If there is one thing as clear as day, and has been for years (do a Google search), is that no one has been able to get into Trump's head how tariffs work!
He repeated it again in an answer he gave yesterday to the Economic Club of New York, which apparently was a room full of people too polite to follow up his answer with "Sir, that first part, about tariffs - is just plain wrong":
Even the Washington Post doesn't make it clear the fundamental problem with Trump's answer with this headline:
Trump offers confusing plan to pay for U.S. child care with foreign tariffs
while The Independent offers a blunter assessment in the link to its report, but didn't explain it properly in the actual article:
It takes someone in comments at the WAPO to make the obvious point, and I find it incredibly annoying that journalists do not automatically make it whenever Trump says "foreign governments pay tariffs":
Indeed. It seems the Los Angeles Times is the one outlet that makes the point bluntly, even though the article itself is behind a paywall. (Incidentally - the LA Times digital access for $60 - US - for a year is one of the best value online subs around - I'm seriously tempted.) Anyway, from the Google search:
another Trump bonkers claim
ReplyDeleteIt is very frustrating that journalists refuse to challenge such obvious falsehoods as he argument about tariffs. I have no idea why journalists have become so timid. For example, when Trump said Harris has a very low IQ why didn't a journalist ask for an actual number? Or when Trump stated that migrants were taking much more than 100% of job why wasn't he called out on that?
ReplyDeleteThe only explanation I can think of is that to publicly embarrass a politician like that will mean that politician will never agree to another interview.
Tariffs are always an unfortunate thing. But the loss is manufacturing has gotten so extreme that even this bad medicine may be necessary. If you could reform banking it might be unnecessary but the bankers have a very powerful team getting in the way of reform.
ReplyDeleteTariffs won't solve the loss of manufacturing. Cheap labour, very lax labour laws, and few environmental constraints are no longer possible in the West. In China it is a 996 working life. No-one in the West will tolerate that and nor should they. Tariffs would have to be so high it would crush spending and induce a longstanding recession. Even if tariffs were high enough to make a difference it takes years to build plants. Tesla may be in trouble because of cheap Chinese EVs and VW announced huge layoffs because it can't compete with China. Even if China folds there are plenty of other developing economies to step in and offer similiar deals for western corporations. You can blame the banks if you wish but corporations chose to turn a blind eye to the human and environmental consequences of placing their manufacturing in China. Nor do we care because the dividends are great and the widgets are cheap.
DeleteThis is a new idea that high wages means you have to lose your manufacturing. It does not precede the 90’s. The opposite was held to be the case under the influence of Henry Ford, who saw his success as a car manufacturer, in paying much higher wages than everyone else.
ReplyDeleteThe reason why theory and practice diverges with regards to tariffs is indeed the bankers. Since under dysfunctional money and banking the bankers will tend to lend for land speculation and other wealth destroying undertakings and tariffs can lead to some loanalbe funds to be diverted from the usual numbers rackets into the creation of plant and equipment.
There were no manufacturing plants in developing nations until after the 70s Graeme. Your analysis also ignores the relative cost of labour.
ReplyDeleteThere was manufacturing in other countries. But we were better at it, were richer, and so could out produce these poorer countries, while paying higher wages. That’s why we were richer. We were better at making and building stuff. That’s what it means to be a richer country. It means to be better at making and building things.
DeleteOf course those are the cliff notes. To explain further we have to go to my economic theory of employment and my canals theory of post-Roman empires. But having strong manufacturing is not optional. You can last awhile on ponzi-money numbers rackets but as soon as you lose manufacturing power you are on the way out. That’s the same for Venice, the Dutch hegemony, the British Empire, and now the Americans. You might continue for a half century on war, intrigue, numbers rackets, and raping satellites. But once your home base loses manufacturing power you are on the way out.
DeleteI agree we need strong manufacturing but the public and politicians aren't prepared to pay the price for that. People want cheap stuff and if it breaks in a few years they'll buy the latest model. Consumerism has become an obsession that has robbed us of manufacturing potential which in turn robs us of the necessary infrastructure to facilitate innovation by the development of expertise in various fields. I find it interesting that various countries become very skilled in specific domains and sometimes wonder if that comes down to providing the manufacturing base that allows ongoing mentoring of up and coming professionals thereby accelerating technological development in a given field.
ReplyDeleteThe problem Graeme is that the horse has bolted and the stable has been burned to the ground. The public, the corporate and political classes only think about next year not the next decade. As a wit once said a politician plans for the next election a statesman for the next generation.
