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I’m not seeing anyone discuss this here, so I figured I’d raise an important point: this style of tariffs is crushing for US manufacturing. While a universal ta

I’m not seeing anyone discuss this here, so I figured I’d raise an important point: this style of tariffs is crushing for US manufacturing. While a universal tariff with no exceptions incentivizes domestic manufacturing, a selective tariff with specific industry exceptions is absolute poison. You might think, as the authors of this exemption did, “well then we will exempt computer parts.” Then people will simply import the parts. But if you manufacture those parts in the US, you are suddenly at a massive disadvantage. Your computer parts factory likely runs using a large amount of imported raw materials, imported machines, and imported tooling, and there are no tariff exemptions for those broad categories… so you’re screwed. Oftentimes there is no reasonable domestic substitute. You will go out of business in favor of someone importing the parts, which now happens tariff-free under an exemption. That’s why, generally speaking, tariff exemptions are deadly to domestic manufacturing.

jopsen 2y ago
Even universal tariffs with no exceptions is a problem. Many things cross US/Canada/Mexico border in the process being manufactured. And tariffs will stack up. Many advanced products (tech/chip, etc) are not entirely made in any single place. Some stuff is imported, and some is exported again, and tariffing the world, will also make the world tariff you. I think this is all around bad. Best case scenario the US has elected a president who decided to burn all political capital, alliances and credibility in search of a slightly better deal. Doing this sort maximum pressure economic extortion style policies, *might* getter you a slightly better deal. But at what cost? Can EU countries buy US military equipment, when it turns out that the US will withhold support for equipment we've bought and paid for, in order to pressure a democracy, fighting for its existence, into surrender. Trump may get a win in the headlines, because everyone thinks he'll go away if he get a win.
- randunel 2y ago
  > Can EU countries buy US military equipment, when it turns out that the US will withhold support for equipment we've bought and paid for, in order to pressure a democracy, fighting for its existence, into surrender. Why would anyone buy US military equipment that's either "10%" handicapped on purpose, or remotely disabled whenever the US changes its feelings about the users of said military equipment?
  - belter 2y ago
    "“We like to tone them down about 10 percent, which probably makes sense because someday maybe they’re not our allies, right?”" - Trump
  - prawn 2y ago
    There have been many headlines/stories about this in Australia where we have a submarine deal within the AUKUS alliance.
- DonHopkins 2y ago
  He's already gotten what he wanted from it and bragged about it: so many leaders of different countries calling up and kissing his ass. He's certainly not going to give any of them what they wanted, and now they all have the taste of his ass in their mouths. At least they have something in common with Elon Musk, now.
  - ben_w 2y ago
    There's many sayings about diplomacy, though I understand the reality is much more mundane. One that comes to mind is "a diplomat is a person who can tell you to go to hell in such a way that you actually look forward to the trip" — like all good quotes, attributed to a wide variety of famous people. Competent governments send arse kissers to those who need pampering, and send blunt to those who need to see bluntness. But (in a competent government) these things are uncorrelated with the actual negotiation position — "speak softly and carry a big stick" etc. Trump being bellicose to everyone at the same time is a sign of his own incompetence.
  - FranzFerdiNaN 2y ago
    I belief his story about dozens of countries calling him about as much as his story of him taking a cognitive test and having every single answer correct. Or his doctors statement that said that there has never been a healthier president than Trump.
    - monkeyfun 2y ago
      Yeah, this is a man who literally says he has the greatest memory in human history but then constantly says he can't remember stuff a day or two later or coincidentally was living under a rock and has no idea what's going on in his cabinet.
    - outer_web 2y ago
      > Men came to me with tears in their eyes, big men, and said "sir..."
  - viraptor 2y ago
    Worth looking at the actual deals. The initial talks with Canada and Mexico resulted in reported "deals" and "wins" that were actually just confirmations that the deals negotiated under previous administration are in fact happening.
jijijijij 2y ago
