Trump’s proposed tariffs will not create or save any jobs. All it will do is drive up prices. Wages are unlikely to follow. It’s a lose-lose proposition for all involved.
Asia Times writer, George Koo, is among the few who understand the folly of Trump’s proposed plan. Koo asks Is Trump’s appointment of Peter Navarro some kind of a joke?
Navarro is the China-bashing author of the book ‘Death by China’.
The simple but erroneous idea is that import tariff will protect jobs in the domestic market. It simply doesn’t work that way. It’s unbecoming for a Harvard PhD economist, like Navarro, to say so.
Ronald Reagan tried to protect America’s auto industry
A fairly recent example that comes to mind was when Reagan wanted to protect the American auto industry by imposing an import duty on cars made in Japan. The idea was to give the US carmakers breathing space to become more competitive.
Instead of taking advantage of the import barrier to work on their competitiveness, the US car companies simply took advantage of the new prices for imported Japanese cars by raising their own sticker price.
Imposing import duty across the board on goods made in China would be wrong-headed and even more disastrous than asking the American consumer to pay more for their cars.
Most of the consumer goods made in China such as apparel, shoes, toys, and hardware haven’t been made in America in decades. There are no domestic industries to protect and the import tax would just add the daily cost of living for every American.
Trump has to understand that America is losing jobs to automation and technological advances and not to China. Someday, for example, Uber is going to rely of self-drive cars and all the drivers will have to find another job. Amazon will use drones to deliver their packages and UPS will have to either operate the drones or else find some other line of work.
America’s future lies in generating highly qualified and skilled workers and not in bringing back low paying jobs from overseas.
Thus, we hope that Trump will have the wisdom to look for the win-win approach with China. To promote Navarro’s line of military confrontation and restart the nuclear race can only lead to a lose-lose outcome and such outcomes would be devastating beyond imagination.
Negotiation Ploy or the Real Deal?
I still wonder if Trump is engaging in over-the-top rhetoric as some sort of negotiation ploy or if he really believes what he says.
Either way, Navarro is a clear loser who cannot possibly benefit the Trump team.
Related Articles
- “Death by China”: Beijing Fires “Trade Cooperation Warning” at Trump
- Will Globalization Survive Trump?
- Reflections and Reader Comments on Free Trade: “China Doesn’t Play Fair!”
Mike “Mish” Shedlock
i have to take off my hat; on this one i really agree with you; its all a game for Trump but he may find out the hard way and WE have to suffer thru this
cheers
This is a bunch of nonsense. Countries have been using tariffs for hundreds of years to protect domestic industries and jobs, because they work. When NAFTA was signed and tariffs against Mexico were lifted, U.S. manufacturers started moving production down there. Same thing happened when Communist China was admitted to the WTO. To say the opposite is not true is just ludicrous. If labor costs me $15/hr in the U.S. and $2/hr in China, I will ship production there. If a tariff is slapped on the goods I bring into the U.S. to compensate for that disparity, then I will move production back to the U.S. as I no longer have any benefit of producing in China. It’s simple math. Sorry to interfere with the religious zealotry of the “Free trade at any price” crowd.
spoken like a tariff loving fool who welcomes higher prices to save a few thousand jobs
Countries have been using tariffs for hundreds of years because they protect the profits of those few who are in a position to hobnob with politicians. That’s all that matters in politics, after all. The rest is all indoctrination of reliable dimbulbs. And ditto for the rest of what passes for “regulation.”
The “argument” you are using wrt US vs China, is equally applicable to San Francisco vs Detroit. As in, San Franciscans supposedly being better off if it wasn’t for them darned Michiganers underpaying their auto workers. “Stealing” jobs from their San Franciscan colleagues. But do you honestly believe either San Francisco or Detroit would be better off if San Franciscans had to manufacture their own cars, due to punitive tariffs? Aside from the few San Franciscans who owned some woefully uncompetitive auto maker?
And the silliness doesn’t stop there. Would kids really be better off if daddy imposed sufficient tariffs on clothing to make sure clothes could be affordably sourced from anyone but mommy?
If Chinese people are willing to suffer lower wages than Americans in some field, they inevitably render Americans more competitive in other fields, by lowering Americans’ costs. that this isn’t easily empirically measured, is because we live in a gangster state where the financial and other asset pumping dependent industries (actually rackets, as there’s nothing industrious about living off of Fed welfare), by way of Fed debasement, captures the lion’s share of the gains. But the solution to that is just getting rid of the Fed, along with the rest of government’s ability to meddle in (“manage” in newspeak) the economy once and for all. Ideally overnight without any warning.
There is only one test. Are the American people winning or losing. Not corporations or government spending or GDP. To pretend that all of the losers are simply collateral damage necessary for the greater good is simply perverted. The same crap that has produced hundreds of millions of deaths forever. What exactly ARE we advancing toward. Utopia? Who does that include?
What’s your metric?
“What exactly ARE we advancing toward.”
Ideally, freedom. Realistically, hell.
I agree that blindly setting tariffs is a bad idea. I currently am an importer and pay tariffs on the most of the products we buy even though they are specialty products and not made here. These tariffs amount to stealing from the importer because they aren’t protecting any jobs.
On the other hand, the stores that are set up in China and listed on Amazon and Ebay need tariffs. Due to an old treaty, our USPS ships for these Chinese businesses to US customers for FREE! Once the goods hit our border, they are picked up by the USPS and delivered at no cost. This is why we see all this free shipping out of China. There is no way any American retailer can compete and this is the one area that needs attention. Amazon has been recruiting Chinese vendors since 2012 and now they are destroying what’s left of American retailers. They can ship anything here up to $800 tariff free and now they are dressing up their websites to look American so that the customer doesn’t know the difference. Time for a smack down and clean up these phony businesses. The USPS is literally supporting Amazon and Ebay by subsidizing the Chinese vendors.
