Trade

It’s time to take a closer look at tariffs. First off, the best situation is to have free and fair trade which under the best conditions means no tariffs. If that is so then why do so many countries have tariffs and why is the US entering the tariff scene. The answer is all about the word fair. China wooed American companies by using low prices. Over the past 50 years American companies discovered that they could produce products in China at such low prices that they could even absorb the higher shipping cost and make more money than producing goods in America. How China was able to do this is something that was rarely considered by US companies. To start with their labor cost were cheaper, sometimes even using slave labor but over time that difference narrowed. China did not have the environmental restrictions nor the worker protections that the US has. China used government subsidies to lower production cost and China manipulated their currency to promote cheap exports. All of these things resulted in unfair trade practices. China had a simple plan that worked quite well. They would use the above mention advantages to produce products below manufacturing cost and flood the world markets with these cheap goods. In time they would run competitors out of business. This hurt US manufacturing. One example is the steel industry. Before 1970 the US made more steel than any country in the world. This year the US will make 80 million tons of steel and China will make one billion tons. This means that the steel used in the US to produce US cars is made from Chinese steel. This same thing happened in many products and the US lost much of its industry. This is about to change as the end of globalization is bringing industry back to America. Tariffs are being used to accelerate this process. The establishment in the US has profited handsomely from this global trade at the expense of the US worker and they are fighting to maintain the status quo.

Fair trade

Karl Marx said that capitalism would fail because the proletariat (poor) doing all the work, would rise up against the bourgeoisie (rich) and move to a socialist type government, where the people owned the businesses. Then along came Henry Ford and did something that Marx had never thought possible. Henry was paying $5 per day in 1914 when you could buy a new Ford for $260. Marx, in is wildest dreams, never thought that the workers would be able to buy the products they made. This opened the door to what came to be called a consumer-oriented economy and it stayed that way for 80 years, while the country built up the biggest middle class in history. Then starting in the late 60’s things changed. Manufacturing jobs were sent overseas and corporations and financial institutions took control of the economy. During these past 50 years the democratic party, long considered to be the working man’s party, became the party of the rich white educated and the working people now look to Trump for help. He is reversing the trend of the past 50 years and is bringing good jobs back home. He is telling the other countries that the US will no longer be the world’s policeman and that they must have fair (reciprocal) trade agreements.

Revolution

In years past most companies sold stock to get money for growth but in recent years companies have turned to private equity firms like Blackstone and Carlyle. The advantage is that private equity firms are not subject to government oversight. Thus, they can offer a higher return with lower risk and that in itself should be a warning. A public company can be quickly evaluated by its stock price but with private equity the public must rely on managements value. As the number of private equity firms end up in bankruptcy the public trust is waning and the growth in this area is declining. This decline is part of the Trump revolution. The economy is moving away from the trend toward finance back to the old ways of manufacturing. The influence of the big banks will also lessen as smaller banks begin to make business loans. Big corporations will rely less on mergers and start to build new facilities which means more emphasis on manufacturing. For people who were adults in the 50’s and 60’s this will be a return to the old days but for most people this will be a new experience.

Trade

A good example of the unfairness in tariffs can be seen with the difference between the US and Germany when it comes to auto imports. The US charges a 2.5% tax on German auto imports and Germany charges a 10% import tax plus a 19% value added tax. In the United States, the Cadillac Lyriq is available from $58,590 but customers in Germany, where the EV has just been launched, will have to pay almost $30,000 more for one. The new Trump proposal increases the US tariff to 25% but it still leaves the US in and unfair situation. Other European countries also have tariffs plus value added taxes. Almost all of the US trade partners are charging higher tariffs than the US and Trump is attempting to minimize the difference while still giving other countries the advantage. These other countries are not happy as they see Trump’s fair-trade policy as unfair to them. This is an attempt to reduce the one trillion-dollar US trade deficit. The plan is to encourage other countries to lower their tariffs which in turn will allow the US to lower tariffs and in the long run have lower tariffs for all countries.

War

During the three-year Ukraine War more than one million have been killed or injured but the battle rages on. The war has resulted in widespread destruction, displacement and a humanitarian crisis, with millions facing food insecurity, lack of basic necessities and trauma, while also causing significant damage to infrastructure and disrupting education and healthcare. Meanwhile those in the West are safe in their homes and the military industrial complex racks up the profits as they restock their weapons of war. The West has contributed $287 billion to the war effort. Grain exports are down resulting in food shortages in Africa. Natural gas is cut off from Europe resulting in a 400% increase in utility cost and a two-year recession in Germany. Recent polls show Americans favor continued support for Ukraine even if it prolongs the war. It appears that they agree with Biden’s, as long as it takes, plan.

Change

As the Trump revolution gets underway, it is time for a review of how we got here. It began at the end of WW 2 with the formation of the United Nations followed closely by NATO. The 50-year cold war signaled a change in the world order with the US being at the top of the heap. As the battle between communism and capitalism took hold, technology led the way to automation and increased productivity. The next step was the movement of industrial jobs to lower wage markets like China. As manufacturing moved out the service economy filled the gap and this opened the door to the modern American financial business. This brought low inflation and low prices for imported consumer goods but it was a death blow to good paying manufacturing jobs in the US and Europe. While the wealthy people and large corporation saw their fortunes rise the working people saw their wages stagnate. Companies began moving over seas and taking the jobs with them. Our country has suffered from rising income inequality and chronically slow growth in the living standards of low- and moderate-income Americans. This disappointing living-standards growth—which was in fact caused by rising income inequality—preceded the Great Recession and continues to this day. The policies of Biden, American First and Trump make America Great, have attempted to reverse this trend and those who have profited from the global economy are fighting against these changes.