[bengotow]

This line caught my attention:

"The US manufacturing of Mac Pro is made possible following a federal product exclusion Apple is receiving for certain necessary components."

Is this sort of a "if you don't make us pay tarrifs on component X, we'll build component Y in the USA?"

Also I'm happy to see Apple doing this. Even if it's 50% press fluff, I think it'll make other companies in the industry think harder about their own practices because Apple commands such a great reputation.

[wyldfire]

> Is this sort of a "if you don't make us pay tarrifs on component X, we'll build component Y in the USA?"

Yes, that would be my assessment.

Here are the criteria used by the US Govt to grant the tariff waiver [1]:

> Whether the particular product is available only from China and specifically whether the particular product and/or a comparable product is available from sources in the United States and/or third countries.

> Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other U.S. interests.

> Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.

[1] https://www.federalregister.gov/documents/2019/09/20/2019-20...

[kerkeslager]

Wow, what an enlightening link.

At first, reading that there's an exemption process, I thought that the bill was better-thought-out than I initially had thought. But then seeing the existing exemptions, I'm realizing that this stinks of lobbying. It's clear that these exemptions are targeted at specific products, and are almost certainly there because some company lobbied to bypass going through the normal exemption process.

[rayiner]

That’s not the bill. That’s from the federal register, which records decisions of administrative agencies. Assuming you’re talking about Annex A, that is a recording of specific products that the USTR has ruled are excluded in response to existing exclusion requests:

> As set out in Annex A, the exclusions are reflected in 38 specially prepared product descriptions, which cover 46 separate exclusion requests.

As is clear from Section C, these are decisions on publicly filed exclusion requests that were the subject of public notice and comment. There is in fact a whole website dedicated to explaining what these exclusion requests are and how to apply for them: https://ustr.gov/issue-areas/enforcement/section-301-investi...

As discussed above, criteria for exclusion are things like products that are only available from China, whether the product is strategically important to China, etc. But the decisions are made case-by-case and that’s why the list of excluded products is literally a list of specific products.

This is just a funny misunderstanding, but a lot of “the government is so corrupt” type ranting is rooted in these sorts of erroneous readings of legal documents.

[kerkeslager]

Thanks for the correction! It seems I didn't understand what I was reading.

[malshe]

> This is just a funny misunderstanding, but a lot of “the government is so corrupt” type ranting is rooted in these sorts of erroneous readings of legal documents.

Great point! I have seen my views change on many things once I started to read up/listen to experts who know the law.

[pergadad]

But the list of criteria itself looks like a lobbying piece. It's not, say, medical products. It's among others products that are part of China's own industrial strategy.

If you are punishing China, why would you leave out the sectors China considers as most important and on which it aims for strategic dominance?

[jfengel]

Presumably, it's because the regulators concluded that these were areas where we'd be cutting off our noses to spite our faces. It's widely thought that that applies to the entire bill, but even aside from that, this is basically what lobbyists are for.

They are representatives from the various American industries, hired to make their case in front of the regulators. The regulators are full-time bureaucrats, who know a lot about the domain at hand but also need to know what particular American companies want. There's no one answer to it; what the bureaucrats do for a living is make judgments about what's needed and what's not.

A big company that hires the best lobbyists (the ones with the most experience and the most contacts) definitely has a leg up, but the regulators aren't solely at their beck and call. (Usually. It's not that regulatory capture doesn't exist, but the vast majority of day-to-day dull grind of government really is just ordinary people trying to make good policy.) Often, small companies band together to hire a decent lobbyist; DC is chock full of organizations with names like "Vegan Caterers of America" and "Society of Diesel Mechanics" that don't have tons of money but they do show up at regulators to make their cases on matters nobody cares about except them.

I'm not really here to defend the system or make the case for it one way or another. It's just that DC works very differently from the way it's portrayed on TV (including the news), in ways that are simultaneously more interesting and excruciatingly boring. I don't have any specific info on this case, but it does sound like exactly the kind of hodgepodge that results from making a lot of little decisions rather than one big sweeping gesture.

[sulam]

Yes, but aren't you glad to know our government is looking out for the live bait and tackle vending machine industry?

[baybal2]

Thanks for pulling that link out. Just look at that exemption list.

Product category description lists look to me almost exactly like rigged state tenders would look like in some post-Soviet country

> LED lighting fixtures, a kind of used in horticulture, containing over 5,000 LEDs spread across 6 light bars

> Grills composed of steel wire, each measuring 49cm by 47cm, weighting 0.36kg

> Power supplies ... measuring 148cm in length, 43cm in width

Those items are pretty much purpose written for individual benefactors

[ajdlinux]

And if you read the Background section, you'll see that this list is the result of a process where the USTR asked for exclusion requests, and companies had to provide the codes of the specific products they want excluded.

"Under the June 24 notice, requests for exclusion had to identify the product subject to the request in terms of the physical characteristics that distinguish the product from other products within the relevant 8-digit subheading covered by the $200 billion action. Requestors also had to provide the 10-digit subheading of the HTSUS most applicable to the particular product requested for exclusion, and could submit information on the ability of U.S. Customs and Border Protection to administer the requested exclusion."

