Here is a shorter version with the pertinent subject matter.
video link would be set to 7 minutes 13 seconds.
China is a special case, no question. But the USA has deficits with other countries too. The deficit is not always only the fault of the partners with the export surplus or their tariffs.
The USA should ask what they perhaps can change to get more competetive.
Last month I found a report about a 3,600 TEU container vessel that cost $209 million built in the USA (Jones Act). The Emma Mearsk with 15,200 TEU cost in 2018 money $175 million built in Denmark (EU). A 21,000 TEU built in South Korea costs $175 million too. And Denmark is not a low wage country.
Germany fell to the end of the EU country’s economical development, from leader to laggard. It is now the leader again but after painful cuts to wages (pay freeze over a few years) and welfare system. Our unions went along knowing there was no other way to get down the unemployment rate of 11.7% (5 million people) and rising wages again.
If productivity and wages don’t fit anymore companies look for ways to reduce labor expenses like GE going to Fort Worth and EMD to Muncie.
On the other hand you need products other countries want to buy. Your own market is so large, companies think of it first not the export. In Germany we have to keep export in mind.
Automobiles are a good example. Even lowering the EU tariff to zero wouldn’t help the American car builders much. They have only very few fitting models for the European market.
Pointing at others means three fingers point back at me.
Regards, Volker
IMHO, the auto industry is a fitting example. Particularly post-war and into the sixties, there was little market for small cars. European and Japanese cars (and small US sports cars like the 'Vette and T-Bird) were seen as a niche market that provided little competition for the “boats” that Americans wanted. Bigger was better.
Even cars made by US companies for foreign markets sold miserably in the states (Opel).
Because foreign autos provided little competition to the US automakers, the workers could pretty much ask what they wanted for wages, and did. With no real competition, the automakers had little choice but to pay up. So we ended up with low-skills jobs getting paid premium wages. We also ended up with robots on the assembly lines.
At the risk of getting shot down like the Famous World War I Flying Ace Snoopy on his dog house, here are a couple of respectful thoughts.
President Trump seems to view almost everything as a business deal and for the most part does follow the tenets laid out in his book Art of the Deal. Basically go in and ask for the stars when you really want the moon, and then negotiate back from there. You might get the stars, or some stars and the moon, or just the moon. He is very brash but if you look through the noise of both President Trump and the media, that pattern seems to be there over and over again.
He is also pragmatic - he wants to get a deal of some sort because he knows he can come back again and negotiate again in the future. If you can strike one deal with a counterparty, you have a good chance of striking another deal in the future.
Also, remember that President Trump went to Wharton, and despite what critics say, you don’t get through Wharton and become a billionaire by being an idiot. You may not agree with his policies, but the fact of the matter is he is not a low IQ person. That does not mean one has to like or agree with him.
President Trump reminds me most of General George Patton - brash, mercurial, a disrupter, and adept at focusing on results.
I expect we will see some renegotiated deals come to fruition in the next six months or so that will result in more freer trade - not free trade yet but freer trade on many items. That will allow President Trump to say that he made a better deal.
He is a pragmatist and will ”move the chains”, to borrow a football phrase, but will not have the tariffs go on so long as to crash the economy. That would not be pragmatic or logical or sound business.
Again, just some respectful thoughts based on observations, and my crystal ball is just as cracked and cloudy as ever,
Patton tended to generate a lot of casualties on both sides.
A person with power just talking about adding tariffs slows the economy.
Well there are tariffs now enacted all over the place. The markets have not flipped out yet, but the Union Pacific Railroad sure as heck is worried. I see the picture clearly but am reluctant to discuss this on the Forum. PM to me if you want to chat.
I sure as heck would not want the Union Pacific at my door.
One way to look at tariffs is that they level the playing field and bring jobs back, all on the premise that these problems developed out of a lack of fairness. So in this way of thinking, the tariffs are a restoration of justice.
Maybe this mischaracterization of the problem arises from the term “fair trade.” But there is also the term “free market.” Free market means that there will be winners and losers. Is that unfair? It is to people who advocate tariffs.
Tariff advocates seem to feel that because we import a lot of goods from China, they should import similar amounts of goods from us. But China looks at it as them doing us a favor by providing goods at a lower price than we could produce them for; if we produced them ourselves. And the goods that they could import from us would cost them more than if they made those goods themselves. So what is unfair about that?
This is the problem. Neither side will agree that they are being unfair, and yet a new tariff is like a shot across the bow. The recipient will always retaliate, and then you have a war. Both sides lose a lot in wars even if there is a decisive winner.
So in my opinion, the best thing to do with an unlevel playing field is to let it lie. Our economy is poised to achieve dramatic growth after ten years of lackluster performance. Promote that and forget about the bumpy playing field. If we rise to the 6-8% GDP growth, business will be roaring and wages and hi
Euclid all that money that is our trade defict worldwide does not leave this nation in goods and services rendered to other nations it leaves this nation in Hard Currency we have to pay for those goods. Just imagine what shape our infastructure could be in with say an additional 50 Billion a year to spend on it. Let alone how much smaller the deficts would be for this nation along with our debt we owe why less money being spent for welfare programs more tax revenues coming in to the governments nationwide. Better schools for our kids more jobs overall nationwide. Yes trade wars are bad overall however we as a nation can not keep sending half a trillion dollars in cash each year to China without it starting to hurt us in the long term.
