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Tariffs Won’t Solve The Bigger Problems
(I am a bit under the weather …)
Later today President Trump will unveil more tariffs against imports from various countries. In consequence prices in the U.S. will rise, GDP will sink, U.S. financial markets will take another hit.
To build or regain manufacturing capacity requires well coordinated long term projects. Research, training, infrastructure development, capital allocation and market protection all need to work together over several years if not decades.
Pursuing just one of these measure – tariffs, and likely only for a short time, will not change any of the related problems in other fields.
The 'invisible hand' of the markets will respond to Trump's moves by showing him a very visible finger.
Posted by: HB_Norica | Apr 2 2025 15:48 utc | 23
They have expensive labour, a poor public school system and an entitled work force.
Labor in the US is expensive in comparison to much of the rest of the world for three reasons often overlooked: The high cost of health care which is a private insurance dominated system mulcting profits; the high cost of housing, which is dominated by literally rent-seeking banks; the high costs of transportation by private car. Wages that overall have to supply some of these costs are necessarily higher. [Part of the issues with US transportation is the inescapable one of a massive land area with many areas with low population density, thus higher relative infrastructure cost. But that still affects firms’ bottom line.]
As to the public school system, insofar as it is a genuinely poor system, the fact that it is not really a system but a decentralized mess that has been contaminated for decades by local gentry who for decades kept trying to run public schools like businesses has done great damage. The decaying infrastructure of governance which has simultaneously impelled efforts to provide essential public services via schools (like food for far too many children) has left it somewhat schizophrenic. The so-called public school system of a country with huge geographical mobility doesn’t even have a national curriculum! This is not a system.
The belief that the US working classes are entitled apparently reflects a belief that mere workers don’t have a right to live in common decency, and possibly serves as a coded call to lower US pay and standard of living to be competitive—in the bosses’ eyes!—with the third world working classes. But it may just be the firm belief that the overweening power of US unions is ruining everything, despite the US unions are not powerful.
Posted by: CullenBaker | Apr 2 2025 16:01 utc | 27 If US manufacturers could make a profit manufacturing for the US market, they would have done so. They exported production abroad because they couldn’t. Reshoring production into a domestic market turned monopoly by protective tariffs to eliminate competition from foreign goods will tend to limit total production, merely redistributing income into the de facto monopoly firms’ profits. The argument for protecting infant industries is two-fold: The higher profits will ultimately raise total production as re-investment of profits increases physical (and ultimately financial) productivity. And, industrialization has benefits for the whole society. But this only applies when profits, and prospects for more profits, are high enough to provoke re-investment in real production, as opposed to finance/speculation. Trump’s schemes no more address this issue of profits than the Austrians, Chicago school, monetarists, gold bugs, various Keynesians/post-Keynesians/MMT theorists do.
Plus, any reshoring would have to address infrastructure. Biden attempted, verbally at least, to do so with the infrastructure bill, the oddly-named Inflation Reduction Act, and the CHIPS bill. But per President Band-Aid’s usual, all too little, too late. Even the Build Back Better program was too small and superficial and no one knows whether that was anything but a negotiating ploy, never meant to be enacted. And to top it off, one of the biggest incentives to investing in real capital is to increase labor efficiency, because labor costs cut into profit margins. The decades long campaign to lower real wages continues unabated under Trump. One of the things Biden was resented for was how Covid relief briefly helped the lowest wage brackets temporarily get raise real wage increases. That was why all the moaning about labor shortages, workers quitting minimum wage jobs and the Fed raising interest rates to fight a purely imaginary wage-push inflation. The belief that only government deficits can be inflationary and that all government spending is waste (the real complaint driving DOGE) means that the government is actively suppressing wage demand. How can a shrinking of US markets promote profitability, hence reinvestment? Trumpery is cultism.
Posted by: Exile | Apr 2 2025 16:24 utc | 39 The general rule is, wars can always be funded. No state goes broke, then quits the war. It loses the war, then goes broke. After the war, sure, even a victor, like France in the American Revolution, can tear itself apart as the ruling class tries to burden the rest of the nation with paying the war debt—usually at face value, not market value!—can tear the country apart. But that’s not what you’re saying, which appears to me to be, as the man said, not even wrong.
Posted by: steven t johnson | Apr 2 2025 17:43 utc | 75
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