So... it's not exactly a surprise if the list reads like it was compiled for the benefit of individual companies. Because... it was.

[VLM]

Yes exactly but you're reading too much into the intentions.

Lets say there's a tariff to encourage those little bags of screws that home depot sells to possibly come from the USA instead of China, or at least tax the Chinese because they do govt funded product dumping to make the market unfair. Really it doesn't matter why. The point is we want to discourage retail sales of Chinese screws for whatever reason, possibly even valid reasons.

Given the above... if I'm importing screws to build cars, and our govt likes domestic auto production, the govt doesn't want to screw me over with high screw taxes such that people buy Japanese cars instead. What they want is people at home depot not buying little bags of chinese screws, what they don't want is instead of "making" 1 cent of taxes on screws they'd lose 1 dollar of taxes on my electric cars because my cars would be too expensive compared to untaxed japanese cars or whatever.

So I apply for an exemption, but seeing as you don't employ me, so I'm gonna spec "M3-0.5 16 mm long SSHS grade 6 anti-corrosion finish screw". There's no point in me paying my lawyers to get an exemption for "screws" in general, just so that you don't have to pay for an exemption to import screws for your internet connected toaster. I mean, good luck with your internet connected toaster product... but pay for your own lawyers.

It is admittedly kinda silly to try to centrally control large scale industrial operations by taxing material components, why not do social control of operations directly by tax codes for electric car factories and internet connected toaster makers, but here we are doing tax code stuff on the parts that make those toasters or whatever.

[baybal2]

> why not do social control of operations directly by tax codes for electric car factories and internet connected toaster makers, but here we are doing tax code stuff on the parts that make those toasters or whatever.

The West pretty much doing that already in more ways than one.

Last G7 was all about finding new ways to tax new industries

[cl0ckt0wer]

Wow, I had to look this up. Great band name! https://en.wikipedia.org/wiki/Chabazite

[_puk]

> > LED lighting fixtures, a kind of used in horticulture, containing over 5,000 LEDs spread across 6 light bars

Also, really makes one wonder if that sort of specific setup is perhaps the subject of an existing patent.

Imagine being in a position whereby there can be no innovation beyond a specific exclusion on a competitive cost basis, and that exclusion being wholly owned already.

Seems an alarming way to either enrich incumbents, or stifle Innovation full stop, or both.

[lonelappde]

This insinuation is simply false. Anyone building any product can apply for a waiver under the same general rules. The waivers only apply to the specific products that apply.

[ken]

Big companies like Apple can easily put many people to work applying for exemptions, while small business owners can’t afford to. The mere existence of such a system is rigged in favor of incumbents.

This is the “well anyone technically could have” excuse, aka the first chapter of “The Hitchhiker’s Guide to the Galaxy”.

[woah]

Reminds me of the detailed but oddly vague exemptions in California’s new AB5 law

[jtbayly]

So, my interpretation is not the same as yours. It does not appear that there is any consideration in this list for something along the lines suggested by the GP. Namely, I don't see "Company agrees to bring production of some other product into the US" as grounds for granting the waiver.

Is there any evidence that this was a quid pro quo sort of arrangement?

[wyldfire]

That's the vibe I got from the Apple PR. "Yay, still made in USA. This wouldn't have been possible without the exemption we got from the govt for us to import these parts w/o high tariffs." (Simultaneously prostrating ourselves and indicating our resolve to move production if necessary)

[1] https://mobile.twitter.com/realdonaldtrump/status/1154774656...

[lonelappde]

The point is that Apple tried to build a Mac in Texas, but would have to pay a tariff on some component X. So Apple said maybe it's better to build a the whole thing in China since we're paying tariff anyway. And the administration said OK, you can import X without tariff to enable the assembly in TX. It's not Apple's that the tariff pricing structure had perverse incentives.

[hoseja]

Except material/component cost and Apple margins are utterly unrelated.

[darksaints]

Regulatory capture in action right here. I'm willing to bet Apple fully supports these tariffs now that they have their waiver.

[Angostura]

If they had achieved waivers on iPhone components perhaps but a tiny volume, high-margin product like the Pro?

[lonelappde]

Baseless speculation. Especially silly since Apple does not compete on price at all.

[lucideer]

> I'm happy to see Apple doing this. Even if it's 50% press fluff, I think it'll make other companies in the industry think harder about their own practices because Apple commands such a great reputation.

Apple also operate at a scale most companies can't, which means that even without federal product exclusions Apple would still be in a better position to do this than most companies. Those companies in the industry can think all they want, but they're unlikely to get the same federal exclusion, and even less likely to be able to execute anything like this anywhere near as efficiently as Apple.

I really don't see how federal subsidies of any kind can be seen as benign when they explicitly target market giants.