> Your computer parts factory likely runs using a large amount of imported raw materials, imported machines, and imported tooling, and there are no tariff exemptions for those broad categories… so you’re screwed. All the planning charts and demolition orders have been on display at your local 24/7 news feed for more than eight years, so there’s no point in acting surprised about it. You’ve had plenty of time to lodge any bribe worth the president's time and it’s far too late to start making a fuss about it now. Oh, for heaven’s sake, Americans, President Trump did a crypto scam on his supporters before being sworn in, you know. I’m sorry, but if you can’t be bothered to take an interest in local affairs, that’s your own lookout. I've no sympathy at all.
- chipotle_coyote 2y ago
  [flagged]
- jiggawatts 2y ago
  > crypto scam on his supporters It absolutely blow my mind that that was just "Friday", and not the biggest scandal in Western political history. "It's just Trump being Trump, move on, move on, nothing to see here, no consequences for anyone..."
  - alabastervlog 2y ago
    The speed with which we went from “out-of-context recording of a ‘yeaaaaaah!’ can end your presidential campaign” to “suggesting your supporters shoot your opponent if she wins doesn’t mean you can’t be president… twice” was incredibly quick.
  - jijijijij 2y ago
    I honestly have a hard time coping with it. No joke. It's revolting, how that wasn't the end. Right after the Hawk Tuah girl was burnt at the stakes for the same stunt, too. It's not even that it is pure evil and predatory, it's the aesthetics of it... It tainted civilization, at the very least America! It's so, so pathetic and cringe. Unbearably distasteful and undignified. Too much cringe. The only thing topping this, was the president of the United States selling cars in front of the white house, a few weeks later. I can't. Man, imagine an alien patrol passing that Tesla (a billionaire's fucking car in space as a beacon of Earth life's legacy, honestly makes wanna puke) and then learning about the state of things here. I feel embarrassed to the core living in this period of time. I'd rather shit my pants on live TV. I crave the cleansing heat and certainty of thermonuclear warheads. Shoot these fucker with a bullet of frozen sewage and then sterilize this place for we all sinned collectively. Send some tardigrades to Mars and hope for something better, but turn off the lights on Earth. Tainted.
quasse 2y ago
Universal tariffs with no exception don't even incentivize domestic manufacturing when it cuts local manufacturers off from an outside market that's bigger than the domestic one. My company manufactures equipment in North America, with the most expensive input coming domestically from Ohio. Guess what though? Retaliatory tariffs from the global community means that the most rational course of action is now to move that manufacturing *out of the US* so that we can sell to the global market without penalty. Sorry Ohio, but Mexico is currently *not* engaged in a trade war with Canada and half the EU so the rational decision for a company who wants to sell in those markets is to divest from the US.
- pbasista 2y ago
  > engaged in a trade war with ... half the EU That is generally not possible. All EU countries share a common trade policy. Another country can either be in a trade war with the entire EU or with none of the EU. According to the Wikipedia [0], The EU member states delegate authority to the European Commission to negotiate their external trade relations. [0] https://en.wikipedia.org/wiki/Common_Commercial_Policy_(EU) https://en.wikipedia.org/wiki/Common_Commercial_Policy_(EU)
numpad0 2y ago
People don't want incentivization of American domestic manufacturing. That's where the fundamental disagreement is, after all. People don't have confidence in American products built on US soil by upper middle class Americans. It's going to take long to (re?)build trust to reverse that.
- jmole 2y ago
  That’s ridiculous, there is plenty of confidence in US manufactured goods, the problem is that US manufacturers have impossible economics for anything that isn’t boutique or super high margin. Need an impedance controlled 16 layer board for your fancy new military radar? No problem. Need a basic 2 layer PCB for mass manufacture? No one in the US will make it at the price you need to be competitive.
  - mitthrowaway2 2y ago
    "No problem"? It's not just that the prices are high; I can hardly get those guys to even answer the phone and give me a quote. I can get that board from China before I've gotten through to a local sales rep. Then when they do finally check their messages they want to fly out, meet me at my office, size up my operation and my budget, have a nice chat over dinner, and spend a few weeks pestering me with phone calls without ever getting down to business.
    - jpc0 2y ago