Trump needs to clean out all the unnecessary regulations that are making it impossible to run a small business. Any business under 10 employees should not be required to obey any federal hiring guidelines, benefit guidelines or wage guidelines. They should be able to hire and fire at will because they own the business and can’t afford incompetent employees that can sue them for any reason. Small businesses are disappearing fast because it’s both too expensive and too risky to open a business with everyone putting a financial target on your back. All the crap that the government requires makes it almost impossible to open a business today. When your employees have more rights then the owner, then why bother?
Oh, ahh… I have been wondering about these Chinese Ebay sellers with their “free shipping”. Often, some auctions will end for like $ 0.55 and it looks like there can’t be money in the fulfillment.
DT would get high blood pressure hearing of this particular “deal” with the USPS. WTH were the negotiators thinking?!?
Tariffs are “stealing” from you, yet I assume you are passing those costs on to you customers….Unless of course you have competition that prevents that. I assume that all other importers pay your same tariff so if you have competition, it must be coming domestically. American jobs…Maybe?
We do not have protectionist tariffs today. We have political and lobbyist tariffs where specific businesses (not necessarily industries) BUY protection….From foreign AND domestic producers.
Ideally we would need no government to intercede for us as we SHOULD be able to protect ourselves. Choose wisely, understanding that profligate consumption of imports WILL eventually cost our jobs….Even jobs we really didn’t like.
Even Conservatives like sugar, and hopefully we would know that excess would eventually kill us. What we need is constant reminding of that fact, not laws that limit our consumption. What has happened however is that our government and big business have lied to us, passing trade bills that lead us to believe that our actions are accounted for, that the government has this handled and would not knowingly allow us to sglf destruct. YET, we see the numbers, the trade deficit, the job and industry loss, the massive public and private debt funding all of this…And we KNOW it’s screwed up.
We are left with really crappy choices at this point. We must stop the bleeding of Jon and industry loss while also stopping the dramatic rise in debt.
The ONLY way to reverse this at this late date is to lower American business taxes and offset them with tariffs on imports that most directly threaten jobs.
Tariffs are wrong, but there is a right way. China stole the jobs by requiring made in china to be sold in china.
Do the same and the jobs WILL come back. But tariffs will be needed to phase that in. Yes, local companies will raise their prices. We know that. But make it uneconomical to use the cheap labor and ship things halfway around the globe.
That should sound ridiculous to you, and it is. It is a horrible waste of energy resources, and many people think the planet matters too. Maybe I’ll coin the phrase, earth life matters.
Oh, and by the way — companies are ALREADY jacking up prices. Do you think those $120 tennis shoes cost more than $2 to make?
You are not getting any bargains from imported products. You get extremely overpriced junk. The company execs make a killing off of us.
We need to understand that protectionism was never a blind tax. It was designed to target specific goods and industries in an attempt to level them with domestically made goods. When we did this in the past we had great success as it maintained a positive trade balance and put the tax load NOT on American manufactures but foreign ones. It was designed to be selective in what it taxed and I do not think even the most protectionist advocate will suggest we simply throw a flat percentage tax on every imported good. The intent would be to match every import in price to its domestic counterpart. I realize that our trade is far more voluminous and diverse than it was 120 years ago, and any attempt to control a market of this size would be problematic at best and likely rife with corruption and distortions, BUT that does not invalidate the concept and I think it could prove valuable in targeted cases to attempt to set precedent.
Our first consideration would be to eliminate all business income taxes. Where protectionism of the past taxed only foreign and none of US production (business or labor), today we tax seemingly ONLY domestic production, which MUST STOP if we are to keep any domestic production over an extended period. Further we should minimize the government hand prints (bruises) on business that hamper so much of its activities.
But, still, there IS a place for SOME protectionist programs. What we have today is always too little too late. We rely on courts to decide when specific industries are being harmed, with judgments coming well after the damage is done and many have gone out of business. As Mish says, we are not going to bring back the textile industries with tariffs….that industry is dead and gone, but we can PROTECT our remaining industries with tax, tariff and regulation reform combined and nuanced.
What should be apparent (although it obviously is NOT) is that something MUST be done. We can’t afford to continue with the same lie that we will simply retrain our millions of unemployed and underemployed that have been displaced by American market dissolution….a group that only continues to grow, along with their expectations of entitlement. Dead end.
And just for another thought, we keep seeing this repeated again and again that we are not losing our jobs to China but to automation. This misses the point…there IS no difference between automation, China or illegal labor as they ALL undercut American wages. WE can control Imports and we can control Illegal labor, but we fail to understand how we are deliberately enabling technology to accomplish these same wage busting affects. Automation is a direct alternative to wages but it does not come from heaven or from inevitability. It is our financial system that drives technology as it depends TOTALLY on massive debt and profligate stock sales. We are actually borrowing money from future generations to create technology to ensure that they NEVER have a job. We want to pretend that somehow this technology will create new jobs, but we can see that just isn’t true, and when it does, those jobs are filled with H1B visa immigrants, many of them educated in OUR schools with scholarships backstopped by American tuition payers.
We can pretend that technology is an act of God, and inevitable “advancement” that we must simply adjust to, but that just isn’t true. We are DELIBERATELY being displaced and all of it enabled by DEBT. Further, while we see our people unemployed by whatever means, they are subsidized with even more debt and more theft from those still with a job, to remain in the consumption culture. We are using massive debt to create robots to supply us goods and services that we are increasingly forced to pay for with ever greater debt….a debt made artificially cheap for the time being to even further enable this “virtuous cycle”, eliminating ever more jobs, placing higher and higher demand on more and more expensive education that does not accomplish any goal more than even higher combined public and private debt.
What happens to all of this once interest rates take off? Or are we going to be stuck on zero forever?
We see substantial loss in manufacturing jobs every month…EVERY MONTH. If reeducation or simply higher education that we see hundreds of billions in debt alone paying for was working, why haven’t we seen a manufacturing resurgence…or ANY resurgence beyond baristas and bartenders?
This is typical progressive thinking….that the brave new world is just around the corner…yes it is all new territory that has never existed before but we are better, times are different and THIS TIME, if we just push further out, believe a little bit more, ignore all of the naysayers and just go for it, the whole world will see our genius and applaud.