[djsumdog]

This is also specifically the Mac Pro; which is just insanely expensive to begin with (even before this latest one). With this going mostly to businesses and corporate clients, they can afford to do more domestic assembly or even component sourcing and just pass it on to that limited customer base.

[flyingpenguin]

Also because this product is more targeted at business use, assembling it in the US may open the product for more customers. I work in defense and some of our HP computers have to come from a special division of HP that assembles the computers in the US.

[leoc]

The previous, "trashcan" Mac Pro was apparently also assembled in the US, and Apple wanted you to know it: https://youtu.be/IbWOQWw1wkM?t=110 . I assume that keeping the Mac Pro in the US is primarily a political/public-image decision (or indeed a public-spirited one), and maybe secondarily a way to maintain some expertise in manufacturing in the US, just in case.

BTW, the last time that Apple manufactured primarily or exclusively in the US was probably a long time ago. Back in the beige-case era it did a lot of assembly in places like Ireland.

[hinkley]

Also comparatively low volume. If you're going to research a big change to manufacturing processes you start with a lower volume unit.

If they did this with the iPhone then the shareholder meetings would be pandemonium.

Doesn't hurt that it's also the device with the least need for miniaturization. Even if from the standpoint of an American it's a little insulting that they're giving us a device that a monkey could build.

[bilbo0s]

Bingo!

This is the one product Apple could build anywhere on the planet and still make a profit. Will probably run between 30 and 50k for configurations that most effects houses would want in any case, so the higher cost of production is no sweat off their backs.

[esmi]

I wonder how true that is. The volume is probably going to be pretty low which means it will harder to amortize the NRE. It’s not just all the hardware engineers either. There probably a ton of specific software, not to mention drivers, in this product too.

[gtirloni]

One aspect of this that's usually pretty clear in these discussions is the huge chain of suppliers for anything that's available in China. If the US wants to tip the balance to the point that starts existing again in the US (and as efficient as it's in China today), Apple's subsidies could have a network effect that also benefits small US companies.

[lucideer]

That may be the case for some large companies (though I'd still be skeptical of the extent of the beneficial effect), but at least in Apple's case, they have a long history of curbing this network effect by securing exclusivity of their supply chain. See e.g. https://news.ycombinator.com/item?id=3194836

[gtirloni]

Good point and a nice opportunity to improve the fine printing in these agreements.

[baybal2]

> Apple also operate at a scale most companies can't, which means that even without federal product exclusions Apple would still be in a better position to do this than most companies. Those companies in the industry can think all they want, but they're unlikely to get the same federal exclusion, and even less likely to be able to execute anything like this anywhere near as efficiently as Apple.

This is also tells of that even an entity the size of Apple+Flex+Foxconn can't run a whole vertical manufacturing themselves.

It is kind of a myth that Foxconn came to South China when "there was nothing," and did everything in house. Foxconn was a whacking huge buyer of everything in Guangdong since the very beginning, going back to times when the biggest foreign manufacturers in China were Japanese (true, Toshiba, Shrap, NEC, Sanyo all had factories in the middle of what is now Futian district of Shenzhen)

[philwelch]

Apple’s scale is a limiting factor, not just a benefit. I’d be surprised to see MacBooks or iPhones made in Texas because the scale of manufacturing is so much higher than Mac Pro.

[lonelappde]

This is misinformation. The exclusive is equally available to anyone making a similar product.

[Despegar]

>Is this sort of a "if you don't make us pay tarrifs on component X, we'll build component Y in the USA?"

They're basically responding to these stories by WSJ and Bloomberg saying that they're moving production of the Mac Pro back to China. That was never confirmed by Apple and Tim Cook denied it when asked on an earnings call.

https://www.wsj.com/articles/apple-moves-mac-pro-production-...

https://www.bloomberg.com/news/articles/2019-07-23/apple-see...

[squilliam]

I'm pretty sure that it's referring to the requirements to state that a product is "Made in the USA". Typically it means that atleast 51% of the components are USA-sourced.

I think that Apple just got a waiver from the Govt to say the Mac Pro is "Made in the USA" despite not meeting whatever arbitrary guidelines to fulfill that requirement.

[TAForObvReasons]

> It will not be considered a deceptive practice for a marketer to make an unqualified U.S. origin claim if, at the time it makes the claim, the marketer possesses and relies upon competent and reliable evidence that: (1) U.S. manufacturing costs constitute 75% of the total manufacturing costs for the product; and (2) the product was last substantially transformed in the United States.

https://www.ftc.gov/news-events/press-releases/1997/05/examp...

Note the key measure here is cost, and manufacturing costs includes indirect costs like land rent. An easy workaround here would be for Apple to use a shell company to own the land/plants and lease it at exorbitant rates (to hit the 75% threshold)

[csdreamer7]

> Is this sort of a "if you don't make us pay tarrifs on component X, we'll build component Y in the USA?"

According to GamersNexus on Youtube; power supplies and cases (imported steel) were hit very hard by tariffs.

