Trump just announced that they are putting across the board 10% tariffs on imports from the less developed countries, which is mainly raw materials or food. Maybe some textiles. What does that have to do with reshoring manufacturing or so called “fair trade”? Nothing. But it will cause prices to go up. Trump’s tariff strategy does not make total sense to me.
A 10% tariff had everything to do with repatriation of manufacturing. Do you understand how tariffs and global economics work? Your ignorance is showing.
“What does that have to do with reshoring manufacturing or so called “fair trade”?”
Tariffs are a tax on foreign producers who have free access to our markets but make no contribution to our markets or economy. If you tax US producers, and don’t tax (i.e. place tariffs on) foreign products coming into our country the foreign producers will always have a significant cost advantage. it is unfair for the US government to tax US producers but not their foreign competitors in our domestic markets.
In addition to subsidizing exports, many foreign countries create barriers to trade for US companies attempting to export to those foreign countries. These barriers include tariffs, inspection fees, customs fees, quotas limiting the amount imported, and regulations on imported goods imposed solely for the purpose of making those foreign goods more expensive. When foreign companies impose these fees and regulations on US products, but the US allows foreign products to enter the US market with no tariffs, fees, quotas or regulatory restrictions, US companies are disadvantaged and trade is unfair.
Trump’s point is he is all for free trade but it must be 100% reciprocal. If a country is putting restrictions, quotas and fees on US imports, we will impose tariffs on that country to equalize the economic playing field.
Recognize also that many of our allies (Europe, Canada, Mexico) are placing stiff tariffs on US imports while at the same time benefiting from low defense expenditures thanks to the US taxpayer shouldering their defense burden. So their imports flow freely into the US, they restrict US exports, and they get a free ride on defense. This economic imbalance is not sustainable and will destroy the US financially.
Factories have a 20-30 year life span so for an investor to build a factory in the US the investor must have a reasonable expectation he/she will receive a reliable stream of income for 20-30 years off that investment. In the 1990’s the globalist policies of the US opened American markets to free and no or low restriction access to foreign countries. We did not demand reciprocity for this generous end to quotas, tariffs and special regulations. The world responded by maintaining restrictions and fees on US goods while taking full advantage of open US markets. As a result US based factories moved offshore and middle class jobs were decimated in the US. It was more profitable for US companies to produce offshore, and import goods back into the US under the open market trade rules than it was to continue producing in the US. Hence today products ranging from appliances, to autos, to apparel, to electronic goods are made offshore instead of by Americans in American factories.
Trump is trying to change, with tariffs on foreign goods, the economic imbalance that penalizes US production and the employment of US workers. It took 30 years to offshore American industry under the globalist trade policies. It will take another 30 years to rebuild American manufacturing. However, before investors will rebuild US supply chains by making long term investments in new factories, they must be certain global cost structure (tariffs, duties, quotas, etc) is equalized and not unfairly tilted against the US.
If you choose to maintain the current imbalanced trade system which is economically tilted against US production, you will see the remaining US factories go offshore, just as John Deere recently sent some of its farm production in the US to Mexico. More middle class jobs will be lost and US trade deficits will increase. You will enjoy your cheap goods today, but future generations of Americans will live in a world in which the US economy is like that of an impoverished third world country and our citizens live the life of people in third world countries.
If you want to rebuild US industry there will be some pain. You will pay more for products. You will pay the tariffs levied on imported foreign goods while US supply chains are being rebuilt. Once the US factories are up and running, if they pay middle class wages you will continue to pay higher prices that you did a year ago when foreign producers, paying workers slave wages, imported with no restrictions or tariffs into the US market.
We’ve been on a 30 year binge of enjoying cheap foreign produced products while the American factories and jobs went away. We are late to realize the cost of the binge must be paid either by rebuilding our industrial infrastructure or declining into a third world low standard of living economy. Choose wisely.