      You are pretty confused about why this is. When the only market you ever had was high touch high cost low volume production then that is your default business model. The biggest issue is that Trump is pushing tariffs without first ramping up local manufacturing, the type of manufacturing you are looking for isn't _currently_ being catered for in the US. It may in the future depending on how things pan out, the bet Trump is making is that it can happen, time will tell whether he is true. I don't think it will generate jobs for local US manufacturing since the only way to compete with low cost of labour markets is to automate more than the low cost of labour country. Business is reasonably good at filling whatever niche is willing to pay. So far the evidence is that Trump is willing to over commit and then backtrack. Having a negative outlook doesn't help anyone, think positive about your country and shift with the times.
Renaud 2y ago
Universal import taxes on everything make no sense. If you want to protect strategic production, you apply selective tariffs to support that local production while ensuring it can ramp up and import what it needs until it becomes self-sufficient. Most countries, the US included, have used selective tariffs for this purpose. Applying a blanket tax on every type of import just increases inflation, as you can't possibly manufacture everything locally. For many products—especially cheap ones that were outsourced to China—there's no way to produce them cheaply enough for your internal market to absorb all production. And you can't export them either, because their higher production cost makes them uncompetitive compared to cheaper alternatives from low-cost countries. The secondary effects of import taxes are wide-ranging: they help when applied selectively and carefully; they don’t when applied capriciously and without thought. The mere fact that high taxes were slapped on phone imports so "phones could be made in the US," only to backtrack mere days later, demonstrates that this is either the work of an insanely bright economist nobody understands, the scheme of a grifter aiming to benefit personally, or the capriciousness of a borderline dementia patient who cannot act rationally.
- DonHopkins 2y ago
  Why not two out of three?
- FooBarBizBazz 2y ago
  Really the way to do it, AFAIK (say, per How Asia Works), is to apply selective subsidies, not tariffs, and to subject the subsidized industries to substantial export discipline. That's what gets you South Korean world-beaters. Autarkic tariffs just get you Indian industry, where consumers have learned that the few goods marked "export quality" are superior. And, I don't want to be partisan about this stuff, but, that's basically what "Bidenonics" was trying to do, in a small way: Subsidize a few industries like semiconductors and batteries and solar panels, that were deemed strategically important. Whether the US was ever going to be as serious as South Korea or Japan about this remained to be seen. Frequently the subsidies seem to be handed out and then nothing happens (e.g., "Gigafactory" in Buffalo, NY).
  - 2y ago
energy123 2y ago
It's the opposite! A universal tariff is a tariff on all inputs that manufacturers need to be competitive. How will Ford or Tesla ever be competitive if all their inputs are 24% more expensive than Toyota's inputs? Autarky doesn't work. Juche doesn't work. Comparative advantage works, both theoretically and in practice if we study economic history.
- soVeryTired 2y ago
  Do you really believe in the comparative advantage argument though? Surely it’s only true if comparative advantage is fixed over time. And surely in order to leverage comparative advantage, an economy would need to know how good they would be at producing every possible good. There are good reasons to trade, but comparative advantage doesn’t feel like the correct theoretical underpinning to me.
  - energy123 2y ago
    > And surely in order to leverage comparative advantage, an economy would need to know how good they would be at producing every possible good. Comparative advantage is an emergent property of trade that occurs naturally, it is the default state of being and can only be undermined by government policy. You benefit from comparative advantage when you buy bread from the bakery instead of spending 2 hours a day baking your own bread. Imagine how much poorer you'd be if the government put a large tax on you buying bread to force you to bake it yourself, in the name of self-sufficiency. That's what's happening with these blanket tariffs, instead of targeting only critical defense manufacturing, Trump also wants t-shirt sweatshops to magically come back to the US despite only 4% unemployment. It's rank foolishness.
  - bflesch 2y ago