Caselabs, a maker of cases in the US, went out of business partially due to tariffs on imported steel driving up prices.

PCBs such as motherboards and graphics cards just moved to Taiwan.

Even cheap power supplies went up by $20 at least on average based on my anecdotal price browsing on PCPartPicker.

[mastazi]

Sort of tangentially related, Gamers Nexus is one of my favourite PC hardware news outlets, they usually publish articles on their own website [1] with sources backing up what they say in their videos or just expanding with more info[2] (on their Youtube channel, you can often find links to related articles in the video descriptions).

[1] https://www.gamersnexus.net/

[2] For example you can find more info on tariffs here https://www.gamersnexus.net/industry/3368-manufacturers-on-t... and specifically about Caselabs here https://www.gamersnexus.net/hwreviews/3455-caselabs-magnum-s...

[rasz]

"let us import 200 million of phones and we will totally make ~1 million of this overpriced computer in US"

[arcticbull]

Does it matter in which country the robots are doing the work? Ultimately that's the future we're shooting for, so this appears to be re-arranging the deck chairs on the Hindenburg.

[solotronics]

Yes because we should be the ones building and maintaining our robots as well.

[PunchTornado]

who is we? the people in China?

[arcticbull]

It takes about 5 people to run a whole automated factory. The design and development is where the real money is. Let the assembly go to the lowest bidder.

[vonmoltke]

Even with automation, it takes a lot more than five people to run an electronics manufacturing operation. I know first-hand; I supported one earlier in my career.

[arcticbull]

I'm confident that's true but looking into the future, I can't imagine the trend is going to be more people in automated facilities making more money. This is a transient state. The future is basically full automation in manufacturing facilities with zero humans. We need to design society around that instead of pining for the good old days of banging away at metal with a hammer for money.

Hyperbolically, this is turning America into a renaissance faire as a make work project.

[solotronics]

Barring some disaster that sets humanity back significantly progress will accelerate. There will be a point where most people can't keep up, maybe there will be cybernetic modifications to learn faster. I think there will have to be a new form of economy to support people because already we are straining to assign resources efficiency in the US.

[efa]

They have deck chairs on blimps? :-)

[jodrellblank]

There is a photo of the top of the Graf Zeppelin, sister ship of the Hindenburg, being repaired mid-flight[1], so the roof was accessible from inside (through the scaffolding of the interior gas bag area, rather than neatly for passengers), provided quite a large platform, and claimed to be stable in-flight. The gondola had promenade / viewing areas with "large windows which could be opened in flight" visible in the photos in [2], to address concerns about air pressure or temperature.

I don't know if they ever did put deckchairs on top but had they thought of it and wanted to do it, it might have worked out ok. (View was likely better inside, looking down).

[1] https://www.mutualart.com/Artwork/Repairing-the-hull-of-the-... - one of the people is sitting on the side of the photo. They were large enough, stable enough in-flight, and the top was accessible.

[2] https://www.airships.net/hindenburg/interiors/

[GoToRO]

"Smoking room". Nothing wrong with that!

[arcticbull]

Haha, it's a reference to the 2006 White House press correspondents dinner that Colbert hosted, and absolutely destroyed Bush at. It's on YouTube, and it's a great watch.

[lacampbell]

Colbert was hilarious when he played a blowhard obnoxious conservative. Now that plays a blowhard obnoxious liberal it's not nearly as funny, like he's not putting the same effort into this persona.

[crumpets]

>absolutely destroyed Bush at

Weird. I thought Bush finished out his term.

[arcticbull]

Indeed, I was referring to his level of composure over the course of the evening.

[Tinfoilhat666]

Trump: "Apple will not be given Tariff waiver, or relief, for Mac Pro parts that are made in China" https://mobile.twitter.com/realdonaldtrump/status/1154774656...

Is this a win or loss for Trump? (probably a win because he always wins)

[OldSchoolJohnny]

That line is critical because it means they will effectively be manufactured in China but some token amount of assembly will happen in the U.S. so that they appear to be seen to be manufacturing in the U.S. when in fact they are made in China in any meaningful non-political sense.

[seanmcdirmid]

A lot of the components are not made in China though. The GPU is most definitely not, nor is the CPU. A lot of the low value chips are Chinese, the mainboard probably is, but on a value basis, the most expensive components are not.

[baybal2]

Well, if you don't count that parts not coming from this China, comes from that China.

And yes, by far the semiconductor dependence on Taiwan is like another tip of the iceberg thing to the whole process.

Just as American big co extremely naive in thinking that they can replace Chinese labour and factories with Vietnam (whose total industrial output is like one district o Dongguan,) it is equivalently naive to think for mainlanders that they can run away from dependence on Taiwan when even Koreans and Japanese can't do it now (Samsung tapes out a lot of ICs at TSMC and UMC, despite having own fabs for cutting edge stuff)

[zelon88]

There's a downside too.

Royalty doesn't cook their own meals. Their time is more valuable than that.

Likewise, America doesn't make it's own underwear. We have China to do that. Similarly, they have us to make safe airplanes and complex satellite equipment.

