> “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
What a weird tone. Is that a thing in the US? Can the president (legally) order companies "home"? Doesn't sound like "land of the free" to me.
No, he cannot, but he can say whatever he likes, as we've seen.
The constitution enables the institution of arbitrary import tariffs, but it offers absolute protection to American companies. Neither the president nor Congress is legally allowed to tax exports (Article 1, Section 9, Clause 5)
This is not "absolute protection". American companies import much more than they export, so if he can't do whatever he wants to imports, there is no economic freedom.
Funny that Americans indoctrinated the entire world into thinking that import barriers were not civilized. And then now we discover that this is in fact a "founding principle"... right at the moment when the country cannot keep up with the competition. How convenient.
We didn't 'discover' it. America's constitution is one of the shortest in the world and written in very clear language. The text is available for free around the world. Being ignorant of its contents is completely 100% on you.
It seems that Americans are the ones who didn't know about this wonderful content for decades... only to rediscover now that it so important to restrict imports (when the country can't compete anymore, of course)!
It is not a thing. The president doesn't have the authority to do this. There were some major lawsuits about this issue I believe around WWII relating to the redirection of certain industries to serve the war effort. If I recall correctly, the result was that the executive branch has basically no authority to do this barring something like a state of emergency.
Anyone who knows more than me feel free to chime in!
No, it's not a thing. Generally speaking, the president can't do much here besides ask companies to do this. There might be some ways he could force companies to no longer do business with China, like declare sanctions against China, but they would be on shaky legal grounds. And by shaky legal grounds, I mean guaranteed to be challenged in court and go all the way to the Supreme Court.
> can't do much here besides ask companies to do this
Incorrect, the president controls the defense apparatus, which can label any country they wish a "threat to national security", which according to laws enacted since 9/11 can prevent American companies to do business with other countries. In the post 9/11, trumpian world, economic freedom depends on the mood of the president.
There are probably a few ways the president could do it unilaterally, legally:
1) Raise tariffs to absurd levels (like, 10000% tax on anything from China).
2) Some sort of national defense justification. He could probably put all employees, companies, and executives on terrorism or customs watch lists and make life difficult for them.
3) Use existing sanctions on other nations as a way to forbid doing business with various entities in China.
There's probably also another way to do it that would, presumably, be illegal:
4) Unilaterally blockade the nation, since he's chief of the armed forces (this is an act of war).
> There's probably also another way to do it that would, presumably, be illegal:
Whether the President commiting acts of war unilaterally is illegal depends on disputed Constitutional questions, such as the scope of Presidential inherent powers and the Constitutionality of the delegation of powers to the President under the War Powers Act.
The president controls the defense apparatus, which can label any country they wish a "threat to national security", which according to laws enacted since 9/11 can prevent American companies to do business with other countries. In the post 9/11, trumpian world, economic freedom depends on the mood of the president.
Just because the President has certain powers, doesn't mean he will be allowed to abuse those powers and remain unchecked.
If Trump tried to force all American companies to stop doing business in China by declaring China a "national security threat," his efforts would be immediately met with a challenge from the courts and he would very likely be impeached or removed from office. What would not happen is the rest of the government simply throwing up their hands because "the president controls the defense apparatus."
If it really worked that way, Trump would already have declared Mexico a national security threat, forced the government to fully fund the wall, seized all necessary lands via eminent domain and started building it by now.
It works so well that Trump is maintaining concentration camps where children are physically abused. And his appointments in the supreme court are letting him bypass congress and build a useless wall with money diverted from the military. If you think that this is normal, then you're part of the problem.
In that “Donald Trump being President and saying whatever he wants” is a thing in the US, yes.
> Can the president (legally) order companies "home"?
There may be statutory bases on which the President could adopt emergency sanctions which would have that effect (but probably not that effect alone), but a tweet simply ordering the companies to behave a certain way certainly is not, even if such authority exists, a valid way of invoking it.
> Doesn't sound like "land of the free" to me.
Donald Trump's statements often have no recognizable relationship to the legal powers of the Presidency, and often aren't, even when superficially announcing substantive action, even followed up with by any action by the administration (whether such action would or would not be within the law), or are followed up with action that is very different in substance than the statement would suggest.
"hereby ordered" means exactly nothing without legal authority behind it. The President can't just "order" companies to randomly do things. I mean, he can, but they don't have to comply, and there's no legal penalty if they don't.
It still carries a lot of weight if the president says something like this. Legal or not. And since it doesn't seem to be legal it is actually worse that the head of a country uses this sort of language.
Furthermore, doesn't "hereby" mean specifically "this thing that you are now reading/hearing/seeing is the instrument of the order?" In other words is he issuing an order via a tweet?
