The Art of Trade War.
How Analyzing Public Tariff Data Might Just Be the Smart Bet in the Growing Global Trade Wars.
A few months ago, we headed down to Washington, D.C. for a first-hand tour of the front lines in the growing global trade conflicts. There was no bloodshed, no gritty professional infantry fighting for truth and justice. Instead, along with about 50 other journalists, we attended a press conference with U.S. Commerce Secretary Wilbur Ross.
We crowded into a Capital Hilton ballroom, down the road from the White House, for what turned out to be a remarkable 45-minute Post-Information Age experience: We had an ordered -- if wonky -- discussion about trade. Not trade “wars” or trade “headwinds” or the tired ethics of what societies should charge businesses to do business. Rather, we simply dug into the practicalities of what Germans might levy for American cars. What Canadians might charge for German steel. And what the Chinese may find to tariff Canadian logs.
In any other age, this would have been a commerce-geeks only day in D.C. But in this era of a billion channels of business information being on, but nothing quite being said, we found a calm room filled with sensible people talking through the inner workings of world trade, an electric a moment the nation’s capital.
We loved it. And so would you.
The 3,000 Year Trade War
Here’s Mr. Ross’s point: There is absolutely nothing new about tensions over what countries charge to do business in that country. Heck, you go back to the dawn of global trade, when 13th Venetian merchants took the time and expense to conquer Constantinople, in Turkey, to force merchants, who bought and sold with the ancient Chinese, to do business using Venetian tariffs. What exactly has changed since then?
Even sillier, the hard facts about how much one country pays to trade with another have not changed either. Here in the United States, we have the Harmonized Tariff Schedule, maintained by the United States International Trade Commission, which bills itself as an “independent, quasi-judicial Federal agency with broad investigative responsibilities on matters of trade.” This organization employs teams of so-called “Nomenclature Analysts” that do the miserable work of figuring out what to name most everything imported and exported by the U.S. Economy. And then tracks what gets charged to do that importing or exporting.
https://hts.usitc.gov/current
List after list of products and the tariffs for those products: Chemicals, cork, carpets, footwear, stone, zinc and even works of art. For the record, paintings and drawings are tariff free. But theatrical scenery is not. And waste cork costs nothing to buy or sell overseas. But crushed cork is free to import, but can cost $.22 per kilogram to export. We have no idea why.
What today’s so-called Trade War boils down to then is, what other countries charge for to import and export the same products we import and export. Sure enough, the European Union has its own version of the Harmonized Tariff Schedule called TARIC, the Integrated Tariff of the European Union. The Chinese Customs website prints prices for many goods. Google Translate is needed and is surprisingly helpful here.
We’re not claiming that tariff information is easy to deal with. Most data is found as near-useless digital formats that need sculpting. Many sites are incomplete. And products do have conflicting and confusing names. It will take experienced humans with real means to normalize global tariff data into an effective picture of tariffs and trade around the world.
Even so, accurate tariff figures are out there. The story of those costs isn’t. Try any sort of commercial Web search for terms like “Trade War.” That search generates hundreds of millions of stories, web pages and social media comments. But try to search for more subtle global trade ideas like the “Harmonized Tariff Schedule” or “TARIC” and that search is lucky to generate even one percent of the interest in terms like “Trade Wars.”
Few investors seem to care about the critical narrative of what tariffs actually are. And that foolishness opens a trade war opportunity up for investors with means.
A Kayak of Trade!
Where then is the Kayak (KYAK) or TripAdvisor (TRIP) or FedEx (FDX) or UPS (UPS) of global tariffs? That is, the centralized information warehouse of tariffs, trade policy and actual product performance
Just like early Venetian traders enforced its logic on trade to make money, why wouldn’t we collect the critical data of what China is charging to trade its dishes and what America is taxing to sell those dishes? It should be possible to map at what point tariffs effect sales, how sales affect currency exchange rates. How currency exchange rates affect sovereign bonds, global benchmarks, GDP, inflation and all the rest of the major indicators that smart people use to make money.
Regardless, the world has seen trade wars before. And today’s winners will be those who understand where the battle is being fought. And who’s smart enough to take the high ground in the new geography of global trade.
