• 0 Posts
  • 175 Comments
Joined 2 years ago
cake
Cake day: July 1st, 2023

help-circle

  • U.S. factories in most cases cannot produce goods that are competitive in a global market. Our labor costs are too high.

    This idea that we can revive American traditional manufacturing of basic goods is a complete fantasy. The factories in Vietnam aren’t going anywhere, because they will still be selling to the other 95% of the globe outside the U.S. Even if factories are stood up in the U.S., they will be constrained to producing higher-priced goods exclusively for the domestic market, with all the attendant inflationary impacts from start-up costs and higher labor costs.

    Meanwhile, retaliatory tariffs from other countries will cause the collapse of U.S. exports. We’ll lose markets for the sectors where the U.S. is still competitive, like agriculture, advanced manufacturing, and even services.

    Trump’s approach is similar to the failed development strategy of import substitution industrialization, except in this case he thinks it will cause the U.S. to reindustrialize. In any case, it will fail for the same reasons ISI failed in Latin America.



  • It’s possibly the most stupid basis for tariffs. The penalty is directly proportional to U.S. reliance on a country’s imports. The countries that are the most important suppliers to the U.S. are penalized the most. It’s a policy designed to cause maximum reshuffling of production, which maximizes the start-up costs of developing new factories and so on. And those factories are not going to be in the U.S. Import substitution industrialization is a failed policy and it won’t work for reindustrialization either.