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Comment by Workaccount2 | Hacker News Reader

I work in electronics and deal with electronics manufacturing.

The tariffs are about as annoying as a mosquito. Not great but also not bad enough to bring the party inside.

To reach parity with manufacturing electronics in the US, tariffs would have to be on the order of 500-1000%. I could be paying double right now for the stuff we have made in China, and it would still totally blow the socks off domestic quotes. Never mind that domestic capabilities have been crumbling, meaning you spend way more to get a lower quality result, churned out by equipment that is 40 years old.

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This is why tariffs only work in cases where you already have a strong local production that you're trying to protect (Japanese rice farmers, Florida orange growers) or where you want to force foreign companies to set up factories locally (Toyota, TSMC, etc.) but the latter only works for really high volume and high revenue items.

It does _not_ work to resuscitate long-dead manufacturing industries.

What works then?

A first step might be recognizing the opportunity, the chance, of having low costs at the inputs of one's own economy. Lower cost steel, electronics, cars is not a bad thing. It's a great thing. It's an opportunity. Instead, understand your own economy and what actually makes sense to produce locally. Of which there is plenty - really the US economy is doing pretty well.

The US might achieve again local low cost electronics manufacturing eventua... wait, what? Was the US ever the place for low cost electronics manufacturing? No it wasn't. At any rate, the US can try and promote whichever industry they want - but surtaxing its entire economy in the meantime is insane (plus a significant part of the rest of the planet along the way.)

There's more at stake than cost. Steel, electronics, and vehicle production are strategic capabilities, essential to fighting a long war. And even if no major war ever happens again, importing the inputs to an economy leaves the country vulnerable to sanctions or to being undercut when the nation providing the inputs moves up the tech stack.

For too long Americans have preferred immediate profit over long-term capacity.

> Instead, understand your own economy and what actually makes sense to produce locally. Of which there is plenty - really the US economy is doing pretty well

I'm curious what you're referring to here. It seems to me that China is catching up in most of the industries where America is still competitive (e.g. computing, pharmaceuticals, vehicles).

I'd say our economy is mostly floating on our military strength and the financial system it protects, but that won't last without a tech or manufacturing advantage.

So many problems here:

- You can maintain a strategic capability without destroying your economy along the way. See for example the heavy press program. A strategic capability, very specific, hard to rebuild. You could certainly apply that to some level of local steel production (which does exist last I looked) - the way US navy ship-building competence is carefully maintained for example. You don't have to inflict that cost on most of the steel used for, say, building and bridges construction.

- You can want to run your entire economy on a "self-contained" basis but that goes against all the work that has been done for now decades in the name of economic efficiency. Such an idea will cost you dearly in the final output: standard of living. (For a small country it would be hopeless but both China and the US are large enough that they could aim for complete know-how.)

- Everyone is free to compete with anything. And yes, China is large enough that it can try and be effective at everything. Even that, does not negate the benefits of trade.

- (The US competitive on civilian vehicles?? Doesn't matter, this is a detail at this stage.)

- I don't expect very much of the US military vehicle production - in final assembly or in subsystems - comes from China. What little there is, you could import from Europe.

- The US economy "floating on military strength"??

> The US competitive on civilian vehicles??

Yes, the US is still the second largest producer of civilian vehicles, although I admit, I didn't realize how far ahead China already was:

https://en.wikipedia.org/wiki/List_of_countries_by_motor_veh...

> The US economy "floating on military strength"??

Yes, it's our military strength that makes investors trust our currency and allows us to maintain the world's largest trade deficit. Not just our own, but the weapons we provide to friendly governments (mostly dictators) around the world.

The rest? You're just ignoring the possibility of either sanctions being imposed on us (cutting off the free trade which, I agree, increases standard of living while it lasts) or fighting a major war (in WW2 the entire civilian production capacity was redirected to the military, a limited "strategic capability" will not be sufficient).

In fact, even the recent (very limited) war in Ukraine was more than our current production capacity for ammo could handle.

> Yes, the US is still the second largest producer of civilian vehicles

Isn't that mostly for internal sales? The US export some civilian vehicles, that's true. But my impression is that much of the local production is due to threatening and begging in exchange for somewhat less difficulty for selling within the US. So, "competitive" would be arguable.

I'll concede that recent years have shown that stockpile and production capability in particular for ammo is low for an era where - after all - there are circumstance where a lot of ammunition gets expended fast. And THAT very much won't be solved through tariffs. Not even for guidance electronics.

Long term and stable support through various targeted subsidies. Biden did this for some manufacturing industries and we're already seeing results with increased production and private investment that far outpaces the public investment that kicked it off. One key issue is that these industries and the supporting resources and expertise take a long time to develop so the support needs to be consistent. Blowing up trade deals and flip flopping around on tariffs every few weeks is the opposite of what will help. Trump talked a big game on manufacturing his last term but accomplished absolutely nothing; I expect this term to be worse.

Those subsidies are called The Defense Budget.

There would probably be near zero electronics and machine manufacturing in the US without military spending. I really cannot emphasize enough how many shops out there are kept alive by military contracts stipulating domestic manufacturing.

This is also why the defense budget never gets cut, by dems or repubilicans. It's the backstop for a gazillion jobs and domestic manufacturing capability.

As much as I dislike the US' militaristic identity and especially its foreign policy, and would like nothing more than to slash the military budget in half and use it for something beneficial, when it comes to the economic benefits of the military-industrial complex, you're absolutely right.

Just a guess as I really have no idea but maybe subsidies?

Right, subsidies, tax breaks.

But a big problem, especially when it comes to competing with China, is that you need your supply chain to be local too. The main reason manufacturing is so affordable in China is not just labor costs, which are now lower in some other countries than China, but because you have the entire supply chain right at hand.

