TDS Sufferers Can't See Trump's Tariffs May Seem Crazy But There's Method In His Madness

Amusing to see all the TDS victims in mainstream media, both paid journalists and ordinary punters in the comment threads, seem to have forgotten that China, aided and abetted (unintentionally perhaps, we should give them the benefit of the doubt,) by western governments, have been waging economic war for decades.

Well informed economics writers were pointing out during the 2008 / 9 financial crisis that if China chose, it could wreck the global economy by using its vast holdings of US debt (bonds,) to collapse the dollar.

Despite this being well known, western nations have continues to export jobs to the far east, run up more debt and encourage China and other 3rd world nations to dump more and more cheap, shoddy, heavily subsidies consumer goods in western markets.

Trump's tariffs may be a crude and ill considered approach to solving this problem, but no matter how much irrational hatred some people harbour towards him, at least admit his administration has acknowledged that the problem exists and needs to be dealt with. 

Throwing markets into disarray with tariffs one minute and then removing them the next may not seem the ideal recipe for boosting business confidence in both the short and long term. Not only do companies need reasonable assurances that their investments will be profitable, but they also need workers that can fulfill business needs. 

Manufacturing is extremely complex these days. Gone are the days of plugging a worker onto an assembly line with only a few hours of training. The machinery is complex. It takes real knowledge and skill now to work in most advanced manufacturing facilities, and the United States’ labor force does not have those skills right now. What this means is that any factories that are re-shored to the United States are not going to be as productive as their off-shore equivalent. Not only with these factories be less productive, but they will also cost more to run as labor costs are significantly higher.

The only way to counter these negative incentives is through reasonable, well-articulated, and consistent tariff and domestic policy, which will include, in some form, tax incentives and/or funds for building factories and training workers. There’s no way of getting around that. Reasonable policy will set guard-rails and co-invest; the market will still dictate what, where, and how to build. Every country that has successfully rebuilt their manufacturing base (Germany, South Korea) has done it with this combination of policies. The United States will not be the exception to this rule. 

Still, as described in Boggart Blog's Currency Wars page, China has been working to undermine the economies of the developed world for at least a decade and probably since around the tirn of the century. Politicians in the liberal democracies have been too afraid of being called protectionist, racist or nationalist to act in defence of domestic economies they have allowed the nations they serve to become dependent on China for far too many essential goods. Thrump's chaotic approach may mean there are painful times ahead but someone had to do something sometime. 

FROM THE ARCHIVES:

 

 

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