How many jobs do we need to lose before we decide we are on the wrong path? How much wage redistribution to subsidize the non working is too much? What will we do when we have few jobs, no possibility to advance ourselves through ANY channel because everything is dominated by a few very large technology firms that OWN their markets, regardless of our laws against monopolies.
All of human history proves that technological advance is not only inevitable, but it is humanity’s reason for being.
You don’t come out and say it, but your only viable proposal is using the force of the State to limit technological advance. Nothing else can possibly stop it. And the force of the State doesn’t even have a snowball’s chance in Hell of stopping it.
In this ever-changing universe in which we live, the only thing that has ensured humanity’s survival is technological advance. It may end up that humanity hastens its own demise or transmogrification via technology, but it is certain that preventing technological advance will GUARANTEE our extinction.
But more to the point, what you intimate is impossible. Technology can’t be stopped.
Spot-on.
Somehow we existed for thousands of years, but until the last two hundred have we seen anything that looks like what we would call technological advance. A same period in time where we have seen these advancements in the “quality” of our lives we have also seen the wholesale growth in mass murder….Hundreds of millions, many efficiently eliminated with our technical marvels.
Our life quality will not be determined by its length or its conveniences. It will be determined by our contentment and individual personal satisfaction that will NEVER be supplied by the latest technogadget.
I bristle at the though that my father and grandfather, who both lived hard laborious lives, would see their lives as fruitless and without meaning because they were deprived of our modern conveniences.
Our modern consumerist world has “evolved” a new standard of life that is separated from one of personal skill and accomplishment against strong odds, and instead centers about the notion of luxury and convenience procured from the LEAST effort, with DEBT as the true enabler, not technology.
Well James, I agree and disagree, same as with the automation juggernaut @ fish. Automation is sure to increase to a major share, but not quite as rapidly as some imagine , or to encompass as much as we might imagine for even longer, and there is no point entering an argument based on guessed time frames.
So @fish, it matters that the mid level skills, high end labour skills remain in society, as it is from this knowledge that progress in automation will originate. It is also important that the social and economic adaptation is somewhat linear as a completely disruptive introduction is a serious threat to our evolution. Example, I am still looking for someone to present a sound sociopolitical economic path through this, and more obviously human nature will have a final say however eutopic any plan may appear.
James, though I could dispute your assertions to human destiny on philosophical grounds, lets run with it for now, and lets assume technology must be destined for human good, human and good also being subjective. A quick search brought me to this
http://www.techvshuman.com/read-preview/
which appears knowledgeable and voices probably what a lot of people intuit. Assuming so I just leave it at that as a point of reflection, and I imagine you are already aware of the topic, if not the text.
Good overview. But Leonhard, while entitled to his opinion, engages in the is/ought fallacy. He is correct that the future will not be shaped by fear, but it will be shaped by competition — just as all of human history has been shaped. Those things which humans cannot successfully compete against robots will be done by robots. Those things which humans, in the marketplace, demand be done by other humans will be done by humans.
The only way this future can be forestalled is for toolmakers to voluntarily cease innovating, which will result in the extinction of the human race. So it will not happen.
So how is technological advance inevitable if it eliminates its customers means of paying for its products and services? Are we simply doomed to starve because we can’t help but destroy our jobs? Technology CANNOT displace labor to the point of eliminating its customers UNLESS artificial funding is created to facilitate it. The vast majority of all technology finds its customers using debt to fund its purchase. If that debt was not available, would those purchases be made?
And DO NOT suggest that I am proposing using the power of government to LIMIT tech growth, when it is government who is enabling unbridled debt funded tech growth that is displacing jobs. To pretend that government has no role in artificially manipulating labor demand markets, be it through immigration, trade OR DEBT, is flat out idiotic.
And freedom implies in no way that markets should have access to unlimited credit at artificially low rates….unless you enjoyed the “freedom” provided by the 08 crash.
I mean, my God! Do you really think that we would see the plethora of techno gadgets much less job replacing automation if the massive amounts of credit and entitlements were not available? HOW IS THAT NATURAL OR INEVITABLE?
We will always have tech advancements, but those advancements cannot exceed our ability to adapt and adjust our economy, our population, our life styles to match. The desire of a relative few trying to get massively rich by selling us what we cannot afford cannot be the determiner of our future….or we will have no future.
You really need to get past this monomania that without a job an individual is doomed to starvation. There are MILLIONS, if not BILLIONS, of unemployed (or unproductively employed) people already subsisting on the dole.
When all labor can be done by robots using energy that is practically free, then humanity will have the opportunity to discover the meaning of life — a meaning in which physical labor is excluded from the equation.
“technology is humanity’s reason for being?”
You can’t make this stuff up. How absurd can one be? Whose reason would that be for have humanity exist?
People who think “technology is humanity’s reason for being” are usually also those who believe that one can simply print wealth.
If your casual study of history doesn’t inform you that humans are first and foremost toolmakers,and all of human society is organized around that endeavor, then we obviously have nothing to discuss.
Of course, keep maintaining the fallacy that because I note the obvious I also endorse it.
@katsaus, I don’t believe wealth can be printed. So, while granting your absurd ad hominem of a premise, I guess I’m the exception that “proves” your rule.
Another thought is, that if the future contains a bunch of robot factories let them be here in America!
I thought the Reagan program to change the behavior of Japanese automakers worked. According to you, the Japanese just for some mysterious reason built they built auto plants in the US. The Reagan policies had nothing to do with the change.
I would rather try a new approach to trade with Trump rather than stay with the disastrous policies we have had for the last 25 years!
Mish, you should be aware of how hollowed out the Chicago area has become. There used to be good middle class manufacturing jobs and these are gone. The south side is now just a wasteland and the people are left in a hopeless situation without jobs or educations..
It doesn’t matter to those so far untouched by it.
Hello Mish,
When a tariff is collected where does the money go? The same question for the fines levied against banks.
Julius Adams
In the late 1800s and early 1900s 95% of federal revenues came from import tariffs.That was a TAX on FOREIGN producers and virtually NO TAX on American production, business or labor, AND we had a significant positive trade balance.
