Thoughtful, challenging, fun as always. But I think a bit too bombastic on the "why didn't you adjust away from China sooner, you are just dumb and wrong" part. And this is where the US consumer and the US consumer environment holds some responsibility for the current situation. The reason the theoretical US business outsourced to China and the reason very few diversified away from low cost countries in the past 10 years might be that US consumers demand low prices (as capitalism kind of fundamentally says they will). So if you as a business say "no I believe in US industry so I will onshore more of my work and customers will pay more because they share my belief in US industrial needs" you would have been (mostly) wrong. You would (mostly) have gone out of business. That would not have been clever. As a business owner the challenge for me is not just what I think is right, but what my competitors will do and how I can compete successfully with them and if I can do something cheaper to the same standards as I can get in the US elsewhere I will. If anyone in my industry is using China or other low cost markets and I am competing with them I either have to sell something substantially better or different than them so that my customers will pay more. In a service business that's viable. If I make fridges or cars or widgets, it's just not realistic a lot of the time for a lot of suppliers. Could tariffs have a role in shifting that equation? Yes. You are not getting an argument from me on that as a viable path. But throwing up an overnight trade blockade (via tariffs) and thinking that anyone who didn't see that coming is stupid ignores the reality of running a business. If we were serious about onshoring industrial production then a more coherent approach to what industries, what production, what tariffs, what countries would give you a better chance of long-term success. Creative uncertainty is no more likely to have a positive outcome than creative destruction. In fact they feel very much like the same "break stuff and hope it all works out in the end" mentality that you dislike from your economist colleagues.
"the reason very few diversified away from low cost countries in the past 10 years might be that US consumers demand low price"
This has been Oren's point for many years though: government policy is necessary for establishing rules of the game that take into account not just immediate consumer welfare, but both consumer and producer welfare over the mid-long term.
There were businesses that managed to convince consumers not to dump their products for cheap Chinese imports. And those businesses will be well positioned going forward. (Unless Trump changes his mind again, which he probably will, because unlike Oren, Trump is in it mostly for Trump not for American workers.)
Right, Brian. I'd agree. And Oren has been intellectually honest about supporting some of the less flashy elements of President Biden's more quiet protectionism and industrial policy in that direction. But that's the problem here. Tariffs might work in the long term. They might. But it takes time and patience to reverse decades of de-industrialization (some of which is not work we want back) and unpredictable tariff policy would not give any sensible business owner the confidence to reinvest in the US. The other issue is that this is not a bilateral world. The most likely outcome of a trade war with China would have been removal of production from China to another low-cost country, or at least a diversification away. The only way to deal with that in the medium term would be to take steps to either lower production costs in the US or chase the work around the globe for years with tariffs. Lowering production costs in the US? Robots, AI and automation might do it. Would be great for profits for US companies. But it wouldn't be a great deal for the US working class that got screwed by globalization. It would just be another twist of the knife. There's a joke about a London cabbie who is at the Albert Hall and is asked by a tourist how to get to Buckingham Palace. "Well I wouldn't start from here," he replies. If I wanted to reindustrialize I wouldn't start from a rose-tinted vision of the industry of 1985. If we were worrying truly about how to bring meaningful strategically significant industrial labor back to the US without driving down labor cost to a competitive level (which is what tariffs do - oversimplified), then the answer remains the same as the creative destruction answer that Oren hates so much. We have to really commit to a more skilled educated workforce that allows us to compete on quality not price. Or close our market off and produce Pontiacs and Oldsmobiles for ourselves and no one else.
I belly laughed at this one. Oren is getting nervous, knowing that his legacy is tightly tethered to the whims of the orange man baby. He’s sunk to blaming the businesses for the carnage of DonOrenomics:). Life as a think tank elite-never sullied by real world uncertainties, always with a ready excuse for why the plan blew up. And sadly, never a word as Don decimates the rule of law, obliterates our long time alliances, hollows out our scientific golden goose, and drives away the smartest students, all so central to a successful economy. Weren’t all the indicators so much more positive just a few short months ago? It’s becoming clear that Oren shares Don’s world view of returning to the 50’s. Maybe they will discuss the dangers of vaccines when Don gives him a ride on his groovin new plane!
