> If the tariffs remained in effect for three decades, or more, there may have been incentive to move manufacturing back to the US;
I don't understand why people take this as a given.
Tariffs are a two-way street. What incentive does a company have to move a billion dollar facility to the USA when it will face reciprocal tariffs on any exported goods from the USA?
The calculus is pretty complicated. Economies of scale become a factor - is one large global factory more efficient than separate regional facilities? Also income disparities; Americans can more afford to pay a 25% premium on a good than most of the rest of the world can; so maybe you just make Americans pay more. Or, maybe you do both, have a world-wide facility and a American facility, but still charge Americans the tariff premium, and pocket the 25% as profit instead (steel producers model; also pickup trucks); this works well in conjunction with the USA's low business taxes.
Then there's "hacks" like shipping goods to a country that has lower tariffs with the USA, then using cheap local labor to do the bare minimum to have the goods considered to be produced there. There are some obvious good choices here, supposing the country's leadership is willing to play ball into the ninth inning.
So it's not a given that that long-term effects are increased domestic production. It's just as likely to be a siphon of prosperity and a impediment to wealth generation since it will be hard to start companies in the USA that export products.
> The calculus is pretty complicated. Economies of scale become a factor - is one large global factory more efficient than separate regional facilities?
It's not about efficiency. Companies in the US only build and ship their products from the opposite side of the planet because over there they can abuse the local slave labor and pollute the environment in ways that would never be accepted in the US. Even when they could easily afford to by accepting less profit, they aren't going to move production to the US when it means they can't take advantage of those things.
> What incentive does a company have to move a billion dollar facility to the USA when it will face reciprocal tariffs on any exported goods from the USA?
Access to the richest single market in the world ?
> Access to the richest single market in the world ?
How long do they stay the richest single market in the world if rest of the global world are producing and trading at greater efficiency while the US are facing large short term supply disruptions, higher costs and reciprocal trading tariffs on their exports?
If the US is planning on stopping the thing that made them OK in the first place, why do you think they would be OK after?
That’s also before you get into the fact that stopping immigration into the US doesn’t make those people disappear * , they’ll immigrate to other countries or stay home may very well cause some countries with a declining population to stop or reverse that trend
* Not en masse anyways, that’s come later as more of a final solution
Thats why I put "OK" in quotes. It remains to be seen if the immigration moves will kill the 'get out of jail free' card the US and few other countries have had. These trends don't change overnight so we have to wait and see. At this time though their population pyramid is pretty good compared to their rivals. It might take years of continued decline to finally destroy the good thing they had going. Meanwhile China had 20+ years to rectify their problems and now its too late.
It doesn’t remain to be seen, we know the fertility rate for America isn’t high enough to maintain replacement rates without immigration. Here’s one article but you can find many with google https://budgetmodel.wharton.upenn.edu/issues/2024/3/22/us-de...
The current admin is saying they are going to stop immigration. I don’t find it comforting or plausible if you’re telling me that we have to wait and see because they might fuck up one step of their plan and that’ll make the other steps less painful
How do you think economic turmoil is going to affect the birth rate in the US and how do you justify labelling a birth rate that's been below replacement for 18 years as "OK"?
We're already seeing the effects. Many people don't feel secure enough in their finances, or confident enough in the future they'd be bringing children into to have kids. As far as I can tell things will only get worse long before they even have a chance to get better.
I wonder if the baby boom depends on who wins the war. If people are happy about the outcome, their finances are improving, and they are full of hope for the future it'd be easy to start families. If people aren't happy with the outcome, if they are suffering, if they have to live under more restrictions or a worse economy I doubt as many people will be comfortable bringing children into the world.
Please brother, don't make me imagine a world war with nukes. The whole world is going to collapse, It would take us atleast three century back and it would be the darkest chapter ever.
I think there are some really smart people in the world. We can use them to create beautiful discoveries. Seriously, it sends me shivers thinking of a world war, but it may happen, and I have no control over it. I have to just watch the world wither away.
I'm in that group. The thing is China already crossed that rubicon 20+ years ago. So the US only really needs to outlast China in this regard. It will create problems of its own and pro America people like Peter Zeihan argue that large generations create more large generations. Boomers -> Millenials -> Gen Alpha. I dont fully buy this though.
Their population pyramid looks good though compared to China:
>how do you justify labelling a birth rate that's been below replacement for 18 years as "OK"?
The US being a nation of immigrants has this unique selling point of attracting people to make up for their woes such as birth rate. Unless we see millions of citizens getting deported, the people "voluntarily" relocating don't move the needle in this metric.