He may think he is, yes. He's not issuing a legally valid order, and he's not issuing it by a legally valid medium. (At least, I'm pretty sure it's not, but IANAL.)
In fact, if he thinks that Twitter is a legally valid medium and that anything he says is a legally valid order, that would explain a lot...
If it was feasible for companies to manufacture in the US they would. Effectively blocking China without a concomitant investment in US manufacturing is a lose/lose situation.
Of course it’s feasible. It’s just marginally more expensive. A combination of tighter labor, environment, and safety regulations, and a higher cost of living.
The tariffs are exactly what will spur the investment in US manufacturing, and the marginal benefit of manufacturing in China and then shipping the end product halfway around the world eroded away.
For certain definitions of “marginally,” I suppose. And keep in mind many of the more complex things manufactured in China are done so from components themselves manufactured in China or elsewhere in east Asia, so either those would also have to be manufactured here, or they’d have to be imported, and we’re back where we started. And so on all the way down to the raw materials.
Marginal cost is an economic term. I’m not using the term colloquially to mean small or insignificant.
Of course manufacturing is an ecosystem which builds up over time, with positive feedback loops where investment drives further efficiency throughout the supply chain.
All the more reason to raise tariffs now, and hope that they stay high for enough years to stop the ongoing atrophy in the US ecosystem.
It’s not just because China’s an unfair competitor from a labor rights and environmental impact perspective. It’s also a massive national security issue.
>For certain definitions of “marginally,” I suppose.
The choice isn't just "manufacture in China" or "manufacture in the US". According to Peter Zeihan's The Accidental Superpower (2014), manufacturing in China has gone from being one quarter as expensive as in Mexico to 25% more expensive. He expects that the US shale and natural gas boom will further reduce costs in Mexico and the US.
> The choice isn't just "manufacture in China" or "manufacture in the US".
Well, yeah. But the problem is that China has such a huge head start in all this that all the stuff I said about moving manufacturing to America would apply to Mexico too in terms of having to import components and/or raw materials from China, at least at first.
That said, in terms of national security concerns and such, yes, it would be in America's interest for Mexico to be a manufacturing powerhouse at or near China's level, and I'm sure Trump and his fans would appreciate that a booming Mexico would probably mean less illegal immigration to the US.
More likely the tariffs (and currency manipulation by the Chinese) will just result in other Asian nations ramping up their factory creation. I know my company (we make toys and games) will be looking at Vietnam and a few other South East Asian nations before looking at home. I think you're greatly underplaying things when you say "marginal" benefit here. There's no way my company could employ as many office workers if we had to employ American factory workers instead of Chinese factory labor.
This isn't an A or B only choice. There's so many other options than US or China. And it's not just labor/safety, it's building an actual factory (which takes huge time and money commitments) which might be less viable in about 17 months if Trump and his protectionist policy aren't still in office.
Moving your Factory out of China to another Asian nation is a national security win, for starters.
But once you’ve started considering that process, maybe you run the numbers and find the marginal cost (an economic term, not to be confused with “small”) of producing locally isn’t as high as you think.
Every company importing from China is doing this analysis. For some percentage of those companies, the numbers will make sense to move into the US. Whether they are building a new local factory or contracting for space on an existing US line.
And it’s not purely “is the US marginally cheaper today,” but the bigger question of; is it less risky overall to produce in the US based on what might happen in the future?
China and the US are not allies, and US companies should see some degree of risk in keeping their production in China.
And I even forgot to mention the rampant intellectual property theft and counterfeiting.
I agree with you on the weird tone issue. It very much reminds me of proclamations (usually Facebook, but going back to Usenet) made by folks widely regarded as not all present. The random all-caps words are part of it, as is the word "hereby".
The other weird thing politicians do is add the word "great" to everything - great state, great company, great nation, great this, great that... to the point that the effectiveness of the word is lost.
Government has asserted its own greatness since antiquity; consider how we address kings as "Your Majesty". Sometimes, the claim that the local government is great was encoded into law as required to be acknowledged as fact. In monarchies of the past (and sometimes of the present) denying the King's majesty was a serious crime called lese majesty.
Lots of politicians/governments do this as some form of self-congratulatory propaganda, maybe?
Notice how any country with the words "democratic" or "republic" in the name are actually dictatorships? And it's an extra tyrannical dictatorship if it has both.
If he can set 25% tariff on everything imported from China, what's stopping him from setting 2500% tariff on everything? Wouldn't that effectively and immediately stop all trade with China?
No because China will continue to devalue the Yuan like they have been, negating much of the tariff effect.
