Serious economics question

[Guest]

Pumpf, this is worth the 20+ minutes...if anyone has counters to Oliver on the other side of the issue, I'd love to be educated...

[Guest]

And by counters, I don't mean tearing down Oliver...

[Guest]

The retaliatory tariffs have now had an effect. Not just stuff coming in. Stuff going out. Not just soybeens farming. Company's had to scramble to understand which and what stuff they are selling to China got tarriffed. Their list is very confusing and targeted mostly. Example certain types of electronic measurement devices but not mechanical like in scales. High end laboratory equipment stuff. It effected more companys then Harley.  Machine shops in general have had to increase the price quotes for their customers. Planners and buyer jobs got more challenging trying to please their bosses. Noticed smaller machine shops have already closed. Harley can pick up and off shore. The guy with 25 employees with razor thin profits who had his materials cost increased 25 % just quits before he's bankrupted or already is but now can't afford his restructuring bill. It was weird really one just closed without telling his customers he was going out of business. It was a machine shop. Stamping companies have had to increase their costs to customers as well. It effected many US company's. Mine included. Hasn't happened in mass yet but as the larger companies try to figure ways to offset costs you know what they will determine. Hope next year is a happy Labor day as well.
I hope in the end it brings manufacturing back to the US. However there will be a growing period. After WWII more the 50% of jobs were manufacturing we are now at around 9-10%. What made us a world power during the world wars was our ability to flip the switch and turn civilian manufacturing company's into military. At 9% we couldn't do that in the event of a 3 major world conflict. China has eyes on passing us in military world power status. Russia never stopped trying just couldn't compete financially.  China is the #2 economy Russia is like 14th right next to Mexico. 

[Guest]

I will also just add. While I like the idea of trying to force China to level the playing field. I questioned his approach. What he did here was a broad stroke. China paused and targeted. His were HUUGH theirs were strategic. He used a sledgehammer for surgery they used the appropriate scalpel. 

[Guest]

@suncoastvike said:
I will also just add. While I like the idea of trying to force China to level the playing field. I questioned his approach. What he did here was a broad stroke. China paused and targeted. His were HUUGH theirs were strategic. He used a sledgehammer for surgery they used the appropriate scalpel. 

I am not saying what he did was right or wrong,  but sometimes it takes a sledgehammer to get the things started and once the process has begun the craftsman moves down to finer instruments.

[Guest]

@JimmyinSD said:

@suncoastvike said:
I will also just add. While I like the idea of trying to force China to level the playing field. I questioned his approach. What he did here was a broad stroke. China paused and targeted. His were HUUGH theirs were strategic. He used a sledgehammer for surgery they used the appropriate scalpel. 

I am not saying what he did was right or wrong,  but sometimes it takes a sledgehammer to get the things started and once the process has begun the craftsman moves down to finer instruments.

I don't know either. I know Trump is always saying someone else is stupid. My worry is the Chinese response seems more strategic and targeted. How can we inflict the most damage on them with the least amount of fallout on our workers. Which way seems smarter and more thought out?  We will see which approach is more sustainable. They may wish to drag out negotiations. Make it appear they are close then walk back. I believe Trump felt or feels they would buckle before we felt the effects. They might have set themselves in a position to go deep. He might be underestimated his opponent /opponents. More then China is in on it now.  I'm uncomfortable with his choice on this one. I can only hope he's right. What else can I do?

[Guest]

Nobody wins a trade war.  Putting a tariff on steel imports didn't help the US steel industry but it had a ripple affect to dozens of other American industries, driving up their costs - auto industry, construction (I have personally seen costs for steel & timber jump by over 15% since 2017) are two of the biggest that have had to scramble.  

Trump tax cuts helped the steel barons but the savings were passed onto CEO's and executives, not the worker bees.  Zero, or very minimal pay increases given to the 10's of thousands of steelworkers, and instead their healthcare costs coming out of their paychecks continues to climb, so whatever minimal increase in their own paychecks from a meager tax cut were completely offset by their healthcare contributions ... meaning they are making LESS money while CEO's scored ridiculous bonuses and the companies engaged in stock buy-backs rather than share the wealth.  Friday announced 16,000+ steelworkers set to strike:  https://www.cnbc.com/2018/09/19/a-steel-...gence.html

Trump doesn't understand that US companies have established contracts with steel companies all over the world.  Trump himself does not use US steel in his own buildings for God's sakes.  Why?  Like any business you source the most cost-effective solutions regardless of where it's made.  Same reason 90% of the world's apparel is made in SE Asia, including the beloved MAGA hats - cost of labor.  Trump makes massive tax cuts that did nothing to help bring wages up for the middle and lower income classes, then brings a sledgehammer in as tariffs thinking he can force corporations to bring back manufacturing here.  It's a disaster and it won't ever happen.  

