Trump's tariffs won't bring manufacturing home, it will make the U.S. an economic backwater

 It's weird how the Trump tariff apologists keep saying that these efforts will encourage manufacturers to move their production back to the U.S. That seems to assume that the U.S. is the only, or the most important, market for multinational companies. In the current world, it is not.

Most of the world still has relatively low trade barriers. Imagine you are a multinational company in a world with mostly low tariffs to trade, where most of the world's consumers live, and then this one economy with high trade barriers that has a minority of consumers. Where would you put your manufacturing? In that one surrounded by tariff economy, or in the (relatively) free trade zone that is the rest of the world where most potential customers live? It really seems like Trump's wall of tariffs around the U.S. will encourage much of the world economy to write off the U.S., not move their manufacturing there. 

For example, think about a company like Apple which makes its iPhones with components and steps that take place across several countries. With Trump's tariffs, Apple how has two choices: it could try to build a copy of its entire world-spanning supply chain in the U.S. But that would cost a lot of money, some of the components of an iPhone (rare earths, lithium) may not be abundant enough to supply domestically in the U.S., Even if they managed to pull off an all-American supply chain that would only be a benefit for the iPhones it sells in the U.S. Most iPhone users are not in the U.S.

The company's second choice is to keep all or almost all of its existing supply chain (Apple claims that the final packaging step for its products takes place in Cupertino, CA, but that one step could be easily and cheaply moved elsewhere), and to continue to sell its products to the 96% of the world's population that is not in the United States. Even when you only talk about the wealthier parts of the world: Europe, Japan, Australia, New Zealand, much of China, South Korea, parts of the Middle East etc., there are currently a lot more high-end consumers outside the U.S. than inside it. In any choice between the U.S. consumer and all the other consumers combined in the rest of the world, the rest of the world is where most of the money is these days.

lunatic tariff announcement day

Trump has declared tomorrow to be “Liberation Day,” the day he announces, and apparently imposes, sweeping tariffs on the rest of the world. Aside from Trump and his circle of true believers, almost everyone thinks the policy will be a total disaster.

But why did he pick April second for his big tariff day? He seems to like to announce new tariffs at the beginning of the month, why not today? I’m guessing the only reason is he doesn’t want his bone-headed widely unpopular tariffs to be portrayed by the media as an April Fools joke. April 2nd will be Liberation Day only because Trump is so thin-skinned he can’t handle his main, arguably only, economic policy to be called the joke that it is.

Trump's economic destruction of the U.S. is mostly not because of tariffs

I'm no financial expert, but it seems like while the financial markets and economic commentators are taking into account the effects of the Trump tariffs (including the uncertainty from the on-again-off-again tariffs and tariff threats), they are completely ignoring the downstream effects of the Trump/Doge spending freezes and layoffs.

The freeze and end of government grants will and in some cases already have had a devastating effect on the biomedical, health care, higher education, and non-profit sectors of the economy. The end of USAID and the cut off of military aide to Ukraine is a serious blow to American agriculture and the defense contractors.¹ Cuts to education funding mean local schools across the country will have to cut special ed programs and/or raise property taxes to make up the difference. Cancelled government contracts means the losses of private-sector jobs, which is on top of the tens of thousands of federal job losses, and countless state and local government job losses from cut off federal grants. All of those newly unemployed people and people employed by de-funded private businesses are going to cut back on their own spending, which will depress consumer behavior. On the whole, I think these downstream effects are going to have a much greater effect than the tariffs and they are the reason I think the U.S. is heading into a major economic downturn, at the same time that Elon is attacking the social safety net designed to make mass unemployment easier on the people involved.

