritizing dialogue with Washington in hopes of a “fair and good relationship.”

(click to enlarge)
This marks a shift from Indonesia’s previous position on the U.S. and China. The government in Jakarta seemed to be moving closer to Beijing, wanting beneficial trade deals so much that at one point it even seemed amenable to acknowledging China’s claims on Indonesian territorial waters. Now, if Indonesia wants the U.S. to consider its needs, it will likely have to distance itself somewhat from China. It will likely look to get closer to its fellow ASEAN members. In fact, it recently (and surprisingly) struck a deal with Vietnam on trade that also resolved overlapping claims on exclusive economic zones. Moreover, Indonesia could, in theory, intensify trade with other markets like Egypt, Nigeria, South Africa and Kenya that are potentially interested in buying electronics, motor vehicles and palm oil. It could also, in theory, goose trade with South America, particularly Chile, its biggest regional trade partner, sending broadcasting equipment, footwear and automotive products. The Comprehensive Economic Partnership Agreement it signed with Canada last year gives Indonesia yet another option for diversifying its exports.

Of all the countries in Southeast Asia, Cambodia is possibly in the worst position. Over the past few years, this small, poor country’s manufacturing industry grew steadily, spurred by the production and exports of textiles, apparel, footwear and furniture. Exports to the U.S. increased to nearly $10 billion from January to December 2024, up 11 percent compared to 2023, and it currently has a $12.3 billion export surplus. Cambodia has emerged as a preferred destination for Chinese manufacturers seeking to lower their production costs and, more recently, to avoid tariffs. More than half of the country’s factories are, in fact, owned by China, and of all ASEAN members it is the closest to China politically and diplomatically. It is therefore likely that the U.S. will use Cambodia to “punish” China. The country is already prone to unrest, and with 17 percent of the population still living in poverty, it cannot afford to lose any export revenue.

Unsurprisingly, Phnom Penh immediately asked Washington for relief after “Liberation Day,” and its leaders expressed a willingness to both diversify its clients and give the U.S. preferential trade treatment. And, like its neighbors, Cambodia seems poised to diversify its trade partners. For the past five years, Cambodia has expanded its reach in European markets, and there is interest on both sides to expand it further. Notably, it has grown disillusioned with the slow progress and underperformance of China-backed infrastructure projects, so it has decided to mend ties with fellow ASEAN members in the hopes of upgrading diplomatic and trade status with the likes of Vietnam and Laos. While Cambodia has some options, its ability to find new partners will be undermined by additional tariffs, should negotiations fail.

Vietnam is in a similar but more enviable situation as Cambodia. Its economic growth was driven by the manufacture and export of electronics, textiles, footwear and agricultural products, but unlike Cambodia, it has a more developed economy and a more diverse export portfolio. After the tariff announcement, the government in Hanoi established a “rapid reaction force,” requesting ministries to work on ways to effectively implement cooperation mechanisms and agreements with Washington in an effort to encourage U.S. businesses to invest in strategic fields and products where they have advantages and where the both nations have demand. So, while Vietnam is looking to strike with the U.S. first, it is likewise pursuing other options in Europe and in ASEAN.

China, meanwhile, will be affected by ASEAN's responses, but it’s hard to see any of the bigger players moving more into China’s orbit, especially if doing so compromised their stated goal of enhancing inter-ASEAN trade. The Philippines is a close U.S. ally and the least likely to align with Beijing. For Indonesia, making concessions to Washington is one thing; abandoning Beijing is something else entirely. Cambodia is already close to China, and though Vietnam has made efforts to diversify its alliances to avoid getting caught in the U.S.-China trade conflict, it is still overwhelmingly dependent on trade with China, which accounted for 26 percent of Vietnam’s trade turnover in 2024. Yet, Cambodia and Vietnam both know how constrictive a relationship with China can be, whether through Beijing’s reneging on funding or through confrontations in the South China Sea. China’s unreliability is an advantage to Washington, the on-again, off-again tariffs notwithstanding, especially since China is facing steep tariffs of its own. If it is to weather the storm, Beijing needs to achieve economic self-reliance, especially in tech, and make sure its people don’t get too restive. The bottom line is that most of these countries would rather negotiate a deal with the U.S. than cast their lot in with China.
Even so, Beijing will try to capitalize on Washington’s apparent disregard for Southeast Asia. Later this month, President Xi Jinping is embarking on a rare three-nation visit to Vietnam, Cambodia and Malaysia in hopes of appearing as a stabilizing force and strengthening trade and defense ties. (Malaysia got off lucky on Liberation Day, seeing as how the U.S. is its third largest trading partner, buying 11 percent of its exports, but then Malaysia is also set to lead ASEAN negotiations with the U.S. on tariff remediation.)

