> It’s unclear what legal authority Trump would be able to use to compel U.S. companies to close operations in China or stop sourcing products from the country
Listen, I'm not a fan of Trump but that was taken out of context. Go read the full quote. The statement was more "no one has done this yet, I'm going to do it" and not claiming any specialness.
It's hard to just pick up and switch when you are so entrenched.
That said, I would love if more US companies built stuff here in the US. Yeah, prices might be a little higher, but at least we aren't exploiting the labor of vulnerable people in foreign countries anymore.
I don't know. People in developing countries choose to work long hard hours because it's better than what they've had and they all want to better their condition. It's not perfect, but better than the alternative.
Vulnerable? Maybe. But they are taking less pay because they have no other alternatives. Buying nothing from them does not improve their situation. In fact much of the Chinese (or other low cost countries) economy has come from the vast amount of US dollars that have been injected for low cost goods. That has for sure raised things in those countries. Not for everyone but it's not like the 1950's either or even close. Ask anyone who grew up in the 60's and 70's what China was like back then.
Many Chinese would thank you because you bought stuff manufactured by them. Without the opportunity to work on those "exploiting job", they'd be doing something with much less pay and much more hard works, and many of their next generations would be still doing the same job instead of having the opportunity to gain better education.
That's my question: do the people that want 100pc of the manufacturing to come back to the US have a plan for the inevitable ecological fallout? When we outsourced production to China we also outsourced the pollution produced by that manufacturing.
That's an extremely narrow version of global economics. There are tons of benefits to local markets being serviced by local producers, and there are also benefits to being serviced by foreign producers. Also, if you take those jobs away from foreign markets without replacing them (or fixing the labor conditions) how exactly can you see a generation starving and jobless as a net good?
Isolationism doesn't work without completely changing the paradigm, and what you're proposing is basically just saying "Good luck on your own" as if without American corporations these people would immediately shift to some sort of worker's paradise.
> It's hard to just pick up and switch when you are so entrenched.
Companies play arbitrage with the costs of doing business in different countries all the time. Union issues at your plant in Mexico? Close it down (taking a "loss") and switch production to India, or China. It happens all the time as externalities change the profit equation, companies will and do react accordingly.
My biggest concern right now with China trade, aside from their abysmal environmental standards is that they are actively committing ethnic cleansing[1]. It baffles me how little attention this gets.
To the point of exploitation, why not use tariffs as a way to enforce standards AND protect economic interests? Instead of targeting specific countries, it could be a points based system where "Long hours without overtime?" +5%, "Poor safety standards" +10%, and so on. Not to say the US is necessarily perfect here, but as far as I can tell, it's a long way ahead of the typical places it outsources production to. Enforcement might be hard, but any resistance to inspection etc. could be met with automatic application of the suspected tariff.
This seems like it would satisfy the goal of advancing human rights, but also give a more incentive to just hire workers in the developed countries.
I was curious about this, so I found a somewhat recent study that looked at how much it would cost for an "all-american" iPhone. The authors of the study think it would cost about $30-40/phone to do final assembly in the US (with Chinese and other foreign components), and sourcing all-US components would add another $30-40/phone. What is only lightly mentioned is the many, many billions of dollars it would take to build all of those production lines domestically, which makes it a non-starter. I could easily imagine it costing hundreds of billions of dollars.
This shows an incredible ignorance of the employment market of tool and die makers in the US and the American manufacturing enviroment in general.
Simply put, the US has nowhere close to the skilled labor force needed to 'bring it home'. In Flint, MI, as of 2017, journeyman die-makers pull about $130k. Yes, that Flint. [0,1] Yes, starting wages for a CS bachelors in SF. But for a person without a HS degree. In Flint.
Journeyman takes about 5 years of post-HS apprenticeshiping and the relevant CAD and math skills, FYI.
So, you may be thinking that in about 5 years time the US would be able to get back to where we are today.
We currently have ~70k tool and die makers in the US [2]. Though numbers are very hard to come by, as of 2006 there were about 3 million tool and die makers in China, about 1 million of which came at the expense of US jobs [3]. So, we need to grow the US tool and die makers in the US by roughly 1500%. Not 10%, not 100%, not 500%, but by ~1500%.
That, simply, is not going to happen without massive government financial input. That bill, to get all the tool and die makers that we need in the next 5 years at ~$15/hr that an apprentice makes, would cost about $145,000,000,000 in just wages. For just die-makers. Then you have assemblers, machinists, lathers, welders, etc. We're talking trillions at the low-ball numbers for the cost to re-educate the workforce. This will be a double digit percentage increase in the cost to manufacture anything that you pay for. The US consumer and the US government are simply not going to pay for that.
