Tariff Insanity

[RetiredAt63]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Henry Ford raised his workers' salaries so they could afford to buy his cars.  Lesson forgotten?

Times were different 110 years ago and the analogy, while interesting at first glance, doesn’t hold up.

If people are unemployed and safety nets have shrunk, there won't be any income for discretionary spending.

The point was, if people don't have enough income they don't buy things.  Modern economics is based on people having discretionary income.

[Ron Scott]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Henry Ford raised his workers' salaries so they could afford to buy his cars.  Lesson forgotten?

Times were different 110 years ago and the analogy, while interesting at first glance, doesn’t hold up.

If people are unemployed and safety nets have shrunk, there won't be any income for discretionary spending.

The point was, if people don't have enough income they don't buy things.  Modern economics is based on people having discretionary income.

1. Significant increases in the prices of discretionary items will result in fewer domestic purchases, almost no export market, and a resultant diminished market space—unattractive for investment.

2. If American manufacturers have the option to automate (AI, robots, other) they will…and that should keep costs competitive and permit exporting, etc. But they does not “bring back” jobs. And that manufacturing would have come back anyway because—when labor costs are no longer an issue—it will usually be cheaper to locate the manufacturing near the consumers, saving shipping costs.

3. The world currently operates on a hyper-efficient global supply chain. If American simply exempts itself from this and the rest of the world continues, we’ll be fucked and they will gain share.

The tariffs will not work as intended. This is not that difficult to understand…

[GuitarStv]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Hard to say. Since consumers already spend all but 4.9% of their paychecks at today's prices, I suspect an increase in prices would simply force them to reallocate spending. It's counterintuitive to think an increase in prices would enable consumers to save more of their pay, so I suspect overall consumer spending would stay the same, if not increase.

Since we're almost all employed in the services sector, the main threat to jobs would be if people had to cut back on services consumption to pay much higher prices for manufactured goods. I.e. it could become less normal to eat restaurant food more than twice a week, as many households currently do. Or we could return to a world where people change their own oil, mow their own lawns, mend torn clothing, DIY home repairs, do their own taxes, etc. Similarly, it might be more common for people to hold onto physical objects for much longer than they do today.

So the net effect is probably that fewer people pay for servants and maybe consume less?  Is there no downside at all then?

[Ron Scott]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Hard to say. Since consumers already spend all but 4.9% of their paychecks at today's prices, I suspect an increase in prices would simply force them to reallocate spending. It's counterintuitive to think an increase in prices would enable consumers to save more of their pay, so I suspect overall consumer spending would stay the same, if not increase.

Since we're almost all employed in the services sector, the main threat to jobs would be if people had to cut back on services consumption to pay much higher prices for manufactured goods. I.e. it could become less normal to eat restaurant food more than twice a week, as many households currently do. Or we could return to a world where people change their own oil, mow their own lawns, mend torn clothing, DIY home repairs, do their own taxes, etc. Similarly, it might be more common for people to hold onto physical objects for much longer than they do today.

So the net effect is probably that fewer people pay for servants and maybe consume less?  Is there no downside at all then?

In the LaLa world in which we all live on love in handbuilt houses and buy very little it’s a nirvana. In the real world it’d be like living in an underdeveloped country. If you’re OK with that, then Trump’s tariffs are perfect. But there are already many options to choose from in other countries without taking America down this path. To each his own.

[reeshau]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Henry Ford raised his workers' salaries so they could afford to buy his cars.  Lesson forgotten?

Times were different 110 years ago and the analogy, while interesting at first glance, doesn’t hold up.

If people are unemployed and safety nets have shrunk, there won't be any income for discretionary spending.

The point was, if people don't have enough income they don't buy things.  Modern economics is based on people having discretionary income.

1. Significant increases in the prices of discretionary items will result in fewer domestic purchases, almost no export market, and a resultant diminished market space—unattractive for investment.

2. If American manufacturers have the option to automate (AI, robots, other) they will…and that should keep costs competitive and permit exporting, etc. But they does not “bring back” jobs. And that manufacturing would have come back anyway because—when labor costs are no longer an issue—it will usually be cheaper to locate the manufacturing near the consumers, saving shipping costs.

3. The world currently operates on a hyper-efficient global supply chain. If American simply exempts itself from this and the rest of the world continues, we’ll be fucked and they will gain share.