So long as China prioritizes its domestic economy over its regional economy, and so long as ASEAN nations still have a chance to persuade the Trump administration to lower its tariffs, we don’t expect a mass exodus of Southeast Asian countries from the U.S. camp into the welcoming arms of China. The likelier outcome is that Beijing will continue to have good relations with the countries it already has good relations with, and it will maintain its influence in small, weaker economies like Laos and Myanmar. Still, that ASEAN members have been forced to diversify their trade partners, to include each other, is no small thing.

[Crafty_Dog]

April 9, 2025
                                 
                                           

                                    

                                    
                                       Oil in the Trade War
                                       OPEC’s plan to increase production actually has little to do with tariffs.
                                                  By: Ekaterina Zolotova
                                       
                                          
Immediately after U.S. President Donald Trump announced his slew of tariffs last week, OPEC+ members, led by Russia and Saudi Arabia, announced a significant increase in oil production for May. At 411,000 barrels per day, up from a planned 135,000 bpd, this is the group’s highest output since 2020. The move has little to do with the trade war; Russia was not targeted by tariffs at all (the sanctions regime against it practically brought trade down to zero), and the tariffs levied against Saudi Arabia, few as they were, excluded oil so as not to disrupt the U.S. energy market. In fact, OPEC’s announcement was almost certainly made in concert with Washington, given their close interaction in recent weeks. Indeed, it may well be the beginning of concessions and mutually agreed actions meant to create a market that will suit everyone involved.

That’s not to say the new policy won’t be disruptive – even for Russia, Saudi Arabia and the U.S. The sharp increase in OPEC production and the tariffs from the U.S., especially against the backdrop of lowered demand from major oil importers in Asia, are shocks to the energy market. Prices for Brent crude and WTI crude fell by $10 to $60-$65 per barrel over the weekend. Riyadh needs oil to be over $90 per barrel to cover government spending, so the current rates will force it to cut spending on several of its flagship projects. Moscow needs all the money it can get to fund the war in Ukraine and to triage its economy. And the U.S., despite increased exports in recent years, needs oil revenue to reduce its trade deficit and maintain drilling (which $60-per-barrel prices allows it to do).

(click to enlarge)
The only reason they would agree to goose production is that they see indirect benefits from lower prices. Immediately after starting his second term in office, Trump demanded that Saudi Arabia and OPEC reduce the cost of oil, in part to put pressure on Russia in Ukraine. Because this necessarily comes at the expense of long-term benefits, it’s likely that the call for low prices was meant to ease near-term inflationary pressure on U.S. consumers. Lower oil prices could, in theory, help offset the growth of domestic food prices by reducing transport costs. And though it’s difficult to predict whether commodity prices will fall or how much savings will be generated if tariffs remain in place, the calculus U.S. leaders are making is that less money on gas means more discretionary income for consumers.

For Saudi Arabia, OPEC+ is the vehicle through which it manages global supply and demand, so it’s in Riyadh's interests to keep it buoyant and relevant. But more important, temporarily lowering oil prices can help eliminate competitors and rogue actors that ignore its oil dictates. In Kazakhstan, for example, producers have recently increased production as part of a new expansion project for the Tengiz oil field, exceeding targets by as much as 300,000 barrels per day. And in Iraq, the government has no sign of implementing compensatory cuts for past overproduction. But the bigger target here is Iran, which Washington and Riyadh are clearly targeting. Washington warned in February that it intends to dramatically reduce Iranian oil exports as part of the maximum pressure campaign against Tehran’s nuclear program. As always, what hurts Iran tends to help Saudi Arabia – economically and geopolitically.