I dare say you're right, and frankly it surprises me how silly Oren is here. I think many people to this website would agree that giving away our industrial base to China in 2000 was a terrible idea. But clearly the idea that everyone is now being mandated to change direction on a dime or you're going to go bankrupt--without a shred of government support, leadership, or industrial policy-- is absolutely absurd. And of course, undermining Oren's contention that 'this is how Democracy is supposed to work' is the simple fact that, no one--but literally no one--voted for this empty-headed bombastic policy that's so idiotic that Trump had to back off within days of imposing it. Additionally, underscoring the utter idiocy of the whole gambit, Trump nearly broke the international economy in the first week of Liberation Day, as people who sit at the center of the finance world saw up close with complete shock and horror--and most of those people I dare say are Republicans.
I'm really surprised that Oren is unable--or rather unwilling--to talk about what Trump's economic policies ACTUALLY are and will work, as opposed to merely accepting what they CLAIM to be, ie. an attempt to reshore manufacturing in America. There is simply no evidence they would work in any way to achieve that end--and Oren knows it. It was all a half-assed, lazy effort to bully the international economy for purposes that remain entirely unclear, precisely because no one can figure out how they would help Americans in the slightest. Oren is quite aware of the difference between rhetoric and reality. But he is unable to break ranks with Trump. Such a shame that someone who I really previously appreciated for their intellectual rigor and independence, calling his profession on their intellectual bankruptcy, is proving themselves to be just another weak-kneed apologist for a dangerously out of control administration.
Well said. It's infuriating to watch elites who know better bend the knee. I always knew a demagogue like Don was possible, history is replete with them. But I was woefully naive in believing that we'd have leaders who would stand up to them. It's caused me to read more about the historical patterns of authoritarianism, and it's not encouraging. Acquiescence of elites is critical to the success of authoritarians, and history shows how so many are willing to go along. Sadly Oren fits the mold, unable to place the common good over personal advancement. One thing Don has been successful at is driving shame out of our public discourse. And to think there was a time my fellow conservatives prattled on about character counting. How quaint.
A 10% tariff won't cause businesses to change sourcing away from China since that will result in a less than 5% markup at retail in the U.S. Since investment costs and production costs in the U.S. are likely to be significantly higher, why wouldn't a businesses simply continue to source from China or shift their sourcing from China to another foreign nation? U.S. consumers will sensibly choose the lowest cost alternative--assuming quality and delivery times are acceptable.
A better approach would be to subsidize investment for production of defense- and medical-critical products. You can also make a case that it is sensible to re-shore products that can be produced with a high degree of robotics and minimal labor--but that will require significant investment and probably government support (i.e., CHIPs Act), but we aren't going to produce labor-intensive products such as footwear or clothing in the U.S., so it is stupid to tariff them--a tariff would be a regressive tax that will hurt the poor the most--or to subsidize them.
In any case, this administration's economic proclamations (note legislation is absent) and exemptions, look like central planning--which is problematic in so many ways.
100%. Industrial policy and explicit import quotas for strategic industries is a far better way to re-establish key manufacturing sectors in the US that broad based tariffs. Biden was closer to right on this with CHIPS than Trump is with tariffs. But unfortunately he trusts Peter Retardo for some reason so we all just get fucked.
Wonderfully written. Whether you agree with him or not (I happen to agree) he, Oren, is one of our most talented writers in the field of political economy. Make that the most talented.
Here's hoping the world is as simple as Don and Oren claim. If so, their tariff regime should fix things in short order, especially if they combine it with an elimination of automation. I live in a rust belt state, I can't wait for the flood of new factories as Don implements his 4D chess inspired strategery. Liberation Day may soon become a national holiday:) Good luck America.
