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by kshri24
154 days ago
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> The US has the second largest manufacturing base in the world after China. It's larger than India and is even slightly larger than the EU. Of only end products. The "largest manufacturing base" is misleading when majority of inputs for your finished goods are dependent on imports. > it doesn't matter if something is currently made in the US It definitely does matter. The right way to have gone about this was to first build the manufacturing capacity in US before imposition of tariffs. It was done in the reverse, which led to US revealing its hand too early, allowing for rest of the World to re-calibrate and start the process of de-dollarization. > foreign manufacturers to have to lower prices. They could also switch to substitute products or reduce consumption and then foreign manufacturers would still have to lower prices to limit the extent to which that happens. It won't happen. There is no reason for exporters to lower prices when tariffs only set a new normal. Once the prices have gone up and consumer spending has stabilized around those jacked up prices, that will set the benchmark. Just study history. No product has been devalued due to any contingent circumstances unless the product itself becomes obsolete. Here you are not talking about novel products being developed and manufactured that will obsolete something popular. You are talking about bringing back manufacturing of nuts, bolts etc. Things that are critical and have an already established price in the market that will only go up higher in price once manufacturing moves to US eventually. Rest of the World will adjust to the new higher price. |
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Isn't it easier to figure out how to manufacture screws given steel than to figure out how to manufacture airplanes given screws?
> The right way to have gone about this was to first build the manufacturing capacity in US before imposition of tariffs.
But what's the incentive to do that if there are no tariffs? You either need a reward for doing it (subsidies) or a penalty for not doing it (tariffs). But the US government is already running unsustainable deficits, so there is no money for subsidies unless you want to pay higher taxes or cut some other spending, and good luck convincing people to do either of those things.
> There is no reason for exporters to lower prices when tariffs only set a new normal.
If China charges $100 to manufacture something that the US would have to charge $120 to manufacture and then you put a >$20 tariff on it, China could keep charging the same prices, but that would make it cost effective to make it in the US. To prevent that from happening they would have to lower the price, and therefore have the incentive to.
Now suppose it would cost $200 to manufacture in the US and the tariff is 50%. Can China just keep the price where it is and make the customer pay $150? The customer has a finite amount of money, so if they did then the customer would buy a new phone every six years instead of every four years. Meanwhile the $1000 phone just became cost effective to manufacture domestically, because 50% of that is more than the $100 increase in manufacturing cost, so they lose that business too. What response to this do they have other than to lower prices?