The tariffs will not work as intended. This is not that difficult to understand…

Just look at what's happening to fast food.  Facing increasing costs and labor shortages, things are automating.  Self-service kiosks, drink machines, Flippy the robot.

[GuitarStv]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Hard to say. Since consumers already spend all but 4.9% of their paychecks at today's prices, I suspect an increase in prices would simply force them to reallocate spending. It's counterintuitive to think an increase in prices would enable consumers to save more of their pay, so I suspect overall consumer spending would stay the same, if not increase.

Since we're almost all employed in the services sector, the main threat to jobs would be if people had to cut back on services consumption to pay much higher prices for manufactured goods. I.e. it could become less normal to eat restaurant food more than twice a week, as many households currently do. Or we could return to a world where people change their own oil, mow their own lawns, mend torn clothing, DIY home repairs, do their own taxes, etc. Similarly, it might be more common for people to hold onto physical objects for much longer than they do today.

So the net effect is probably that fewer people pay for servants and maybe consume less?  Is there no downside at all then?

In the LaLa world in which we all live on love in handbuilt houses and buy very little it’s a nirvana. In the real world it’d be like living in an underdeveloped country. If you’re OK with that, then Trump’s tariffs are perfect. But there are already many options to choose from in other countries without taking America down this path. To each his own.

America voted to be more like an underdeveloped country.  Trump was clear about the things he was going to do, and has been following through on the mandate US citizens gave him.  All we can hope for from the outside is that the destruction of the US is mostly going to hurt the dumbasses who enabled it rather than the rest of us living elsewhere in the world.

[Just Joe]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Henry Ford raised his workers' salaries so they could afford to buy his cars.  Lesson forgotten?

Times were different 110 years ago and the analogy, while interesting at first glance, doesn’t hold up.

If people are unemployed and safety nets have shrunk, there won't be any income for discretionary spending.

The point was, if people don't have enough income they don't buy things.  Modern economics is based on people having discretionary income.

1. Significant increases in the prices of discretionary items will result in fewer domestic purchases, almost no export market, and a resultant diminished market space—unattractive for investment.

2. If American manufacturers have the option to automate (AI, robots, other) they will…and that should keep costs competitive and permit exporting, etc. But they does not “bring back” jobs. And that manufacturing would have come back anyway because—when labor costs are no longer an issue—it will usually be cheaper to locate the manufacturing near the consumers, saving shipping costs.

3. The world currently operates on a hyper-efficient global supply chain. If American simply exempts itself from this and the rest of the world continues, we’ll be fucked and they will gain share.

The tariffs will not work as intended. This is not that difficult to understand…

Just look at what's happening to fast food.  Facing increasing costs and labor shortages, things are automating.  Self-service kiosks, drink machines, Flippy the robot.

And $20+ for two people to eat drive-thru food.

[deborah]

I’m just wondering what the demand will be for labor-intensive products we buy now that are imported from Asia where the hourly rate is $1.60, if manufacturing shifts to the states.

What does America look like when consumer demand falls?

Hard to say. Since consumers already spend all but 4.9% of their paychecks at today's prices, I suspect an increase in prices would simply force them to reallocate spending. It's counterintuitive to think an increase in prices would enable consumers to save more of their pay, so I suspect overall consumer spending would stay the same, if not increase.

Since we're almost all employed in the services sector, the main threat to jobs would be if people had to cut back on services consumption to pay much higher prices for manufactured goods. I.e. it could become less normal to eat restaurant food more than twice a week, as many households currently do. Or we could return to a world where people change their own oil, mow their own lawns, mend torn clothing, DIY home repairs, do their own taxes, etc. Similarly, it might be more common for people to hold onto physical objects for much longer than they do today.

So the net effect is probably that fewer people pay for servants and maybe consume less?  Is there no downside at all then?

In the LaLa world in which we all live on love in handbuilt houses and buy very little it’s a nirvana. In the real world it’d be like living in an underdeveloped country. If you’re OK with that, then Trump’s tariffs are perfect. But there are already many options to choose from in other countries without taking America down this path. To each his own.

America voted to be more like an underdeveloped country.  Trump was clear about the things he was going to do, and has been following through on the mandate US citizens gave him.  All we can hope for from the outside is that the destruction of the US is mostly going to hurt the dumbasses who enabled it rather than the rest of us living elsewhere in the world.

Unfortunately, these policies are distorting our reality in the rest of the world. Because they can’t make their margins in the US, companies are now increasing prices in other countries to pay for the US tariffs.