Closing trade to the extent that we're making our own underwear INSTEAD of satellite parts can't really be chocked up as a win. It just promotes the notion that China should build their own satellite parts and we should make our own underwear.

If making underwear isn't enough to feed a Chinese family, why would we with that destiny upon American families?

Tl;Dr, America makes complex, high quality machines and equipment. Refined oil products. Things that require quality over quantity. Things that you can't substitute a generic for. Those are our bread and butter exports. Cheap crap that gets thrown away, like Apple computers, are China's bread and butter. We can either accept these facts and balance markets accordingly (and stay on top at the same time) or we can compartmentalize the world and all be stuck spinning our wheels and duplicating lots of effort, cold-war style, but with stupid-crap like personal computers instead of nuclear weapons and spaceships.

[tylerjwilk00]

Manufacturing is a ladder. You use the previous generation manufacturing to create the new. Once you lack certain manufacturing processes by moving it over seas you are in a sense kicking your own ladder out from underneath you. The trade wars now are a response to realizing large pieces of the ladder are gone.

[criddell]

I remember a few years ago reading how Dell had lost the ability to make their own computers gradually over time. On the face of it, every bit of manufacturing and design they moved out of the US made sense, but all of it added up over time meant that they had effectively lost control of the computers they were selling.

It was an interesting story that but my google-fu isn't strong enough to find it.

[notfromhere]

At some point, your manufacturing partners in China are going to realize they control the means of production and can capture the added value by developing their own front office to market and sell the goods they already manufacture.

At what point do places like Dell become just licensing operations?

[Xixi]

IIRC that's the story of Asus: they started out by making parts, and at some point (a decade ago?) started to sell their own desktop/laptop computers.

[crispyambulance]

    > At what point do places like Dell become just licensing operations?

I don’t know, but I expect that there’s a roomful of well-paid asshole MBA’s at Dell working on that “problem” right now.

Everything outsourced and a few product mangers picking stuff out of a catalog— That’s ultimately what the supply chain leads to as corporations grow.

[cptskippy]

I thought Dell has always been reliant on ODMs. Were they at any point manufacturing components themselves?

Dell was still building PCs from off-the-shelf parts in the 90s so much of what they have was developed in the last 20 years. I've got to imagine they still have people in house who know how to setup manufacturing.

[notfromhere]

Even most of the assembly is overseas now. Eventually Asian companies are going to just market their own brands instead of letting Dell be a supply chain manager and marketer.

[wysifnwyg]

That's happening already as manufacturing countries ignore copyrights from the source country.

[TAForObvReasons]

It's from "How Will You Measure Your Life?" https://www.amazon.com/How-Will-Measure-Your-Life/dp/0062102... discussing how Dell started outsourcing bits and then expanded until Asus decided to make their own computers.

Google search revealed http://sajithpai.com/wp-content/uploads/2016/06/How-will-you... (summary page 13)

[ehnto]

You might say the same thing is happening in software. As everything is outsourced to specialty services, eventually you aren't building or running anything but the glue. If a service goes down, and there is no replacement, you can find yourself in a position where you don't know how to rebuild your own product.

[hobo_mark]

Was it a lecture by Clayton Christensen by any chance?

(can't find the lecture I had in mind but this one mentions the same part in passing) https://youtu.be/rpkoCZ4vBSI?t=2915

[criddell]

Yes it was. I've gone searching for it with the information that you and others have left here and that's definitely where it came from.

[Spooky23]

I recall that article and also can’t find it. The punchline for me was the chairman of their Taiwanese partner, who said something like “Americans are happy with their ratios. (ie reduced inventory) I am happy with cash.”

[llampx]

Wall Street rewards ratios not cash.

[ValisTuring]

Are you referencing this article:How Hewlett-Packard And Dell Destroyed Their PC Advantage ... Piece-By-Piece https://www.forbes.com/sites/panosmourdoukoutas/2013/04/14/h...

[xchaotic]

In retrospect they were right as PC became commodity anyway

[munk-a]

Actually US businesses were doing fine for the most part, except for those trying, and failing, to compete with the ladder replacements that moved overseas. There is a militarily strategic reason for keeping domestic production of your full supply chain, but most businesses don't care because (and this is a shocker) corporations aren't Americans, nor are they Chinese or any other nationality. They are greedy and self-interested and don't give a hoot about their country of residence.

[hoseja]

Seems to me Chinese corporations are Chinese and their executives(' families) can be disappeared on demand to make it stay so.

[la_barba]

Caring about the market, and not societies, is the kind of capitalism, that the US has been heavily promoting for quite a while. But seems like young people are starting to catch on to this social-democracy thing..

[avar]

You might be interested to know that your notion of a successful macro-economic policy has been thoroughly tried throughout history, and has been deemed a colossal failure, see e.g.: https://en.wikipedia.org/wiki/Mercantilism

[IronWolve]

Right. China using slave labor, in dangerous, polluted, deadly manufacturing hell holes, to make ladders 10x cheaper than the USA with human rights, polution controls, unions, etc. etc.