Not to pick on you, but: the fact that people here are discussing Trump's insane drivel as if it were a sensible policy proposal with pros and cons to debate is highly disturbing to me. I can almost see the Overton window inching rightwards in real time.
> “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
What a weird tone. Is that a thing in the US? Can the president (legally) order companies "home"? Doesn't sound like "land of the free" to me.
The president controls the defense apparatus, which can label any country they wish a "threat to national security", which according to laws enacted since 9/11 can prevent American companies to do business with other countries. In the post 9/11, trumpian world, economic freedom depends on the mood of the president.
Just because the President has certain powers, doesn't mean he will be allowed to abuse those powers and remain unchecked.
If Trump tried to force all American companies to stop doing business in China by declaring China a "national security threat," his efforts would be immediately met with a challenge from the courts and he would very likely be impeached or removed from office. What would not happen is the rest of the government simply throwing up their hands because "the president controls the defense apparatus."
If it really worked that way, Trump would already have declared Mexico a national security threat, forced the government to fully fund the wall, seized all necessary lands via eminent domain and started building it by now.
It works so well that Trump is maintaining concentration camps where children are physically abused. And his appointments in the supreme court are letting him bypass congress and build a useless wall with money diverted from the military. If you think that this is normal, then you're part of the problem.
If he can set 25% tariff on everything imported from China, what's stopping him from setting 2500% tariff on everything? Wouldn't that effectively and immediately stop all trade with China?
No. American companies would still be allowed to sell to China. The constitution offers pretty much absolute protection when it comes to export tariffs.
That isn't the heart of the issue. The issue is US products being produced in China and sold in the US. We import > 500 billion from China and export under 130 billion to China.
>We import > 500 billion from China and export under 130 billion to China.
It's not so simple as, "Hey, lets pocket 500B - 130B = $370B and put it in the bank or spend in what we want".
First of all, prices will increase, and production will move to other countries.
If you ban imports from other countries, many things will become unaffordable to many people, which creates knock on effects. PCs and Smartphones getting more expensive means fewer people will use them, which means a smaller market for software. People will have less money to spend on, say, restaurants. People living off the $130B of exports will be out of jobs and some will go on unemployment and social welfare. Others will be hired with lesser pay, so will buy less. There will be so many knock on effects beyond this. Tesla is down 4% just today based on new tariffs announced by China for the future.
We are already paying new subsidies to farmers, from taxpayer money that can used to, say, build super fast trains in the US like China has.
There are also a lot of U.S. citizens who make a living working in roles that are part of that china->U.S. supply chain. Lots of potential unforeseen consequences that I'm not qualified to assess. But if you had an ideological desire to, for example, roll back a half century of increasing globalization in an attempt to bring back the halcyon days of stable, high paying U.S. manufacturing jobs then you might in your private views be willing to accept a couple of decades of suffering to get there. Of course you'd also have to believe that restoring U.S. manufacturing would bring back those production jobs, and not just sell a lot of robots.
> Tesla is down 4% just today based on new tariffs announced by China for the future.
The tariff is scheduled to take effect Dec 15th. Tesla will be producing cars locally in China by then, or within 30 days of then. I believe Tesla China sales have already slowed in anticipation of the lower cost locally produced version.
If anything, Tesla stands to gain from increased import tariffs from US->China.
$500B exported on behalf of American companies from China
$130B exported to China
-----
$370B where does this go?
Most of it goes to American controlled companies. A small amount goes to Chinese labor.
No because China will continue to devalue the Yuan like they have been, negating much of the tariff effect.
The only solution, and a much "simpler" one (because it does not involve myriad scrutiny of which products to apply tariffs to and how much, etc.) is devaluation of the dollar. We've been here before, where US domestic manufacturing faced pressures as dollar was too strong. The Plaza Accord [0] involved Germany and Japan taking measures to increase their currencies against the dollar (in some ways successfully in some ways not). But it did result in a few years of dollar devaluation.
A better way currently, given that there isn't the same coordination or appetite for China or others to allow their currencies to rise too much against the dollar (because they don't want to sacrifice their domestic industry) is for the federal reserve to bid for gold, at a much higher price. This will diminish the dollar and treasuries role as reserve and increase (which is already happening) gold's place as premier nuetral reserve asset (see global central banks declining purchasing of treasuries, increasing gold purchases, and decreasing $ fx reserves over the last few years).
The US can either run the global reserve currency or close its trade deficit. They cannot do both [1]. Weakening the dollar and bidding up gold will solve a lot of the trade imbalances affecting the world [2] as well as devalue the massive amounts of debt overhanging the US and world economies.