    IMO your logic is all wrong. Comparative Advantage ist just applied "opportunity cost" of time. Humans and resources are unique, everyone has their theoretically "optimal" use of time in terms of economic output. The invisible hand of the market will let you know what aspect of your output is most valuable for others. The benefit of this invisible hand is that the "economy" as a whole does not need to know how good they are at producing everything. People just need to know if what they are producing now is more valuable than the next best alternative. Everything else will be sorted out with market forces. In university lectures we were given the famous argument about olive oil from Greece and that it would never make sense to do our own olive oil because we both lack the natural resources (unique soil + sunshine) which allow olive trees to grow easily and we'd also have much better yields growing other things on the fields. So to me, both opportunity cost and comparative advantage are really basic building blocks of economic understanding and I'm a bit dumbfounded that someone wouldn't understand these concepts.
beloch 2y ago
Factories, tooling, machinery, etc. must be amortized over a market and production run. If you're making toilet paper, the cost is relatively low and the market is huge. The TP you make today will still be good TP in a decade. No one toilet paper factory can serve the world, so you'll need many of them in many markets. The inputs can be found within the U.S.. Why not build one in the U.S.? A factory that produces a specific model of phone is only going to be able to run for a few years before it needs to retool for a newer model. That means a huge investment goes into such a factory on a continual basis. If one factory can serve the entire world demand for that model, why build two? If you're going to build just one factory, are you going to build it in a market that's walled off behind trade barriers, both for outputs and inputs? Only if that market is significantly bigger than the rest of the world combined. If the rest of the world is bigger, than you build outside the trade barriers and people inside of them will just have to pay more. Tariff's might bring low-end, high-volume manufacturing back to the U.S.. Chip fabs, phone factories, or anything so high-end/low-volume that it must be amortized over a global market is not going to return to the U.S. because of tariff's. An administration that changes their minds every few hours only makes matters worse. Whether Trump has recognized this and is conceding defeat or he's bowing to pressure from companies like Apple is immaterial. That kind of factory is not coming to the U.S. anytime soon.
- speleding 2y ago
  I agree with your general point, but I just read the book "Your life is manufactured" by Tim Minshall, in which he describes the production of toilet paper in detail and it's a surprising global industry. Wood pulp with the correct density comes from a few specific places on the globe (Scandinavia and South America apparently).
  - washadjeffmad 2y ago
    Those are big markets, but there are a lot of suitable softwoods for pulp production, farmed around the globe. Ideally, you want to use ones with good natural ratios of lignin to cellulose and hemicellulose (that's just to say, the constituents of biomass) to minimize processing and chemistry costs.
Aurornis 2y ago
> While a universal tariff with no exceptions incentivizes domestic manufacturing Not really. Efficient manufacturing requires access to a lot of different inputs from all over, from the machines that make things to the raw materials. Putting tariffs on everything only incentivizes companies to move to a location where they can freely buy what they need and manufacture it for the world. The US is not the only consumer of most manufactured goods. Making them in a country with cheap labor and no extra import tariffs makes more sense than in a country where everything is under tariffs
atoav 2y ago
Relocating a factory to the US is expensive both as an investment and in its operation. Thst means you're thinking on a time horizon of decades not years. So if you're the CEO of a corp that is expected to be incentivized to move production to the US you would want to know how long those tariffs are going to last. And lets face it, even if Trump instigated those tariffs via executive order at day 0 and didn't touch them till the expected end of his office that would not be enough incentive to relocate production. (1) because he could change the tariffs literally at any point (and he did just that) and (2) because any president after could just reverse the executive order immidately. The erratic way Trump installed, modfied and communicated the tariffs run counter to the communicated purpose. E.g. why of all things excempt computers and electronic devices now from the tariffs? Why put a 10% tariff on goods from dirt-poor countries whose goods you already buy at an rate bordering on exploitation to your own benefit. The way I see it, either he has no idea what the hell he is doing, or he is doing it for another purpose, e.g. insider trading. And I see myself exceedingly tired of journalists trying to read the tea leaves on a madman.

