Trump Readies Sweeping Tariffs and Investment Restrictions on China
nytimes.com
nytimes.com
Overall, what has happened is that low skill and unskilled jobs have gone to where labour is the cheapest. This has benefitted the poorest of the poor, at the expense of poor people in first world countries. The other consequence is that labour and safety standards are effectively eroded as where these jobs are offshore to are unlikely to enforce these requirements. The result of this has been to reduce global poverty and drive down the prices of goods (i.e. clothing).
However, then you have places like China which then place restrictions on market entrants, enable local companies to steal intellectual property and undercut western companies, without legal recourse. No-one has been willing to call China on these actions for fear of losing out on the entire market.
It’s indisputable that China has used many protectionist manoeuvres to hamper and limit foreign participation in Chinese markets, but western countries have been willing to accept that in return for having access at all. If we want to renegotiate that position fine, and maybe judicious use of tariffs and restrictions could be a useful tool to use to prompt serious negotiation, but that’s not the same thing as just flat out hitting the nuclear button and going for an all out trade war, which is what seems to be happening.
I think in its totality trade has globally reduced poverty, and improved lives globally. But that doesn't mean that there are not people who have been harmed by it, and see it as unfair. If your grandfather and father worked in a steel mill, and you worked in that steel mill and got let go because "its cheaper in China" then I can understand why that person may not feel that it is fair, to be sacked from everything they know. Whose family helped build and run that mill, through blood, sweat and tears.
Historically, elites have tried to mask this by saying that these low skill jobs will be replaced by higher skilled and higher paid jobs, and through training those low skilled works can just take these higher paying jobs. The rise in Trump is in large part due to the perceived callousness of elites on those who have been made worse due to trade. I think this is the key failing through-out the Anglosphere. How to get unskilled people into work, how to enable them to maintain their dignity, and do an honest days work for an honest days wage.
We can't blame China for the disadvantages our intellectual laws place on us.
The big problem is the 40 yo and up demographic. I think I speak for many of hn'ers when I say that if AI made programmers obsolete tomorrow it would suck, but it wouldn't ruin me. I'm young enough and financially well off enough that I could weather that storm. When I get to the point where I'm too old for entry level work and too young for retirement, that storm becomes a much bigger deal.
This isn't just theoretical. By and large the biggest "fix" to the problems of the rust belt have been younger people moving to greener pastures. Indeed its happened before with the industrial revolution causing urbanization. You don't need to dig far into the stats to notice that most of America's post-industrial towns skew older. The issue is the political class (either for lack of wisdom or excess of greed) didn't prepare any plan for the older demographic when they made deals like NAFTA.
Its a very tricky problem to solve. The old jobs aren't coming back and the old people aren't going away. The only solution I can think of is government make-work programs available exclusively to people living in certain areas and above a certain age. But making such a program is its own political challenge. Would the people who benefit from it even vote for it or is it too "communist"?
That is wishful thinking: free trade creates innovation and innovation not only concerns new products but also new processes. If, for example, someone came up with a cost-wise way to replace all Foxconn workers or factory workers in general then these workers would be jobless.
As many others pointed out companies like Google have more revenue with less people, and what is worse is that if you want to create ten Googles there are not enough trained people to hire.
In simple game theoretical terms we assume that because we have some simple rules in capitalism we can predict the outcomes when indeed the game possible moves and ramifications are hyper complex.
Sure in your example foxconn fires all its workers. Now foxconn has a pile of money. Either they spend that doing some other thing (which requires labor) or their executive's go out on a personal spending spree creating a demand for labor in the leisure sector.
Free trade can't kill employment. Only technology can kill employment in the long term. And technology only starts killing jobs after its played a ton of sector-to-sector automation whack-a-mole.
Don't be so sure. As of last year, Apple was sitting on a quarter of a TRILLION dollars in the bank.
Seems to me that sitting on cash is a dumb medium-long term strategy, and companies which do it will eventually be out-competed by those which don't.
We are living in a post scarcity world (take it with a grain of salt) in the sense that a lot (really a lot) of capital is unallocated or (the same) only allocated in portfolios but bot producing anything in a direct way.
