At RealClearPolitics Charles Lipson remarks on the trade deal with China. I wanted to bring attention to this segment of his post:
These failed policies don’t leave Washington with many options. The U.S. can either accept Chinese protectionism, as Europeans and previous U.S. administrations have, or it can make them an offer they can’t refuse. The terms are obvious:
- Threaten China’s export-driven economy
- Make that threat believable and sustainable
- Offer China a reasonable deal
- Make it costly for China to delay, and
- Buttress the deal with tough enforcement mechanisms
While I agree with the general contours of that analysis I think he’s making one big miscalculation. China’s economy is no longer export-driven. That used to be the case but no longer. Today it is propelled by the domestic economy and fueled by debt, at the prefectural city and company level. Since the yuan is not convertible the debt is mostly denominated in dollars. That means China must hold many, many more dollars than should be the case.
China’s growth is not export-driven. It is dollar-driven.
I have no sympathy for the Chinese authorities. They have placed themselves in this conundrum.
We need to do what’s right for our own economy and otherwise let the chips fall where they may. In my opinion that means we should be producing a lot more of what we consume which means a lot more onshore manufacturing. That won’t mean a return to the “dark satanic mills” of the past. There should be a great increase in additive manufacturing and “lights out” manufacturing in general. We and the entire world will be better off for it.
Something else we agree on, sorta. I would move in a more protectionist/mercantilist direction than you might. Living in Ohio since 1972, I saw the destruction of the midwestern industrial economy, which is still ongoing. As a boy in the textile region of Massachusetts, I saw the transfer of the mills to the nonunion south. My grandfather worked as a steam fitter in those mills.
There is no coming back from those losses. The laid-off workers are not retrained to new jobs and skills. It doesn’t happen.
Whether the midwest industries can be rebuilt is a question. Maybe not. But we have a government and Ruling Class that is opposed to even trying.
The American working class, white, black, and brown, needs someone to represent them and fight for them against the federal government and the working class. Trump is the first iteration.
For interest, I was looking at articles about tariff’s effects on supply chain.
My summation was last year’s tariffs forced most companies to come up with contingency plans; but didn’t execute them while the negotiations looked positive.
My bet is with the latest tariffs the contingency plans will be executed, and it will happen very quickly because the planning is already done.
To Dave’s point, the tariffs aren’t forcing the Chinese government to change its behavior — but it is causing changes in American companies behavior.
I do not forsee manufacturing coming back to State-side, the plans seem consistent is going out of China to a number of countries, South-east Asia (Vietnam in particular), South Asia, and Mexico. Which arguably is still preferable from an American perspective.
That is precisely what I see the purpose of tariffs being. While I agree that the old manufacturing jobs won’t be coming back, I think that manufacturing will, indeed, return onshore. It’s already happening.
Not in appreciable numbers. We are only back to where we were in 2008. Way done below where we were in 2001.
https://data.bls.gov/timeseries/CES3000000001
From 1980 to 2010 the number of manufacturing jobs in the U. S. declined substantially. Since 2010 the trend has changed and they have increased by more than 1 million, an appreciable number. As long as we can keep that going in the right direction all that is needed is the passage of time.
I’d rather the trend was in the right direction than the wrong direction. How about you?
Manufacturing output does not equal manufacturing employment. The most labor intensive manufacturing went offshore for obvious reasons. (And that most affected by environmental regulation.) Separately, efforst at reducing labor through technology naturally were stepped up. That said, it is, in fact, the case that manufacturing employment is rising as some of the non-employment costs of moving offshore are realized, and as some of the regulatory burdens have been relieved, but it is hard to imagine full repatriation. With tarrifs, its hard to quantify where manufacturing employment equilibrium resides, but it will be better. Its also impossible to actually determine the effects of consumers. People who have probably not priced a product or service offering in their life claim its all passed through to the consumer. Nonsense.
As for curious’ observation about contingency plans, many have already been implemented, and others are waiting in the wings.
“I’d rather the trend was in the right direction than the wrong direction. How about you?”
I would rather be realistic, how about you? Manufacturing jobs have increased since the worst economic decline since the Great Depression. Hardly surprising. I expect some manufacturing to return, or we will manufacture new stuff that was never manufactured overseas anyway. I just dont expect jobs to come back at a high level. It is a mistake to send everyone to college and it is a mistake to count on having manufacturing jobs back at the levels they were 20-30 years ago. (Politically it is a great move to promise that they will return since so many want to believe it.)
Steve
Anecdotal, but I noticed a couple strip malls in town always full of cars, got nosy a went for a look. Viet women washing feet at $25 a pop!
They had a dozen chairs, all full, offering pedicures, manicures, scalp massages, on and on. A profitable business opportunity they saw where I couldn’t tho it was right at my feet.
And maybe that’s the future. You can’t bring back jobs building cars while the carmakers are buying robots.
I am being realistic. A million more manufacturing jobs is a lot.
That isn’t my target. My objective is not losing jobs, increasing them somewhat. That’s what we’re doing and we should be happy about it.
In Chicago that would have been put to a halt quickly. To do that you have to be a licensed nail technician and that requires 600 hours of training.