> If he can set 25% tariff on everything imported from China, what's stopping him from setting 2500% tariff on everything?
(1) the absence of any statute granting him the authority to impose export tariffs, and
(2) the fact that any statute which did exist purporting to grant him such authority would be invalid under the Export Clause, which explicitly prohibits export taxes and duties.
OTOH, he could prohibit pretty much any trade he chose with China under the International Emergency Economic Powers Act (the main law under which Executive-declared sanctions are instituted.) He just can't tax exports.
No, he cannot, but he can say whatever he likes, as we've seen.
The constitution enables the institution of arbitrary import tariffs, but it offers absolute protection to American companies. Neither the president nor Congress is legally allowed to tax exports (Article 1, Section 9, Clause 5)
This is not "absolute protection". American companies import much more than they export, so if he can't do whatever he wants to imports, there is no economic freedom.
Funny that Americans indoctrinated the entire world into thinking that import barriers were not civilized. And then now we discover that this is in fact a "founding principle"... right at the moment when the country cannot keep up with the competition. How convenient.
We didn't 'discover' it. America's constitution is one of the shortest in the world and written in very clear language. The text is available for free around the world. Being ignorant of its contents is completely 100% on you.
It seems that Americans are the ones who didn't know about this wonderful content for decades... only to rediscover now that it so important to restrict imports (when the country can't compete anymore, of course)!
No, it's not a thing. Generally speaking, the president can't do much here besides ask companies to do this. There might be some ways he could force companies to no longer do business with China, like declare sanctions against China, but they would be on shaky legal grounds. And by shaky legal grounds, I mean guaranteed to be challenged in court and go all the way to the Supreme Court.
> can't do much here besides ask companies to do this
Incorrect, the president controls the defense apparatus, which can label any country they wish a "threat to national security", which according to laws enacted since 9/11 can prevent American companies to do business with other countries. In the post 9/11, trumpian world, economic freedom depends on the mood of the president.
It is not a thing. The president doesn't have the authority to do this. There were some major lawsuits about this issue I believe around WWII relating to the redirection of certain industries to serve the war effort. If I recall correctly, the result was that the executive branch has basically no authority to do this barring something like a state of emergency.
Anyone who knows more than me feel free to chime in!
There are probably a few ways the president could do it unilaterally, legally:
1) Raise tariffs to absurd levels (like, 10000% tax on anything from China).
2) Some sort of national defense justification. He could probably put all employees, companies, and executives on terrorism or customs watch lists and make life difficult for them.
3) Use existing sanctions on other nations as a way to forbid doing business with various entities in China.
There's probably also another way to do it that would, presumably, be illegal:
4) Unilaterally blockade the nation, since he's chief of the armed forces (this is an act of war).
> There's probably also another way to do it that would, presumably, be illegal:
Whether the President commiting acts of war unilaterally is illegal depends on disputed Constitutional questions, such as the scope of Presidential inherent powers and the Constitutionality of the delegation of powers to the President under the War Powers Act.
"hereby ordered" means exactly nothing without legal authority behind it. The President can't just "order" companies to randomly do things. I mean, he can, but they don't have to comply, and there's no legal penalty if they don't.
It still carries a lot of weight if the president says something like this. Legal or not. And since it doesn't seem to be legal it is actually worse that the head of a country uses this sort of language.
Furthermore, doesn't "hereby" mean specifically "this thing that you are now reading/hearing/seeing is the instrument of the order?" In other words is he issuing an order via a tweet?
He may think he is, yes. He's not issuing a legally valid order, and he's not issuing it by a legally valid medium. (At least, I'm pretty sure it's not, but IANAL.)
In fact, if he thinks that Twitter is a legally valid medium and that anything he says is a legally valid order, that would explain a lot...
The other weird thing politicians do is add the word "great" to everything - great state, great company, great nation, great this, great that... to the point that the effectiveness of the word is lost.
Lots of politicians/governments do this as some form of self-congratulatory propaganda, maybe?
Notice how any country with the words "democratic" or "republic" in the name are actually dictatorships? And it's an extra tyrannical dictatorship if it has both.
Government has asserted its own greatness since antiquity; consider how we address kings as "Your Majesty". Sometimes, the claim that the local government is great was encoded into law as required to be acknowledged as fact. In monarchies of the past (and sometimes of the present) denying the King's majesty was a serious crime called lese majesty.
If it was feasible for companies to manufacture in the US they would. Effectively blocking China without a concomitant investment in US manufacturing is a lose/lose situation.
Of course it’s feasible. It’s just marginally more expensive. A combination of tighter labor, environment, and safety regulations, and a higher cost of living.