jopsen 2y ago

Even universal tariffs with no exceptions is a problem. Many things cross US/Canada/Mexico border in the process being manufactured. And tariffs will stack up. Many advanced products (tech/chip, etc) are not entirely made in any single place. Some stuff is imported, and some is exported again, and tariffing the world, will also make the world tariff you. I think this is all around bad. Best case scenario the US has elected a president who decided to burn all political capital, alliances and credibility in search of a slightly better deal. Doing this sort maximum pressure economic extortion style policies, *might* getter you a slightly better deal. But at what cost? Can EU countries buy US military equipment, when it turns out that the US will withhold support for equipment we've bought and paid for, in order to pressure a democracy, fighting for its existence, into surrender. Trump may get a win in the headlines, because everyone thinks he'll go away if he get a win.

randunel 2y ago
> Can EU countries buy US military equipment, when it turns out that the US will withhold support for equipment we've bought and paid for, in order to pressure a democracy, fighting for its existence, into surrender. Why would anyone buy US military equipment that's either "10%" handicapped on purpose, or remotely disabled whenever the US changes its feelings about the users of said military equipment?
- belter 2y ago
  "“We like to tone them down about 10 percent, which probably makes sense because someday maybe they’re not our allies, right?”" - Trump
- prawn 2y ago
  There have been many headlines/stories about this in Australia where we have a submarine deal within the AUKUS alliance.
DonHopkins 2y ago
He's already gotten what he wanted from it and bragged about it: so many leaders of different countries calling up and kissing his ass. He's certainly not going to give any of them what they wanted, and now they all have the taste of his ass in their mouths. At least they have something in common with Elon Musk, now.
- ben_w 2y ago
  There's many sayings about diplomacy, though I understand the reality is much more mundane. One that comes to mind is "a diplomat is a person who can tell you to go to hell in such a way that you actually look forward to the trip" — like all good quotes, attributed to a wide variety of famous people. Competent governments send arse kissers to those who need pampering, and send blunt to those who need to see bluntness. But (in a competent government) these things are uncorrelated with the actual negotiation position — "speak softly and carry a big stick" etc. Trump being bellicose to everyone at the same time is a sign of his own incompetence.
- FranzFerdiNaN 2y ago
  I belief his story about dozens of countries calling him about as much as his story of him taking a cognitive test and having every single answer correct. Or his doctors statement that said that there has never been a healthier president than Trump.
  - monkeyfun 2y ago
    Yeah, this is a man who literally says he has the greatest memory in human history but then constantly says he can't remember stuff a day or two later or coincidentally was living under a rock and has no idea what's going on in his cabinet.
  - outer_web 2y ago
    > Men came to me with tears in their eyes, big men, and said "sir..."
- viraptor 2y ago
  Worth looking at the actual deals. The initial talks with Canada and Mexico resulted in reported "deals" and "wins" that were actually just confirmations that the deals negotiated under previous administration are in fact happening.

jijijijij 2y ago

> Your computer parts factory likely runs using a large amount of imported raw materials, imported machines, and imported tooling, and there are no tariff exemptions for those broad categories… so you’re screwed. All the planning charts and demolition orders have been on display at your local 24/7 news feed for more than eight years, so there’s no point in acting surprised about it. You’ve had plenty of time to lodge any bribe worth the president's time and it’s far too late to start making a fuss about it now. Oh, for heaven’s sake, Americans, President Trump did a crypto scam on his supporters before being sworn in, you know. I’m sorry, but if you can’t be bothered to take an interest in local affairs, that’s your own lookout. I've no sympathy at all.

chipotle_coyote 2y ago
[flagged]
jiggawatts 2y ago
> crypto scam on his supporters It absolutely blow my mind that that was just "Friday", and not the biggest scandal in Western political history. "It's just Trump being Trump, move on, move on, nothing to see here, no consequences for anyone..."
- alabastervlog 2y ago
  The speed with which we went from “out-of-context recording of a ‘yeaaaaaah!’ can end your presidential campaign” to “suggesting your supporters shoot your opponent if she wins doesn’t mean you can’t be president… twice” was incredibly quick.
- jijijijij 2y ago
  I honestly have a hard time coping with it. No joke. It's revolting, how that wasn't the end. Right after the Hawk Tuah girl was burnt at the stakes for the same stunt, too. It's not even that it is pure evil and predatory, it's the aesthetics of it... It tainted civilization, at the very least America! It's so, so pathetic and cringe. Unbearably distasteful and undignified. Too much cringe. The only thing topping this, was the president of the United States selling cars in front of the white house, a few weeks later. I can't. Man, imagine an alien patrol passing that Tesla (a billionaire's fucking car in space as a beacon of Earth life's legacy, honestly makes wanna puke) and then learning about the state of things here. I feel embarrassed to the core living in this period of time. I'd rather shit my pants on live TV. I crave the cleansing heat and certainty of thermonuclear warheads. Shoot these fucker with a bullet of frozen sewage and then sterilize this place for we all sinned collectively. Send some tardigrades to Mars and hope for something better, but turn off the lights on Earth. Tainted.

quasse 2y ago

Universal tariffs with no exception don't even incentivize domestic manufacturing when it cuts local manufacturers off from an outside market that's bigger than the domestic one. My company manufactures equipment in North America, with the most expensive input coming domestically from Ohio. Guess what though? Retaliatory tariffs from the global community means that the most rational course of action is now to move that manufacturing *out of the US* so that we can sell to the global market without penalty. Sorry Ohio, but Mexico is currently *not* engaged in a trade war with Canada and half the EU so the rational decision for a company who wants to sell in those markets is to divest from the US.

pbasista 2y ago
> engaged in a trade war with ... half the EU That is generally not possible. All EU countries share a common trade policy. Another country can either be in a trade war with the entire EU or with none of the EU. According to the Wikipedia [0], The EU member states delegate authority to the European Commission to negotiate their external trade relations. [0] https://en.wikipedia.org/wiki/Common_Commercial_Policy_(EU) https://en.wikipedia.org/wiki/Common_Commercial_Policy_(EU)

numpad0 2y ago

People don't want incentivization of American domestic manufacturing. That's where the fundamental disagreement is, after all. People don't have confidence in American products built on US soil by upper middle class Americans. It's going to take long to (re?)build trust to reverse that.

