Crypto News: Supply Lines: Digesting tariff threats

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Donald Trump is seven weeks away from re-entering the White House and yet he's already threatened to slap new tariffs on countries that are home to almost half the world's 8 billion people. Which means we are learning all over again how to digest the president-elect's threats.

If there's an important lesson worth revisiting from his first trade wars, it's that Trump's warnings regularly run into procedural, political and even economic constraints. The result is often a largely symbolic version of the headline threat, or one that ignores it altogether. Disruption and drama rather than destruction is the way Trump's trade wars have operated.

For today's Big Take we brought together analysis from Bloomberg Economics, home to our in-house economists, and the journalism of Bloomberg News. It heeds those lessons and offers a plausible road ahead for Trump's new trade wars that features both a historic increase in US tariffs and a global economy surviving the resulting storm.

Because the protagonist is a capricious president, it is a scenario riddled with caveats. But it is one informed by public and private conversations with people who worked on Trump's first waves of tariffs and an understanding of how they came together. It also recognizes the political and economic realities Trump faces.

Which brings us back to his recent tariff threats.

Trump has in recent social media posts pledged to hit Canada and Mexico with new 25% import levies unless they do more to stop an influx of migrants and the opioid fentanyl into the US. He curiously threatened a 10% tariff on China if it doesn't halt fentanyl headed to the US.

Then on Saturday he added a threat to impose a 100% tariff on imports from China and other BRICS countries if they did not pledge allegiance to the dollar.

All those threats, however, remain subject to the laws of procedure, politics and economics.

Presidential Powers

Trump has plenty of executive powers to draw on. But each of those have processes attached. As was in evidence with all the preparations and deliberations that went into his first tariffs on China, which were rolled out and adjusted in fits and starts over some 30 months.

Even within his Republican Party there are politics to deal with. He will enter office Jan. 20 with narrow majorities in both houses of Congress. Which means losing the backing of a few farm-state senators and members of the House of Representatives with constituents who faced retaliation from tariff targets last time could stall other parts of his agenda.

The laws of economics may be the most unbending, though.

Trump ran in 2016 promising to kill NAFTA and ended up renegotiating it and rebranding it instead after advisors and CEOs explained that erasing the pact would shock the US economy.

His signature China tariffs were also phased in via lists of goods designed to do as little harm to the US economy and consumers as possible.

This time around the economic consequences are arguably greater.

A 25% tariff on imports from Canada and Mexico would kill the USMCA, Trump's rebranded NAFTA. It would hurt the trade-dependent economies of border states like Texas and be a massive blow to the auto industry and others with regional supply chains. It also would raise the very consumer prices Trump vows to bring down.

A 100% tariff on imports from BRICS countries would do more harm to the dollar's global standing than any efforts to build an alternative currency. Never mind the loss of its safe-haven identity. The dollar's reserve status depends on demand driven by its use in trade and financial transactions. Less trade with Brazil, China and India would just mean less demand for dollars.

The tariff threats will continue. But for the next four years it's worth taking a beat when they emerge. Not everything turns out quite as ordered in a late-night post.

—Shawn Donnan in Washington

Click here for more of Bloomberg.com's most-read stories about trade, supply chains and shipping.

Flying high | The race to secure goods from China before tariffs are imposed has taken off, with international cargo flights out of the Asian nation increasing to new records in the weeks since Donald Trump won the US election. There were 3,485 international cargo flights in or out of China in the week of Nov. 24, the most in data back to March 2023. That was the third straight week with more than 3,400 flights, according to the data from the Ministry of Transport.

President Joe Biden, making the first visit to Africa by a sitting US president in almost a decade, sees his journey to Angola this week as a way to counter Chinese influence in the region and secure access to minerals critical to weaning the global economy off carbon-based fuels.
The Biden administration unveiled new restrictions on China's access to vital components for chips and AI, escalating a campaign to contain Beijing's technological ambitions.
FedEx and UPS are increasing shipping rates and adding surcharges, including fuel surcharges, rural address premiums, and fees for oddly shaped packages, which can add up to 50% to shipping costs.
China's factory activity continued to expand in November. Meanwhile, the owner of the Uniqlo apparel chain is closely monitoring to see if Chinese demand for its products is affected by Chairman Tadashi Yanai's reported comment that the company isn't using cotton from Xinjiang.
World Trade Organization members agreed to reappoint Ngozi Okonjo-Iweala as director-general for a second term, cementing her in the job for another four years that are expected to be fraught with tariff disputes led by Trump.
South Korea's exports returned to growth on the back of continuing demand for semiconductors. Separately, South Korea reportedly has the capacity to purchase more US energy, which is competitive in cost with Middle East imports.
Mexico is planning to carry out a "cleaning" operation across the country to combat the flow of illegal merchandise entering the country mainly from China, according to the Economy Ministry.

Trump‎ has warned BRICS ‎against challenging the dollar. He doesn't have to worry ‎much. According to a Bloomberg Economics report, a BRICS currency is a fantasy, and replacing the ‎greenback remains a distant dream.
If implemented, Trump's latest tariff threat against China, Mexico and Canada would slash US imports and reroute a huge volume of global trade, adding downside risks to US GDP and threatening to nudge inflation higher, according to Bloomberg Economics.
Run SPLC after an equity ticker on Bloomberg to show critical data about a company's suppliers, customers and peers.
Use the AHOY function to track global commodities trade flows.
See DSET CHOKE for a dataset to monitor shipping chokepoints.
For freight dashboards, see {BI RAIL}, {BI TRCK} and {BI SHIP} and {BI 3PLS}
Click HERE for automated stories about supply chains.
On the Bloomberg Terminal, type NH FWV for FreightWaves content.
See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.

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