ArtwordBlog

Trump tariffs

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by

Ronald Weihs

“Trump doesn’t know a tariff from a hole in the ground. Everybody knows that.”

“Trump thinks that a tariff against Chinese imports means that China will have to pay more to send goods to the US. Trump thinks that a 25% tariff will teach Canada and Mexico a lesson, and force them to stop immigrants coming in with gunny sacks of fentanyl. Trump is a fool.”

Mike Johnson taking a selfie with Elon Musk and Donald Trump.

Is he really?

I agree that Donald Trump is uninformed in many areas. And doesn’t care that he is. He’s happy to think with his gut. He distrusts experts, with their facts and charts and trends and big words, who are probably trying to put something over on him. Don’t confuse him with facts.

But when it comes to tariffs, I’m not so sure that Trump is ignorant. Financial manipulation has been his modus operandi. It’s probably what he knows best.

Let’s apply Miller’s Law: “In order to understand what someone is telling you, assume the person is being truthful, then imagine what could be true about it“.

Let’s assume Trump knows what tariffs do. What is he trying to accomplish?

Tariffs will mean that imported goods will cost more. Chinese goods, Canadian raw materials, Mexican strawberries will cost more. So buy American! Or do without.

But wait. General Motors makes parts in Mexico. Apple’s i-Phones are made in China. Did China force the US (and Canada) to outsource manufacturing to China? No they didn’t.

In the 1990s, North American businesses were falling all over themselves to take advantage of the really low wages available through globalization. Telecom and high-tech companies in particular embraced the concept of the “virtual corporation”, meaning that they would own the “intellectual property”, but didn’t actually make anything. Instead, they partnered with Chinese corporations to do the actual manufacturing. In this way, they exported their processes and expertise to China, in exchange for short-term profitability.

In 2000, the dot.com bubble burst, followed by the collapse of a vastly over-capitalized telecom sector. China was left with the high-tech manufacturing, the expertise, and lower production costs. So American companies increasingly slapped their labels on products with components from China. Not really China’s fault.

A particularly telling example. China makes electric cars that are technologically world-class, and considerably cheaper than Teslas, made in the USA. What is to keep Americans from buying the Chinese autos? Tariffs. No wonder Elon supports Trump.

What will force General Motors to stop importing components and parts? Tariffs.

Of course, the American public will be paying a lot more. They will be upset, because they are used to the lower-priced imports: clothes from Pakistan, fruit from Chile, guitars from Korea, televisions from China.

So what can Trump do? He can whip up anger against the Chinese in particular, and foreign countries in general, for “forcing” Americans to buy their products.

He can tell Americans that immigrants are responsible for the drug epidemic in the USA.

And he can dismantle the political system, corrupt the courts, and send the police after anyone who protests.

Not really so dumb. Unfortunately.

Comments

6 responses to “Trump tariffs”

  1. Colleen Harrison Avatar
    Colleen Harrison

    Ron we talk about the election as though so much mattered. In the end it was about oil and gas. Companies like Enron were losing 100M a year as we steered towards renewables. They were not going to let that continue happening so they threw there support behind someone who would dismantle environmental policies.

    Reply
  2. Ronald Weihs Avatar
    Ronald Weihs

    True enough, Colleen. I think we’ll find he tries to dismantle more than environmental policies.

    Reply
  3. bruce craig Avatar
    bruce craig

    Tariffs are the anthesis of free trade and market economies.

    Reply
    1. Ronald Weihs Avatar
      Ronald Weihs

      Yes, they are. But free trade is quite a recent invention. Throughout most of history, the world was divided into trade zones. It seems we’re blasting back into the past.

      Reply
  4. Robert Ezergailis Avatar
    Robert Ezergailis

    Actually some countries, notably major BRICS players, especially communist China, do not play fairly in the global marketplace. The Chinese government runs the puppet show there to bring in a maximum amount of valued foreign currency, and particularly United States dollars by any means that it can get away with. So it does things such as clone patented items and sell them at lower prices than they can be made and sold elsewhere. It does not respect patent rights. It produces items, including expensive and customized machinery, for less than the lost of the global price for the raw materials, typically metal. The list of violations of the rules of capitalist business goes on and on. Some others have adopted similar practices. All of them utilize near to enslaved labor in some aspects of their industries, without concern as to environmental and worker safety practices, to cut their costs. There are only two ways to engage in that declared war by those aggressors. One is to ban their produces entirely. The other is to impose very heavy tariffs on their products to level the playing field. Although President elect Trump does not seem to have all the details worked out, or worked out he has the right idea. We need to rebuild our industrial base in all sectors. In raw materials, in primary heavy industries, and in secondary manufacturing. Canada needs to join with the United States rather than trying to go against it. The latter approach will get Canada nowhere at all. BRICS has made themselves into an enemy alliance on what Communist China often calls “the economic battlefield” and the lead in that war is the Chinese PLA, its military. China does not want any genuinely Capitalist nation and its economy to survive. Neither does it want any of those nations, such as ourselves, being able to produce their own civilian and military needs. It wants to dominate and conquer, and economics is the communists most preferred method for doing exactly that.

    Reply
    1. Ronald Weihs Avatar
      Ronald Weihs

      I don’t think that China is quite the demon that you describe, but there is much in what you say. My point is that in the 1990s there was a stampede of North American companies to offload their manufacturing to countries that offered low costs based on exactly the factors you describe. The blame certainly has to be pointed, at least partly, on our own industries.

      Reply

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