I believe that this post by Michael Lind on tariffs at Tablet is worth considering. Here’s a snippet:
In 2023, China’s share of value-added production in manufacturing was 29 percent of the world total—more than the United States, Japan, Germany, and India combined. China’s lead in global gross manufacturing production in 2020 was even greater: 35 percent, more than the combined total of the United States, Japan, Germany, India, South Korea, Italy, France, and the United Kingdom. Today China produces a third of global automobile manufacturing, half of the world’s steel, and 80 percent of the global civilian drone market. China is second only to Japan in manufacturing robots and is the world’s leader in factory robot installations. While China controls half of global commercial shipbuilding, America’s share of the global shipbuilding market has dwindled to 0.1 percent. What this means is that while the United States may lead China in the number of overseas bases and military spending, China would find it much easier than the self-weakened, partly deindustrialized United States to convert its superior civilian manufacturing base to military production.
I suspect that my views on tariffs are somewhat lighter that Mr. Lind’s. Basically, I think that regardless of how damaging they will prove to the U. S. economy we must impose tariffs on Chinese imports. China is a special case. Mr. Lind explains why in this passage:
Chinese state-backed firms dump subsidized products into the U.S. market, wiping out American manufacturers. Then, instead of buying an equivalent amount of American-manufactured goods, Chinese entities invest in American real estate or purchase American financial assets, driving up the value of the dollar, to the detriment of American exporters and the benefit of Chinese exporters.
but I think that Mr. Lind is mistaken in his views on “sector-specific tariffs”. The reality we face is that the entire supply chains for defense-critical goods must be based in the United States or, at worst, in North America. We really have no other choice.
Anyway, read the whole thing.
I think Lind is wrong about industrial robots. Other sources claim China has two-thirds of all the industrial robots in the world, and they buy the same percentage of the world’s total robot production each year. Moreover, they use AI to optimize robot operations, and run the AI on advanced 5.5 (6?) G systems.
The Chinese also are using these systems to optimize transportation. Their most advanced, fully automated ports can load a large container ship in a matter of hours. Our primitive ports need days to do the same.
Kevin Walmsley at Inside China Business describes dark, unairconditioned factors devoid of humans and filled with robots. We must be a few generations behind the Chinese in technology.
I don’t think we know what’s actually going on inside China. All we know is what the authorities want us to know. Maybe “lights out” manufacturing is becoming prevalent. Maybe it isn’t. Maybe the examples you cite are the norm. Maybe they’re the exceptions the authorities want us to see.
I don’t really care. I think we need to craft our policy based on our own goals and needs not on what China may or may not be doing.
If we only impose tariffs on China why wont companies just move to another low cost country? Look, no matter what you do if your goal is to have enough industry here for self defense purposes it will cost us wealth. We should stop lying about that and realize we will face lower economic growth but the question then becomes how do we minimize wealth loss and still achieve our goals. We especially need to ignore Trump when he keeps claiming that the other countries are going to pay for our tariffs.
If we decide to say use targeted tariffs against, just to choose one, steel imports that has very broad effects against many countries and we likely face retaliation tariffs. If we intend to restore all of the manufacturing needed for the defense industry this would mean tariffs on lots of countries, many of them allies, leading to a larger loss of wealth as well as affecting foreign policy.
All of which makes me think targeted subsidies make more sense and when appropriate eliminating regulations that add costs. I think the criticism would be that you are picking winners and losers but you do that anyway with tariffs. We have experience as it was actually working pretty well with the CHIPS act, at least until Trump stopped it.
Steve
There is no other China. There is no country with a population of over a billion and central control. No matter what Vietnam, for example, does it will not just become China under another name.
Baloney. The only metric by which that is true is money spent. Inputs does not measure the effectiveness of a policy. Only outputs do. We are not importing fewer semiconductors than we did before the the CHIPS Act was enacted.
??? We imported $25.4 billion worth in 2023 and $22.6 billion in 2024, a decrease if my math is correct. However, unless I am misreading you what is at issue here is national defense. For that we especially need the high end chips made by TSMC. The Arizona plant is already producing 4 nanometer chips.
https://oec.world/en/profile/bilateral-product/semiconductor-devices/reporter/usa
Steve
“unless I am misreading you what is at issue here is national defense. For that we especially need the high end chips made by TSMC.”
No for national defense it is not advanced chips that is needed. Most weapons platforms like the F35 use chips in the 22-70nm range, 5-10 generations behind state of the art processes.
Generally the computational needs of most weapons systems use aren’t huge — a modern desktop probably far outpowers what is available on an F35. The weapon platforms needs also reflect what was available at the time the design is locked (which is usually decades ago). Also, they prioritize reliability in harsh environmental conditions vs computational capability, which necessitates using older nodes which have larger transistors.
The chips act failed to encourage an increase in legacy node production; it doesn’t have high margins even if it is more critical to day to day life (for example, legacy node chips is what drove the shortage of cars in 2021).
Now its hard to speculate what computational needs the military will have in the future; where computing power itself is a weapon (think AI augmented commanders, or AI generated war plans, etc).