The tariffs are exactly what will spur the investment in US manufacturing, and the marginal benefit of manufacturing in China and then shipping the end product halfway around the world eroded away.
For certain definitions of “marginally,” I suppose. And keep in mind many of the more complex things manufactured in China are done so from components themselves manufactured in China or elsewhere in east Asia, so either those would also have to be manufactured here, or they’d have to be imported, and we’re back where we started. And so on all the way down to the raw materials.
Marginal cost is an economic term. I’m not using the term colloquially to mean small or insignificant.
Of course manufacturing is an ecosystem which builds up over time, with positive feedback loops where investment drives further efficiency throughout the supply chain.
All the more reason to raise tariffs now, and hope that they stay high for enough years to stop the ongoing atrophy in the US ecosystem.
It’s not just because China’s an unfair competitor from a labor rights and environmental impact perspective. It’s also a massive national security issue.
>For certain definitions of “marginally,” I suppose.
The choice isn't just "manufacture in China" or "manufacture in the US". According to Peter Zeihan's The Accidental Superpower (2014), manufacturing in China has gone from being one quarter as expensive as in Mexico to 25% more expensive. He expects that the US shale and natural gas boom will further reduce costs in Mexico and the US.
> The choice isn't just "manufacture in China" or "manufacture in the US".
Well, yeah. But the problem is that China has such a huge head start in all this that all the stuff I said about moving manufacturing to America would apply to Mexico too in terms of having to import components and/or raw materials from China, at least at first.
That said, in terms of national security concerns and such, yes, it would be in America's interest for Mexico to be a manufacturing powerhouse at or near China's level, and I'm sure Trump and his fans would appreciate that a booming Mexico would probably mean less illegal immigration to the US.
More likely the tariffs (and currency manipulation by the Chinese) will just result in other Asian nations ramping up their factory creation. I know my company (we make toys and games) will be looking at Vietnam and a few other South East Asian nations before looking at home. I think you're greatly underplaying things when you say "marginal" benefit here. There's no way my company could employ as many office workers if we had to employ American factory workers instead of Chinese factory labor.
This isn't an A or B only choice. There's so many other options than US or China. And it's not just labor/safety, it's building an actual factory (which takes huge time and money commitments) which might be less viable in about 17 months if Trump and his protectionist policy aren't still in office.
Moving your Factory out of China to another Asian nation is a national security win, for starters.
But once you’ve started considering that process, maybe you run the numbers and find the marginal cost (an economic term, not to be confused with “small”) of producing locally isn’t as high as you think.
Every company importing from China is doing this analysis. For some percentage of those companies, the numbers will make sense to move into the US. Whether they are building a new local factory or contracting for space on an existing US line.
And it’s not purely “is the US marginally cheaper today,” but the bigger question of; is it less risky overall to produce in the US based on what might happen in the future?
China and the US are not allies, and US companies should see some degree of risk in keeping their production in China.
And I even forgot to mention the rampant intellectual property theft and counterfeiting.
In that “Donald Trump being President and saying whatever he wants” is a thing in the US, yes.
> Can the president (legally) order companies "home"?
There may be statutory bases on which the President could adopt emergency sanctions which would have that effect (but probably not that effect alone), but a tweet simply ordering the companies to behave a certain way certainly is not, even if such authority exists, a valid way of invoking it.
> Doesn't sound like "land of the free" to me.
Donald Trump's statements often have no recognizable relationship to the legal powers of the Presidency, and often aren't, even when superficially announcing substantive action, even followed up with by any action by the administration (whether such action would or would not be within the law), or are followed up with action that is very different in substance than the statement would suggest.
At this point people should really understand how to read a statement from Trump. It actually is important to read all the words.
“Hereby ordered to immediately start looking for an alternative” does not mean he is trying to say companies must cease importing from China, even if that’s what the headline will read tomorrow.
It simply says that companies need to start looking for alternatives to China.
Trump is saying it’s going to get increasingly expensive to import all our stuff from China going forward.
Can he make things increasingly expensive to import from China? As long as he’s President, yes he can.
It’s not friendly advice, that’s the point! Businesses don’t typically like it very much when someone makes their supply lines double-digit more expensive overnight.
He’s putting companies on notice. He’s doing it with language which will get the statement widely reported (and unfortunately mis-reported).
But carefully reading what he is actually saying, you can see he’s not actually ordering anything. That’s the point.
In your hypothetical example you would need to change two things. One, it would read “All my relatives are hereby ordered to starting looking at flights a day early...”
And two, you would have to be God, because in that example you would be the one controlling the weather.
I agree with you on the weird tone issue. It very much reminds me of proclamations (usually Facebook, but going back to Usenet) made by folks widely regarded as not all present. The random all-caps words are part of it, as is the word "hereby".