"their tariff regime should fix things in short order"
It took three decades of free trade to get us where we are today and it will take a similar amount of time to get back to where we should be. And, yes, there will be pain along the way, especially for the upper- and upper-middle classes who will bitch about consumer prices and profits.
Perhaps you're right, and free trade has been a net negative for the US. Or perhaps our challenges are due to globalization, and that too has been a net negative for the US. Perhaps automation may have been the real culprit. Or, perhaps the US, in spite of the challenges we face, continues to outpace the world on every meaningful metric. Interestingly, Oren and Don never suggest which country has found a way around the inexorable drumbeat of change, or which economy has outpaced us. Their playbook is the ancient grievance playbook of populist politicians exploiting the inevitable unrest that comes with periods of dramatic change. It's easy to promise simple solutions to people who are hurting. Regardless, pining for a return to the 50's seems less promising than planning to dominate the industries of the future. Oren has hitched his wagon to Don, an aging, angry man who publicly brags about "acing" a test meant to detect dementia. A man who gaslights the working class he purports to represent while pocketing an immense amount of illicit loot. As Don's 4D chess strategery unspools, I'll keep an eye out for evidence of the manufacturing renaissance he and Oren promise. They're sure off to an auspicious start:)
I like the first half of your comment: that you may possibly be mistaken on the issue of trade, and I do not necessarily disagree with your doubts about Trump. I've always been disappointed when it comes to presidential politicians, most recently by Clinton and Obama.
Where I do disagree is your assumption that our choice is between a hopeless pining for a return to the 50's (though I do admit that is what Oren seems to have in mind) and the possibility of dominating the industries of the future. I think the latter is not incompatible with tariffs on goods made in low-wage countries overseas (though I would prefer free trade with other advanced industrial democracies for the usual Ricardian reasons).
So what does that leave? An imaginable future quite different from anything we've known in the past, made possible by the latest advances in modern technology (in transport, telecommunications, IT): https://www.amazon.com/dp/B00U0C9HKW
You might think of what I describe there as little more than the third and final stage in the suburbanization of the metropolitan complex: a plan to resettle America in new country towns.
But that is only half of the story. It's also a way to adapt to the never-ending stream of new labor-saving technologies (aka automation) by reducing the hours of labor, which is the way it was done in the past. Automation is nothing new, but the eight hour day once was. At the very least a family-friendly six hour day is long overdue, at least in my opinion.
Upper middle class and above folks are the ones who are best positioned to handle the coming rise in consumer prices. The people who will get squashed will be lower middle class and poor people who simply will not have the ability to cope with rising prices and will have to make some very tough decisions. As an upper class household my kids might have slightly fewer Christmas presents but it won't really be noticeable, we'll just have to make a bigger Visa payment than we would have liked in January. For lower middle class people (who comprise the core of the MAGA base) it's going to be Christmas presents or car payments (or medication, or traveling to see grandma, take your pick). The notion that the impact of higher prices is going to fall especially hard on the upper classes is absurd. We're insulated. The bottom half of the income distribution isn't.
Well, yes and no. In the long-run, the increase in US wages will more than compensate for the increase in consumer prices (the rise in consumer prices being a rough measure of how much money was funneled out of the pockets domestic low-skilled workers in the first place by shifting production to low-skilled, low-wage workers in countries overseas). But of course we don't live in the long-run, so yes I agree the pain will be greatest for the working poor.
OTH, as an upper-middle-class person myself I can imagine how disappointed I will be when I can no longer purchase relatively complex things manufactured in China at unbelievably low prices. I recently read that the purchase price of a new iphone might go from $1000 to $2000! Why? Because that extra $1000 is now going into the pockets of the US workers now making the parts and putting them together here in this country.