I might die on this take.
But you guys really think birth rate is some magic.
India has an overpopulation issue. In India, we literally have more people than jobs.
So you guys could just tap into India.
China is also similar, except it has outgrown its master. So I can understand the mistrust.
But america put tariffs on India as well which is just ... funny.
Also if america really falls into a recession (60% chance, like I mentioned in my other comment), how much do you think the US would be doing "OK"
I think what the US is right now, is failed democracy. I mean, I used to hate my government, but it was because of their political views/ I just felt that a tiny change in the Indian system is needed (like Media , incentives for middle class), I have hope in India. India can truly change if need be.
I don't think quotes are the appropriate modifier to adjust for the damage from draconian and short-sighted immigration policy. Past tense use of the verb is probably more appropriate since countries are issuing do-not-travel warnings against the US (for the first time ever?). This administration is arrogant fools all the way down. I hope the messages sent by the electorate in 2026 and 2028 are loud enough and the brain drain is still reversible.
The point of the quotes was that we wont see the outcome of these decisions until years from now. Which is why today it is still OK but its like the car speeding and then jumping off the cliff. Will it reach the other side or fall to its doom? Too early to tell, we are still watching.
But that only works if you compare the US with other single countries. The EEA is similar to the US, China will be larger than the US, India will be larger than the US. Any of those combine and you loose by a factor of 2, etc
EEA, despite decades of EU efforts, is not a single market. China and India are nowhere near in terms of purchasing power or individual consumption and won't be for decades.
But we don’t have tariff regimes. That what a common market means. It doesn’t mean that you can sell the same product to everyone. It just means that you can move that product everywhere. And even the regulatory regime is overwhelmingly European (that’s why you get manuals in 20 languages)
You don't have tariff regimes within the common market, that's true. You do have tariffs on goods that are imported from any country other than the 24 in the EEA.
The answer to your conjecture is simple Darwinist capitalism.
By whatever mechanism, imports are now more expensive, leading to less demand. Demand for those products actually stays constant, but the demand for imports goes down.
Now we have a niche. If you can produce a good locally for less than the net cost of import, you have an entire continent ready to buy from you.
The reason this has historically gone the other way is labor costs. Factoring the entire global supply chain into your product, it makes much more sense to do the work in a country where work costs less. If the additional cost to import is less than the delta on labor, you've won capitalism or something.
Or, take another angle. If the US can no longer import vital goods, what do you think will happen? Will the goods magically stop being vital? Will we sit on our hands for several decades and wait for the problem to resolve?
Or does the market respond to a need and rearrange itself to provide as profitably as possible?
It seems insanely risky to attempt to fill a niche that only opened up because of these tariffs. If they’re removed, congrats you just spent a bunch of capital to make a factory that is suddenly no longer competitive.
Don't worry, that's the kind of thing that would only happen in a country with a fickle, mercurial government that doesn't value certainty and the rule of law.
>>Or, take another angle. If the US can no longer import vital goods, what do you think will happen? Will the goods magically stop being vital? Will we sit on our hands for several decades and wait for the problem to resolve?
No - consumers will just eat the cost like they did during COVID.
>> Or does the market respond to a need and rearrange itself to provide as profitably as possible?
rearranging itself will mean leaving the status quo, and passing the cost to consumers. Do you think companies are going to jump to spend millions of dollars and 1 year+ to build factories to work around something that might change in 6 months, or even 4 years ?
You are ignoring the 'Optimus' angle. Maybe Elon's stupid robot can actually do something and he has been whispering this into Trump's ear. That would take care of the labor cost issue. Lets see what happens.
EXACTLY! All the excitement over more and more automation means almost no one will have income to buy anything because almost everyone will be unemployed. So what is the use of producing goods and providing services then, even at lower cost? I don't know.
As for UBI, who is going to provide the money? I've never heard anyone talk about how that is supposed to work. YOUR comment is the first time I have ever heard, well, read, that point brought up. The government can't pay for UBI because there will no longer be a tax base of income earners due to lack of income. Companies can only contribute to the extent that they have customers. I suppose that a super-efficient, low labor economy could be almost entirely export-driven but that assumes the rest of the world isn't in the same situation.
I mean we could start taxing the ultra-rich, who have a greater share of the pool of dollars than they have at any point during history. Pick a number, ooh maybe 200% of the median income, something well below the point where you stop being human and become a giant bag of money pretending to be human, anything above that gets taken away by the state and redistributed to everyone. Rip up all the laws that create ways for people to hide money from taxes. The giant bags of money pretending to be people will scream, and try to make this stop; their money can buy a lot of politicians, and perhaps it will only happen if it’s that or the guillotine.
