But it's only a $0.003 cent increase in the price of a can of Coca-Cola!

The USA Today reached out to me yesterday to discuss the Trump administration's fresh plans to levy tariffs on imported steel and aluminum as well as the swift vote of no confidence by U.S. stocks. Again, nearly everyone hates this idea. Naturally, I was happy to have the conversation with the most widely-circulated newspaper in the country because it's an extremely important economic issue. Among the comments I made for the article was this candid nugget: “there's a quiet concern among investors about the potential of a trade war." That was prior to the stock market's big drop of the day, and prior to every news headline and Twitter hash-tagging the term "trade war." It's fair to say that this concern can no longer be aptly described as "quiet." And no Mr. President, to be very clear trade wars are not "good" and they are not "easy to win." Trade wars are in fact the exact opposite of this: reckless, dangerous, and a race to the bottom. We need serious people in the room here on such matters.

Despite this, Commerce Secretary Wilbur Ross went on @CNBC this morning to straw man the debate by explaining that a "one-sixth of 1-cent increase" in the cost of a Campbell's Soup can and a purportedly teeny-tiny hike in the price of Coca-Cola and beer is "no big deal." *Zoinks!* Ross continued while holding up cans of these classic household staples as props, "I just bought this can today at a 7-Eleven ... and it priced at a $1.99. Who in the world is going to be too bothered?" I'm not sure what's more remarkable in that statement - his curious views on how business input costs filter through to the consumer, or the fact that Ross claims to have gone into a 7-Eleven. I'll leave the second point alone, but briefly address the first. Better yet, here's Campbell's Soup:

"Any new broad-based tariffs on imported tin plate steel — an insufficient amount of which is produced in the U.S. — will result in higher prices on one of the safest and more affordable parts of the food supply."

Now I'm sure that the ~$12.7B Campbell's Soup company put that out there to prepare consumers for the coming "one-sixth of 1-cent increase" they're about to slap their customers with. Or, maybe ... just maybe the mechanisms and inputs that companies use to price final goods in the marketplace are much more complex and mercurial than Wilbur's reductive math would suggest. I suspect that Kraft-Heinz, General Mills, and many other consumer products companies will soon also voice their views if this carelessness goes from plan / "trial balloon" to on-the-books policy. In the meantime, what say you The Beer Institute?

"This 10% tariff will create a new $347.7 million 'tax' on America?s beverage industry, including brewers and beer importers, and result in the loss of 20,291 American jobs."

Small Business & Entrepreneurship Council?

"There is no escaping the fact that these tariffs are new taxes, because that is what they are - will raise costs for many small to mid-size businesses,"

Uh, OK, sure, you can speak up too, National Small Business Association?

"This kind of tariff, while seemingly targeted, could have widespread implications and likely will result in increased prices of many goods,"

So, as is plain to see ... wait ... what? ... fine, go ahead, U.S. Travel Association:

"Trade wars threaten to alienate and disconnect, thereby boomeranging on the travel industry. That's unfortunate considering international inbound travel is our country's No. 2 export."

Alright, *I've* got to jump back in here otherwise this will go on forever. The line is growing longer by the moment. And yet we're left to wonder in sadly sarcastic fashion - who will ultimately pay these rising costs? What's clear is that U.S. businesses and affiliated organizations know who's really on the hook to foot the bill: the consumer.

So why pursue this if you're the White House?

At the core of the problem, I think, is this grossly incorrect understanding, an utter misreading and unlearned view of how the economics of global trade actually work. This idea peddled by the Trump / Navarro / Ross crowd that all trade deficits are bad and that any trade deficit means that you're getting taken advantage of, that you're a loser in the global economic domain, that you're getting picked apart by vultures, is their first grave miscalculation, and yet is also the foundation on which the rest of their trade views are built. It spirals out of control from there leaving the tail wagging the dog and Cabinet members using tallboys as props on cable TV. Fortunately, we have more sober folks like Princeton's Alan Blinder to help us better think through this. Please, go ahead sir ...

"Trade is more about efficiency—and hence wages—than about the number of jobs. You probably don’t sew your own clothes or grow your own food. Instead, you buy these things from others, using the wages you earn doing something you do better. Imagine how much lower your standard of living would be if you had to sew your own clothes, grow your own food . . . and a thousand other things. The case for international trade is no different. It’s not mainly about creating or destroying jobs. It’s about using labor more efficiently, which is one key to higher wages."

Not only is the professor correct, but the ~140K jobs in the U.S. steel and aluminium industries pale in comparison to the over 6.5M jobs in steel-consuming industries. Total contribution to GDP? Roughly $36B and $1T, yes that's TRILLION, respectively. It's hard to argue that there's a net (U.S.) economic benefit in there somewhere by thrashing the latter to hopefully mildly boost the former. To which, the stock market agreed by erasing some $350B in total market value on Thursday despite steel stocks adding a paltry $2.5B to their sector's market cap. Ouch!

No matter. When pressed on CNBC regarding the swift and negative response from financial markets, trade experts, economists, about 98% of the U.S. private sector, and even The Wall Street Journal editorial board, Mr. Ross deflected: "I think we have to differential what's good for corporate America ... and corporate America is the key audience [for the WSJ] ... from what's good for Mr. & Mrs. America," implying that what benefits domestic businesses is not necessarily good for the average American citizen. This is a stunning about-face only three short months after the administration feverishly argued precisely the opposite to push through corporate tax cuts, not to mention the constant drumbeat behind its aggressive deregulation efforts. Basically, their thinking always boiled down to less burden on business is less burden on "main street" because the virtuous cycle of gains from corporate prosperity flows downriver. I guess that's their dogma, until it isn't. Unfortunately in this particular episode the room for error is very slim. Like they chose to on tax cuts, the Trump / Navarro / Ross crowd should listen to business and industry leaders on trade.

Jason L. Ware, MBA / Chief Investment Officer