Manufacturing profits will similarly decline, which is the real reason that tariff reform is such an uphill battle: the "donor class," which bankrolls both political parties, is adamantly opposed. (Same for low-skilled immigration reform.)
I think it’s a fantasy that wages will rise to compensate for the increased costs, the much more likely outcome is that we’re all just poorer until a new president comes in and ends the tariffs (which is pretty likely, as such businesses won’t scramble to onshore production). But time will tell I guess.
Great comments here, and I share the sentiment that this article misses the mark, if I am being very kind to the author.
Doesn't it seem that the so-called Communists are the ones behaving in predictable ways and trade with them entails a great deal of certainty?
So the US government monumentally shifts the ground under American businesses and consumers overnight, without any sort of discernable economic, industrial, or legislative plan, and somehow this is China's and American businesses' fault?
Further, I have seen many claims of how China abused the system and is taking advantage of the USA. Or how the USA provides these expensive and burdensome common public goods in the form of global defense, etc. But have not seen a single proponent of these ideas back these claims up. And upon reflections, claims such as these seem ridiculous.
In summary, no plan, grandiose goals dependent on magical thinking, not our fault, all hot air and bombastic rhetoric from this admistration.
Yeah, I'll be honest, I may not want to see the grasshopper starve, but I wouldn't mind a few years of malnourishment and hard struggle, maybe just short of death.
This doesn’t even make any sense. A person opens a Dog “Boutique”, they sell dog food which they CAN get domestically and toys, leashes, collars, beds, and “clothing” which they get from China at a price PEOPLE CAN AFFORD and then resells it makes a profit and a living and life is Good.
What you are saying is they are fools. They should “invest” in manufacturing those things ( Multi millions to do that) here and then selling them At a price no one will pay? Do you hear yourself? Every single American Benefited from buying from China ( walmart, target, all big box stores) and NOW you’re blaming business owners?
You need to get a better understanding of poverty, commerce and the everyday working class folks, the Tariffs are ridiculous without the permanence AND the funds to build the infrastructure here. Instead the Tariffs are literally destroying Small businesses with NO WHERE to turn.
Mr. Cass, you don’t have to keep doing this. You look ridiculous as it is painfully obvious that Trump is using Tariffs to initiate each country or individual business to come forward and offer him something so he can personally enrich himself. It is clearly not to help the forgotten American worker. You do know that don’t you?
Yes, this is the bottom-line Oren, agree. They argued that "free trade would liberalize China and convert it into a responsible trading partner" wrong it did not. This alone kills their argument all day long. Now, can blame it on Xi coming in in 2012 BUT still doesn't change the argument. They are not responsible trading partners. Never have been. All they want to do is get over on the hairy big nosed barbarians.
Also agree, this was going to happen with or without Trump. It had to. The system was heading for total implosion.
Aha, so, this isn't the unfolding of Don's art of the deal after all? Now it was inevitable:). Good to know. I mistakenly thought Don's incisive actions were having a big impact as he fights to extricate America from its hellhole. Have you bought his meme coin yet? I got in on the gold sneakers, they're still available for $499 if you missed out. I heard he's not keeping any proceeds, he's plowing it right back into his dogged crusade to save the workin stiffs...
So good, so true. I am not a Trump fan, and did not vote for him, but your analysis here is spot on. I may become a Republican, and I will blame it on you.
I've been recommending your Substack Oren to folks who want to understand the steelman case for tariffs but this particular piece is embarrassingly bad. Business owners have to play the hand their dealt, not the one they wish they had.
Forgive me for believing that you are trying to positively spin a downright thoughtless tariff war. Have you started and run a successful small business? Your approach is as elitist as anything out of the Biden administration you abhorred, only with orange stains and mold on it.