The biggest farce is his knowledge of the trade deficit.  Econ 101 will tell you there's nothing wrong with importing more than exporting - if you're importing more than exporting, it only means that people can afford to buy shit, that keeps the economy going and tax revenue coming in.  There's nothing to "win".  All a trade deficit means is that we are not a manufacturing economy, that ship sailed decades ago.  Manufacturing is a global economy, and unless US workers are willing to have a job in a factory that pays $2/hr to compete with Asia, it's never coming back.  Any idiot can look at that and know that's not economically feasible or even legal to pay people that wage here, so why the hell are you bothering to even try and compete in this space?  That's why companies outsource much of their manufacturing labor.  Every corporation will behave in a manner that will look for the lowest possible price to to process a product, it's basic capitalism.  

US has detached itself and moved away from being a manufacturing economy and emerged as a service and tech industry economy, and that's what terrifies so many red state voters.  Manufacturing jobs will continue to disappear as technology improves and other cheaper labor sources are outsourced.  This is American capitalism, sorry - any company worth 2 squirts will do whatever it takes to reduce their production costs to increase their margins.  That's why Trump's strategy to squash solar energy industry jobs and try to bring back coal jobs is a losing battle that only puts us decades behind other countries moving forward with alternative energy, and merely a facade to win jobs in VA, PA.  The future lies in developing alternative energy sources and get away from Middle Eastern oil dependence.  Fuck the Saudis.  But that's why Trump is fighting against California's emission requirements for fuel mileage, the worse mileage our cars get the more gas and oil we burn and guess who wins - Saudis and big oil companies.  Trump's entire economic strategy is to try and force us back into the 19th century using 18th century tariffs, while the rest of the world moves on and shakes their head at our stable genius.

[Guest]

I think that in any world where there’s unequal regulations,
there will need to be “cost of living” tariffs. 
If you are living in a country that values the environment, and you have
regulations in place to protect the environment, your cost of manufacturing
will be higher than a country that doesn’t have those regulations.  If you are living in a country that values
human safety in the workplace, your cost of manufacturing will be higher than a
country that doesn’t have those regulations. 
If you don’t have some sort of tariff that offsets countries that
shortcut your values, production will just move to whatever country is willing
to work unlimited overtime for peanuts, doesn’t value safety, and doesn’t value
the environment.  If you really value the
regulations that we follow, then you need to ensure that the countries
importing goods to your country follow the same regulations or you are hurting
your own production base.


We live in a country coming off NAFTA, where we outsourced
production to countries with lower standards of living.  We got cheaper goods that were made to lesser
standards (safety and environment, etc). 
Production moved to other countries, US factories closed down or
downsized.  Now we want to move
production back to the US, where we have higher standards.  Prices will go up because of that factor
alone.  Furthermore, You can’t just flip
a switch here and just start producing more goods.  Factories have to be built or scaled up.  People have to be employed and trained to do
their jobs at a competent level.  Until
then, you will have too much demand for the supply you have, which will cause
prices to go up.  The increased profit
margin will spur new competitors in the market until equilibrium is reached.  If for some reason, this is a business that
is hard to break into, requires massive capital or expertise and there is no
one to break into the market, you’ve just given a subsidy to the existing
producers on the backs of consumers.


That said, I don’t think we’ve had enough time to see US
production added to the mix yet.

[Guest]

Im no fan of trump trade war but to be frank, something has/had to be done. We’ve aledgedly come out better on the redraft of nafta. 

China is the elephant though. What do you recomend doing to protect the US from cybersecurity issues from China?

[Guest]

@AGRforever said:
Im no fan of trump trade war but to be frank, something has/had to be done. We’ve aledgedly come out better on the redraft of nafta. 

China is the elephant though. What do you recomend doing to protect the US from cybersecurity issues from China?

I just don't worry much about that.  I'm way more worried about the CIA/FBI/NSA and all the cybersecurity issues they pose to us.  I don't care if China breaks into lockheed and steals some designs or something.  What we need to worry about is building an America that can provide for itself, instead of being cripplingly dependent on foreign countries.  A country as big as ours should be able to come to the table as self-sustainable.  We shouldn't be dependent on poverty labor in other countries to make our goods affordable.