How to ruin a strong economy
There seems to be much confusion regarding Trump's tariffs. Some still seem to believe that Trump is a genius and that his ill-conceived tariff-based actions will end up net good for our nation. They seem to believe that Trump will bring manufacturing back to the USA, and somehow lower costs so that the USA can return to being an industrial powerhouse as we were in the decades after WWII. And they do not seem to understand that tariffs are essentially a consumption tax and will not generate massive revenue to fund Trump's initiatives (e.g. tax cuts).
I was asked this question:
"If tariffs are so much of a tax on the people of the country initiating them, why is it that places like China, Japan, Vietnam and India flourished via the use of tariffs?"
This article addresses the false cause fallacy underlying this question.
Nations do not Grow Based on Tariffs
Tariffs —as Trump is using them— are the equivalent of a consumption tax. Consumers pay the tariffs. Worse, Trump is using tariffs as a weapon and our trade partners are reciprocating ... thus we have trade wars. All unnecessary.
None of these nations (China, Japan, Vietnam and India) flourished via the use of tariffs. That is a false assumption.
- China flourished primarily due to foreign manufacturing making use of its cheap labor. Their WTO compliance on reasonable, targeted tariffs increased their expansion.
- Japan flourished because of its disciplined, excellent work culture, smart government, technological innovation, manufacturing efficiency, and a focus on selling to the world.
- India flourished because it dramatically cut tariffs, and created a highly skilled workforce in IT and technical services, pharmaceuticals, and finance. India is a great example of strategic planning and execution at the national level.
- Vietnam is similar to China. It flourished due to cheap labor driving manufacturing and massive exports.
All four flourished in part because of their integration into the world supply chain and their fair operating under WTO guidelines. All four also flourished because of smart government strategies which exploited their strengths. And all four reduced their tariffs prior to seeing strong economic growth.
Why Manufacturing is Not Returning to the USA
The USA labor costs are the primary driver of manufacturing centers relocating across the planet. The workers in Vietnam, China, etc. earn substantially less than USA workers yet are human beings fully capable of learning how to do the jobs required. There is no need for manufacturing firms to pay high labor costs for USA workers.
And Trump cannot reverse this trend. He thinks (possibly) that by imposing tariffs the manufacturing companies will magically relocate to the USA. The only way manufacturing (barring some exceptions) will return to the USA is through the use of robotic technology. Manufacturing operations that are conventional, human-labor-centric, will remain in nations whose labor costs are lower. That is basic economics.
All tariffs will do is is raise consumer prices. They will drive down consumption in the USA and thus our GDP. Further, the damage Trump continues to do in terms of global trade will necessarily result in fewer exports from the USA and thus another hit on our GDP. The list of potential bad effects here is sickening and it is all unnecessary.
The way the USA prospers is to be a powerhouse working in an open global trade environment. We buy cheap goods for our purposes (manufacturing and personal) and then excel primarily on innovation and technological prowess. We should, for example, focus critically on renewable energy both in terms of the technology and exporting the actual energy. We will succeed by being the best in what the world needs most. Energy is a fine example of that.
That is the positive, growth-oriented, winning strategy. Trump is operating as a retrograde protectionist; the opposite of a growth-oriented, winning strategy. He is trying cut costs (but in a stupid fashion) and trying to force the USA to be isolated and entirely self-sufficient. That is a perfect recipe for shrinking the GDP and opening the door for other nations to entirely displace the USA on the world economic stage.
Tariffs and Trade Imbalance
Finally, there is major confusion on the notion of trade imbalance. Trump keeps claiming that the USA is being ripped off whenever we import more than we export to a country. That is a false oversimplification. There is nothing intrinsically wrong with a trade imbalance with an individual nation. If consumers have a high demand for something that cannot be appropriately supplied domestically it makes good sense to enable consumers to buy imports. It does indeed make sense for a nation like the USA to export more than it imports, but to deem a trade imbalance with a particular nation as them "ripping us off" is ridiculous.
The key problem with individual nations is not necessarily imbalance, but dependence. A smart PotUS would focus not on balance with each individual trade partner but rather dependence upon them for critical items. So it does not really matter that Canada is the largest supplier of crude to the USA, what matters is how dependent we are on them. And Canada is not a problem. China, however, is. We have a critical dependence on China for certain rare Earth elements (among other things). This is entirely unhealthy and our past presidents and congresses have let this problem fester.