Thoughtful, challenging, fun as always. But I think a bit too bombastic on the "why didn't you adjust away from China sooner, you are just dumb and wrong" part. And this is where the US consumer and the US consumer environment holds some responsibility for the current situation. The reason the theoretical US business outsourced to China and the reason very few diversified away from low cost countries in the past 10 years might be that US consumers demand low prices (as capitalism kind of fundamentally says they will). So if you as a business say "no I believe in US industry so I will onshore more of my work and customers will pay more because they share my belief in US industrial needs" you would have been (mostly) wrong. You would (mostly) have gone out of business. That would not have been clever. As a business owner the challenge for me is not just what I think is right, but what my competitors will do and how I can compete successfully with them and if I can do something cheaper to the same standards as I can get in the US elsewhere I will. If anyone in my industry is using China or other low cost markets and I am competing with them I either have to sell something substantially better or different than them so that my customers will pay more. In a service business that's viable. If I make fridges or cars or widgets, it's just not realistic a lot of the time for a lot of suppliers. Could tariffs have a role in shifting that equation? Yes. You are not getting an argument from me on that as a viable path. But throwing up an overnight trade blockade (via tariffs) and thinking that anyone who didn't see that coming is stupid ignores the reality of running a business. If we were serious about onshoring industrial production then a more coherent approach to what industries, what production, what tariffs, what countries would give you a better chance of long-term success. Creative uncertainty is no more likely to have a positive outcome than creative destruction. In fact they feel very much like the same "break stuff and hope it all works out in the end" mentality that you dislike from your economist colleagues.
"the reason very few diversified away from low cost countries in the past 10 years might be that US consumers demand low price"
This has been Oren's point for many years though: government policy is necessary for establishing rules of the game that take into account not just immediate consumer welfare, but both consumer and producer welfare over the mid-long term.
There were businesses that managed to convince consumers not to dump their products for cheap Chinese imports. And those businesses will be well positioned going forward. (Unless Trump changes his mind again, which he probably will, because unlike Oren, Trump is in it mostly for Trump not for American workers.)
Right, Brian. I'd agree. And Oren has been intellectually honest about supporting some of the less flashy elements of President Biden's more quiet protectionism and industrial policy in that direction. But that's the problem here. Tariffs might work in the long term. They might. But it takes time and patience to reverse decades of de-industrialization (some of which is not work we want back) and unpredictable tariff policy would not give any sensible business owner the confidence to reinvest in the US. The other issue is that this is not a bilateral world. The most likely outcome of a trade war with China would have been removal of production from China to another low-cost country, or at least a diversification away. The only way to deal with that in the medium term would be to take steps to either lower production costs in the US or chase the work around the globe for years with tariffs. Lowering production costs in the US? Robots, AI and automation might do it. Would be great for profits for US companies. But it wouldn't be a great deal for the US working class that got screwed by globalization. It would just be another twist of the knife. There's a joke about a London cabbie who is at the Albert Hall and is asked by a tourist how to get to Buckingham Palace. "Well I wouldn't start from here," he replies. If I wanted to reindustrialize I wouldn't start from a rose-tinted vision of the industry of 1985. If we were worrying truly about how to bring meaningful strategically significant industrial labor back to the US without driving down labor cost to a competitive level (which is what tariffs do - oversimplified), then the answer remains the same as the creative destruction answer that Oren hates so much. We have to really commit to a more skilled educated workforce that allows us to compete on quality not price. Or close our market off and produce Pontiacs and Oldsmobiles for ourselves and no one else.
The short time horizon of mass democracy presents a serious problem here.
I belly laughed at this one. Oren is getting nervous, knowing that his legacy is tightly tethered to the whims of the orange man baby. He’s sunk to blaming the businesses for the carnage of DonOrenomics:). Life as a think tank elite-never sullied by real world uncertainties, always with a ready excuse for why the plan blew up. And sadly, never a word as Don decimates the rule of law, obliterates our long time alliances, hollows out our scientific golden goose, and drives away the smartest students, all so central to a successful economy. Weren’t all the indicators so much more positive just a few short months ago? It’s becoming clear that Oren shares Don’s world view of returning to the 50’s. Maybe they will discuss the dangers of vaccines when Don gives him a ride on his groovin new plane!
