Everyone seems to HATE the fact that Trump is pulling the world into a tariff war.
I think it’s great… and long overdue.
The current tariff infrastructure has its roots after WWII when the U.S., the dominant economic might in the world, was magnanimous enough to give the war-torn countries in Europe and around the world economic advantages as a way to help them get back on their feet.
Similarly, the U.S. was magnanimous enough to give developing nations — like China — an economic leg-up in their quest to transform from rural to modern economies.
But come on people, all of that was decades ago!
Trump is absolutely correct: It’s time to have a level playing field. Why do we impose a skinny 2.5% tariff on cars imported from China, only to see China impose a stiff 25% tariff — 10 times larger! — on cars they import from the United States?
And why can Chinese companies own 100% of a factory in the U.S., but American companies can’t even own 50% of their factories in China?
And on and on!
I’m calling B.S. along with Trump and I have no clue why EVERYONE isn’t doing the same. China is no longer a developing nation… it has the second largest economy in the world. It’s time China stopped taking advantage of our good will.
While not as bad as the Chinese, there certainly can be more parity with the rest of the world, too.
Similarly, Trump is absolutely correct about stolen intellectual property… because in the modern world, economic might is not just measured in current service or manufacturing ability… but in the ability to use innovation and technology to dramatically improve old industries — or completely invent new ones — and reap the rewards that go along with that.
So who cares if China can manufacture complicated devices like iPhones better than the U.S. today? Maybe the U.S. will invent a new way to build an iPhone that doesn’t require any manufacturing?
After all, that’s what we Americans do… we innovate… that’s our strength.
Eliminating the complicated manufacturing process for iPhones would be unbelievable… and the rewards would be immense… unless, of course, China simply STEALS the new technology to do this.
And THAT’S the situation we have today… China forcing intellectual property transfer as a condition to setting up shop in their country… or, worse, flat-out stealing our IP… and the Chinese government — literally — encouraging all of this.
Fuck that. I’m all for taking our ball and going home if other countries won’t play fairly… because at the end of the day, WE’RE the world’s biggest market…
… and I think it’s awesome that Trump is reminding the world of this.
With that said, Trump may have one thing wrong about trade: Who cares if there are trade deficits?
To me, a trade deficit benefits us… it means our costs are lower than they would have been… which means our profits will be higher… and our stocks will perform better… and that will enrich every American that does any investing or has a 401K plan or that even gets a paycheck.
That’s pretty much the vast majority of the country.
Trump, you’re a business person, you know artificially forcing a higher cost structure on businesses and consumers is exactly the opposite of how a free market should work. Anything artificial always ends in disaster.
I know the counter-argument that Trump loves to tout: If we “export” all of industries overseas, we can hurt ourselves strategically… maybe even get held over a barrel in the future. Case in point, the decline of our steel industry. If we can’t produce our own steel, we’ll be at the mercy of foreigners for such a strategic commodity.
Poppycock.
If the U.S. steel industry can’t compete with foreign competition, then go invent a new way to make steel 10x faster and cheaper. Don’t tell me this can’t be done, Britain did it with glass. Stop crying and get inventing — go create new jobs in new and re-invented industries where the United States can once again be the de facto leader.
There is one exception to this “pro deficit” position, however: While we don’t want the U.S. government to force us to buy local stuff at artificially higher prices, we also don’t want the Chinese government to force their businesses to buy from their local suppliers at higher prices, either.
Which is what the Chinese do today… things that should get bought from U.S. companies aren’t… which artificially increases our deficit because we’re not getting business we should. That part of Trump’s deficit thinking is right on the money.
So, in summary…
… I WELCOME a trade war — short term pain and all — if the end result is a fair global playing field (especially with China!)… and a kick-in-the-butt for our industries at risk to GO RE-INVENT THEMSELVES.
That can only be good for U.S. workers and companies. And, ultimately, for the stock market, too.
Royal Blog 