Recently, I was in Germany (I live in Baltimore, MD) and was pleasantly surprised that a lot of goods are made in Germany. It is hard to find anything in our stores that isn't made in China.
It won't matter if US implement 100% tariff on China, what's going to happen next is that they're still going to create 800 parts in China, which gets shipped to Vietnam and assembled there and exported as a product of Vietnam. Vietnam (or whatever other country) would benefit at the cost of China/United States and more carbon emission due to shipping.
The enormous electronic manufacturing in China isn't moving anywhere, there's just nowhere that has the scale, infrastructure,and the know how to produce cheap electronic products. If you think this is still all just people on the assembly line, you've got a very historical understanding of this process.
Every country with tariffs have an army of bean counters whose job it is to deal with that kind of loopholes. Sure something will slip though, but anything big will get caught.
What do you mean? The stuff is made in Vietnam. Just like all of apple which source their chips to Intel and then assembled in China still count as made in China as a whole in the tariff book. This practice is as legal as it gets and cheaper than paying that 25% extra.
You may argue that it is made in Vietnam, but if whoever has to tax it don't agree, your argument counts for nothing. The US taxation officials don't have to come up with a non-contestable argument for why it is a Chinese product, they just need an argument that their own courts will accept, that generally isn't a particularly high standard in a situation where the USA and China are locked in a trade war.
Yes, the computer is made of 2750 parts, these parts come from 21 countries and some of them made several loops through different country. The final assembly place is $INSERT_COUNTRY. Now tell me, if the $INSERT_COUNTRY is Vietnam, how will the US government justify say this is not? because right now that $INSERT_COUNTRY is China and they're levying tax on that basis. You seem to grossly underestimate how interconnected the world is today.
If it was actually possible to buy Greenland, for say $50 billion, it would be an incredible deal for the US.
It has rare earth deposits, but more importantly as the Arctic undergoes drastic climate changes—particularly in the availability of shipping lanes—it becomes increasingly strategically significant.
Importantly, Greenland is a net economic loss to Denmark of about $500 million per year, so it would be saving Denmark a great deal of money to let the US take it off their hands.
That could be put to a vote in Greenland. Trump says to the ~57,000 residents, "I'll give each of you a million bucks if you vote yes". What do you think will happen?
I suspect this plays quite well in the key battleground states of Michigan, Pennsylvania and Wisconsin. That's the only thing he's going to care about.
This article really took the absurdist language out of his chain of tweets. I think it's unfortunate, no need to deny people the depressed chuckle when they read:
> ....My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?
Along with the use of "are hereby ordered" as nothing but bluster.
I don't grasp why Trump thinks these kinds of messages are any good. Maybe it's okay for his campaign but if we're talking the country, it's clear it doesn't help. All it does is it make companies great and small have to scramble for any kind of contingent plan to deal with him. I'm not a fan of capitalism but I'm a fan of keeping myself fed. The more he meddles in these affairs in such a haphazard way the more it makes the economy unstable. All I can say is that he better pray to whatever god he believes in that it doesn't wind up leading to a recession or a depression.
Playing devils advocate a little with some of the comments, I think this is a long time coming for China. The trade imbalances, current manipulation, and other elements of Chinese governance that has allowed them to get away with so much, for so long, has reached a zenith. If previous administrations of all stripes had done more to protect American interests, perhaps the strong measures of today would not have been necessary.
The U.S. business community decided years ago that manufacturing should move overseas. Ever since, the entire U.S. economy has been centered around the assumption of cheap imports, with the exception of one key product: microprocessors, a product where the U.S. has long retained dominance. This dominance provided an opportunity for balance in the U.S. trade relationship with China, but the leverage was never really used to truly demand changes to trade practices. Now, the U.S. is starting to wonder if moving everything to China was such a good idea, but due to Chinese microprocessor advancements, the U.S. lacks that key trade leverage item they had to realistically negotiate, and many of their traditional 'negotiating' techniques won't work with China.
The U.S. can't go to war with China.
The U.S. can't ban Chinese imports.
The U.S. can't overthrow Chinese Government.
Just as U.S. has built their whole economy around imports, China has done the same with exports, they need to put people in jobs and keep the exports flowing, so they have no real incentive to rework a favorable deal.
So really the U.S. is relegated to performing a Symbolic Trade war: Declare China a Currency Manipulator, Stir the pot in Hong Kong, Requesting Companies return to the U.S.
All the while, the markets are pretending the Trade War is real, delivering massive swings for large investors capable to profiting from the volatility.