I dare say you're right, and frankly it surprises me how silly Oren is here. I think many people to this website would agree that giving away our industrial base to China in 2000 was a terrible idea. But clearly the idea that everyone is now being mandated to change direction on a dime or you're going to go bankrupt--without a shred of government support, leadership, or industrial policy-- is absolutely absurd. And of course, undermining Oren's contention that 'this is how Democracy is supposed to work' is the simple fact that, no one--but literally no one--voted for this empty-headed bombastic policy that's so idiotic that Trump had to back off within days of imposing it. Additionally, underscoring the utter idiocy of the whole gambit, Trump nearly broke the international economy in the first week of Liberation Day, as people who sit at the center of the finance world saw up close with complete shock and horror--and most of those people I dare say are Republicans.
I'm really surprised that Oren is unable--or rather unwilling--to talk about what Trump's economic policies ACTUALLY are and will work, as opposed to merely accepting what they CLAIM to be, ie. an attempt to reshore manufacturing in America. There is simply no evidence they would work in any way to achieve that end--and Oren knows it. It was all a half-assed, lazy effort to bully the international economy for purposes that remain entirely unclear, precisely because no one can figure out how they would help Americans in the slightest. Oren is quite aware of the difference between rhetoric and reality. But he is unable to break ranks with Trump. Such a shame that someone who I really previously appreciated for their intellectual rigor and independence, calling his profession on their intellectual bankruptcy, is proving themselves to be just another weak-kneed apologist for a dangerously out of control administration.
Well said. It's infuriating to watch elites who know better bend the knee. I always knew a demagogue like Don was possible, history is replete with them. But I was woefully naive in believing that we'd have leaders who would stand up to them. It's caused me to read more about the historical patterns of authoritarianism, and it's not encouraging. Acquiescence of elites is critical to the success of authoritarians, and history shows how so many are willing to go along. Sadly Oren fits the mold, unable to place the common good over personal advancement. One thing Don has been successful at is driving shame out of our public discourse. And to think there was a time my fellow conservatives prattled on about character counting. How quaint.
Couldn’t agree more, I think I’m reading the Onion sometimes.
A 10% tariff won't cause businesses to change sourcing away from China since that will result in a less than 5% markup at retail in the U.S. Since investment costs and production costs in the U.S. are likely to be significantly higher, why wouldn't a businesses simply continue to source from China or shift their sourcing from China to another foreign nation? U.S. consumers will sensibly choose the lowest cost alternative--assuming quality and delivery times are acceptable.
A better approach would be to subsidize investment for production of defense- and medical-critical products. You can also make a case that it is sensible to re-shore products that can be produced with a high degree of robotics and minimal labor--but that will require significant investment and probably government support (i.e., CHIPs Act), but we aren't going to produce labor-intensive products such as footwear or clothing in the U.S., so it is stupid to tariff them--a tariff would be a regressive tax that will hurt the poor the most--or to subsidize them.
In any case, this administration's economic proclamations (note legislation is absent) and exemptions, look like central planning--which is problematic in so many ways.
100%. Industrial policy and explicit import quotas for strategic industries is a far better way to re-establish key manufacturing sectors in the US that broad based tariffs. Biden was closer to right on this with CHIPS than Trump is with tariffs. But unfortunately he trusts Peter Retardo for some reason so we all just get fucked.
Trade With Capitalists Should Be Uncertain.
Fixed It For You.
Wonderfully written. Whether you agree with him or not (I happen to agree) he, Oren, is one of our most talented writers in the field of political economy. Make that the most talented.
Here's hoping the world is as simple as Don and Oren claim. If so, their tariff regime should fix things in short order, especially if they combine it with an elimination of automation. I live in a rust belt state, I can't wait for the flood of new factories as Don implements his 4D chess inspired strategery. Liberation Day may soon become a national holiday:) Good luck America.