[maerF0x0]

One problem is that of distribution. Many Chinese families are seeing their livelihood improved by the "underwear" jobs. However, a small group of US families are profiting from the sales of "satellites".

2nd problem is we're buying $336 billion more underwear than selling satellites. At some point we have to have a balanced flow or we'll go broke.

https://en.wikipedia.org/wiki/China%E2%80%93United_States_tr...

[munk-a]

Except, and this point gets bungled in the media all the time, the trade deficit doesn't matter. There are some economic reasons (the entire world's currency is based on the dollar) and there are some political reasons (all countries benefit from the free movement of goods so anyone trying to force a balancing would be ostracized), there is also the fact that the US military is strong enough to defend against seizure but, here are the two really big reasons you should walk away with:

1. We are no longer on a precious metal standard so there is no limit to the supply of money.

2. States don't do business with states, individuals do business with individuals - you, personally, likely have a severe trade deficit with Apple (or your computer vendor of choice) you have purchase their services for money but they have never directly purchased yours. This does not matter you are at a deficit and surplus with a variety of players and the world keeps on turning.

[maerF0x0]

> you, personally, likely have a severe trade deficit with Apple

Yes, but I do not have a trade deficit on the whole as well.

I understand the analogy of a single trade deficit doesnt matter. But the deficit on the whole does matter, no?

[snowwrestler]

The U.S. balance of goods and services trade is one component of a complex economy. Of course it matters, but the simple balance does not imply that it's a bad thing, or that it will harm the U.S. economy in the short term or long run.

> Yes, but I do not have a trade deficit on the whole as well.

Presumably you mean that you add net value to your wealth each year, despite having a "trade deficit" on most economic relationships. Well, so does the U.S. The net change in the national income is called GDP growth and it is mostly positive in spite of the negative balance of trade.

Why? Because the U.S. economy is primarily internally driven; trade is only about 15% of GDP. So more important than the balance of trade is how that trade impacts the domestic economy.

Would we experience even more economic growth if we had a positive balance of trade? Maybe. If we kept imports the same and grew exports, that would be great, but that will either happen or not based on private industry. The government does not have a magic lever to create new exportable goods and services.

But the government does have a variety of levers to reduce imports, some of which it is pulling right now. To predict the economic effects, it's not enough to just look at the balance. You would need to untangle the domestic effects of reducing imports that may be inputs to domestic economic growth. It's certainly possible to use trade restrictions to create a positive balance of trade, and create negative GDP growth at the same time.

[erobbins]

> Because the U.S. economy is primarily internally driven; trade is only about 15% of GDP. So more important than the balance of trade is how that trade impacts the domestic economy.

That's almost scarier, really. It's a big shell game with money just moving in circles.

[avar]

> Yes, but I do not have a trade deficit on the whole as well.

Yeah you (as in, most people) do, people just call it a mortgage, a car payment etc.

I.e. they enjoy the present-day use of assets whose total price today is something they'll be paying for down the line, because they think having them today will contribute to their future growth.

The exact same logic is at play when countries decide to indebt themselves. Public debt just amounts to borrowing from the future.

[AlexTWithBeard]

I think you're right.

There's plenty of articles explaining why deficit is not a problem, but despite of all the economic theory I find this view very weird. In the bottom line, if you're consuming more than you're manufacturing, mostly likely you're in trouble.

[omegaworks]

>In the bottom line, if you're consuming more than you're manufacturing, mostly likely you're in trouble.

Or you are a dominant entity on the world stage with the power to demand more physical goods than the physical goods that you produce.

Trade deficit rebalancing is an argument for the destruction of the supremacy of the dollar.

[simonh]

Not all consuming is importing, and not all production is exported. This distinction is actually crucial. The balance of trade is only one part of a bigger picture, the other is domestic production and consumption. You can't understand one without also factoring in the other.

If a country has a very productive, vibrant and innovative domestic economy, it can increase the value of it's domestic net assets. It generates valuable new technology perhaps, it finds ways to maintain it's standard of living using fewer resources, or simply increases it's standard of living at current prices. It becomes a wealthier nation, without trading externally at all. Maybe it even attracts foreign investment.

In 2018 the US trade deficit was $890m (10% higher than 2017, thanks Trump), but it's GDP growth was $1trn.

If internal activities increase the value of the domestic economy by more than the trade deficit, then the trade deficit really doesn't matter. It's already paid for.

Finally, the only way to buy goods abroad is for someone to sell your currency and buy theirs. If you're buying more abroad than people buy from you, the balance is exactly equal to the 'deficit' in trade of your currency. Well, nobody is forcing anyone to buy your currency but if they do that's implicitly an investment in your economy.

[alexis_fr]

Or you consume more than you produce, and output other forms such as debt or a lower dollar, so foreign companies will day be able to purchase things you’ll produce in the future. So everything balances out it the end, doesn’t it?