Instead of chasing an ill-conceived notion that a nation is ripping us off we should instead focus on developing domestic and foreign sources so that we are critically dependent on as few nations as possible.
And because of our dependence on China and the time it would take for us to become sufficiently independent, poking them gratuitously is stupidly counterproductive.
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Trump is damaging our nation and will continue to do so until his supporters start criticizing (rather than defend) his foolish actions.
That's what many, if not most, of his supporters want. That's what they voted for.
They "want" the lower prices he promised, the end to the Ukraine war, the end of "wokeness", and basically the ability to blame someone else for their misfortunes.
Unfortunately most were either taken in by his lies, or not smart enough to realize that he had no clue as to what he was doing, and all he wanted to do was be put in the same position as Putin, Bashar al-Assad, Kim Jong Un, Nicolás Maduro, and Xi Jinping.
This rings true. Trump supporters believed the con-man. Now that he is in power and is fucking things up, they are more concerned about saving-face rather than deal with reality and turn from a supporter into a critic.
Plus the very base followers that only believe what he tells them, despite the evidence from their own eyes.
bottom line - you can support trump, or you can protect and defend our constitution, but you can't do both ...
Well, I think that you are giving to much benefit-of-doubt treatment to some obviously corrupt individuals. Many like him because he is a dick and they are dicks, too. They knew what they were getting and have been on-board with the lies from the beginning.
Of course, Trump knows how and loves to sic people on other people too. And republicans just adore their gov'mint jobs and want to hang on them come hell or high water! Want to see republican politicians turn on Trump. . . let him start picking them off in lots instead of one on one!
Some of the true cult of Trump followers believe the gospel of Trump. They attack ideas that their lord tells them to, regardless of observable incorrectness.
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If Biden and his team was lying to the public (and effectively wasting the people's time with his reelection attempt) then shame on them. But, us, peering in from "30-thousand feet above" not knowing for sure, and Trump basically acting out in public a one-man show gone amuck, that is a whole separate narrative unto itself!
There was plenty of public video evidence of Biden's obvious infirmities.
Biden has nothing to do with this topic.
Per the author's request at 1.1.11, I drop this effective immediately.
I'm sorry, is he still president?
Trump figured out a long time ago that demonizing the 'others' works.
The left doesn't want to admit something drastic had to be done to turn the disastrous policies of the past around. Yep, the markets are taking a beating, but the selloff is based on temporary human emotions reacting to fear and uncertainty. What other indicators point to a coming worsening economy/recession.
Some short-term pain and loss are necessary for greater long term good. It's hard to imagine what a mess we would be in if Harris had won
Explain how Trump's tariffs will result in a long term good; and clearly define what you mean by long term good.
From the article:
that's exactly what I'll be saying to maga sycophants when they soon become victims of their cult leader's madness ...
What disastrous policies? Inflation and unemployment were declining, and the stock market was at record highs. Exactly what about that was disastrous?
Actually, what you’re describing is how Trump got elected. He lied to people and told them inflation was out of control, when it wasn’t. Of course, he also told them Haitian refugees were eating their pets, and that China would pay the tariffs, so clearly Trump figured MAGA will believe anything.
No, markets are often said to be driven by things like fear and uncertainty, but those are reactions that largely come from serious, educated professionals whose job it is to maximize wealth in those markets.
Is it temporary? Sure. Trump is not immortal, so one of these days, we will have someone in power who is not insane and we can work on getting our economy back to normal. The only uncertainty in the markets now was 100% the result of this unnecessary, self-inflicted wound perpetrated by Trump himself. And a businessman like him should know that uncertainty is always bad for the economy.
It’s actually easy to imagine because all you have to do is look at the state of affairs a couple months ago. Declining inflation. Declining unemployment. Record high markets. Friendly relations with Mexico, Canada, Panama, Greenland, NATO, and so on. Now, all that is gone - exploded by an insane megalomaniac.
Some of us still like some of you.
Thank you. I genuinely appreciate that.
Trump is the purveyor of those in spades; together they are a clarion call for revengeful retribution ... that stuff Melville wrote about and Ishmael spoke of.
WTF? over 2 trillion lost in the USA Stock market in 48 hours, 7 Trillion globally?
That's not short term pain
It's twice as hard for a realist to not imagine that absolutely none of this would have happened if Harris had won.
The market would be chugging along, the unemployment numbers would not have exploded by 205%.
Our Allies would still be our allies and trusted partners around the globe.
Gee, why can't you see that?
That is apparently the whole problem in a nut shell.