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[ 2.0 ms ] story [ 187 ms ] threadBy unclear, they mean no legal authority.
TLDR: dictators can't do whatever they want.
That said, I would love if more US companies built stuff here in the US. Yeah, prices might be a little higher, but at least we aren't exploiting the labor of vulnerable people in foreign countries anymore.
Well, they will be jobless now.
Isolationism doesn't work without completely changing the paradigm, and what you're proposing is basically just saying "Good luck on your own" as if without American corporations these people would immediately shift to some sort of worker's paradise.
Companies play arbitrage with the costs of doing business in different countries all the time. Union issues at your plant in Mexico? Close it down (taking a "loss") and switch production to India, or China. It happens all the time as externalities change the profit equation, companies will and do react accordingly.
To the point of exploitation, why not use tariffs as a way to enforce standards AND protect economic interests? Instead of targeting specific countries, it could be a points based system where "Long hours without overtime?" +5%, "Poor safety standards" +10%, and so on. Not to say the US is necessarily perfect here, but as far as I can tell, it's a long way ahead of the typical places it outsources production to. Enforcement might be hard, but any resistance to inspection etc. could be met with automatic application of the suspected tariff.
This seems like it would satisfy the goal of advancing human rights, but also give a more incentive to just hire workers in the developed countries.
[1] https://en.wikipedia.org/wiki/Xinjiang_re-education_camps
I was curious about this, so I found a somewhat recent study that looked at how much it would cost for an "all-american" iPhone. The authors of the study think it would cost about $30-40/phone to do final assembly in the US (with Chinese and other foreign components), and sourcing all-US components would add another $30-40/phone. What is only lightly mentioned is the many, many billions of dollars it would take to build all of those production lines domestically, which makes it a non-starter. I could easily imagine it costing hundreds of billions of dollars.
https://www.technologyreview.com/s/601491/the-all-american-i...
Simply put, the US has nowhere close to the skilled labor force needed to 'bring it home'. In Flint, MI, as of 2017, journeyman die-makers pull about $130k. Yes, that Flint. [0,1] Yes, starting wages for a CS bachelors in SF. But for a person without a HS degree. In Flint.
Journeyman takes about 5 years of post-HS apprenticeshiping and the relevant CAD and math skills, FYI.
So, you may be thinking that in about 5 years time the US would be able to get back to where we are today.
We currently have ~70k tool and die makers in the US [2]. Though numbers are very hard to come by, as of 2006 there were about 3 million tool and die makers in China, about 1 million of which came at the expense of US jobs [3]. So, we need to grow the US tool and die makers in the US by roughly 1500%. Not 10%, not 100%, not 500%, but by ~1500%.
That, simply, is not going to happen without massive government financial input. That bill, to get all the tool and die makers that we need in the next 5 years at ~$15/hr that an apprentice makes, would cost about $145,000,000,000 in just wages. For just die-makers. Then you have assemblers, machinists, lathers, welders, etc. We're talking trillions at the low-ball numbers for the cost to re-educate the workforce. This will be a double digit percentage increase in the cost to manufacture anything that you pay for. The US consumer and the US government are simply not going to pay for that.
[0] https://www.industryweek.com/supply-chain/tool-and-dying-aut...
[1] https://www.payscale.com/research/US/Certification=Journeyma... US average wage for die-making is about $26/hr, FYI.
[2] https://www.bls.gov/oes/current/oes514111.htm
[3] https://www.uscc.gov/sites/default/files/moncrieff_statement...
What a weird tone. Is that a thing in the US? Can the president (legally) order companies "home"? Doesn't sound like "land of the free" to me.
He's an authoritarian thug who still doesn't know how governing works.
Just because the President has certain powers, doesn't mean he will be allowed to abuse those powers and remain unchecked.
If Trump tried to force all American companies to stop doing business in China by declaring China a "national security threat," his efforts would be immediately met with a challenge from the courts and he would very likely be impeached or removed from office. What would not happen is the rest of the government simply throwing up their hands because "the president controls the defense apparatus."
If it really worked that way, Trump would already have declared Mexico a national security threat, forced the government to fully fund the wall, seized all necessary lands via eminent domain and started building it by now.
It's not so simple as, "Hey, lets pocket 500B - 130B = $370B and put it in the bank or spend in what we want".
First of all, prices will increase, and production will move to other countries.
If you ban imports from other countries, many things will become unaffordable to many people, which creates knock on effects. PCs and Smartphones getting more expensive means fewer people will use them, which means a smaller market for software. People will have less money to spend on, say, restaurants. People living off the $130B of exports will be out of jobs and some will go on unemployment and social welfare. Others will be hired with lesser pay, so will buy less. There will be so many knock on effects beyond this. Tesla is down 4% just today based on new tariffs announced by China for the future.
