October 8, 2020

The balance of trade was improving due to trade agreements and cooperation, until Trump decided that beating up the world was the way to do everything. He doubled the trade imbalance with his method of doing things.

Beating up people is expensive. It creates enemies. Enemies are not good customers. They buy their products elsewhere.

Tariffs then multiplied the problem by making exports more expensive. Trump says he's the tariff man. That's like saying he's the criminal. Tariffs are so destructive to international trade that they are criminal. It's no different than taking a hammer to someone's automobile.

People found out what tariffs do during the 1890s, when horse shoes were being traded. The products of the nineteenth century could be manufactured anywhere, and still tariffs didn't work. To pick up where the losers left off in the nineteenth century and try to win at the game in the twenty first century is no different than blood letting to cure diseases.

Global trade requires cooperation, because everyone must be involved in the process. To replace cooperation by beating everyone up is no different than McDonalds workers beating up the customers to sell more hamburgers. It's not how business works. If that is what they are teaching at Wharton, presidents need to be going to agriculture colleges instead.

Conservatives are trying to "bring back" the manufacturing as their method of reducing the balance of trade deficit. That's like bringing back chipped flint. Modern products cannot be produced without globalized industry. Global components and customers are needed.

The workers don't exist in the U.S. for reversing globalization, which is the main reason why manufacturers left. The second reason why they left is because the components aren't being produced in the U.S. Conservatives don't understand what components are in modern production.

There are thousands of different types of screws that go into modern products. The first problem in the U.S. is that the components are described in other languages, usually some variation of Mandarin. Hiring someone who speaks Mandarin to evaluate thousands of screws gets expensive. It wouldn't be possible, because there is no list available. The items flow with the manufactured subcomponents. That's why manufacturers give up when they try to manufacture in the U.S., even after the tax payers spend billions on trying to bribe them and the buildings get constructed. They have to give up and go back to Asia.

Trump wasn't the first decider to encounter the problems associated with international trade. That's why trade agreement after trade agreement was being produced, before Trump changed the formula to beating everyone up.

The U.S. held the cards and used the trade agreements to equalize the balance of trade. The arrangement was for the U.S. to produce the complex products such as aircraft, software and industrial machinery. The countries which had a lot of labor available would producing the small-sized and simple products.

Trump assumed no one ever thought of international trade until he came along, and therefore, foreigners took advantage of the U.S. He didn't know why all those trade agreements existed, but since someone was taking advantage of the U.S., the answer would be to beat everyone up and demand a re-arrangement of terms. Nothing but expensive chaos and enemies was the result. Chaos and enemies destroyed competitiveness in the U.S.

Nationalized products became obsolete due to complexities which require international production. Nokia was walking away with cell phone production as a national product from Finland, until the smart phone became too complex to be produced in one country.

Japan ran into the same problem with many products. They were walking away with digital cameras and copy machines including the supply industries, until those product became obsolete. They didn't easily revert to globalized products in the high tech area, though they did in the auto industry.

Trump and the conservatives don't know what is happening in industry. They assume 1950s type industries exist based on auto production and steel smelting. So they created tariffs on steel and aluminum, which would supposedly increase U.S. manufacturing. Nothing resembling it was possible. The tariffs increased the cost of raw materials and components resulting in less competitiveness for U.S. products.

Autos, now days, are produced with tens of thousands of components which cannot be produced in the U.S. Ten or twenty thousand new manufacturing plants cannot be set up in the U.S. to produce those components. Even if they tried to, the manufacturers need to supply global markets, not just a few companies. That means the companies need to be large. It also means they need to be webbed into supply chains that evolve nearby.

There is no shortcut to those demands. Defying them takes manufacturers out of business. That's why manufacturers went "off shore." They needed to incorporate into the evolving supply chains. Conservatives assume they were just bunch of liberals who hated "America." So they tried to reverse the process. It's as stupid as trying to reverse evolution.

The problem with Trump and the conservatives is that they disconnect from the complexities and pretend that simply changing the standard is the answer to everything. Destructive standards supposedly solve all problems, so they don't need to know what they are doing.