Of the three, Russia's position in the oil market is the most shaky, though Moscow seems to be better prepared for price fluctuations this year than last: In the 2025 budget, oil and gas revenues was set at 10.9 trillion rubles ($126 billion), projecting an average annual oil export price of $69.70 per barrel. More, sanctions prevent Moscow from fully enjoying the benefits of high oil prices, and any major deviation from its projections will hurt its bottom line.

And the government will probably be unable to offset the drop in price with increased supplies since that, too, is constrained by sanctions. India, for example, has been a reliable oil buyer despite sanctions, but even it recently refused to accept a tanker carrying 767,000 barrels of Russian oil ostensibly for inadequate documentation. And in late March, the vice president of Chinese company Sinopec Shanghai Petrochemical, which had also frequently defied sanctions, said the firm had reduced its oil purchases from Russia in the first quarter of 2025 after more than doubling purchases in 2024.

Despite the drawbacks, Moscow has had to become more accommodating to both OPEC and the U.S., thanks to the still unresolved conflict in Ukraine, the prospect of economic slowdown and the investment flight out of Russia. It seems as though Moscow agreed to more significant concessions in the oil market in exchange for, among other things, the return of several banks to the SWIFT system, the U.S.-Russia reconciliation and the negotiations on Ukraine.

Meanwhile, Russia is also interested in maintaining dialogue with Saudi Arabia. If sanctions are ever lifted, Russia will be able to sell oil freely again. Keeping the momentum toward negotiation and peace, then, requires market considerations for the Middle East. With prices as low as they are, Asian buyers will have no reason to open themselves to sanctions by buying Russian oil at a discount. Indeed, India's largest refineries recently announced they would look to the Middle East instead of Russia for raw materials. Yet Moscow is confident it will maintain its share of the market because Arab countries can produce only so much before doing so contravenes their own imperatives. And in any case, Moscow has in place several long-term oil contracts that will continue to pay out, and it believes it will be able to make enough headway in Asian markets to stay afloat.
In fact, for the Kremlin there are several short-term benefits to lower oil prices. Its budget accounts for not only the price of oil but also the ruble exchange rate at which oil is traded – the average annual dollar exchange rate is 96.5 rubles. The recent strengthening of the ruble to 83 rubles per dollar reduces oil and gas revenues for the Russian budget. In this case, the weakening of the ruble, which is very sensitive to changes in the main export market, may actually work in Moscow's favor because it could soften the decline in oil prices and exports. Since OPEC’s announcement, the exchange rate has risen by only 2 rubles.
The U.S., Russia and Saudi Arabia believe whatever pain the announcement may cause will be short-lived. Gradual increases can always be suspended or canceled, depending on market conditions, to maintain oil market stability. Oil exporters likely expect this to be a typical bear market lasting at least two months and with a price drop of at least 20 percent. This could be long enough for the U.S. and Saudi Arabia to eliminate competitors but not long enough that they will suffer significant losses. It’s not without risk, but OPEC and the U.S. probably suspect that demand will, in turn, rise.

And in this regard, there is room to maneuver. The U.S. and Russia both expect domestic demand to grow, especially within the framework of an import substitution policy, which Moscow is forced to carry out in light of sanctions, and which the U.S. is trying to stimulate through protectionist policies. And despite the prevailing pessimism over reduced industrial production in China, the world’s largest oil buyer, exporters believe the rest of Asia will make up the loss in demand. After all, China will likely rebound in some form or fashion, and India alone is buying more oil at a colossal pace. And it’s not out of the question that both India and China take advantage of low prices by increasing their imports.

The oil market has already begun to recover from the initial shock of the OPEC announcement, and Brent and WTI futures have begun to grow. In general, the oil market remains uncertain amid the brewing trade war and slowed demand. However, the actions of the U.S., Saudi Arabia and Russia suggest that they have reached some understanding about prices. As negotiations continue, expect more concessions for favorable geopolitical outcomes.

[DougMacG]

https://cowboystatedaily.com/2025/04/11/australia-sells-29b-in-beef-in-america-wont-allow-one-hamburger-in-from-u-s/

Australia Sells $29B In Beef In America, Won’t Allow ‘One Hamburger’ In From U.S.

The previous president never mentioned it but the New York Times, Washington post, AP are all over it, oops they don't care. This international news comes from Wyoming.

