We manufacture things in America. We have done so for centuries. Measured by its share of the real, inflation-adjusted GDP, manufacturing in the USA has stayed nearly constant over my lifetime, including back to the supposed Golden Age of the 1950s. This from the St. Louis Fed:
This doesn't seem intuitive. We remember that there used to be more American factories where workmen assembled stuff. Manufacturing employment has indeed declined:
The two charts can be explained by this one. Manufacturing has been subject to efficiencies and automation, so the dollar value added by manufacturing has not kept pace with the overall price level, which now -- as always -- consists of many things not subject to the same efficiencies.
Manufacturing in the U.S. has not suffered a significant decline. Rather, manufacturing's roughly constant share of real GDP and declining employment share indicate an increase in productivity of the manufacturing sector relative to the overall economy. This is likely because of automation.
American workers seeking family-wage jobs aren't competing against Mexican and Chinese workers. They are competing against robots. If factories move to the USA in response to tariffs -- a slow and questionable proposition -- they will be filled with labor-saving machines, not blue-collar workers.
A close reader of this blog, Michael Trigoboff, writes in comments that the Democratic Party's go-to remedy for displaced American workers -- get retrained to write computer code -- is unrealistic in practice. He taught computer science classes at Portland Community College and saw that it takes an unusual native intelligence and mindset to do that work. There are alternative approaches. There are unfilled jobs in construction that involve physical, hands-on movement and assembly of materials. These are location-specific and not subject to the standardization that takes place in factory-manufactured goods. Much of this work is currently done by immigrants. A set of policies on immigration and employment verification that re-established construction trades as a worksite for blue collar workers has more promise than does a tariff policy that attempts to re-shore blue-collar factory jobs.
The U. S. still makes and sells things abroad: intellectual property, software, movies, and content platforms. The U.S. has strong reason to use its trade relationships to protect those products against piracy. A tariff war weakens our influence with trading partners that use -- and steal -- those products. The stock market understands this. Apple is down 30 percent since Trump's inauguration and it became clear that he was serious about imposing tariffs. The stock is down almost 10 percent today on the news of Trump's tariffs. We were never going to assemble i-Phones in the USA. But Apple was going to design and brand them and sell them around the world at high margins, bringing wealth into the U.S.
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| Apple stock as of 8 a.m. Pacific Time today. |
5 comments:
I was in Taiwan a few weeks ago touring factories that make computers for HP, Dell and Nvidia (they don’t actually manufacture themselves). The level of precision manufacturing by robots is astonishing with high yields and low defects.
I asked one of the CEOs about how they see Tariffs. She proudly said they are tooling their assembly lines to minimize or even eliminate labor so they can manufacture anywhere in the world that is favorable or at a minimum, agnostic to trade policy, and without regard to the need for skilled labor.
So I agree that labor as a percentage of factory production is shrinking.
Our founding fathers established a new form of government that was called the American Experiment. Trump is a scam artist and TV personality who started a new experiment: seeing whether a bunch of amateurs, who know nothing about governing or civics, can run a country as large and complex as the U.S.
How’s it working so far? Just a few examples from our national security team:
We all know about ‘Signalgate.’ It’s also come to light that members of the national security council have used personal Gmail accounts to conduct government business. In addition, , an investigation by Der Spiegel has revealed that sensitive personal details of key security officials were readily accessible on the internet. Reporters uncovered mobile numbers, email addresses, and even passwords linked to top government figures, including National Security Adviser Mike Waltz, Director of National Intelligence Tulsi Gabbard, and Secretary of Defense Pete Hegseth.
Oh, and regarding those magical Trump tariffs that are going to make us all rich:
Paul Krugman, a Nobel Prize-winning economist, summed them up best: "I'm not saying that the Trump team’s thinking is unsound. I don’t see any thinking at all." One small example – the countries targeted by Trump for tariffs included some uninhabited islands.
And the fun has just begun.
Trump slump, could it lead to a mimic of the Great Depression? Didn’t tariffs have something to do with it? I sound alarmist, but the message of Fox News of trust Trump doesn’t work for me. Let’s hope for enough pain and suffering leads to sane government policy.
Incredibly, Trump reportedly claimed (I read about it) the opposite in his Liberation Day bloviation--that inadequate tariffs caused the Great Depression! His helpers have surely heard of Smoot-Hawley even if he hasn't. This is scorched-earth idiocy.
TrumpGPT seems to have hallucinated a tariff policy.
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