We are already paying new subsidies to farmers, from taxpayer money that can used to, say, build super fast trains in the US like China has.
https://www.latimes.com/business/hiltzik/la-fi-hiltzik-trump...
The tariff is scheduled to take effect Dec 15th. Tesla will be producing cars locally in China by then, or within 30 days of then. I believe Tesla China sales have already slowed in anticipation of the lower cost locally produced version.
If anything, Tesla stands to gain from increased import tariffs from US->China.
The only solution, and a much "simpler" one (because it does not involve myriad scrutiny of which products to apply tariffs to and how much, etc.) is devaluation of the dollar. We've been here before, where US domestic manufacturing faced pressures as dollar was too strong. The Plaza Accord [0] involved Germany and Japan taking measures to increase their currencies against the dollar (in some ways successfully in some ways not). But it did result in a few years of dollar devaluation.
A better way currently, given that there isn't the same coordination or appetite for China or others to allow their currencies to rise too much against the dollar (because they don't want to sacrifice their domestic industry) is for the federal reserve to bid for gold, at a much higher price. This will diminish the dollar and treasuries role as reserve and increase (which is already happening) gold's place as premier nuetral reserve asset (see global central banks declining purchasing of treasuries, increasing gold purchases, and decreasing $ fx reserves over the last few years).
The US can either run the global reserve currency or close its trade deficit. They cannot do both [1]. Weakening the dollar and bidding up gold will solve a lot of the trade imbalances affecting the world [2] as well as devalue the massive amounts of debt overhanging the US and world economies.
[0] https://en.wikipedia.org/wiki/Plaza_Accord
[1] https://qz.com/1266044/why-does-the-us-run-a-trade-deficit-t...
[2] https://www.nytimes.com/2019/06/16/opinion/elizabeth-warren-...
(1) the absence of any statute granting him the authority to impose export tariffs, and
(2) the fact that any statute which did exist purporting to grant him such authority would be invalid under the Export Clause, which explicitly prohibits export taxes and duties.
OTOH, he could prohibit pretty much any trade he chose with China under the International Emergency Economic Powers Act (the main law under which Executive-declared sanctions are instituted.) He just can't tax exports.
The constitution enables the institution of arbitrary import tariffs, but it offers absolute protection to American companies. Neither the president nor Congress is legally allowed to tax exports (Article 1, Section 9, Clause 5)
Incorrect, the president controls the defense apparatus, which can label any country they wish a "threat to national security", which according to laws enacted since 9/11 can prevent American companies to do business with other countries. In the post 9/11, trumpian world, economic freedom depends on the mood of the president.
The most relevant law is the International Emergency Economic Powers Act, which was passed 34 years before 9/11.
Anyone who knows more than me feel free to chime in!
1) Raise tariffs to absurd levels (like, 10000% tax on anything from China).
2) Some sort of national defense justification. He could probably put all employees, companies, and executives on terrorism or customs watch lists and make life difficult for them.
3) Use existing sanctions on other nations as a way to forbid doing business with various entities in China.
There's probably also another way to do it that would, presumably, be illegal:
4) Unilaterally blockade the nation, since he's chief of the armed forces (this is an act of war).
It's not worth enumerating the illegal things that the President can do. It's not bounded by anything.
Whether the President commiting acts of war unilaterally is illegal depends on disputed Constitutional questions, such as the scope of Presidential inherent powers and the Constitutionality of the delegation of powers to the President under the War Powers Act.
It's an extremely weird tone, but this has been an extremely weird presidency.
[0] https://www.snopes.com/fact-check/donald-trump-sentence/
> Can the president (legally) order companies "home"?
He ordered them to start looking if you want to be pedantic, which still does not "order companies home," as was stated.
Furthermore, doesn't "hereby" mean specifically "this thing that you are now reading/hearing/seeing is the instrument of the order?" In other words is he issuing an order via a tweet?
In fact, if he thinks that Twitter is a legally valid medium and that anything he says is a legally valid order, that would explain a lot...
Notice how any country with the words "democratic" or "republic" in the name are actually dictatorships? And it's an extra tyrannical dictatorship if it has both.
The tariffs are exactly what will spur the investment in US manufacturing, and the marginal benefit of manufacturing in China and then shipping the end product halfway around the world eroded away.
Of course manufacturing is an ecosystem which builds up over time, with positive feedback loops where investment drives further efficiency throughout the supply chain.
All the more reason to raise tariffs now, and hope that they stay high for enough years to stop the ongoing atrophy in the US ecosystem.