To steal a line, the mainstream media covers stories like this, that vindicate Trump, with a pillow, until they stops breathing.

[DougMacG]

National Economic Council Director Kevin Hassett said today on CNN’s “State of the Union” that the Trump administration was negotiating trade policy with 130 countries.

[Crafty_Dog]

Can't say the WSJ is making an unfair point here:
==============================

The Lessons of Trump’s Tariff Exemptions
It’s good to be Apple’s Tim Cook but not to be a small manufacturer that can’t afford a K Street lobbyist.
By The Editorial Board
Updated April 13, 2025 4:07 pm ET

Tariffs are advertised in the name of helping American workers, but what do you know? They turn out to favor the powerful and politically connected. That’s the main message of President Trump’s decision to exempt smartphones and assorted electronic goods from his most onerous tariffs.

Customs and Border Protection (CBP) late Friday issued a notice listing products that will be exempt from Mr. Trump’s so-called reciprocal tariffs that can run as high as 145% on goods from China. The exclusions apply to smartphones, laptop computers, hard drives, computer processors, servers, memory chips, semiconductor manufacturing equipment, and other electronics.

The CBP notice takes the tariff rate on these products down considerably. Barron’s calculates that the exceptions cover $385 billion in 2024 imports. That includes $100 billion from China, or 23% of U.S. imports from that country. The tariff rate falls to 20% on the newly exempted Chinese exports.

These exemptions are good news for consumers who were facing much higher prices for smartphones that are a staple of modern life. How would you like a $2,400 iPhone? But the big winners are the giant companies that assemble these products abroad and now get a reprieve, at least for as long as they remain in Mr. Trump’s good political graces.

Apple CEO Tim Cook is a big winner, as are Dell Technologies’ Michael Dell, Jensen Huang of Nvidia, and the executives and shareholders of Hewlett-Packard and TSMC. This is no rap on them, since their job is look out for the best interests of shareholders and that means getting tariff carve-outs when they can. Some of the companies may not even have sought exemptions, though the opacity of the process for getting one is the Beltway Swamp’s dream.

The Trump exemptions carry several lessons that vindicate tariff critics. One is a rebuttal of the fantasy pitched by Commerce Secretary Howard Lutnick to CBS News that an “army of millions and millions of human beings screwing in little, little screws to make iPhones, that kind of thing is going to come to America” and be automated.

Guess not. As CEOs and these columns have argued, there aren’t nearly enough American workers who could do that work. And even if there were, most of the economic value-added doesn’t come from final-stage assembly. It comes from design and higher-end component supply. It is no credit to the Trump Administration to have a Commerce secretary who knows so little about modern commerce. Oh, and on Sunday Mr. Lutnick said the tariffs on electronics could go up again in the coming months.

The exemptions also expose the fiction that foreign exporters pay the bulk of tariff costs. If that were true, China would absorb the cost and U.S. consumers wouldn’t pay more. No exemptions would be needed. Mr. Trump wants the exemptions to avoid the political blame for rising prices on high-profile products.

This is also a tacit admission that tariffs will make American companies less globally competitive, especially in the artificial intelligence race. That explains the exemptions for ASML’s chip-making equipment and Nvidia’s graphic processing units. Mr. Trump first makes U.S. companies less competitive, then he and his Administration, in their unerring wisdom, pick exceptions worthy of help to remain competitive. Politicians, not success in the marketplace, pick business winners and losers.

The exemptions also undermine the Administration’s legal justification that his tariffs are needed to meet a national “emergency.” Imports of glassware and umbrellas from China are an emergency but imports of electronics aren’t? What are the Chamber of Commerce and other business groups waiting for to sue to block this presidential overreach?

***
All of this exposes the arbitrary political nature of tariffs. Some industries benefit but others don’t. Too bad if you make shoes, or clothing, or thousands of other consumer products that must pay the tariffs but lack the political or market clout to win exemptions. Too bad, too, if you’re a small manufacturer that relies on a component from China but can’t afford a high-priced K Street lobbyist.

Welcome to the new tariff economy, where you still pay onerous taxes, endure punishing regulation, and now must also navigate the political minefield of arbitrary tariffs.