The only solution, and a much "simpler" one (because it does not involve myriad scrutiny of which products to apply tariffs to and how much, etc.) is devaluation of the dollar. We've been here before, where US domestic manufacturing faced pressures as dollar was too strong. The Plaza Accord [0] involved Germany and Japan taking measures to increase their currencies against the dollar (in some ways successfully in some ways not). But it did result in a few years of dollar devaluation.
A better way currently, given that there isn't the same coordination or appetite for China or others to allow their currencies to rise too much against the dollar (because they don't want to sacrifice their domestic industry) is for the federal reserve to bid for gold, at a much higher price. This will diminish the dollar and treasuries role as reserve and increase (which is already happening) gold's place as premier nuetral reserve asset (see global central banks declining purchasing of treasuries, increasing gold purchases, and decreasing $ fx reserves over the last few years).
The US can either run the global reserve currency or close its trade deficit. They cannot do both [1]. Weakening the dollar and bidding up gold will solve a lot of the trade imbalances affecting the world [2] as well as devalue the massive amounts of debt overhanging the US and world economies.
No. American companies would still be allowed to sell to China. The constitution offers pretty much absolute protection when it comes to export tariffs.
That isn't the heart of the issue. The issue is US products being produced in China and sold in the US. We import > 500 billion from China and export under 130 billion to China.
>We import > 500 billion from China and export under 130 billion to China.
It's not so simple as, "Hey, lets pocket 500B - 130B = $370B and put it in the bank or spend in what we want".
First of all, prices will increase, and production will move to other countries.
If you ban imports from other countries, many things will become unaffordable to many people, which creates knock on effects. PCs and Smartphones getting more expensive means fewer people will use them, which means a smaller market for software. People will have less money to spend on, say, restaurants. People living off the $130B of exports will be out of jobs and some will go on unemployment and social welfare. Others will be hired with lesser pay, so will buy less. There will be so many knock on effects beyond this. Tesla is down 4% just today based on new tariffs announced by China for the future.
We are already paying new subsidies to farmers, from taxpayer money that can used to, say, build super fast trains in the US like China has.
> Tesla is down 4% just today based on new tariffs announced by China for the future.
The tariff is scheduled to take effect Dec 15th. Tesla will be producing cars locally in China by then, or within 30 days of then. I believe Tesla China sales have already slowed in anticipation of the lower cost locally produced version.
If anything, Tesla stands to gain from increased import tariffs from US->China.
There are also a lot of U.S. citizens who make a living working in roles that are part of that china->U.S. supply chain. Lots of potential unforeseen consequences that I'm not qualified to assess. But if you had an ideological desire to, for example, roll back a half century of increasing globalization in an attempt to bring back the halcyon days of stable, high paying U.S. manufacturing jobs then you might in your private views be willing to accept a couple of decades of suffering to get there. Of course you'd also have to believe that restoring U.S. manufacturing would bring back those production jobs, and not just sell a lot of robots.
$500B exported on behalf of American companies from China
$130B exported to China
-----
$370B where does this go?
Most of it goes to American controlled companies. A small amount goes to Chinese labor.
> If he can set 25% tariff on everything imported from China, what's stopping him from setting 2500% tariff on everything?
(1) the absence of any statute granting him the authority to impose export tariffs, and
(2) the fact that any statute which did exist purporting to grant him such authority would be invalid under the Export Clause, which explicitly prohibits export taxes and duties.
OTOH, he could prohibit pretty much any trade he chose with China under the International Emergency Economic Powers Act (the main law under which Executive-declared sanctions are instituted.) He just can't tax exports.
At this point people should really understand how to read a statement from Trump. It actually is important to read all the words.
“Hereby ordered to immediately start looking for an alternative” does not mean he is trying to say companies must cease importing from China, even if that’s what the headline will read tomorrow.
It simply says that companies need to start looking for alternatives to China.
Trump is saying it’s going to get increasingly expensive to import all our stuff from China going forward.
Can he make things increasingly expensive to import from China? As long as he’s President, yes he can.
It’s not friendly advice, that’s the point! Businesses don’t typically like it very much when someone makes their supply lines double-digit more expensive overnight.
He’s putting companies on notice. He’s doing it with language which will get the statement widely reported (and unfortunately mis-reported).
But carefully reading what he is actually saying, you can see he’s not actually ordering anything. That’s the point.
In your hypothetical example you would need to change two things. One, it would read “All my relatives are hereby ordered to starting looking at flights a day early...”
And two, you would have to be God, because in that example you would be the one controlling the weather.
What a weird tone. Is that a thing in the US? Can the president (legally) order companies "home"? Doesn't sound like "land of the free" to me.