"their tariff regime should fix things in short order"
It took three decades of free trade to get us where we are today and it will take a similar amount of time to get back to where we should be. And, yes, there will be pain along the way, especially for the upper- and upper-middle classes who will bitch about consumer prices and profits.
Perhaps you're right, and free trade has been a net negative for the US. Or perhaps our challenges are due to globalization, and that too has been a net negative for the US. Perhaps automation may have been the real culprit. Or, perhaps the US, in spite of the challenges we face, continues to outpace the world on every meaningful metric. Interestingly, Oren and Don never suggest which country has found a way around the inexorable drumbeat of change, or which economy has outpaced us. Their playbook is the ancient grievance playbook of populist politicians exploiting the inevitable unrest that comes with periods of dramatic change. It's easy to promise simple solutions to people who are hurting. Regardless, pining for a return to the 50's seems less promising than planning to dominate the industries of the future. Oren has hitched his wagon to Don, an aging, angry man who publicly brags about "acing" a test meant to detect dementia. A man who gaslights the working class he purports to represent while pocketing an immense amount of illicit loot. As Don's 4D chess strategery unspools, I'll keep an eye out for evidence of the manufacturing renaissance he and Oren promise. They're sure off to an auspicious start:)
I like the first half of your comment: that you may possibly be mistaken on the issue of trade, and I do not necessarily disagree with your doubts about Trump. I've always been disappointed when it comes to presidential politicians, most recently by Clinton and Obama.
Where I do disagree is your assumption that our choice is between a hopeless pining for a return to the 50's (though I do admit that is what Oren seems to have in mind) and the possibility of dominating the industries of the future. I think the latter is not incompatible with tariffs on goods made in low-wage countries overseas (though I would prefer free trade with other advanced industrial democracies for the usual Ricardian reasons).
So what does that leave? An imaginable future quite different from anything we've known in the past, made possible by the latest advances in modern technology (in transport, telecommunications, IT): https://www.amazon.com/dp/B00U0C9HKW
You might think of what I describe there as little more than the third and final stage in the suburbanization of the metropolitan complex: a plan to resettle America in new country towns.
But that is only half of the story. It's also a way to adapt to the never-ending stream of new labor-saving technologies (aka automation) by reducing the hours of labor, which is the way it was done in the past. Automation is nothing new, but the eight hour day once was. At the very least a family-friendly six hour day is long overdue, at least in my opinion.
Upper middle class and above folks are the ones who are best positioned to handle the coming rise in consumer prices. The people who will get squashed will be lower middle class and poor people who simply will not have the ability to cope with rising prices and will have to make some very tough decisions. As an upper class household my kids might have slightly fewer Christmas presents but it won't really be noticeable, we'll just have to make a bigger Visa payment than we would have liked in January. For lower middle class people (who comprise the core of the MAGA base) it's going to be Christmas presents or car payments (or medication, or traveling to see grandma, take your pick). The notion that the impact of higher prices is going to fall especially hard on the upper classes is absurd. We're insulated. The bottom half of the income distribution isn't.
Well, yes and no. In the long-run, the increase in US wages will more than compensate for the increase in consumer prices (the rise in consumer prices being a rough measure of how much money was funneled out of the pockets domestic low-skilled workers in the first place by shifting production to low-skilled, low-wage workers in countries overseas). But of course we don't live in the long-run, so yes I agree the pain will be greatest for the working poor.
OTH, as an upper-middle-class person myself I can imagine how disappointed I will be when I can no longer purchase relatively complex things manufactured in China at unbelievably low prices. I recently read that the purchase price of a new iphone might go from $1000 to $2000! Why? Because that extra $1000 is now going into the pockets of the US workers now making the parts and putting them together here in this country.
Manufacturing profits will similarly decline, which is the real reason that tariff reform is such an uphill battle: the "donor class," which bankrolls both political parties, is adamantly opposed. (Same for low-skilled immigration reform.)