[Ron Scott]

Because they can’t make their margins in the US, companies are now increasing prices in other countries to pay for the US tariffs.

Tariffs will do that. Competitors don’t want to lose market share here so better to spread the pain.

The major problem with these tariffs, as above, is that they do not address the inability of the US to manufacture things cheaply.

Tariffs or related trade restrictions should be used for security and strategic purposes (anyone thrilled the US needs to rely on Boeing?) but wanting to manufacture sneakers and dog toys with US labor when the unemployment rate is already low hurts more than it helps.

[Christof]

Henry Ford raised his workers' salaries so they could afford to buy his cars.  Lesson forgotten?

He raised his worker's wages by 100%. But it wasn't so that they can afford to buy a car. At that salary, you still were looking at a third of your annual income to afford a Model T and more to operate it. There were more pressing needs like food, shelter, health, safety, and kids, that these folks rather spent money on. If you look at old pictures you see that most factory workers walked or biked to work, in the US (and everywhere else, too.)

Ford was ahead of his time in many regards and this was one of the many times it showed. His "problem" was that he (and that is him and many other people) increased production efficiency by 800% in a very short time. That involved a lot of changes which people to this day consider to be stressful (just look what AI is doing today). People lasted on average 4 months before they quit. By increasing the salary not only a bit, but doubling it, he managed to increase this time significantly. It definitely helped that he was the first to employ this tactic. He didn't increase it slowly, which is what his competitors would have done. He made a big increase, which made big news and initially gave him a bad reputation among his peers, but it made a huge impact on people's perception.

What is really interesting is that this was the peak of productivity at Ford. They managed to reduce the time to assemble a car to about 90 minutes. Today an F-150 needs 20 hours. In the end, the time was used to increase the complexity, the feature set, the size, and about everything else, except for the number of cars produced per unit of time which returned to the initial duration before Ford was optimizing the whole process.

It's truly fascinating in many aspects. I still haven't finished reading his biography. I just don't think the lesson you see is in there.

[RetiredAt63]

Because they can’t make their margins in the US, companies are now increasing prices in other countries to pay for the US tariffs.

Tariffs will do that. Competitors don’t want to lose market share here so better to spread the pain.

The major problem with these tariffs, as above, is that they do not address the inability of the US to manufacture things cheaply.

Tariffs or related trade restrictions should be used for security and strategic purposes (anyone thrilled the US needs to rely on Boeing?) but wanting to manufacture sneakers and dog toys with US labor when the unemployment rate is already low hurts more than it helps.

Isn't Boeing an American company?

Of course the tariffs will not accomplish what he says he wants them to do.  Note I say "says".  They have made his cronies millions in the stock market and are undermining the US economy.  Putin should so pleased with him.

In the auto industry, the 3 countries have become more and more entwined since the original NAFTA.  That doesn't shift overnight.

[Ron Scott]

Henry Ford raised his workers' salaries so they could afford to buy his cars.  Lesson forgotten?

He raised his worker's wages by 100%. But it wasn't so that they can afford to buy a car. At that salary, you still were looking at a third of your annual income to afford a Model T

I’m not quite sure the point you’re making but today the average price paid for a new car is about 80% of the average salary of an American auto worker. The average worker makes less that $30 per hour and the average car price is about $48k.

[Ron Scott]

Because they can’t make their margins in the US, companies are now increasing prices in other countries to pay for the US tariffs.

Tariffs will do that. Competitors don’t want to lose market share here so better to spread the pain.

The major problem with these tariffs, as above, is that they do not address the inability of the US to manufacture things cheaply.

Tariffs or related trade restrictions should be used for security and strategic purposes (anyone thrilled the US needs to rely on Boeing?) but wanting to manufacture sneakers and dog toys with US labor when the unemployment rate is already low hurts more than it helps.

Isn't Boeing an American company?

Of course the tariffs will not accomplish what he says he wants them to do.  Note I say "says".  They have made his cronies millions in the stock market and are undermining the US economy.  Putin should so pleased with him.

In the auto industry, the 3 countries have become more and more entwined since the original NAFTA.  That doesn't shift overnight.

Yes, Boeing is American. Not our shining example LOL.

[Christof]

I’m not quite sure the point you’re making but today the average price paid for a new car is about 80% of the average salary of an American auto worker. The average worker makes less that $30 per hour and the average car price is about $48k.