It’s simply a mystery?!
We are SO modern now that nothing that worked a hundred years ago would EVER work today. And why should it when we have a monetary system that can simply print all the money we would ever need. When technology advances to where we can print food and shelter, Utopia will have arrived. If we had only abandoned gold as money sooner we could have had smart phones a thousand years earlier.
Amen. US manufacturing grew to be competitive behind protectionist walls. The same holds for many other nations, including Japan and China. There are in fact no examples of countries that outgrew being locations to exploit for resources into value-added competitive outfits without industrial policy, investment in infrastructure & education (the fourth factor of production after capital, labor, and energy), and protection of their own fledgling industry until they could compete against those with an earlier start.
When people talk free trade, they mean expanding market access. No country ever became great without having its own agriculture and its own industry, in other words, a large degree of self-reliance. Countries in Africa that need to import food stuffs and have open markets and/or are under tutelage of the IMF are the worst candidates for prosperity.
America is simply not cost effective, and it never will be while supporting its huge military sector, its medical sector scam, and its doctrinaire neglect of physical and social infrastructure/capital.
You said it perfectly madashellowell.
The “tariffs are bad” groupthinkers who think there should NOT be tariffs forget that the money collected in tariffs would end up with the government so in addition to making american manufactured products more competitive inside US markets the collected tariffs would help stop the current rapid increases in government debt.
.
The claim “put poor will suffer from higher prices if we put tariffs” is FAKE because the poor who is no longer poor because he has a job will be in much better position than the unemployed poor buying chinese stuff at Walmart and the tariffs collected can be for example directed towards better schools or better assistance to the poor if this is wanted and the government debt increases are stopped by making healthcare and hospitals more affordable for people and for government and for medicare by introducing competition in hospitals and doctors and mandating posted prices for all hospital and doctor services.
.
Current system where a person does not know how high the bill will be from a hospital or doctor is insane and like taking your car to a car repair shop with no idea how much it will cost or taking car insurance not knowing what it will cost or shopping at a supermarket where no prices are listed but you know how much you have to pay only after paying at the cashier.
.
Not only insane, but contrary to existing law. You cannot charge two parties different prices, and that cannot be supervised without public pricing. There is a large body of law that makes the practices in the medical sector illegal in all other branches of activity.
There’s a huge, huge difference between tariffs as a means to fund government, and random hackjob tariffs used to reward inefficient incompetents who has the government’s ear. While the government still taxes all manners of other things for it’s sustenance.
A general tariff on everything crossing the border inbound from everywhere, in combination with a straight up land tax, is pretty much ideal as a means of funding government. Minimally distrortive, highly efficient and maximally equitable and universally justifiable.
IOW, the exact opposite of the childish, and economically illiterate, fantasies of the “Come up with some pretext to blame China for something so we can protect the year end bonus of the incompetent CEO who donated to our campaign” nonsense that is usually the topic when tariffs come up.
10% of the value of all inbound goods, 10% of the value of all land. Done.. No “better” mechanism for funding government will ever be found. Guaranteed. The only possible improvement, is simply to avoid funding a government altogether.
So, if our entire US economy is deemed inefficient and incompetent, then I suppose we should be content in that knowledge and perish? I take it then that you assume all of these companies that have either failed or left the country are also inefficient incompetents? Regardless of the fact we are inefficient and incompetent because we cannot survive on $5/day and are generally unwilling to live ten people to a shack?
And by your approximation we should tax a French tire maker the exact same amount as a Chinese one using slave labor?
Good to know. Thanks for your brilliant and compassionate perspective. Obviously your survival or prosperity is not in competition with China OR automation.
So, if our entire US economy is deemed inefficient and incompetent, then I suppose we should be content in that knowledge and perish?”
“Deemed” by whom? There never were, nor will ever be, some anointed “deemer.” Also, there is no “entire US economy” as an entity separate and in opposition to anything else. Just a bunch of individuals stuck on the same continent, trying to make do as best they can. Including by robbing others, if that is an opportunity available to them. As it is for those who happen to either be in government, or belong to the 1% who have government’s ear.
For the vast majority of Americans, getting by by robbing others, or by restricting what others can do in order to force them to pay rents above and beyond the best deal available, is simply not an option. For all those, the best they can hope for, is to minimize the ability others have to squeeze above market rent from them. Which means, minimize the ability of governments to impose regulations, tariffs, taxes, debasement transfers and all the other mechanisms for theft they currently have available to them.
There is no higher good than freedom. Not something magical out there worth sacrificing freedom for. Nor is freedom some weird collection of independent mini-freedoms, some who are more important than others. If you are free, you are free to say what you want to whom you want. Unrestricted. As well as buy whatever you want from whomever you want. Again, unrestricted. And travel wherever you want. And…
There is no “free speech”, “free markets”, “free trade” etc., that exist as supposedly independent entities. Just one, indivisible thing called Freedom. The population of a country either have it, and hence is free, or they are nothing but chattel, bred like livestock to take part in some pathetic and disgusting social experiment undertaken by supposed “elites.”
Mish is a status quoist “free” trade neoliberal. Same as Hillary Clinton. Americans are sick and tired of what neoliberalism has done to them, even if they don’t know its name. That is why Clinton lost to Trump, even though Trump was the most unpopular Presidential candidate in history.
You forgot the /sarc tag. Without it, someone will actually think what you wrote was meant to be serious.
On the other hand Koo might be pointing out that the US economy is becoming defunct. That is to say less needed in the global flow of trade. High level skills are not going to support a whole population, so at some point the US may run out of offerings and the reset will likely mean that trade will actually have to start balancing out, which in turn implies the US devalues towards the lower denominator with a few decades of past mismanagement to deal with at the same time. Don’t get me wrong, the US is still in a good position, but in my opinion has squandered a lot of its credibility internationally, beyond what will bring good return… I am not sure it can maintain its expansionist policies. Protectionism is no easy route as Koo explains, maybe he misses the point that increased profits for domestic manufacturers effectively closes the economic circuit to a national level and so will ultimately encourage the formation of a more productive domestic economy IF national monopoly and legislation don’t interfere in but instead encourage domestic competition.