I wrote about all this back in the day: https://shorturl.at/nbyCX
You raise very good points.
I think it’s a fantasy that wages will rise to compensate for the increased costs, the much more likely outcome is that we’re all just poorer until a new president comes in and ends the tariffs (which is pretty likely, as such businesses won’t scramble to onshore production). But time will tell I guess.
Great comments here, and I share the sentiment that this article misses the mark, if I am being very kind to the author.
Doesn't it seem that the so-called Communists are the ones behaving in predictable ways and trade with them entails a great deal of certainty?
So the US government monumentally shifts the ground under American businesses and consumers overnight, without any sort of discernable economic, industrial, or legislative plan, and somehow this is China's and American businesses' fault?
Further, I have seen many claims of how China abused the system and is taking advantage of the USA. Or how the USA provides these expensive and burdensome common public goods in the form of global defense, etc. But have not seen a single proponent of these ideas back these claims up. And upon reflections, claims such as these seem ridiculous.
In summary, no plan, grandiose goals dependent on magical thinking, not our fault, all hot air and bombastic rhetoric from this admistration.
Yeah, I'll be honest, I may not want to see the grasshopper starve, but I wouldn't mind a few years of malnourishment and hard struggle, maybe just short of death.
The troll factories really come out for you Oren. You're doing good, keep it goin!
This doesn’t even make any sense. A person opens a Dog “Boutique”, they sell dog food which they CAN get domestically and toys, leashes, collars, beds, and “clothing” which they get from China at a price PEOPLE CAN AFFORD and then resells it makes a profit and a living and life is Good.
What you are saying is they are fools. They should “invest” in manufacturing those things ( Multi millions to do that) here and then selling them At a price no one will pay? Do you hear yourself? Every single American Benefited from buying from China ( walmart, target, all big box stores) and NOW you’re blaming business owners?
You need to get a better understanding of poverty, commerce and the everyday working class folks, the Tariffs are ridiculous without the permanence AND the funds to build the infrastructure here. Instead the Tariffs are literally destroying Small businesses with NO WHERE to turn.
Sorry but WTA%?
Mr. Cass, you don’t have to keep doing this. You look ridiculous as it is painfully obvious that Trump is using Tariffs to initiate each country or individual business to come forward and offer him something so he can personally enrich himself. It is clearly not to help the forgotten American worker. You do know that don’t you?
Yes, this is the bottom-line Oren, agree. They argued that "free trade would liberalize China and convert it into a responsible trading partner" wrong it did not. This alone kills their argument all day long. Now, can blame it on Xi coming in in 2012 BUT still doesn't change the argument. They are not responsible trading partners. Never have been. All they want to do is get over on the hairy big nosed barbarians.
Also agree, this was going to happen with or without Trump. It had to. The system was heading for total implosion.
Aha, so, this isn't the unfolding of Don's art of the deal after all? Now it was inevitable:). Good to know. I mistakenly thought Don's incisive actions were having a big impact as he fights to extricate America from its hellhole. Have you bought his meme coin yet? I got in on the gold sneakers, they're still available for $499 if you missed out. I heard he's not keeping any proceeds, he's plowing it right back into his dogged crusade to save the workin stiffs...
Great read!
So good, so true. I am not a Trump fan, and did not vote for him, but your analysis here is spot on. I may become a Republican, and I will blame it on you.
Yea I thought American businesses loved disruption? So are they gonna layoff all the Chief Disruption Officers?
I've been recommending your Substack Oren to folks who want to understand the steelman case for tariffs but this particular piece is embarrassingly bad. Business owners have to play the hand their dealt, not the one they wish they had.
Forgive me for believing that you are trying to positively spin a downright thoughtless tariff war. Have you started and run a successful small business? Your approach is as elitist as anything out of the Biden administration you abhorred, only with orange stains and mold on it.