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Saturday, 5 January 2019

Trump's top economic guru: if you thought Apple was bad, hold onto your butts (VF)

Vanity Fair title: TRUMP’S TOP ECONOMIC GURU: IF YOU THOUGHT APPLE WAS BAD, HOLD ONTO YOUR BUTTS

Vanity Fair subtitle: A top adviser to the president warned that Trump’s ongoing trade war with China will hurt a slew of U.S. companies.


"On the first trading day of the new year, Apple announced that it was cutting its revenue outlook for the first time in nearly two decades, lopping off as much as $9 billion from estimates on account of weaker demand in China. Unsurprisingly, the market reacted to the news with horror, with the Dow, S&P 500, and Nasdaq dropping 660.02, 62.14, and 202.43 points, respectively, in what one analyst called the “darkest day” in the company’s history. Like an unanesthetized adult circumcision, it was an event investors would prefer to forget—the sooner the better. But according to Donald Trump’s top economic adviser, there’s more where that came from!

“It’s not going to be just Apple,” a weirdly gleeful Kevin Hassett, who chairs Trump’s Council of Economic Advisers, told CNN on Thursday. “There are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded” thanks to the effect of Trump’s trade war on China’s economy, he said, a point echoed by Pantheon Macroeconomics’s chief economist Ian Shepherdson, who described the situation as “awful, [with] worse to come.” But rather than follow up his dire forecast for U.S. companies with an announcement that Trump had finally been convinced his battle with Beijing is a self-defeating exercise that is hurting American interests, Hassett explained that a state of events in which the president’s policies are destroying corporate profits and dragging down the stock market is exactly where the White House wants to be. “China is feeling the blow of our tariffs,” Hassett declared, failing to mention, like his boss, that said tariffs are essentially paid by U.S. consumers. Ergo, claimed the man who wrote an entire book, published on the eve the dot-com bubble burst, that predicted the Dow would hit 36,000, “that puts a lot of pressure on China to make a deal. Their economy, for them, you might call a ‘recession.’ It’s slowing down in a way that they haven’t seen in a decade.”

While gouging China’s economy is presumably a major part of the administration’s plan, that Trump’s trade war is also hurting the U.S. is what makes it truly absurd. Yes, we’re hurting China, but as Tim Cook & Co. will tell you, we’re also getting kneed in the balls ourselves, and then punched in the stomach while coughing up blood. Moreover, according to Trump’s top economic adviser, this is all part of the plan!

In the long run, U.S. companies should benefit despite the short-term damage to their bottom line, Hassett added. 
“If we have a successful negotiation with China then Apple’s sales and everybody else’s sales will recover,” he said, before predicting that U.S. economic growth would continue to be strong.

In fact, a report released this morning suggests that “U.S. economic growth is on track to slow over the coming year,” but we can rest easy knowing that neither Hassett, nor the rest of the minds that make up the Trump economic brain trust, have ever been wrong."

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