This is quite a thing for the President of the United States to say. He is predicting people will have less, and it will cost more.
I realize counterfactuals are of limited efficacy, but let’s say that was President Biden or candidate Harris telling Americans back in October, “You don’t need three 3-eggs in your omelet, you can do with two and it might cost a little extra.”
Setting aside the actual numbers (30 v. 3 or 4 and 250 v. 5), this is an argument that tariffs will cause scarcity and prices to go up, but that somehow we are collectively going to be wealthier.
The only way for common people to have less and yet for the country as a whole to be wealthier is for the already wealthy to be even wealthier.
I am not, by the way, endorsing his theory that having a trade surplus means we are wealthier and a trade deficit means we are getting screwed. We could see the trade deficit shrink, and may all end up poorer because there is simply less trade. Or, if the price tag on the goods I buy goes up and my income remains stable, I am poorer for the situation, even if someone else is making more money.
The utter insanity of all of this is stunning.
Of course, the fact that so many polls put his approval in the low 40% range, after only 100 days in office, suggests that his rhetoric and policies are not resonating with the populace.
And yet, the parade of off-putting pronouncements continueth.
The following from Bessent isn’t exactly encouraging. He says essentially that in the short term, the stock-up in advance of the tariffs will provide inventory, but hopefully negotiations will lead to a resumption of normal trade. Note that he is acknowledging the conditions for a serious disruption.
And China has to know that its greatest leverage is in making those shelves empty. Xi can withstand more pain and more directly control his side of this equation than can Trump.
These people are playing with fire. The funny thing is that the best possible outcome is likely more or less the status quo ante with some figleafs that Trump can say he got via his arting the deal.
One last entry from Lutnick. There is something creepy about asserting a “new model” (which sounds very command economy) where generations will all work in the same plants. It is enhanced when a billionaire is making the assertion.
While there is some real political appeal for bringing back manufacturing to the US in the abstract, the notion that a given manufacturing operation will be a generational trap for Americans is less appealing.
Indeed, note this survey via the Cato Institute (emphases mine):
One of the more intriguing results of a recent Cato Institute–commissioned poll about trade and globalization was the respondents’ views on manufacturing. When asked whether the country would be better off if more Americans worked in the sector, 80 percent responded in the affirmative. Given widespread perceptions of American industrial decline—very much at odds with available evidence—that’s not entirely surprising.
But here’s the interesting part: among those same respondents, just 25 percent stated that they would personally be better off in a factory instead of their current work. It’s a result that holds across class, education, and racial lines. The most enthusiastic group, those aged 18–29, still registered just 36 percent interest in manufacturing employment.
The write-up further notes:
Americans love the idea of people working in manufacturing, but most don’t think they would benefit from such work themselves.
The poll result comports with manufacturing job data. As of May, there were over 600,000 open positions in manufacturing, and the number hasn’t dipped below 300,000 in roughly a decade. These openings are one reason why the National Association of Manufacturers has championed a plan to expand immigration. Similarly, the secretary of the navy has called for increased immigration and work visas to address a lack of workers at the country’s shipyards.
Such jobs can’t find enough interested Americans to fill them.
There is a lot of romance about manufacturing.* There are also real frustrations linked to places where the loss of manufacturing hit hard, but the notion that we are going to go, en masse, into manufacturing as our national livelihood is another discussion.
I think we are going to find out, if we continue down the trade war path, that people actually like cheap goods and lots of choices more than they like years-long scarcity and higher prices in the hopes of maybe, someday, on-shoring more manufacturing (that will likely be done mostly by robots anyway).
*And as economist Kenneth Rogoff noted this week on the Ezra Klein Show,
Back in the 1970s, you had the same ads where you see the person working on the machine line or something but you saw them with farmers. They were constantly showing the farmers. We had to help the farmers.
And you know what? Those jobs went away even though we’re the agricultural powerhouse in the world. Because everything became mechanized. That’s a lot of what’s going on in manufacturing. What we blame on China — a lot of it just has to do with the way of the world.
These jobs are going away. It doesn’t matter. If we don’t trade with anyone, these jobs aren’t going to exist. And that’s just a false sale that’s being made about that.