While every tariff announcement causes the stock market into a new spiral, none of those other announcements have had that effect, and the financial media doesn't seem to be paying any attention to how those things will effect their precious stocks once entire industries start going under. The biomedical industry, for example, is almost entirely supported by NIH grants. The Trump administration has effectively dismantled the mechanism for awarding new grants while freezing many already approved grants. The American biomed, a giant industry that puts a ton of money into the economy and I am sure ultimately produces far more tax revenue than the cost of the grants that support them, is going to die or flee to other countries. Even after the Trump/Musk madness passes (assuming it does) we may never fully get that industry back.

I don't understand why that is not a bigger story than the tariffs.

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1-In most cases the "aid" sent abroad was actually the U.S. paying domestic producers for the product that was sent as aid. So when you read that the U.S. "sends $100 billion to Ukraine" in military aid, it does not mean the U.S. is sending all that money to Ukraine. Most of the money is sent to U.S. weapons manufacturers to pay for weapon systems or ammunition, which is then donated to Ukraine. So the money is actually invested directly into the U.S. economy and supports jobs in the U.S. Food aid works in a similar way as a stealth agricultural subsidy)

"Dividing up"

 This article (NYT gift link) about Trump's upcoming call with Putin takes a really creative spin. While the spokespeople for Trump and Putin have told the press that the agenda for the call is to discuss how to "divide up" Ukrainian resources, the authors of the piece assume that means the discussion will be about how to divide up stuff between Russia and Ukraine in a settlement of the war in Ukraine. But if you focus on the actual quotes from Trump or Putin people, it looks to me like the discussion will be about how to divide up Ukraine's resources between Russia and the United States.

Like with the "peace talk" in Saudi Arabia a few weeks ago, Ukraine is not invited to this discussion. And there is zero reason to believe that the Trump Administration has any interest at all in making sure that the Ukrainian government retains any assets. This call is just a modern day version of the 1884-85 Berlin Conference. Never mind that Trump can't actually deliver a ceasefire without something in the deal to convince Ukrainians to cease firing on their invaders.

Trump policies are vastly increasing the number of "illegals" in the U.S.

In the brief time that Trump has been in office, he has revoked the legal status of Venezuelans, Haitians, and now Ukrainians. If you add up the numbers from each of those links, that is over a million people who were "legal" who Trump is now making "illegal."¹ While I am sure that some of those people losing protected status will leave the U.S., many, if not most, will probably try to stay. Meanwhile, the Trump Administration has deported about 18,000 people in the first month of his presidency.

One hallmark of both the original Trump Administration was that most of the administration's efforts are directed at people who are legally in the country, while calling them "illegal." This time he seems to be going even further, making moves to make more people "illegal." It's ironic because Trump and his supporters supposedly want to reduce the number of "illegals" in the country but all he is doing is making more. It's also a needless massive human tragedy. But that only registers with people who aren't bigoted monsters.

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1- Yeah I know that no human is illegal and the preferred term, at least for people in my circles, is "undocumented." But the problem is the Venezuelans, Haitians, and Ukrainians who had protected status have documents. The problem isn't that they didn't have the proper papers. They did. The President is just declaring that those papers are no longer proper. In this context "undocumented" doesn't seem to describe who they are.

It was my whine before our time

I was boycotting the State of the Union Address (yeah I know it's not called that this year) before it was cool. 

The Whine Cellar: 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020 2021, 2022, 2023, 2024.

Trump is incapable of learning

You can argue over how much the COVID-19 pandemic led to Trump's loss of the presidential election in 2020. But there is a pretty compelling argument that but-for his botched response to that pandemic, Joe Biden never would have beaten him.

Which is why it is even more crazy that Trump is not even making the minimal effort to try to stop something like that from happening again. We are facing a major measles outbreak, a bird flu outbreak, our worst regular flu season in years, and the appearance of a new mystery illness in Congo. That's just in the first month of Trump's new term! What is the Trump Administration doing? Cutting jobs at the CDC, ending anti-disease efforts in the Congo, crippling our vaccine development system, and possibly canceling existing vaccine contracts.

Trump isn't just a dumb-dumb who has not learned from his mistakes. He seems to be doing everything he can to take the diseases' side.