MAGA's argue that the world is made us of "makers" and "takers" —remember that narrative from the 2010's? They have a plan to align this country against its 80 years of alliances with those they see as not friends, supporters, and collaborators - but groups of 'western' TAKERS. First you detach the country from its 'roots' of the past 80 years or so. . . and then you replant it according to new power dynamics and whim.
They admire dictatorships that rule for long periods of time regardless of the people trapped in those systems.
While Democratic options are messier and the elections are a constant source of upheaval, the level of material comfort is arguably better for 80% of most democratic populations.
Instead of the top10% of countries like Russia, Hungary where the majority lack decent food and housing.
Hell 30% of Russians still use outhouses.
Do you do ANY research, or do you just parrot what newsmax tells you? Not taking a shot at ya, just asking a legit question.
Ask yourself who thought it was "disastrous" that the US was leading the world economically post-Covid under Biden...
Democracies are structured with a safety valve that toots a louse of a leader out at regular intervals. We must keep this. Nobody wants to be stuck with a louse for a leader—not even those places in the world that are.
IF, if, if!
There's an olde saying:
If my grandmother had a wheel and two handles, she's be a wheelbarrow!
IF!!!
I really don't think Harris would have had to do much if she had been elected
We had a functioning government led by distinguished pros and were leading the whole world post-Covid. All past tense!
Some already have. A few elected officials, and some who had voted for him.
Years ago Trump was going on the late night talk shows trying to sell his line of neckties. I think it was David Letterman who pointed out to him that they were being made in China.
Were they cheaper than the rest of high end ties because they were made in China? Of course not, they were being made in China to put more in Trumps pocket. Which is the same reason jobs were off shored. Lower labor costs means more money for the CEO's and managers because they are rewarded for higher profits. These people are the opposite of patriots.
Who thinks we can ever have a good and fair economic system when the goal is to pay the workers the lowest salary possible?
If they bring back , lets say, t shirt manufacturing, the imperative will still be to pay those Americans making those t shirts the lowest salary possible. When you pay many of your workers the lowest salary possible you are creating a permanent underclass.
And that is the essence of capitalism. Ultimately there must be a base of low-paid workers to drive profits. Although that was more true in the industrial age where human workers were essential, it is also true today in the use of robotic technology as the substitute for 'low-paid workers'.
So, as noted in the article, the USA's best chance of manufacturing is with AI and robotic technology. The days of USA labor driving manufacturing are long gone.
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MAGAs think that if we get t shirt manufacturing back to the US their lives will improve if they get one of those jobs. Problem is they will still be the lowest paid people. Prices will go up across the board and they will be the ones the least able to afford them.
Do you think manufacturing jobs are the lowest paying jobs?
THe problem isn't capitalism. You live life enjoying possessions, convenience and health care a Rockefeller born 100 years before you couldn't conceive of. Our country's biggest health care concern isn't starvation but poor people consuming too many calories and living sedentary lives like a 19th century nobleman. Do you understand what a miracle that is?
The problem isn't capitalism, the greatest ant-poverty and improver of the human condition engine ever created. It's that people are envious of others. Material wealth, safety, physical comfort and endless distraction don't make some people happy because others have more, and they don't feel that's fair, that they are entitled to more status, more wealth. They then devote their lives to redistributing those things to their personal benefit. Blaming capitalism is just a cop out to make their pursuit of an increase in personal status seem less selfish.
The problem, per the topic of this article, is Trump's irrational and damaging use of tariffs.
Poor people can buy a 32" television for 125 dollars BECAUSE they are made by low wage workers overseas.
I have gone a little off topic, I will leave it alone now.
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That doesn’t square at all with 2.0. Either the owners pocket the profit or the consumers benefit.
JR's obvious point @2 is that Trump produced the ties in China to benefit from lower costs but did not pass those lower costs onto his customers. His general point was that Trump was not alone in this practice.
His point @3.2.4 is that other companies use the lower costs of production to be more price competitive. In @2 he was speaking of products sold to people with money and in @3.2.4 he is talking about products sold to people with far less money. A different market.
Two different markets with different strategies both of which are exploiting the low cost of imports.
Some are, some aren't.
There is a company named Temu (and there other similar ones) who sell all kind of consumer goods online. They are based in China or some other Asian country. You can buy a hoodie for 7 or 8 dollars and a pair of shoes for 15. Maybe get a microwave for 25. Yeah these items are inferior, but superficially they get the job done. Americans patronize these companies because they have to, to stretch their money. Millions and millions of Americans need cheap prices. Why? Because our system requires them to be paid the lowest wage possible in order to make more money for the ceo's owners, managers and stockholders.