It’s not just because China’s an unfair competitor from a labor rights and environmental impact perspective. It’s also a massive national security issue.
The choice isn't just "manufacture in China" or "manufacture in the US". According to Peter Zeihan's The Accidental Superpower (2014), manufacturing in China has gone from being one quarter as expensive as in Mexico to 25% more expensive. He expects that the US shale and natural gas boom will further reduce costs in Mexico and the US.
Also see "[Why China should follow Trump’s example and cut taxes](http://www.scmp.com/week-asia/opinion/article/2056874/why-ch.... Quote: "As far as manufacturing is concerned, according to Cao, everything is cheaper in America apart from manpower."
Well, yeah. But the problem is that China has such a huge head start in all this that all the stuff I said about moving manufacturing to America would apply to Mexico too in terms of having to import components and/or raw materials from China, at least at first.
That said, in terms of national security concerns and such, yes, it would be in America's interest for Mexico to be a manufacturing powerhouse at or near China's level, and I'm sure Trump and his fans would appreciate that a booming Mexico would probably mean less illegal immigration to the US.
This isn't an A or B only choice. There's so many other options than US or China. And it's not just labor/safety, it's building an actual factory (which takes huge time and money commitments) which might be less viable in about 17 months if Trump and his protectionist policy aren't still in office.
But once you’ve started considering that process, maybe you run the numbers and find the marginal cost (an economic term, not to be confused with “small”) of producing locally isn’t as high as you think.
Every company importing from China is doing this analysis. For some percentage of those companies, the numbers will make sense to move into the US. Whether they are building a new local factory or contracting for space on an existing US line.
And it’s not purely “is the US marginally cheaper today,” but the bigger question of; is it less risky overall to produce in the US based on what might happen in the future?
China and the US are not allies, and US companies should see some degree of risk in keeping their production in China.
And I even forgot to mention the rampant intellectual property theft and counterfeiting.
In that “Donald Trump being President and saying whatever he wants” is a thing in the US, yes.
> Can the president (legally) order companies "home"?
There may be statutory bases on which the President could adopt emergency sanctions which would have that effect (but probably not that effect alone), but a tweet simply ordering the companies to behave a certain way certainly is not, even if such authority exists, a valid way of invoking it.
> Doesn't sound like "land of the free" to me.
Donald Trump's statements often have no recognizable relationship to the legal powers of the Presidency, and often aren't, even when superficially announcing substantive action, even followed up with by any action by the administration (whether such action would or would not be within the law), or are followed up with action that is very different in substance than the statement would suggest.
“Hereby ordered to immediately start looking for an alternative” does not mean he is trying to say companies must cease importing from China, even if that’s what the headline will read tomorrow.
It simply says that companies need to start looking for alternatives to China.
Trump is saying it’s going to get increasingly expensive to import all our stuff from China going forward.
Can he make things increasingly expensive to import from China? As long as he’s President, yes he can.
"All my relatives are hereby ordered to depart a day early for the annual Christmas gathering, as storms are predicted for the I-80 corridor."
He’s putting companies on notice. He’s doing it with language which will get the statement widely reported (and unfortunately mis-reported).
But carefully reading what he is actually saying, you can see he’s not actually ordering anything. That’s the point.
In your hypothetical example you would need to change two things. One, it would read “All my relatives are hereby ordered to starting looking at flights a day early...”
And two, you would have to be God, because in that example you would be the one controlling the weather.
Edit for spelling.
The enormous electronic manufacturing in China isn't moving anywhere, there's just nowhere that has the scale, infrastructure,and the know how to produce cheap electronic products. If you think this is still all just people on the assembly line, you've got a very historical understanding of this process.
It has rare earth deposits, but more importantly as the Arctic undergoes drastic climate changes—particularly in the availability of shipping lanes—it becomes increasingly strategically significant.
Importantly, Greenland is a net economic loss to Denmark of about $500 million per year, so it would be saving Denmark a great deal of money to let the US take it off their hands.
> ....My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?
Along with the use of "are hereby ordered" as nothing but bluster.
"Manufacturers Want to Quit China for Vietnam. They’re Finding It Impossible."
The U.S. can't go to war with China.
The U.S. can't ban Chinese imports.
The U.S. can't overthrow Chinese Government.
Just as U.S. has built their whole economy around imports, China has done the same with exports, they need to put people in jobs and keep the exports flowing, so they have no real incentive to rework a favorable deal.
So really the U.S. is relegated to performing a Symbolic Trade war: Declare China a Currency Manipulator, Stir the pot in Hong Kong, Requesting Companies return to the U.S.
All the while, the markets are pretending the Trade War is real, delivering massive swings for large investors capable to profiting from the volatility.