Its true that one purpose of a tariff is to protect domestic production. Another purpose is to hurt specific trading partners; when we impose an xx% tariff on China, companies who were previously importing goods from China may domesticate some production, but they may also just turn to e.g. Vietnam or Japan. A further third reason for tariffs is simply as a bargaining tool, as we've seen with Canada recently.

Sometimes you can tell what the real purpose of the tariff is based on what is being tariffed, and from who. For example, putting a tariff on Canadian energy: Canada is an ally of the United States who we generally don't have geopolitical interest in fighting with, and the United States has very, very strong domestic energy production and domestic energy consumption; so, the purpose is less about harming Canada, and more-so about protecting the domestic industry from being undercut by international partners. However, when it comes to electronics and microchips, we don't have the domestic production capacity, so the purpose is more aligned with: Yeah, we'll try to build that up, but we're most concerned about simply weakening China. If that production were to instead get built up in Vietnam or Japan because labor is cheaper, we'd have to see how the administration would react, but I suspect: there's a reason why we haven't levied similar tariffs against them.

Much of this I assume is due to labor costs. We're already seeing some basic techs start to return back to higher-tech, higher-labor-cost countries (like the US Gulf Coast) because of automation improvements. So now things that have historically been low-hanging fruit for countries trying to industrialize (and therefore able to provide the labor cheaply) are being taken away from them, because now one systems engineer can oversee, say, an entire textiles or smelting or wiring facility. It's only a matter of time until this bleeds further up the ladder, in my opinion, and electronics isn't too far up the ladder from wiring.

That's part of it for sure, but really the killers are that China has an insane electronics pipeline from component manufacturing to distribution, insane investment in electronics manufacturing R&D, and a supply a fresh young heads to keep things moving forward. They also do insane volume and can buy everything in quantity 10 billion (exaggeration- sort of, but economies of scale to the max).

The US has basically no domestic component manufacturing, no central hubs of electronics parts distribution, no young talent entering the field, and no new shops entering the market with cutting edge automation/capabilities. And it doesn't make much sense from a financial POV either. A team of one writing an AI wrapper "electronic parts picker" SaaS app will pull more money than a team of 50 building a board house, and they don't need $50 million upfront for capex.

If having everything efficiently in one spot was the key factor, industry would all still be located in the places the industrial revolution happened.

Shipping is extremely cheap these days. You can move any manufacturing you want, if you're determined to do so.

One spot is a key factor in the sense of the common jurisdiction and culture, and also access to shipping routes. Hence Shenzhen.

> places the industrial revolution happened

It's still very much there on the map of Europe: https://en.wikipedia.org/wiki/Blue_Banana

> Shipping is extremely cheap these days. You can move any manufacturing you want, if you're determined to do so.

Sure, this works when you know exactly what you want. If you're prototyping or looking for a replacement component, those who can walk/drive to visit 10 potential suppliers' factories in a day have a competitive advantage versus waiting 10 business days for the samples to arrive.

Having a concentration of jobs in one place also results in having a concentration of domain experts in that place; forming a self-sustaining ecosystem. A lot of local governments the world over have tried and failed to replicate Silicon Valley, but without the critical mass of academia, technologists and VCs. Trying to replicate Shenzen without the machinists and injection mold greybeards is equally fruitless.

Again, if this was such an advantage, there would be little manufacturing in Asia at all. It would have never been economical.

Manufacturing in Shenzen was economical, just not as maximally profitable as it is now. Economies of scale are a thing.

Apple, and Google could have been formed anyway on earth, but there were advantages of being in Silicon Valley that compounded the growth into the behemoths they are now without worrying about where to source talent.

> Much of this I assume is due to labor costs.

It's not, it's network effects/economies of scale. Everything is highly automated already.

> We're already seeing some basic techs start to return back to higher-tech, higher-labor-cost countries (like the US Gulf Coast) because of automation improvements.

China is better at automating electronics manufacturing than the United States and has a decade or two lead on us. They also have policy advantages the US can't dream of, like building a new set of factories in 3 years instead of 5-7, with housing for all the workers and centralized water/power/gas utilities. The government is also capable of writing blank checks and forcing the finance industry to fund things that they otherwise wouldn't.

The current administration is not smart or agile enough to address the root causes of the decline in American electronics manufacturing and motivated by individual greed instead of national dominance.

Look at the Chinese auto industry to see how they're able to mobilize sectors much faster than anyone else. The US cannot hope to compete using a 20th century model of globalized economies where we pretend China is only competing with sweatshop labor. That has not been true for 25 years.

Everything is not automated. That's a ridiculous claim. Almost half a billion people in China are working in manufacturing. Plenty of manual labor.

It's similar in the US. Even modern giga factories employ thousands of people.

> The current administration is not smart or agile enough to address the root causes of the decline in American electronics manufacturing and motivated by individual greed instead of national dominance.

It's naive to think that China's politicians are not motivated by individual greed. American politicians are, on average, about as greedy as politicians in other countries.

We're not talking about your average American politician, we're talking about Donald Trump and his inner circle. They are demonstrably more corrupt and greedy than the average American politician. Tangentially, they're a lot stupider than the average politician in the world, and whether they're as corrupt as they act or just incapable of severing personal and professional/institutional gains is unclear.

> We're already seeing some basic techs start to return back to higher-tech, higher-labor-cost countries

Is there a place where I can look up what's being brought up back to North America? Last time I tried searching for it, all I found was:

1) TSMC et al. building big factories over here (which, I think, is a bit different because of subsidies, and realpolitik) 2) People complaining in pro-manufacturing Twitter posts how nobody wants to automate the existing factories

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