jmole 2y ago
That’s ridiculous, there is plenty of confidence in US manufactured goods, the problem is that US manufacturers have impossible economics for anything that isn’t boutique or super high margin. Need an impedance controlled 16 layer board for your fancy new military radar? No problem. Need a basic 2 layer PCB for mass manufacture? No one in the US will make it at the price you need to be competitive.
- mitthrowaway2 2y ago
  "No problem"? It's not just that the prices are high; I can hardly get those guys to even answer the phone and give me a quote. I can get that board from China before I've gotten through to a local sales rep. Then when they do finally check their messages they want to fly out, meet me at my office, size up my operation and my budget, have a nice chat over dinner, and spend a few weeks pestering me with phone calls without ever getting down to business.
  - jpc0 2y ago
    You are pretty confused about why this is. When the only market you ever had was high touch high cost low volume production then that is your default business model. The biggest issue is that Trump is pushing tariffs without first ramping up local manufacturing, the type of manufacturing you are looking for isn't _currently_ being catered for in the US. It may in the future depending on how things pan out, the bet Trump is making is that it can happen, time will tell whether he is true. I don't think it will generate jobs for local US manufacturing since the only way to compete with low cost of labour markets is to automate more than the low cost of labour country. Business is reasonably good at filling whatever niche is willing to pay. So far the evidence is that Trump is willing to over commit and then backtrack. Having a negative outlook doesn't help anyone, think positive about your country and shift with the times.

Renaud 2y ago

Universal import taxes on everything make no sense. If you want to protect strategic production, you apply selective tariffs to support that local production while ensuring it can ramp up and import what it needs until it becomes self-sufficient. Most countries, the US included, have used selective tariffs for this purpose. Applying a blanket tax on every type of import just increases inflation, as you can't possibly manufacture everything locally. For many products—especially cheap ones that were outsourced to China—there's no way to produce them cheaply enough for your internal market to absorb all production. And you can't export them either, because their higher production cost makes them uncompetitive compared to cheaper alternatives from low-cost countries. The secondary effects of import taxes are wide-ranging: they help when applied selectively and carefully; they don’t when applied capriciously and without thought. The mere fact that high taxes were slapped on phone imports so "phones could be made in the US," only to backtrack mere days later, demonstrates that this is either the work of an insanely bright economist nobody understands, the scheme of a grifter aiming to benefit personally, or the capriciousness of a borderline dementia patient who cannot act rationally.

DonHopkins 2y ago
Why not two out of three?
FooBarBizBazz 2y ago
Really the way to do it, AFAIK (say, per How Asia Works), is to apply selective subsidies, not tariffs, and to subject the subsidized industries to substantial export discipline. That's what gets you South Korean world-beaters. Autarkic tariffs just get you Indian industry, where consumers have learned that the few goods marked "export quality" are superior. And, I don't want to be partisan about this stuff, but, that's basically what "Bidenonics" was trying to do, in a small way: Subsidize a few industries like semiconductors and batteries and solar panels, that were deemed strategically important. Whether the US was ever going to be as serious as South Korea or Japan about this remained to be seen. Frequently the subsidies seem to be handed out and then nothing happens (e.g., "Gigafactory" in Buffalo, NY).
- 2y ago

energy123 2y ago

It's the opposite! A universal tariff is a tariff on all inputs that manufacturers need to be competitive. How will Ford or Tesla ever be competitive if all their inputs are 24% more expensive than Toyota's inputs? Autarky doesn't work. Juche doesn't work. Comparative advantage works, both theoretically and in practice if we study economic history.