Well then we should just stop doing it if it is hurting us. Why is it someone else’s fault? A trade war will hurt us more.
The fallacy of a trade deficit is that it is unfair.
If I go to a McDonalds with a dollar, and I buy an iced tea, I give them the dollar and they give me the tea, I walk out with zero dollars. From a ballance of trade standpoint, its a horrible 100% trade deficit, McDonalds got 100% of the “trade” and I was left with no dollars. Is that unfair?
No. I bought something, McDonalds has $1 and I have an iced tea. Assuming you accept that $1 is a fair price for a large iced tea, then we both broke even on the transaction.
The problem with measuring a “trade deficit” is it only takes into account the currency being exchanged, not the net sum of goods and services. If I buy a Chinese cell phone, yes they end up with the money, but I end up with the cell phone.
Being a rich, materialistic nation, with tons of disposable income, we will always have a “trade deficit” because we have a lot of money to buy stuff and we like to buy foreign stuff, especially finished consumer goods which have the highest value added. We won’t get a trade surplus with China until they have a population with enough money to buy a lot of American made consumer stuff (assuming we make something they want to buy and its regarded as higher quality).
Umm…The Doller that you paid for the Ice Tea at Mcdees goes to pay the worker who made the tea for you,the payment on the Ice Machine, the grower of the tea, The railroad that hauled the sugar for your tea and the power company. If all those are US based thats good because the doller stays here to be recycyled here in the USA. If the doller goes to pay for a Ice Machine that is made in China then we might not ever see that doller again and that doller is not avalible for lending bt our banks here but the Chi-Coms get to decide what to do with it.
And thus their economy grows richer… their people become more affluent… and they buy more ice tea from McDees as McDees opens up branches in China to service that growing market.
Well, if the USA would try to produce everything in the USA it will get costly for customers and companies.
The web has some comparisons of Apple iPhone 6. Produced in the USA it is estimated to cost about the twice the China-made price. Than there is the workforce question. Foxconn, Apple’s Chinese factories, employ about 150,000 people. Would the USA have these people with the necessary abilities?
A third point: About two thirds of the iPhone production is sold outside the USA. At twice the price Apple clearly would loose this foreign business not being competetive anymore.
Many other products are similar, jeans, sneakers, solar panels.
If you want Made in America again and not pay more, workers would have to accept massive wage cuts and they would have to expect additional steps in automation of industrial production.
Regards, Volker
In order to compete in world market we workers have to live like the rest of the world.aka the 3rd World…Grass Huts and No Flush Toliets…Drive a donkey or a camel to work.
The harsh reality is that we (Americans, Canadians, and most Europeans) have been prospering on the backs of third world nations who exploit their workforce and don’t give a rat’s behind about the environment. It’s easier to create everyday cheap products like T shirts and ironing boards when you can pay child labor wages with no bennies. Think about that the next time you shop discount. Right now we have it pretty good: most of us have decent jobs that allow us to own homes and vehicles that are made here… but all the other stuff like our clothes and appliances etc are made cheaply elsewhere… And next time we go on vacation in Mexico or Dominica, don’t forget to ask what the resort people get paid… peanuts really… So we in the west really can’t claim to be hard done by… most of us are overweight because we don’t walk more than 100 paces in the run of a day… And those of us who do require some physical exertion as part of our daily routine… it’s still nothing compared to what others contend with around the world. We have it pretty good really… thanks in no small part to the unsung sweatshops around the world that have made it possible for us to supersize ourselves and our already outsized lifestyles.
[tup] Well said!
Luckily we just need to accept that some work is better done in low wage countries if we want to keep our high standards. The globalization has proceeded too far to turn it back without endangering our wealth.
Regards, Volker
A lot of the manufacturing would be automated if we didn’t use 3rd world countries.
And by that same token there would be a upswing in the machine tool sector to build those additional automation tools.
There is no perfect world.
Just to throw in a little bit of information about Lieutenant General George Patton, here is an excerpt from paperlessarchives.com Third Army After Action Reports:
Under the command of Lieutenant General George S. Patton, Jr., the Third Army participated in eight major operations and gave new meaning to “hard charging, hard hitting, mobile warfare.” The Third Army’s swift and tenacious drive into and through France, Belgium, Luxembourg, Germany, Czechoslovakia, and Austria contributed immeasurably to the destruction of the Nazi war machine of Adolph Hitler’s Germany.
The Third Army liberated or captured 81,522 square miles of territory. An estimated 12,000 cities, towns, and communities were liberated or captured, including 27 cities of more than 50,000 in population. Third Army captured 765,483 prisoners of war. 515,205 of the enemy surrendered during the last week of the war to make a total of 1,280,688 POW’s processed. The enemy lost an estimated 1,280,688 captured, 144,500 killed, and 386,200 wounded, adding up to 1,811,388. By comparison, the Third Army suffered 16,596 killed, 96,241 wounded, and 26,809 missing in action for a total of 139,646 casualties.
This is not a commentary on the current economy, politics, etc. It is just some factual information about the performance of General Patton.