Sure, but aren't we past rational debate on this point? Not only are the new trade policies irrational, it's quite possible that they're intentionally irrational as a bargaining or maneuvering tactic. We're not going to reason or argue our way out of this one.
As I commented yesterday, there's a playbook for reshoring that's being totally ignored:
First you invite industry to reshore via subsidies and preferential access to government contracts. If necessary, the government must directly invest in new firms. (They already do this in a very small way with In-Q-Tel and others, so it's not totally beyond the pale. For a time there was even a US Army VC firm.) If you talk to a Chinese factory owner or mine boss, many of them will tell you that they got their start with a >$2M direct investment from their government.
Second you gradually tighten the screws on foreign finished products, not industrial inputs like metals, plastics, ores, etc.
Third you streamline export paperwork requirements and relax things like ITAR.
Then, when that's all humming along and the factories are working, you can launch blanket tariffs to protect your nascent industries, if need be. But you must exempt necessary industrial inputs from tariffs.
It's possible that personnel problems can, to some extent, be solved with automation.
But, anyway, the playbook's being torn up and read backwards, so it's all moot. We're just going to have to ride the tiger and see what the world looks like in a few months.
> it's quite possible that they're intentionally irrational as a bargaining or maneuvering tactic
This is the rationalization being projected onto the situation, but it doesn’t make logical sense.
The administration launched a trade war with 100+ fronts and left no time to negotiate with all of them, let alone the biggest players.
The biggest players are already calling the administration’s bluff with counter-tariffs. If there was an expectation to use the threat of irrational tariffs as a bargaining chip, they didn’t leave enough time to do it.
I don't see how else they could've done that - if they decide not to tariff some countries, countries that did get tariffed could trivially reroute their goods to go through said exempt country - I'm not even sure goods would need to move physically to said country or they could get away with cargo ships registered under them and/or ports handed over to be the territory of said country.
tariffs are assessed based on the country of origin. you can't skip a tariff by routing your goods through another country. or maybe you can, but that's called smuggling and the only way to do it is outright fraud and lying on the import forms.
if your product is sourced from china, you pay the tariff on china whether you are importing it from a canadian supplier, a cambodian supplier, or a chinese supplier.
> the only way to do it is outright fraud and lying on the import forms.
It seems like the incentive to do this has just gone up immensely.
There are also more creative ways to get around country of origin labeling, as I understand it. For example, do 90% of the work in the high-tariff country and the final 10% in the low-tariff country which becomes the point of origin.
If your product is imported through China as the supplier, depending on how you structure your arrangement, it can be sourced from wherever you like, at least on paper.
again: that's fraud, it's illegal, and the consequences begin with getting your whole shipment seized.
if you want to smuggle products illegally, that's on you. but the parent's assertion was that tariffs can be trivially bypassed by changing the country of origin. maybe we have different understandings of "trivial", but for me it being illegal makes it non-trivial.
Behaving irrationally, intentionally or not, is scaring investors away rather than attracting them.
Seen from abroad, trust in the rule of law and property rights has been eroded. Today Trump sends randos to El Salvador, maybe tomorrow he will nationalize enterprises or other assets, with no meaningful opposition from the Congress and the judiciary? Germany is already pulling gold from the US, that had been stored there for decades. Better safe than sorry.
Amazingly, this is exactly what Russia has been trying to do for years now: introduce chaos and uncertainty. Capitalism can handle bad news all day long, but it can't withstand prolonged unpredictability and ambiguity.
I think you actually _should_ assume that he's acting rationally, just that his motivations aren't aligned with what you think they should be. Trump has a mafia mentality, and the purpose of the tariffs has absolutely nothing to do with policy and everything to do with control. He wants to have a guillotine hanging over the head of every country and corporation that he can use at will, so that every CEO has to come to him and bend the knee, so he can grant them an exemption on a case by case basis in return for personal loyalty to _him_.
There is a reason that the power to tax resides in congress, and it's specifically to prevent that. They've just abdicated their role and here we are with a king instead of a president.
> Sure, but aren't we past rational debate on this point?
No.
> Not only are the new trade policies irrational, it's quite possible that they're intentionally irrational as a bargaining or maneuvering tactic.
Not really, at least not a well-considered bargaining or maneuvering tactic. There is no incentive to comply if there isn't a clear compliance goal and a clear willingness to reward progress toward it as well as punish noncompliance. Irrationality is poor bargaining.
More to the point, though, the space for rational debate is NOT with the architects of the policy, who, yes, seem beyond reason. The space for debate is among everyone else, including the people who have the Constitutional power to arrest the executive policy in this area (whether that debate centers on the merits of policy in the broad sense or their own narrow future political fortunes or some combination of those.)
> As I commented yesterday, there's a playbook for reshoring that's being totally ignored
Broad reshoring of industries or broad sectors that have left the US because its comparative advantage in the present world trade regime has shifted elsewhere is an objectively economically harmful idea, and expending resources on it consumes resources that could be productively employed in pursuit of relative economic inefficiency. There may be select industries that can be identified where there is a rational argument that that would be only a short-term hit and that there would be long-term benefits, or where security or stability issues given real expected international threats make that a cost worth bearing (though in the latter case it is still generally probably better to work to maintain existing alliances and work jointly to "reshore" critical industries broadly within our international political alignment rather than making it an isolated national policy, both because there are often going to be other places in the alliance where it is less out of line with present comparative advantage and because it is a broadly shared benefit where it makes sense to share the costs.)
We don't need a better playbook to achieve autarky, we need to reject it as a goal.