[solotronics]

It only doesn't matter until all of a sudden it does. The global economy is constantly in flux. It might not be too long before a majority of countries decide it's in their best interest to not use the USD for international settlements and when that happens the bubble pops big time.

[wysifnwyg]

To further that point, when country X does not respect country Y's copyrights and begin undercutting country Y's market for those items, it creates a further imbalance.

[gigatexal]

There’s so little of substance in this post and so much xenophobia and hyperbolic thinking I’m surprised it’s not been downvoted to smitherenes.

China is the second largest economy in the world. They’ve got many smart individuals in business and engineering and everything in between.

And for someone writing on a tech board like HN to think that tech won’t pull China and India and the Philippines and other countries onto the same plane as western powerhouses is just myopic. Tech and education over time lifts all boats.

[groby_b]

Except e.g. Uyghur boats. Those get summarily sunk. Hong Kong boats will be set on fire instead.

No, tech is not a universal equalizer by itself. Without an entire socioeconomic environment to support innovation, gains will be at best temporary. (On the flipside, we lately seem to be entertaining the idea of converting the US to an autocratic environment too, so we can certainly achieve leveling that way)

[gigatexal]

Yeah ... the heavy handed nature of a Communism and Xi’s leadership, I think, will lead to a revolution one day. But even if not there’s a growing middle class that will propel consumption ever more. Who would have thought that China would be such a large global economy say 30 years ago?

[adventured]

> Closing trade to the extent that we're making our own underwear INSTEAD of satellite parts can't really be chocked up as a win.

If you remove the instead part of that (which doesn't make sense as an either-or), it's a big win if your goal is to remove manufacturing, jobs and capital from a strategic superpower competitor like China.

If in-sourcing underwear to the US results in only 1,000 net additional jobs - making a billion pairs of underwear per year - and results in the loss of 20,000 low paid manufacturing jobs, supply chain, infrastructure, tax revenue, etc. in China. That is a win, if your goal is to make China slightly weaker. If the US nets out to even and China loses, it's a win for the US - if you view China as a superpower competitor for the next century (which nearly everyone in DC does today).

If the US could use increased automation to pull back every bit of outsourced manufacturing, even in a fictional zero net gain scenario (ie no net job gains, no net tax benefit, no net capital retention benefit, etc), it makes the US more powerful versus the rest of the world, as the rest of the world loses trillions of dollars in outsourced manufacturing value (ie an enormous injection of capital to be used to build out their nations, as in China or presently as is happening in Vietnam). If you're a politician in DC you would view that as a useful increase in US hegemony.

Apparel in-sourcing, as one example, has already begun globally. It's only going to get more aggressive over the coming decades. Developed nations will pull back various pieces of their manufacturing chains, as substantial automation gains make it reasonable to do so. When you combine those gains with the upside of geographic location - being close to your customers, eg for rapid trend adjustment purposes in apparel - the in-sourcing advantage is strong.

[varjag]

Microelectronics, both cheap and expensive, is really the same technology. You move out the high volume base, engineering careers become dead ends and low volume high value products become problematic too.

"Let's move production to China and keep R&D here" is a pipe dream.

[zelon88]

Not when it's illegal to export your IP. Those are the contracts where America makes money. All the non-descript brown buildings you pass by on your way to work are the manufacturing/heat-treating/welding/plating shops that make every piece of machinery that flies overhead.

Name me one piece of a commercial airliner that you are allowed to source from China. I'll wait.

So when you consider what we're currently making, Apple Computers in a massive factory with suicide nets over the windows is a race to the bottom. Nobody wants to compete with Chinese manufacturing on their home turf of cheap Wal-Mart goods. We'll be living in dog cages too if we do that. We want to make airplanes and spaceships and meaningful technology.

[lostlogin]

> Name me one piece of a commercial airliner that you are allowed to source from China. I'll wait

Boeing have opened a plant there which seems to do interiors now, and it moving into other areas in the future.

Rudder parts are made at a separate facility in a different. These are for the 787 and 737. The link claims there are 9,000 Boeing’s flying with Chinese made parts.

http://europe.chinadaily.com.cn/business/2016-09/10/content_...

https://www.google.co.nz/amp/s/mobile.reuters.com/article/am...

https://www.google.co.nz/amp/s/qz.com/1497137/boeings-china-...

[llampx]

This comment is so laughably wrong. China started with cheap plastic toys and now manufacture extraordinarily complex devices like iPhones and have spearheaded development of an entire new class of vehicles (EVs) that they can export to the rest of the world.

[varjag]

You can legislate IP as much as you want if all your engineering jobs have followed production.

Not sure what the analogy with planes is all about, it's exactly the thing they are both manufactured and designed in the same country.

[zelon88]

The analogy with planes is that planes pay the bills. Spaceships pay the bills. Coffee cups and Wal-Mart items won't pay the bills.

Building iPhones doesn't pay China's bills (they're citizenry is impoverished) so why would we want to compete with them for jobs to build iPhones? Let them keep doing it! We keep building spaceships and airplanes.