soVeryTired 2y ago
Do you really believe in the comparative advantage argument though? Surely it’s only true if comparative advantage is fixed over time. And surely in order to leverage comparative advantage, an economy would need to know how good they would be at producing every possible good. There are good reasons to trade, but comparative advantage doesn’t feel like the correct theoretical underpinning to me.
- energy123 2y ago
  > And surely in order to leverage comparative advantage, an economy would need to know how good they would be at producing every possible good. Comparative advantage is an emergent property of trade that occurs naturally, it is the default state of being and can only be undermined by government policy. You benefit from comparative advantage when you buy bread from the bakery instead of spending 2 hours a day baking your own bread. Imagine how much poorer you'd be if the government put a large tax on you buying bread to force you to bake it yourself, in the name of self-sufficiency. That's what's happening with these blanket tariffs, instead of targeting only critical defense manufacturing, Trump also wants t-shirt sweatshops to magically come back to the US despite only 4% unemployment. It's rank foolishness.
- bflesch 2y ago
  IMO your logic is all wrong. Comparative Advantage ist just applied "opportunity cost" of time. Humans and resources are unique, everyone has their theoretically "optimal" use of time in terms of economic output. The invisible hand of the market will let you know what aspect of your output is most valuable for others. The benefit of this invisible hand is that the "economy" as a whole does not need to know how good they are at producing everything. People just need to know if what they are producing now is more valuable than the next best alternative. Everything else will be sorted out with market forces. In university lectures we were given the famous argument about olive oil from Greece and that it would never make sense to do our own olive oil because we both lack the natural resources (unique soil + sunshine) which allow olive trees to grow easily and we'd also have much better yields growing other things on the fields. So to me, both opportunity cost and comparative advantage are really basic building blocks of economic understanding and I'm a bit dumbfounded that someone wouldn't understand these concepts.

beloch 2y ago

Factories, tooling, machinery, etc. must be amortized over a market and production run. If you're making toilet paper, the cost is relatively low and the market is huge. The TP you make today will still be good TP in a decade. No one toilet paper factory can serve the world, so you'll need many of them in many markets. The inputs can be found within the U.S.. Why not build one in the U.S.? A factory that produces a specific model of phone is only going to be able to run for a few years before it needs to retool for a newer model. That means a huge investment goes into such a factory on a continual basis. If one factory can serve the entire world demand for that model, why build two? If you're going to build just one factory, are you going to build it in a market that's walled off behind trade barriers, both for outputs and inputs? Only if that market is significantly bigger than the rest of the world combined. If the rest of the world is bigger, than you build outside the trade barriers and people inside of them will just have to pay more. Tariff's might bring low-end, high-volume manufacturing back to the U.S.. Chip fabs, phone factories, or anything so high-end/low-volume that it must be amortized over a global market is not going to return to the U.S. because of tariff's. An administration that changes their minds every few hours only makes matters worse. Whether Trump has recognized this and is conceding defeat or he's bowing to pressure from companies like Apple is immaterial. That kind of factory is not coming to the U.S. anytime soon.

speleding 2y ago
I agree with your general point, but I just read the book "Your life is manufactured" by Tim Minshall, in which he describes the production of toilet paper in detail and it's a surprising global industry. Wood pulp with the correct density comes from a few specific places on the globe (Scandinavia and South America apparently).
- washadjeffmad 2y ago
  Those are big markets, but there are a lot of suitable softwoods for pulp production, farmed around the globe. Ideally, you want to use ones with good natural ratios of lignin to cellulose and hemicellulose (that's just to say, the constituents of biomass) to minimize processing and chemistry costs.

Aurornis 2y ago

> While a universal tariff with no exceptions incentivizes domestic manufacturing Not really. Efficient manufacturing requires access to a lot of different inputs from all over, from the machines that make things to the raw materials. Putting tariffs on everything only incentivizes companies to move to a location where they can freely buy what they need and manufacture it for the world. The US is not the only consumer of most manufactured goods. Making them in a country with cheap labor and no extra import tariffs makes more sense than in a country where everything is under tariffs

atoav 2y ago

Relocating a factory to the US is expensive both as an investment and in its operation. Thst means you're thinking on a time horizon of decades not years. So if you're the CEO of a corp that is expected to be incentivized to move production to the US you would want to know how long those tariffs are going to last. And lets face it, even if Trump instigated those tariffs via executive order at day 0 and didn't touch them till the expected end of his office that would not be enough incentive to relocate production. (1) because he could change the tariffs literally at any point (and he did just that) and (2) because any president after could just reverse the executive order immidately. The erratic way Trump installed, modfied and communicated the tariffs run counter to the communicated purpose. E.g. why of all things excempt computers and electronic devices now from the tariffs? Why put a 10% tariff on goods from dirt-poor countries whose goods you already buy at an rate bordering on exploitation to your own benefit. The way I see it, either he has no idea what the hell he is doing, or he is doing it for another purpose, e.g. insider trading. And I see myself exceedingly tired of journalists trying to read the tea leaves on a madman.