That's what smart experienced people would do. But if you run the power game as an ego polishing reality show with whole world stuck in it, all logic is off the table. Sad to be part of it and absolutely powerless
> Sure, but aren't we past rational debate on this point?
There is no point debating the administration or supporters. Peter Navarro hatched this idea, and he is nearly alone in his logic.
However, a broader debate is useful. A professor in Europe recently pointed out that Nixon did the same thing in the 1971. The intent was to destabilize and reset the dollar value compared to other currencies. He basically set off a grenade in the office. He proposed "New Federalism", and "Nixon's decision to end the gold standard in the United States led to the collapse of the Bretton Woods system. According to Thomas Oatley, "the Bretton Woods system collapsed so that Nixon might win the 1972 presidential election.""
https://en.wikipedia.org/wiki/Richard_Nixon#Economy
By the way. Bretton Woods and Treasury monetary policy after WW2 was crafted by Lauchlan Currie. Currie was a renowned economist and worked at US Treasury from 1934. In WW2, Currie was Franklin Roosevelt's chief economic adviser. Currie was also a Russian agent. His US passport and US citizenship was revoked in ~1954 and he lived the remainder of his life in Colombia.
I thought the major shift after WWII with Bretton Woods was that throughout all of human wars up to that point, the winner usually took the land in some way or another and the US wasn't interested in that and more interested in a global economic stability pegged to the US dollar. And the US decided policing trade routes and peace across western countries was more important than claiming spoils of war.
Preferences are independent of rationality, surely?
If a guy with a finite lifespan has a preference for autarky, expansionist military invasions, racial hierarchies and a secret police regardless of the consequences and then rationally pursues those preferences in ways that are likely to bring them about before his death of old age, the guy doesn't qualify for the category "delusional" and instead fits into one of the moral categories.
One of his preferred "gurus" is a guy who pushed one of those self-help bullshit "if you just believe hard enough, you'll manifest your desires!" proto- The Secret frameworks, and he does appear to operate that way—strident bluster, declaring defeats and "white peace" as unqualified victories, willfully ignoring inconvenient facts, all that stuff. Like, look at the totally-bizarre sharpie incident in his first term, for a trivial but illustrative example.
However, it's worked out well for him personally (less so for those he does business with, or near, or for the US...) so despite being on-paper delusional, I admit the waters are rather muddied.
https://en.wikipedia.org/wiki/Norman_Vincent_Peale#Influence
A certain amount of bullshitting is a rational strategy for sane, low-conscientousness actors with middling intellects.
> it's quite possible that they're intentionally irrational as a bargaining or maneuvering tactic.
You're giving them too much credit. This is more of a "some men just want to watch the world burn" situation than a "4-D chess" situation.
Hopefully we're never past rational debate.
I mean, the people making decisions might be well past rational, but hopefully there's always a contingent of people putting deep, rational thought into what might be the best plan to utilize going forward. And hopefully good ideas keep spreading and somehow find their way back to the top. Before it's too late.
The problem when someone only hires sycophants is that competence is pretty far down the list of requirements. And, even if someone is competent they won't share dissenting ideas out of fear they'll end up replaced by another sycophant.
If the goal was to really reshore there are a lot of ways to encourage companies to move in that direction. The CHIPS act is one but Trump wants to cancel it. And I'm sure there are others than can work, but broad based tariffs are not a solution.
I don’t think this playbook works for complex products. Before every component needed for an iPhone is locally manufactured, the overseas competitor manufacturers of those components would be many generations further. You’d be competing with the whole world.
The designers of the chips in the iPhone are basically US entities. (And more generally, Apple, Nvidia, AMD, Qualcomm, etc. are US companies.) They can gradually limit foreign production and re-shore with subsidies.
Sure, foreign chip manufacturers might gain a leg up, but it might not be totally ruinous. There's a way to do it that's smooth, gradual, and mostly painless.
The US has maintained full employment for quite a long time now. You can bring the factories to the US. You can likely even automate a lot of the work. But not all the work – in a place where everyone who wants a job already has one.
So, the question really is: What are Americans willing to give up? Something has to go if workers are reallocated away from whatever they are doing now into these factories.
> First you invite industry to reshore via subsidies and preferential access to government contracts. If necessary, the government must directly invest in new firms.
Summarized: the government gives money to companies, or more charitable "invests".
I would totally agree with you on this path forward BUT FOR the fact that thos nation is dead broke. Completely dead broke. There's no responsible money to do this with. None.
It's not though. The US has been getting compensated for its military investment all around the world.
The explicit architecture of the petrodollar system is that the US will protect international shipping, and in return all petroleum contracts will be priced and executed in dollars. This makes the USD the international reserve currency, and every country participating in international trade needs to hold USD.
How can they put those USD to work? By buying up safe US government debt and other financial instruments.
The US has been rewarded with near unlimited borrowing ability assuming it remained the most stable, powerful, and trusted partner. We could use that to fund practically any investment we want.
> that the US will protect international shipping, and in return all petroleum contracts will be priced and executed in dollars
People say this, but the dollar is free-floating against other currencies and oil is priced on (OPEC-manipulated) supply and demand, so it seems like an accounting fiction. Like, we could price oil in pork belly futures.
Yes but they are settled in dollars, and all the countries of the world are in fact holding dollar reserves.
There's no money because your parties always vote for tax cuts and never for revenue raising measures.
And because of the dollars currency hegemony, the world helps you do it. Just let the tax cuts expire and increase the federal tax rates on higher incomes.
Even if you didn't want to do this, the world will literally fund whatever nonsense you want and you could deficit spend to restore manufacturing.
You as a country have a bunch of options (more than most) and it's sad to watch ye flail around ineffectually.