I always share this example which happen alnost everyday in my software development company: if my customer is technical (another software company) they care (even not explicitly) about HOW I am charging them "per resource per hour" and less thinking in terms of pure ROI. When the deal involve financial people trying to leverage their capital they care more about the ROI and see the service as an investment when they don't need to go into so many details. In this case the same service can be charged with a much higher multiplier that makes you think the value they put to money is less significant. Indeed there is a third case when finance people think they have more power because they just have money, I pass those.
But this trade war is one that we have needed to fight for a long time. Let’s do this.
As has been supporting emerging friendly dictatorships.
>By the late 1920s the economy of the United States had made exceptional gains in productivity due to electrification, which was a critical factor in mass production. Horses and mules had been replaced by motorcars, trucks and tractors. One-sixth to one-quarter of farmland previously devoted to feeding horses and mules was freed up, contributing to a surplus in farm produce. Although nominal and real wages had increased, they did not keep up with the productivity gains. As a result, the ability to produce exceeded market demand, a condition that was variously termed overproduction and underconsumption.
I don't like trump at all. But I agree with defending our country. And overall, the less we can rely on China the better.
The US stands to lose all of the manufactured (especially electronics) goods China makes. The supply chains for a lot of its companies (especially tech) will be severed. China stands to lose soybeans, civilian aircraft, corn and... chicken feet, I suppose?
Of those, the only one that isn't easily substitutable with imports from elsewhere is civilian aircraft, and China is already pretty far ahead on making its own.
I think, on balance, given the relative substitutability of US vs Chinese imports, China has the upper hand in a peaceful scenario. The US can't really replace the Chinese industrial ecosystem whereas China can get corn and soybeans from elsewhere - assuming that shipping is not blocked.
...which is why I'm worried that the US might try to escalate a trade war to blockades and from blockades to, well, you know...
That said, if the US continues with a policy of unfettered trade while China continues with managed trade, China's hand grows stronger while the US's gets weaker. The US doesn't actually have a lot of good options now - it's about 15 years too late for it to safely reverse this process.
For future reference the giant trade deficit has benefited the USA enormously and increased quality of of life of most Americans. The incredible thing here is not that we import so much from China but that the hyper-productive Chinese exporters and manufactures have been so willing to surrender real goods and labor for the green pieces of paper we call currency which the government can create at the push of the button. This was the trade of the century.
I suspect that this will ultimately only help China and hurt America. China will be forced to develop their own internal markets and diversify their exports more -- which they've been doing already. You'll also just see more action from other low wage exporters like Vietnam. In the end Americans will just as price increases. Tariffs won't bring back jobs, reduce the extreme inequality that's killing the country nor are they real investment.
The goal of the tariffs is of course not to stop that trading. The goal is just to pick up some free money under the assumption that China will not dare to start a trade war.
Sanctions hurt people on both sides. For example, is a company in California has phones made by a contract manufacturer in China, imports them, and reexports them all over the world at steep prices, who's hurt most if the volume of that trade is limited?
China will certainly notice that, but in the long run the U.S. will certainly lose more from that decision: The heavily (illegaly?) subsidized U.S. agriculture will get a hard hit, as will every industry that relies on Chinese components, from smartphones to cars. It will be a boon for the other continents, though, as their companies will gain market share, because the U.S. products will have to be sold at higher prices.
There are no global benefits to limiting trade, which this action is. Neither are there any overall regional benefits. Certain industries will benefit, and certain industries will lose, on both sides of the border, as markets adjust.
Some people will be forced to do their trade with different people for higher prices, rise prices, or close business, or suck it up in private life. That's about it.
Ricardo recognized that applying his theory in situations where capital was mobile would result in offshoring, and therefore economic decline and job loss. To correct for this, he argued that (i) most men of property will be satisfied with a low rate of profits in their own country, rather than seek[ing] a more advantageous employment for their wealth in foreign nations, and (ii) that capital was functionally immobile. [1]
I definitely did not learn this in Microeconomics when we studied comparative advantage.
"Whichever factor receives the lowest price before two countries integrate economically and effectively become one market will therefore tend to become more expensive relative to other factors in the economy, while those with the highest price will tend to become cheaper. An often-cited example of factor price equalization is wages. When two countries enter a free trade agreement, wages for identical jobs in both countries tend to approach each other."
It could be argued that this is a good thing if one considers the benefit of bringing third-world people out of abject poverty to outweight the loss of slightly reducing the living standards of first-world semi-skilled labour.