Personally, if I were managing this as a ‘household’, I would be very picky on what was purchased from outside, retaining the middle level skills and ability functioning – what you can do for yourself you do for yourself and only relegate one skill if you actually have a more productive one to move to. That is to say training the whole population to high skill sets is a false avenue, an idea that probably is academically sponsored or some elitist fantasy designed to flush the stupid who are not personally picked for the few existing place.
You must know this Mish, you quote theory and practice, as well as being aware of student debt bubbles and unplaced graduates.
Stupid above should be ‘stupid’ – people only find out they are stupid when there are no openings for them, but conned would fit also.
Something to think about, “How can we protect our industry if America is allowing China to take a certain economic advantage. Not sure of all the facts, if any, but if China is sending their products over to America, most seem to be crap, then why not do something to equalize the playing field?” Just a question!
Rather than tariffs, why not incentivize on shoring that makes sense to have, through tax breaks?
Have no doubt, automation will upset the best laid plans for skilled labour and middle class jobs no matter where in the world and anyone trying to stop that juggernaut will fail.
The House GOP has a bill to do this, it would put taxes on goods and services sold in the USA, but not sold overseas. Right now, the USA taxes a corporation based on where it is located (where profits are earned), which is why US companies offshore and do inversions.
Our government needs money badly. While tax cuts can potentially actually increase revenues due to economic expansion, why is it that we can have no problem taxing our businesses punitively while completely abstaining from taxing foreign companies at all. Why would we believe it is to our advantage to tax American businesses over foreign? Hell, we even tax our own citizens living and working in foreign nation’s but we CAN’T tax foreign business that is KNOWINGLY taking jobs.
Yes, I know. Mish believes these jobs are going to go anyway… Inevitable, like automation. Given that we no longer are going to actually PRODUCE anything, as WORK is apparently too lowly for the entitled American, I can only assume that we will all become consultants and salesmen. Those should be very secure and “in demand” occupations for sure….
There will be millions of unemployed foreigners too and automated factories won’t care where they are situated and will probably be very mobile, popping up for a few years here, a few years there.
A period where labour mobility becomes less important, global trade reduces, but FACTORIES become the mobile element. By mobile, I mean easy to set-up, breakdown and move. Having fixed factories for years can become a thing of history. Automation will change that.
I don’t see anyone thinking like this yet but it would change the landscape completely. They will go where treated best, like capital does.
Treat them best and they will come.
Look at China and how they deal with their millions of unemployed. Riots and murder in the streets. China has been able to implement major tech advances in production because they are seemingly willing to accept the human cost. They have used the meth of super credit to fund massive expansion of their economy including automation that threatens their population’s employment while also creating a massive inflation in their cost of living. Naturally they end up with violence in the streets because they have not created vast amounts of welfare and entitlements to satiate the jobless. They have the added bonus of a large population with very low expectations.
Technological advance is as inevitable as armageddon….based on current assumptions.
How mobile depends on political and physical contraints. But robots will effectively end wage arbitrage, since they cost the same everywhere. US robots will not be paying for medicare, social security, or the JF-35 program, as do American workers. Robots in America will suffer no penalty compared to robots in Chindia. Were governments to tax the productivity of robots, they would be slitting their own wrists.
There is only one path they will accept and it is a deliberate one. Automation will eliminate jobs. Those jobless will become state dependents. The working population (tax base) will shrink putting a larger tax burden on them, further driving up labor costs incentvizing even more automation. The equation will force more costs onto automation owners pushing consumer costs higher. The few more concentrated group of business owners who have successfully purchased the monopolistic protection from government will find themselves in the same crosshairs as insurance companies, being blamed for rising costs that will unavoidably be forced upon them due to massive redistribution costs driven by unemployed people dependent on the government.
All of this is to one end. Ultimately government will find it “necessary” to nationalize these companies in a “desperate act” to save the republic. The mantra will be an old one…That “the people” should own their means of production, and of course a government “of the people” doing this is the only rational next step.
This is how it is done. It is how Saul Alinksy told them to do it.
Automation is NOT liberation, it is the ultimate dependency on a means of production that we will not own and will not even comprehend. There is none of the things we use daily that 95 percent of people have any clue of how it works. It is MAGIC!
If people were to actually work to understand and OWN technology that produces rather than simply consume and become dependent upon it, we MIGHT have a chance. People are not encouraged to invest in their own productive capacities. When we look at productivity factors of modern production, it is NOT due individual’s efforts but due to business owner’s investments in technology. And those employees who master these technologies do so by being paid to learn by their employers. Very few spend their own time and money to improve their productive skills, to enhance their value to the employer. No, it’s up to the business to invest in people and then hope they actually produce. It’s not hard math for business to choose solutions that eliminate people, and most do NOTHING to change that, and when pressed, make even worse by demanding more.
We are trapped by delusion created by a government that provides false choices….The notion of “entitlement” with absolutely no means of providing it beyond theft, and when that fails, profligate money creation. They will lie to us and tell us that we can buy infinite goods from a super low wage China and only suffer job loss because of evil self serving businesses. They will tell us that we can infinitely tax wealth and production and that WE will not have to pay those costs.
And they tell us there is NO danger in dependency, even though it has been the dominant theme of every breathing creature that their security lie with independence and self sufficiency, the thing that every parent impressed upon their child until our most recent couple of decades. People used to leave home to make it on their own in their late teens and early twenties. Now we have it as part of law that we have dependents up to 26 now and record numbers living with their parents indefinitely.
A prosperous society is one that is a productive society full of productive people. It’s more than money and more than survival, it’s pride and contentment that will NEVER exist in a dependent welfare redistribution society.
Treat them best and they will come.
Punish them for being somewhere else is not the way.
How to treat them best? Tax, infrastructure, skillsets.
Perhaps US is best to tackle these 3 things first before even considering tariffs.