I was unsuccessfully trying to point out that a car wasn't the necessity it is considered today. Moreover, essentials did cost a much higher percentage of their income. Food and shelter accounted for most of a worker's family spending with everything above going to clothes, health and other important spending.

Today food and shelter might still feel expensive. But we are not spending 100% of our income on them. That leaves more money to spend on other stuff like a car-

The other point is that Henry Ford was really smart, but he didn't give money away to his workers so that they could afford to buy his car.

[Christof]

Isn't Boeing an American company?

Boeing is an American company that didn't realize it was taken over by McDonnell Douglas (another American company). It manages to struggle with a company like Airbus that was created as the most inefficient aircraft manufacturer in the world. I live near an Airbus facility. Airbus created not one, but several aircrafts, just to transport partly assembled aircrafts between manufacturing plants (Toulouse and Hamburg in my case), because its owned by multiple countries and every country pays careful attention that everything is distributed equally.

A Boeing company that focuses on quality and limits production to Seattle would have no problem outperforming Airbus by a large margin. Fortunately for us, that is not what Boeing decided to do.

[sonofsven]

Dave Chappelle had this figured out 7 years ago


https://youtu.be/inlDT62oGy8?si=b639Iy-85Qy9FLYB

[Cassie]

Project 2025 clearly states that they want the majority of the people poor because then they do not have time to protest because they are too busy trying to just survive. We are well on our way to that happening, unfortunately

[classicrando]

Project 2025 clearly states that they want the majority of the people poor because then they do not have time to protest because they are too busy trying to just survive. We are well on our way to that happening, unfortunately

That feels like something that's going to backfire spectacularly.  There is only so poor you can make people and keep them somewhat invested in the system. 

[GuitarStv]

Project 2025 clearly states that they want the majority of the people poor because then they do not have time to protest because they are too busy trying to just survive. We are well on our way to that happening, unfortunately

That feels like something that's going to backfire spectacularly.  There is only so poor you can make people and keep them somewhat invested in the system.

Trump wasn't elected because people were invested in the system.

[classicrando]

Project 2025 clearly states that they want the majority of the people poor because then they do not have time to protest because they are too busy trying to just survive. We are well on our way to that happening, unfortunately

That feels like something that's going to backfire spectacularly.  There is only so poor you can make people and keep them somewhat invested in the system.

Trump wasn't elected because people were invested in the system.

I was alluding to crime and violence.

[GuitarStv]

Project 2025 clearly states that they want the majority of the people poor because then they do not have time to protest because they are too busy trying to just survive. We are well on our way to that happening, unfortunately

That feels like something that's going to backfire spectacularly.  There is only so poor you can make people and keep them somewhat invested in the system.

Trump wasn't elected because people were invested in the system.

I was alluding to crime and violence.

Trump is a criminal who has previously incited violence in an attempt to overthrow democratic elections.  Crime and violence don't seem to be a problem either.

[rocketpj]

Project 2025 clearly states that they want the majority of the people poor because then they do not have time to protest because they are too busy trying to just survive. We are well on our way to that happening, unfortunately

That feels like something that's going to backfire spectacularly.  There is only so poor you can make people and keep them somewhat invested in the system.

Trump wasn't elected because people were invested in the system.

I was alluding to crime and violence.

It would be something of a self fueling machine, in that Republican policies are sure to make many people poorer and immiserated, and a portion of them will turn to crime.  Which Trump and the rest will blame on Democrats somehow, and justify furthering their own agenda.  Creating more desperate people, which will get blamed on opponents of Trump etc.

[cerat0n1a]

Airbus created not one, but several aircrafts, just to transport partly assembled aircrafts between manufacturing plants (Toulouse and Hamburg in my case), because its owned by multiple countries and every country pays careful attention that everything is distributed equally.

An alternative way of telling this story, of course, is that Airbus became the world's leading aircraft company, the world's largest helicopter company, and one of the world's largest defence and space/ satellite suppliers by drawing upon the engineering talent of many countries, and siting its operations in places where suppliers and expertise could already be found. That's why they also have engineering offices and factories in Morocco, India, Canada, USA, Malaysia and other places outside of Western Europe. Much easier than trying to persuade the world's experts in composite materials, wing and landing gear design, jet engines and everything else they need to all move to Toulouse.

This is all very relevant to tariffs, of course, because the world is so interdependent, and not even the US or China are big enough to do everything themselves. The US does not have the know-how to build EUV machines for semiconductor manufacture, for example, and there are countless other examples.