Reshoring manufacturing will change very little of that.
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Unless you support Minimum Wage increases or limits on executive compensation, please don’t pretend you care about the wages of immigrants or anyone else in the working class.
As TiG pointed out, robotics will be doing the 'load' work of manufacturing in the present or near future. . . it is not clear how bringing back cheap labor work from overseas to inflated wages at home will equal "good paying jobs" for the U.S.
Plus, something else. Trump (and MAGA) has a mental block: and its bleeding over into international policy: DEI. That is, he seems to think that he can remove diversity, equity, and inclusion worldwide by eliminating equity imbalances across the board. . . not realizing that many of these countries he is attempting to realign (force trade change upon) are not the equal of the United States. . . and will not advance or keep up their pace to change without the added assistance we allow.
In other words, Trump is talking about U.S. "greed is good" and ignoring the shared nature of the global economic increase lifting all that are cooperative within it. It is the belief of a very small man who can not see the greatness in helping all. . .but as a point in clarity we can see Trump also cut off world aid and not just it—food aid to his own citizens whom he swore and oath to protect and yes, serve.
There's this myth out there - and it probably started in the 70s or 80s - that we need to maximize manufacturing jobs, or the country's economy is going to hell. But it's not true.
Robots have taken over a lot of those jobs, and humans are being trained to do other jobs that frankly, pay better. We have a lot more people now than we did 40 years ago, but unemployment generally stays relatively low. Today, instead of standing there with a pneumatic wrench, tightening bolts all day, more Americans are working in the sciences or service industries. These are different jobs, and arguably better jobs, but they are jobs. We didn't need drastic action to get jobs.
As a follow up to 5 above, I see Trump having a scheme to bring manufacturing jobs back to the states, but with a 'host' of improper labor practices, including displacement or elimination of unions, break times payments, overtime payments, and so forth (similar to those activities which Musk companies are being sued). Right to work will be the order of the day.
Elimination of safety and environmental regulations....
People of the Trump mindset, believe that if we lose the ability to make products with our own hands, we will be RELIANT on others to do what we find we can no longer do ourselves. That is a concern of sorts, although it is rather misplaced. Why? Because we have libraries upon libraries of instruction and datasets on how to create the past 'wonders' and patent products of this country (and by extension) the world.
It is. . . a peculiarity about the man himself and the host he leads, that if they are not in full control of their destinies that others will abuse them.
That 'imprint' on the mind, we can not help them resolve. For nobody can speak to the future any better than anyone else. That said, I do wish to be clear that the people of this world should concentrate themselves to betterment and getting out of their own dire straits as nations, and we should do so as a diverse 'Tribe' made up of many peoples acting in unison.
Now enter: Robots and AI and potentially Robots equipped with AI. And the world gets to be a more complex place for the conservative-thinker model that says something to the effect: Stop! I want to get off!
We have to 'retool' our minds to the fact that if we do not let progress happen on its due course, it may STEAMROLL over our nation in its own press ahead. We will be stuck and worse have relinquished our seat that the table where the influential voices need to be in such times of intrigue and power metrics.
Just my thoughts.
Some very good ones too.
And therein lies the rub: What does success in returning manufacturing back to the states get us in the long-run? A regression. The reason manufacturing 'fled away' to begin with as because the work was better suited for others with larger excess populations. Moreover, wisdom dictates:
You can not allow a nation or nations of billions of people to sit idle. . .with their hands. . . think: "Idle hands are the. . .." Finish the proverb. Yes! We had the wisdom to understand that we can have excesses in our country, but we would not be left alone to their enjoyment if the rest of the world hungered and languished outside our doorstep; or worse forced itself upon us for our arrogance.
Note: This comment is mostly about the feelings and passions that fuel parts of our world and drives our ability to exist. And survival instinct coupled with rage is a volatile and powerful motivator for people to prepare, travel, and seize whatever they can from those having grand excesses.
Now this is interesting:
Two questions:
1. How will the U.S. prosper through exporting to scale in Vietnam presuming it is a lower wage and lower cost for goods country?
2. Vietnam surely will fare better in trade for its products sold in the United States without any tariff on them than the U.S. in Vietnam?
PUT AN IDIOT IN CHARGE,
MISSION ACCOMPLISHED.