We could also acknowledge that money is a fiction; money is continually created by the banks under the authority of the government, and money can just be destroyed when it’s taxed instead of thinking it has to “balance the federal budget”. “A dollar” is not tied to any physical store of value but we still love to pretend it is. It’s just a fraction of the overall economic worth of the entire US, and entirely too many of those fractions are in the hands of huge bags of money pretending to be people.
Or we could just ditch “money” entirely. Add things like “lodging” and “food” to the Bill of Rights. There’s probably a lot of problems with this! And a lot of them probably rhyme with the problem that some people just really want to become big bags of money pretending to be people!
You think earning twice the median income (for an American, this means weekly earnings of US $2,278) turns people into "giant bags of money" that are no longer human?
I'm scraping by on less than that in an entire month so maybe the number I pulled out of my ass is a little low.
Bezos makes ~8mil an hour according to some quick Internet searches and that sure is way over the "giant bag of money pretending to be human" threshold IMHO. The idiot-in-chief is worth ~$5mil and he sure is way over that threshold too.
Hahahaha. Wait. Are you serious? Elon has been promising all kinds of things AI that are "just around the corner" for at least a decade now. It's always in the next year or two. There is no chance they cracked autonomous robots with those puppet bots they were showing off not long ago.
Look at all the braindead moves this administration has already done and we aren't even 6 months in. Maybe they actually believe his stupid robot can actually solve their problems. All we can do is sit back and see what happens.
>Factoring the entire global supply chain into your product, it makes much more sense to do the work in a country where work costs less. If the additional cost to import is less than the delta on labor, you've won capitalism or something.
Yes, you've won capitalism, but sometimes, profit is a lower priority. Resiliency and the ability to avoid critical supply chain dependencies are important too. We learned that during COVID, when we only had one facility to make baby formula in the U.S., and we had a dire shortage of masks, gloves, etc. because we imported it all from China.
Another aspect of resilience is avoiding long attenuated supply chains, even if it is cheaper...for now. Why? Because there is a finite amount of fossil fuels (necessary in greater amounts for non-domestic maritime and air transit). Also, lower fossil fuel usage due to in-country sourcing would be better for the climate. I realize that the Trump administration isn't concerned about that! But it is true regardless.
I seem to recall the shortage being "dire", but short-lasting. The market adapted and supplied the needed materiel. Is there any evidence or theory showing that a more protectionist system would fare any better?
>The calculus is pretty complicated. Economies of scale become a factor - is one large global factory more efficient than separate regional facilities? Also income disparities; Americans can more afford to pay a 25% premium on a good than most of the rest of the world can; so maybe you just make Americans pay more. Or, maybe you do both, have a world-wide facility and a American facility, but still charge Americans the tariff premium, and pocket the 25% as profit instead (steel producers model; also pickup trucks); this works well in conjunction with the USA's low business taxes.
25% margins are huge. Sounds like that margin is someone else's opportunity....which is exactly what the Administration hopes will happen.
There is an opportunity here: Cozy up to Trump, have him give you a ton of government money and spin up a company that will take those margins.
It is an interesting and somewhat macabre parlor game to play at a large gathering of one’s acquaintances: to speculate who in a showdown would go Nazi. By now, I think I know.
I don't understand why people take this as a given.
Tariffs are a two-way street. What incentive does a company have to move a billion dollar facility to the USA when it will face reciprocal tariffs on any exported goods from the USA?
The calculus is pretty complicated. Economies of scale become a factor - is one large global factory more efficient than separate regional facilities? Also income disparities; Americans can more afford to pay a 25% premium on a good than most of the rest of the world can; so maybe you just make Americans pay more. Or, maybe you do both, have a world-wide facility and a American facility, but still charge Americans the tariff premium, and pocket the 25% as profit instead (steel producers model; also pickup trucks); this works well in conjunction with the USA's low business taxes.
Then there's "hacks" like shipping goods to a country that has lower tariffs with the USA, then using cheap local labor to do the bare minimum to have the goods considered to be produced there. There are some obvious good choices here, supposing the country's leadership is willing to play ball into the ninth inning.
So it's not a given that that long-term effects are increased domestic production. It's just as likely to be a siphon of prosperity and a impediment to wealth generation since it will be hard to start companies in the USA that export products.