The analogy is.... We're currently building high-tech, high value items where the engineering matters. The manufacturing matters. China buys airplanes from the USA because no commercial airport (including the ones in China) would allow a Chinese-made plane to land there.

Our country isn't held afloat by manufacturing jobs at Apple, or Samsung, or Fisher Price, or Vtech, or Daewoo. It's held together by General Dynamics. General Electric. Boeing. Rolls-Royce. Airbus. Big spenders who contractually must source the highest possible quality out of a domestic supply chain irrespective of price. These are $30-50/hr jobs that put food on America's table.

Making iPhones is a $10/hr job with marginal quality. Throw a handful of iPhones and see what sticks. We're competing with China for jobs they're willing to do for $2/hr jobs. For what?

[charliesome]

> China buys airplanes from the USA because no commercial airport (including the ones in China) would allow a Chinese-made plane to land there.

This is a ridiculous assertion to make when there are indeed Chinese planes landing at Chinese airports.

It's true that the majority of airplanes Chinese airlines currently operate are manufactured outside of China, but this is not the reason.

[ako]

Except that china also makes complex things, like planes and satelites. They don't need america for that.

[josefresco]

... with stolen IP from America.

[rleigh]

It ultimately doesn't matter much. What matters is that you have the ability to manufacture a product. You can own as much IP as you like, but if you don't have the capability of using that in a production process then it really is the Emperor's New Clothes.

Having the capability is important. Outsourcing has removed the crown jewels from many companies, leaving them little more than marketing shells. The real value is in the technical know-how and skills of the people who actually made those companies run. Without that, there is no company and no product.

[michaelmrose]

Owning the rights to ideas isn't a sustainable future unless you also have the influence or the power to force people to respect your imaginary property.

If ultimately the only thing you end up owning over others is ideas it becomes increasingly attractive simply to opt out of such rights.

[denzil_correa]

They have learnt historical lessons from the USA who stole IP from the U.K.

https://www.apnews.com/b40414d22f2248428ce11ff36b88dc53

[evancox100]

I suggest readers to draw their own conclusions from this article. To me, it does not make a convincing case that the scale of IP theft in 18th century USA is anywhere near as comprehensive as what is happening today in China.

[dillondoyle]

And to me there is a big difference between the Government encouraging recruitment of those with knowledge through immigration vs a Government who IS the 'primary' stakeholder in all Corps + actively using state resources/agencies for theft.

[reaperducer]

Why would you compare the actions of a developing country 200 years ago working within that timeframe's norms to the actions of a developed country working within today's norms?

[sangnoir]

> working within that timeframe's norms

As you'd imagine, the norm in the UK[1] was to be against "IP theft" 200 years ago, but the US had a more cavalier attitude then - I wonder why.

1. https://www.smithsonianmag.com/smart-news/how-industrial-esp...

[kenned3]

200 years ago, the behavoiur of the US was not consistant with the "norms" at the time. The UK had clear laws on this, and the US violated them. US leaders encouraged it.

How is this not the same as what China is doing now?

[lostlogin]

But it’s not the norm in China. If you are to decide what is normal, do you do this based on geography or population? Either way, China is a pretty big place.

[charliesome]

There's no inherent scarcity to information. Building your economy on such an assumption is a very shaky foundation to build on.

[mcculley]

This is something I wonder about a lot. How long will IP be of value? IP only has value when it is completely secret or when a government enforces the monopoly for the owner. How can we expect governments to agree to enforce these monopolies reciprocally (or at all) as the cost of information copying and distribution continues to plummet? If a big country decided to drop out of the WTO, what would prevent them from just manufacturing anything they want? Would governments erect trade barriers?

[la_barba]

..created by chinese phd students

(sorry.. i know its a low-blow :P)

[la_barba]

I think you're overplaying the 'cheap crap' argument. China is quite a ways better than they were when that stereotype was passable. They can totally match what the US is doing in a large set of technology based industries. And also, because of the way supply chains work (they naturally form clusters around manufacturing hubs and engender very strong network effects) the US might not be in a position to make any high-tech product at all. It would be cheaper to manufacture it overseas rather than ship every single part/material to the US.

[wyldfire]

> Similarly, they have us to make safe airplanes and complex satellite equipment.

This sounds borderline tongue-in-cheek [1].

[1] https://newrepublic.com/article/154944/boeing-737-max-crash-...

[pinkfoot]

> they have us to make safe airplanes

You make safe airplanes? :)

[wcoenen]

Your "tldr" is roughly 100 words, same as the rest of your comment.

[PunchTornado]

Don't people in Asia need jobs too? they're already much poorer than the average American. why are you happy?

[serf]

>why are you happy?

because the happiness of those around oneself is inherently prioritized as more important than others -- it's more involved with personal success than the happiness of those further.

is that appropriate? I don't know. It's totally normal, though.

[mh8h]

I guess Apple is hedging against a 2nd term for Trump.