I have the vague impression that some people claimed that American car companies had odd management ideas that did not work. While I was at U Michigan in the early 1980s, it was well known that the engineers had proposed launching a robotic manufacturing center, and the labor unions had blocked the idea. It was better known that the lead economist of one car company or another had been ordered by top management to write a report proving that tariffs would be a great benefit to the company. He wrote a report saying that if there were import number restrictions (and they were not iirc tariffs) the Japanese would only import higher end cars on which they made the most money, and jack up their prices until demand fell to meet supply, which would mean huge amounts of cash for the Japanese for R&D and automation. He refused to alter the report, and was sent on his way. At one point, demand was so much greater than legal supply that CA dealers were getting $1500 over list price.
My impression of the foreign car plants here was that they saved on shipping and emphatically said that they took advantage of excellent American labor, on which tehy gave examples. However, there was a full page ad for iirc Toyota that appeared in various magazines, showing an assembly line full with cars. If you looked carefully, you noticed that every so often there was a car with the steering wheel on the left, for the export-to-Japan market. This was a rebuke to American companies who claimed they could not export to Japan because they would need a separate assembly line to build left-wheel-drive cars.
There is a bubble in people. That is the root cause of all other bubbles. But fear not, TPTB are popping the people bubble as we speak.
It’s not lose-lose if you are looking at the whole picture. Politics is a zero sum game. China’s soft power is economic and its hard power is paid for by a growing economy. If global trade slides, China’s GDP growth will slow much more than the U.S. The date at which China’s economy catches the U.S. is pushed far into the future. Countries such as Vietnam and Indonesia also do not want Chinese domination, they may join with the United States.
Slowing global trade with poor economic policies is a way of buying sovereignty and national security. The other option is an arms race with the fast growing Chinese economy, which will result in a war in the South China Sea (China already claims the whole thing as a Chinese lake), and a world war if Japan is sucked in.
Whether you agree or disagree with it, once free trade is no longer dogma, trade policy can be subordinated to national security and other issues. Looking at this solely as a trade issue is missing some other major factors that could be in play.
The Logic of Strategy: Yuan Devaluation and the Road to Trade War
“America’s future lies in generating highly qualified and skilled workers and not in bringing back low paying jobs from overseas”.
That’s why we are moving all those Syrian refugees (Somalians) into the United States. They tell us they are doctors, lawyers, and engineers. We need those people with their average IQ of 68 to get those skilled employment gaps filled.
I think also Trump is playing games with Washington. Even his support of Israel has an ulterior motive apparently. His choices are bizarre enough to believe he is setting them up to fail which will clear space for what he may really intend to do. Dunno though, fingers crossed.
One of the more odd conclusions MMT sets out is that exports are a cost and imports are a benefit to the nation. This is contrary to the usual line in economics. But, if one thinks about it for a moment, it makes good sense. When we export goods we effectively drain resources from the nation, leaving less for the future. All we get in return are numbers in accounts, something not scarce at all.
For imports it’s the opposite. We give numbers in accounts -and they are kept in the local central bank – China has $1.3 Trillion there. Importers benefit from the possible saving of resources and skills that may be in short supply. The US benefits greatly from its imports [not without costs to employment].
Really the whole China argument is not on a sound footing.
It’s too bad that we need so many of those “numbers” to live.
Your assumption is that these “numbers” are not representative of anything of value. You may find that those nations exporting us all of these goods may actually want us to take our numbers back for something of REAL value, like our property, our remaining manufacturing, or even our liberty. It is silly to look at our financial obligations as nothing more than “numbers”. Currency is a medium of EXCHANGE which MEANS they will want to EXCHANGE their goods for something o value from us…not paper or digits.
We have been listening to “learned professionals” for decades trying to explain to us why what would appear to be simply common sense is ignorance and how bewildering multi-equational diatribes imply that we can live without labor on printed money that poor simple foreigners will accept in lieu of REAL remuneration FOREVER!
The dollars that China is taking in exchange for chinese made stuff are real dollars that will find their way back to United States and be used to buy assets like China is already doing and like it will continue to do.
Part of those dollars are exchanged to euros and used to buy assets in Europe.
.
The economist idea that “it is just numbers” can only come from an ivory tower economist who has not worked a day in his/her life in a real job and deals in abstract la-la-land ideas and thinks la-la-la-land ideas are reality.
That is totally backwards.
The current destruction of american manufacturing is destroying jobs and earnings of americans where jobs and earnings in China are growing.
.
Americans are not consuming with money that they have earned with productive work but they are collectively right now consuming with debt as individuals that they have no hope of paying back with the continually worsening employment prospects and americans are collectively right now consuming with debt by US government that they have no hope of paying back with the continually worsening employment prospects for americans and for their children.
.
The consumer demand by americans should have CRASHED by now but increasing amount of private debt and government debt and state debt and corporate debt are keeping the consumer demand up so companies and politicians can cash profits and tax economic activity that are based on continually increasing debt levels which are masking the effects of stupid offshoring of manufacturing decisions by companies and which are masking the effects of stupid offshoring of manufacturing policies by politicians and which are also masking the consequences of stupid immigration policies
.
This is a completely unsustainable model.
.
The current consumer demand is just debt based fake demand that is not sustainable but company CEO’s are cashing it as long as they can to cash as much as they can by increasing stock prices and options and bonuses and salaries based on this unsustainable debt based demand.
Likewise politicians are just looking at the short term of how to get lobbyist money by supporting crazy policies and how to get re-elected.
.
The current view that nothing matters but the short-term and the view that nothing matters but what I-I-I can get out of it for Me-Me-Me will destroy the american model completely if this debt-based craziness is not stopped.
.
Decisions have to have CONSEQUENCES and those consequences have to be felt immediately and not masked by building even bigger ponzis into the economy…
Free trade is another progressive egalitarian notion like open borders that implies that if you protect yourself you are somehow demonizing others and being small minded (ignorant) just as Mish does towards those who believe in “some” protectionism.
