President-Elect Trump has announced that he will withdraw from the Trans-Pacific Partnership (TPP) on his first day in office. In addition he has also proposed to tear up other trade deals the US has with countries around the world such as the NAFTA with Canada and Mexico or enact barriers such as tariffs. So the question now is: How will his proposals impact the U.S. economy?

According to The Petersen Institute, with all other things being equal and trading counterparts act in kind (meaning they also retaliate by imposing tariffs for imports from US which will hurt US companies) the US economy will  be adversely impacted leading to a mild recession in 2019 with a GDP drop of 0.10%

The chart shows the importance of global trade to US economy. According to Niels C. Jensen of Absolute Return Partners “In the US alone, the increased openness of the global economy has tripled the share of trade in national income in the last 50 years (chart 1).”

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Trump plans to impose a 45% and 35% tariff to China and Mexico respectively. If these are implemented it may lead to a full scale trade war if those countries retaliate according to the The Petersen Institute. The chart below shows how that trade war could lead to a decline in US economic growth (marked in dark blue color line)

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Source: Trump – another Brexit moment?, The Absolute Return Letter, November 2016 , Absolute Return Partners

Credit Suisse recently published its annual the Global Wealth Report for this year, The below chart shows the The Global Wealth Pyramid 2016:

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Source: Global Wealth Report 2016, Credit Suisse

The majority of the world’s population or about 3.5 billion people (73% of total adults) have less $10,000 in wealth. The top of the pyramid or 0.7% of the total population holds wealth of more than $1 million. Collectively this tiny group holds about half of the global wealth or about $116 Trillion.

The last time I posted this pyramid was in 2011 when the Occupy movement was popular in the US. Since then the movement has withered away into the oblivion. As more and more wealth is concentrated in the hands of a few, the majority of the population is forced to work as serfs or wage slaves in most countries for low wages.

Download: 

• Credit Suisse Global Wealth Report 2016 (in pdf)

The coal industry in the US has been on a decline for many years. With hundreds of miners closures thousands of mining jobs have disappeared. Just a few years ago some of the coal mining firms filed for bankruptcy as the demand for coal plunged.

President-elect Donald Trump has promised to revive the coal industry and in the process bring back thousands of those lost mining jobs. So many poor former miners in places like the Appalachia such as West Virginia have given their vote to Mr.Trump. Below is one of the photos from a rally in Wilkes-Barre in Pennsylvania:

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To fulfill this promise Trump’s policies have to overcome a multitude of challenges facing the industry. To begin with the demand for US coal has declined because most utilities have shutdown coal burning power plants and switched to cheaper options like natural gas. Hence in order to first create demand massive capital is needed for utilities to re-open those coal power plants. Until that happens mines are not going to open simply to give jobs to miners.

From a recent article in the WSJ:

Donald Trump campaigned on a promise to resurrect the ailing U.S. coal industry and put miners back to work. Delivering on that vow could prove nearly impossible.

Electric utilities that buy more than 95% of the coal mined in America have already retired hundreds of their coal-burning power plants from Colorado to Connecticut—amounting to about a third of the total capacity—and have plans to mothball even more.

While in Appalachia earlier this year, Mr. Trump pledged to “bring the coal industry back, 100%” by rolling back environmental regulations. But coal’s biggest problem is that it is no longer the cheapest fossil fuel around. It is being displaced by natural gas.

American Electric Power Co. of Columbus, Ohio, one of the nation’s biggest utility companies, has sold or retired half its fleet of coal-burning power plants in recent years. No matter who occupies the White House, “it’s not coming back,” said Nick Akins, AEP’s chief executive.

Even if Mr. Trump makes good on his campaign promise to relax or repeal pending limits on carbon emissions, it won’t be enough to restore coal’s market share. “We’re moving to a cleaner-energy economy and we’re still getting pressure from investors to reduce carbon emissions,” Mr. Akins said. “I don’t see that changing.”

Source: Cheap Gas Tests Trump’s Promise to Revive Coal by Rebecca Smith, WSJ, Nov 13, 2016

Below is an infographic showing the current state of the US coal industry:

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Source: What Shape Is U.S. Coal In?, WSJ

Another important factor is that coal as a source of energy decreased from 49% from 2006 to 33% in 2015. In addition to better and cheaper alternative fuel sources, utilities also face stiff opposition to operating highly polluting coal power plants. So even if those plants are brought back to service, the society’s perception on coal has to change. This is the most difficult of all the challenges.

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Source: Is Nuclear Power Vital to Hitting CO2 Emissions Targets?,  WSJ

The top five coal producers are: Peabody Energy Corporation which trades on the OTC market under the ticker (BTUUQ),  Arch Coal, Inc (ARCH), Cloud Peak Energy Inc (CLD), Alpha Natural Resources, Inc (ANR) and Murray Energy. The complete list of coal stocks on the NYSE can be found here.

It remains to be seen if the US coal industry recovers with Trump in office and if the miners that voted for him are able to get their mining jobs back.

Disclosure: No Positions

Readers may also want to checkout:

• A Bleak Outlook for Trump’s Promises to Coal Miners, NY Times

A recent article in the NYTimes noted that traffic fatalities in the US reached the highest in 50 years as more drivers are distracted with smartphone apps. From the article:

The messaging app Snapchat allows motorists to post photos that record the speed of the vehicle. The navigation app Waze rewards drivers with points when they report traffic jams and accidents. Even the game Pokémon Go has drivers searching for virtual creatures on the nation’s highways.

When distracted driving entered the national consciousness a decade ago, the problem was mainly people who made calls or sent texts from their cellphones. The solution then was to introduce new technologies to keep drivers’ hands on the wheel. Innovations since then — car Wi-Fi and a host of new apps — have led to a boom in internet use in vehicles that safety experts say is contributing to a surge in highway deaths.

After steady declines over the last four decades, highway fatalities last year recorded the largest annual percentage increase in 50 years. And the numbers so far this year are even worse. In the first six months of 2016, highway deaths jumped 10.4 percent, to 17,775, from the comparable period of 2015, according to the National Highway Traffic Safety Administration.

“This is a crisis that needs to be addressed now,” Mark R. Rosekind, the head of the agency, said in an interview.

Source: Biggest Spike in Traffic Deaths in 50 Years? Blame Apps by Neal Boudette, Nov 15 2016, NY Times

Globally about 1.2 million people die each year due to road accidents. Some of the countries with lowest road death rates per 100,000 inhabitants are Iceland, Sweden, the UK, Norway and Switzerland while countries like South Africa have some of the highest death rates according to OECD data. Incidentally the U.S. has the highest road deaths among developed countries as shown in the chart below:

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Source: Road death challenge, OECD Observer

Even before the popularity of apps and internet connectivity in cars, many American drivers were bad drivers than European drivers. Though speed limits are much higher in Europe, drivers there tend to drive more safely and drive better cars. In the US, many drive bigger cars and SUVs that look like military tanks on the road but that does not mean necessarily they are safe drivers.