Dear America,
I've been an attentive watcher of the news my whole adult life, but I am suffering lately from news-ennui. This all Trump all the time era has resulted in a disinterest in what is going on that I can't really fathom. Trump is so transparent that whatever he does seems like what could have been predicted, and the reaction to it could have been too. His "base" doesn't care what he does so long as his whirling Dervish act continues unabated, and at the same time the rest of us just sit with our fingers crossed shaking out heads and hoping for the best in 2020. This business with the tariffs illustrates my point perfectly.
I have recounted before a conversation I had with a friend in the mid-seventies when the UAW was renegotiating with the American auto manufacturers and were seeking a total compensation package approaching $25 per hour. It doesn't seem like much now, but with my bachelor's degree in hand I was working in the back office of a brokerage house for less than $150 per week. I said to my friend that we were exporting our standard of living because no one was going to pay $25 an hour to have lug nuts put on his Ford at the assembly plant when he could pay $15 to a Toyota lug nut installer in Japan, and I believe I was right. Many foreign manufacturers are now making some of their cars here in this country, but they still manufacturer at home too and we Americans are as likely to buy what they make--wherever they make it--as we are to buy American. Meanwhile, most of the lug nut installers in this country are now out of work while Mexican lug nut installers are making better wages that they have seen in the past--still less than American lug nut installers mind you--and now most lug nuts are installed there, not here. You might ask, what do lug nut installers have to do with Trump's tariff strategy. Just this: they're forty years too late and as a consequence, they will ultimately do more harm than good.
The time for use of tariffs to keep American jobs in the United States is long passed. In the mid-seventies, we could have kept foreign competition from underselling our own goods in consequence of cheaper labor by tacking tariffs on their goods to make them equal in price to what we produced. Back then, the American car was the standard that everyone else in the world was trying to match. To outsell American manufacturers then, foreign manufacturers would have had to go through what we are going through now, that is, people won't work for the wages that make our goods competitive with those manufactured in poorer countries, so our jobs are going overseas, and with steep tariffs in 1975, that's what Japanese auto makers, Bengali textile mills and Chinese steel mills would face. They would have had to rely on their own markets instead of ours because they wouldn't have been able to compete, our jobs and their wages would have stayed here, and since consumer spending is 70% of GDP, those wages would have sustained our economy and would have insulated it from foreign competition, fair or unfair. But now it's too late.
Tariffs will serve only to stifle not just manufactured goods trade, but the trade in the necessary manufacturers resources as well. Tariffs on steel will cause increases in automobile prices. And the Chinese monopoly on rare earth production will allow them to gouge our electronics industries, which will drive prices in that market up in excess of what we might have gained with our tariffs. And there is much more to the complicated use of tariffs...unbeknownst to Donald Trump and his advisers.
We have the misfortune to be governed by an increasingly autocratic bully who can't tell the difference between strength and power, between brow-beating and influencing, and most importantly between persistence and petulant inflexibility. We're in it deep now, America. Remember to vote.
Your friend,
Mike
Leave a comment