Nationalism is protectionism and progressives HATE both, but in our world progressive indoctrination has seeped into every nook and crevice of our minds and informs even Conservatives that we should let down our guard, welcome in foreigners even if they underbid our wages, welcome in the cheap imports even if it does shutter our businesses, because we all want to be modern and part of the popular consensus of really smart people.
You don’t want to be stupid do you?
George Koo who worked his whole life earning money consulting for american companies who were moving factories and production to China and who is a founder of a company called International Strategic Alliances which still continues consulting for american companies who are moving factories and production to China thinks Trumps plans are crazy?
.
How surprising.
.
I am so shocked and surprised that George Koo would defend his whole business career and the interests of the consulting company he is a founder of and probably still has significant earnings from that helps american companies to move production and factories to China.
.
From George Koo’s profile:
“Dr. George Koo recently retired from a global advisory services firm where he advised clients on their China strategies and business operations. Educated at MIT, Stevens Institute and Santa Clara University, he is the founder and former managing director of International Strategic Alliances.”
.
Maybe some consideration of the motives of Trump bashers who think Trumps ideas are stupid should be used?
For industries which have long left the United States, I agree tariffs do not protect those jobs. What tariffs can do is encourage those industry to return to the US. Job created will be fewer due to automation, except for those building the automation. GE would be one of the biggest beneficiaries since it manufactures robots and their controllers. A return to self sufficiency has a peace dividend in that fewer US tax dollars will be needed since US companies will have fewer foreign operations to protect. If there are no foreign plants to supply the US with military electronics or a large % of consumer goods, then there is no need to worry about the affairs of a foreign country.
Mish,
Would you care to make a falsifiable prediction as to the detriment to the US economy when import tariffs and import/export tax adjustments are applied??
I am another tariff-loving fool, and would love to see proved very wrong on this.
Trump picked the perfect trade team that will ignore the majority convention wisdom in the USA regarding tariffs – would you agree.
By the way have you read Ian Fletcher’s book on the subject?
I suggest you study Smoot-Hawley
How nuts will Trump get? I don’t know, nor does anyone else
Smoot Hawley was imposed when we had a positive trade balance and for years prior had used protectionist tariffs to build that positive trade balance. Smoot Hawley has been blamed for deepening the recession….By many who completely ignore FDR’s policies, his SOCIALIST policies, that did far more damage. Read history and you will see that there was a long battle between Republicans who supported protectionist tariffs and Democrats who wanted “revenue” tariffs that would be applied to ALL goods, foreign and domestic. Also note that not long after Smoot Hawley was generally blamed for the depression, we suddenly find income taxes all the rage…Tax the rich, which ultimately became US.
To compare Smoot Hawley to what we have today is wrong. We are already in a long recession with no protectionism, and after running a massive negative trade balance for multiple decades, it is unimaginable how we can think of ourselves not already at war, and losing badly. How much worse can a $800 billion deficit get?
And you contend that tariffs would raise prices for everyone. Do those tariffs NOT contribute to our government’s revenues? Would they not otherwise offset the potential LOWERING of our domestic production tax burden? How much of the cost of EVERYTHING we buy is currently taxes? Are not tariffs simply the shifting of tax from domestically produced goods to foreign ones?
And let’s also not ignore the “protectionism” of WWII.
We substantially DESTROYED the rest of the world’s productive capabilities for years at substantial cost to American taxpayers. Only when Japan and Europe came back into production did we see our trade balance significantly shift.
Protectionism had become a dirty word and those supporting even a little of it are treated the same as climate change deniers. Let’s have a debate rather than casting dispersions. If for no other reason than we need people to feel like they are part of this and not look fringe freaks that can’t be associated with in public…Or even anonymous blogs!
“America’s future lies in generating highly qualified and skilled workers and not in bringing back low paying jobs from overseas.”
How is America going to do this with its mediocre educational system, its lack of any kind of vocational training excellence, its disdain for the careers of labor employees, its lack of any kind of industrial policy? Sounds to me that America is going to be stuck with a whole of unemployables.
George Koo’s LinkedIN:
-Special Adviser
Deloitte & Touche
1999 – March 2013 (14 years)
Business consulting as related to China
-Board Director & advisor
DFT Corporation
1985 – 2010 (25 years)Wuhan, Hubei, China
Board member from inception of the Sino American JV until 2000.
Advisor to the now Sino American Japanese JV from 2000 to 2010.
-Managing Director
International Strategic Alliances
1988 – 1999 (11 years)
Cross border alliances between the US and China, Japan and Taiwan
So basically George Koo has been an offshoring consultant in how to transfer manufacturing and factories from USA to China for his whole career.
.
How surprising that he thinks Trumps ideas are bad and the current offshoring of manufacturing and factories to China should continue…
Classic Trump negotiation ploy, ripped right out of the plot of every bad police “drama” on TV.
Good cop, bad cop.
China can negotiate “free trade” (both directions) with Trump, the “good cop” — or they can go shove it with tarriffs and economic suffering with Navarro the “bad cop”.
China already lost this negotiation before it started. China will accept US exports into China (a two way street), or China can keep their one way non-sense which will mean burying themselves in their own low quality products and debt.
The quality problems with Chinese products have become so bad that they won’t be missed (regardless of price) — and assuming China decides to address their quality problems it will take them at least a year or two to fix processes and improve quality.
A mercantile economy like China needs exports to survive. Obama is too dumb to figure this out, and he is always bowing to everyone — he doesn’t respect himself or the US.
Trump will force China to accept a two way street on trade; the EU can’t pay their bills so they don’t matter; the UK wants to expand trade with the US, both will benefit…
Countries that accept free trade BOTH DIRECTIONS have nothing to fear from Trump. Those that have been walking all over the US with the current sissy in the White House will have to “negotiate” with Navarro and tarriffs (at least until they fix their attitudes).
In two years, Navarro will have served his usefulness to Trump and will “voluntarily leave to pursue other interests and spend more time with his family”.
There is no trade war coming Mish, that is just media nonsense. There is a new business deal being negotiated, and China thinks they are still dealing with sissies like Bush/Obama.
