Nalivka – Sometimes, It’s Best To Sit On Your Hands And Wait

March 30, 2018 09:15 AM
 
All this hand-wringing over tariffs might well be for naught—this is when risk management is needed most.

When confronted with uncontrollable events that may impact our lives or businesses, many people take a “wait and see” attitude.  In my business of analyzing and making recommendations for clients in the livestock and meat industries, I don’t think that is a very sound strategy.  In fact, I have stressed quite the opposite – looking down the road at the possibility of various events and then employing a strategy to best deal with those events.  It’s called risk management. 

However, I do think there are times when it is best to “sit on your hands” and wait to get better information about a particular event.  In other words, I don’t want to jump to conclusions that may be wrong and that will lead me to a poor decision.   Case in point – the current conversation on steel and aluminum tariffs and the impending trade war that will soon destroy the U.S. economy.

I believe that all of the hand-wringing over tariffs might well be for naught.   President Trump does not play by the old rules of Washington, D.C., and like any tactic or business strategy that is different, it requires all of the parties involved to throw out the old rulebook.  This is no different than changing jobs.  We have all heard the statement, “I don’t care how they did it at your last job, that’s not the way we do things here.”  President’s Trump’s strategy on trade does not replicate the way things have been done in the past and already, there is a light at the end of the tunnel with a U.S.-South Korea trade agreement appearing to be nearly resolved.

As an economist, I have written numerous papers on the likely outcome of a policy, legislation, or regulation on the livestock and meat industries.   A set of assumptions lays the groundwork for any impact analysis and often those assumptions, predict someone’s behavior.   That is often not an easy task to fulfill and consequently, when the assumptions about someone’s behavior are not correct, the analysis can be really wrong.  I am not being critical of all of the numerous impacts that I have read regarding steel and aluminum tariffs, but those analysis also are based on assumptions.  At the end of the day, we don’t really know a lot about how our trading partners, businesses, and consumers will react.  I am just saying that perhaps, we need to give things a chance to play out before jumping to conclusions and predicting the “sky is falling.”      

 

  

 

 

    

 

Back to news


Comments

 
Spell Check

Klaren Koompin
Am. Falls, ID
3/30/2018 11:46 PM
 

  John, you are the first I have heard that is right, thanks for saying what you did, very good to read your comments, you where at Moscow when I was there, we might have had a beer together at a function or two, ??kpk

 
 
Close