We've stuffed it and everyone is blaming everyone else while buying their next new toy made in some sweat shop in a developing country. For example Joe Rogan showed pictures of an Apple manufacturing plant in China where they had fixed nets all around the plant because so many workers were jumping out the window to commit suicide. Do facts like that change buying habits? At the margins, most people don't give a damn because they have the attitude exemplified in the cartoon of a parrot reading the Parrot Times headline: Titanic Sunk: no parrots lost.
Our manufacturing wasn’t destroyed by either consumerism or cheap inputs. It was destroyed by doing stupid shit. Really stupid shit. Like having literally millions of public servants doing worse than useless things. Or propping up our dollar with foreign investment. Or laughing at the Japs when they had a real estate boom then having a real estate boom op our own. Or subsidising the banking system without controlling their lending or forcing rate caps on them. Or failing to keep building flat rail everywhere.
DeleteWe do stupid shit. And that’s why we are poor. It’s not something China did to us.
No horse has bolted. We just made ourselves poorer and sold off the farm so we could pretend it was otherwise. If you do stupid shit you get poorer and if you do more stupid shit to allow you to pretend you are not getting poorer then you get poorer still. On the other hand if you have good policy you can get rich very quickly. So it’s not about any of the things you imagine. But the scary subtext of what you are suggesting is that being good at manufacturing is optional.
DeleteIt’s not optional. We either get good at making and building stuff or we become a poor country.
Let’s supposing you were correct and that the manufacturing of others made us poor. If other peoples manufacturing was making us poor then logically speaking, tariffs would be the cure. I think the policy of idiots and the lack of local sovereignty makes us poor. But if you think the manufacturing of others makes us poor then tariffs is the key. I don’t think tariffs is the key but you would have to conclude that it was.
ReplyDeleteWe are not poorer, we are much richer than 30 years ago. Tariffs will make up poorer by spiking inflation. What you don't understand is human behavior. Like so many economic types you don't put enough time into learning and thinking about human behavior. Economics is one aspect of human behavior. What you don't perceive is that unless people are willing to change their behavior, be prepared to pay much higher prices for products produced here than in sweat shops, no level of tariffs will make any difference.
DeleteWe are not richer than in the 1960’s When I was little my Dad could have a kid every 18 months 4 times in a row and then when Mum went back to work they could buy a farm.
DeleteTry doing that today in a small town. If you are talking the last 30 years we have propped up our dollar with asset sales which in turn damaged our manufacturing competitiveness.
So any perception that we were rich was an illusion. See the chart. Line go up. We must be richer.
So it’s just doing stupid shit which is at issue. Fake wealth because ……. Line go up.
Like so many conservatives you don't understand that there is no returning to the good ol' days. The idea that tariffs will restore manufacturing is simplistic and naive. Which isn't surprising given Trump once said water destroys magnets and migrants are taking 100% of jobs actually much more than 100% of jobs. Simple solutions for a complex world don't work. The essential problem is that we can't know the future, we can't avoid unintended consequences, and no matter what we do there is no beating low labour costs and little regulations leading to working lives, environmental degradation, and living conditions we will never tolerate.
ReplyDeleteEither we get good at making and building stuff or we are fucked. Now you have to take a good long look at yourself and ask yourself why you are such a fucking moron as to gainsay this fundamental reality of life?
ReplyDeleteWhat is it? Are you trying to pretend to yourself that some public sinecure you may or may not have is actually IMPORTANT? What is it?
We will live or die on the basis of being able to get good at this stuff.
And other stuff too. Think of the terraces we see that were prevalent in both ancient Peru and China? We have been here more than two hundred years and with all the tools and tech we have we can’t even terrace a fucking hillside.
All things are possible if we stop being idiots, stop listening to idiots and start listening to people who know what they are talking about.
And part of that is sacking at least a million public servants.
You just have to stop this idiocy that it has something to do with low wages elsewhere making us poor. Were that true, and it’s NOT true then tariffs would cure the problem. Tariffs won’t cure the problem because it’s not true that slave labour elsewhere hurts us. But if you were right, you are wrong but IF you were right than tariffs would stop these poor people making us poorer.
ReplyDeleteWe get poorer because of the stupid things WE do. If we spend a trillion dollars on a real estate gold rush caused by stupid policy, that’s a lot less time, energy and funds that could be used on infrastructure improvement and manufacturing expansion. Or any other useful undertaking.
This is all deeply disturbing but maybe it throws some light on some things. Is it the case that in the public sector people fail to recognise they are welfare queens? And is there some delusion in the public service that there is SOME OTHER GAME IN TOWN… some other option that doesn’t include getting real good and making and building things?
ReplyDeleteIt would explain a lot of puzzling developments if it was known that these delusions were widespread.