How many hundreds of billions in trade deficit would be required before we could actually consider ourselves “at war”. Apparently, if we are to accept the demonization of Smoot Hawley, we can have a trade war with a positive trade balance.
Or am I confused and it’s only really a war if we fight back?
Your choice of language implies you can’t think outside the media box.
China wants to sell to the US, they must also make their markets open to US products. They must make trade a two way street…. No having Chinese customs inspectors delay US products at the docks forever, no forcing US companies to give away intellectual property as a condition for even bidding.
If China doesn’t like having a two way street, they can shove their mercantile economy where the sun don’t shine… see how many weeks it takes for “social harmony” in China to break down.
If China allows a two way street — then all is well. YOU may have to change jobs from underwear maker to something else, and that might upset you personally. But that job was going to disappear anyway (to a 3rd world country or to a machine — the job was going away).
If China wants to pull the bulllying negotiating tactics that worked so well on sissy Obama — they will find Trump isn’t known for diplomacy. Bully’s can try to negotiate with Navarro on how crippling they want tarrifs to be. Want to negotiate free like an adults? Then Mr Trump will see you now.
I don’t want to waste time arguing what label the media wants to put on this. They hated Trump during the election, and the media isn’t very coy about admitting they still hate him now. I am a proud cable TV cord cutter.. You will never convince me that Matt Lauer (stand in whatever TV talking head you like) deserves $15 million per year, while people who actually work should accept five figures.
Not clear on your response. You told Mish there would be no trade war, and I am simply asking what the definition of a trade war is. Regardless of my box, the politicians and economists continue to use the war terminology as an implied threat. What is their REAL threat? A war would imply to me that tensions might increase to inhibit ALL trade….Which would infer a zero trade balance, which on paper looks to me a lot better than an $800 billion loss every year. I know it’s not that simple, that that would do serious damage to some of our industries, but if $800 billion is an acceptable loss, is a trillion….Or two?
On your points, I agree. But what IS a trade war and how do we determine if we are in one. This is THEIR language that we are stuck fighting against. We should at least force to define their terms.
There is no trade war coming or going — ergo nothing to define.
China agreed to two way trade, but they haven’t lived up to their promises. So they can accept the faulty product back for a full refund, or they can make it right.
Having misrepresented themselves initially, China can discuss how to make things right with Trump & Navarro — not the sissy Obama (or the mental “giant” Bush).
Trump doesn’t want to waste time negotiating with people who don’t keep their word (who does?), having Navarro propose crippling tarriffs is a great way to call China’s bluff, and force them to send an adult if they want to negotiate with Trump.
China needs customers for their low quality crap that makes up the US trade deficit. US products are sitting on Chinese docks in perpetual limbo while Chinese customs officials stall — the products aren’t going anywhere now.. If the Chinese want to use lots of delay tactics, and pay tariffs, Trump should just wait. Time is not on the Chinese side.
The only US company with a lot to lose is Apple — and Tim Cook made it quite clear he voted for Hilary like a good San Francisco liberal. Maybe Apple (Foxconn?) will have to start building some products in the US, or Foxconn can build in some other country that follows “free” (two way) trade policy. Probably Cook should stop acting so San Fran partisan, its bad for business.
Walmart is already sourcing a lot more stuff domestically. Advertisers will say it is patriotic or something — but the supply chain and quality problems (counterfeits) was becoming a huge liability. Walmart reducing exposure to China might have been patriotic in part, but it was also good business.
I think Trump needs to focus on repealing Obamacare immediately, and start a national debate on how to control health care COSTS — because those out of control costs are actually a threat to our way of life.
China can squirm in the meantime. So what.
Trade benefits never seem to feed through to Joe average, in form of more affordable CPI prices. Bankers print CPI inflation, regardless of whether or not there is free trade. What difference does free trade make if Joe average keeps moving backward the whole time?
Because of bank printing, free trade has resulted in nothing more than bankers printing service inflation to the moon, while the CPI kept going up relentlessly. Bankers are the only ones who benefitted from trade, because it gave bankers an excuse to print wantonly (confiscate stuff).
We need a gold standard before free trade benefits Joe average (CPI deflation). Voters will not care about free trade unless it really does result in more affordable prices (CPI deflation).
Peter Navarro understands not all trade is good and we are putting in hock future generations of Americans. We should expect the politically heated debate over the new trade agreements to continue. We must ponder how much of this is about individual governments giving up control and becoming subservient to corporate “efficiency” and the desire of companies to both develop and control future rules.
We should not lose sight of the fact that while free trade is important, fair trade is far more so and should be the main issue. Developing a long-term sustainable economic system that is balanced would contribute to both global cohesion and the world economy. The article below highlights the difference between free trade and fair trade.
http://brucewilds.blogspot.com/2015/10/tpp-and-fair-trade.htm
fair trade is a crock of bull shit
Fairness is a subjective notion that is designed to serve one party over another’s interests. We should NEVER seek out a “fair fight” as it represents a 50percent chance of failure. We should seek out those battles we have the best chance of winning and we will never win the battle of raw cost of production against the Chinese. They have nearly an infinite source of compliant labor that will work far cheaper than any American, they have created vast capital from debt that they are using to purchase assets real estate and raw materials of which we will pay dearly for in the future. They have access to technology equal to any in the world and they own not just the robots but the technology that makes them.
How on earth do we have a “fair” fight against that?
I don’t know you but I feel your opinions are drawn from an isolated and idealistic perspective in that your job has never been threatened by this “process”. That you believe all of us working class slobs are just depreciable cogs in the machine to be replaced by more modern, less expensive and frictionless cogs.
Our economy is to serve US. All of us, not just the few that prosper from “economic growth” that obviously serves a very few. I believe it is dangerous for those running our economy to be so far removed from the “data” as they see us just as every other tryant has, as nothing but a impediment to their greater vision.
When you can accurately define how reeducation, training and higher education are actually offsetting these losses in real jobs, not part time and eBay selling, but true “gainful” employment, maybe you will have convinced an old protectionist hack of the integrity of your position.