Despite Trump, Ford moves ahead with plans for Mexico plants

[NED funded]

Let me address Trump and bluffing first: Yeah, I don't think he is bluffing on such things. However, just because he seeks to push the things through that he said he would does not mean they will ultimately materialize. The Muslim ban was put in place and promptly put on hold. He might get something similar in place now, but by now, and I sadly have to give him credit there, even though he likely did not mean it that way, most of those that would have used these channels to come into the US will have. But that was always a kind of self-fulfilling prophecy. Announce that you will ban people and they will pour in before it is properly in place. That's why he rushed it out as was, ultimately shooting it in the foot because he did not properly work it out (as his new EO on the matter might be).
The wall, well, we will see. That has to be approved by quite a few people. I believe that he wants to get it built, but whether his party will support it is not fully sure just yet.

Either way, regarding cars. What I mean is not necessarily that it is a bluff, but more that the tax on foreign goods might only be in place for 3 years. You can tell already that if the democrats get into a position to undo that, they will. That's why the loss of demand has to be substantial in order for companies to go and move instead of weathering out the storm.
Regarding buying power: it is true that the US as a whole has a lot of buying power. But that buying power is mostly concentrated on the upper class/the upper middle class. For the lower and middle classes, an increase in prices does affect their buying power substantially. Returning to a protectionist stance would knock out most of the major retailers pretty quickly, as the US imports a lot of goods. Over time, yes, the US could return to old levels of productivity, but that is a long term project. In the short term, you would have an increase in the cost of living that most households simply could not afford without higher wages etc. Competition will emerge, but remember the aggressive nature of the American economy, which means that quite a few people will lose a lot over this.
And the question ultimately is: for what gain? You said protectionism would be the best thing to do. Why? Basic economic theory suggests that it will only cause inefficiency and lower wealth overall. There were reasons why most countries in the world gave up on protectionism, and those reasons usually involved mutual gain. There are other means to get more people employed in the US. Just a majority of the EC did not vote for them.



Ah sorry, I was not trying to be elegant. It is just how economists talk, sorry:/
Anyway, the line of thought for the 'bring jobs back to America' narrative basically goes like this:
Tax cars that are produced elsewhere-->price increases-->demand falls-->companies producing elsewhere lose earnings-->they move back to the US
I attacked this on multiple points:
A) Because cars are sold by retailers, a 30% increase on the invoice price is not a 30% increase on the retail price, so demand is affected less
B) Even manufacturing plants in the US import raw material or parts from other countries, so even prices for US-made cars increase, so their advantage over those who produce in Mexico falls
C) Operating costs in the US are higher, so if you have say a 10% loss in revenue due to the tax, only like 7% of that would be regained by operating in the US
D) Moving production back into the US will cost money, so the demand-induced gap needs to be big enough
E) Moving production back into the US costs time, during which they have the negative effects of the tax still, diminishing the value of moving back - especially if Trump should only make one term (with Democrats likely giving up on the tax should they come into power)

Due to these points I conclude that Trump needs to induce a very strong loss in demand for cars made elsewhere, in order for his plan to work. A 30% tax - if he can even get it through...congress was it?.... might not be enough to do so.

Nah I just like to remove the elegant english of discussion regardless of the topic. It is something I find annoying in dicussions.

a) We do not really import that many auto parts from Mexico or raw resources, for the most part Mexico is just the country we assembly the car. See data, click on 2017 https://one.nhtsa.gov/Laws-&-Regulat...(AALA)-Reports. And even then, we can tax assembled cars and not auto parts. China does this quite frequently.
b) The idea is to increase the price of producing elsewhere and incentivising companies to stay. So a well thought out border tax should prevent further outsourcing. The incentivising things to stay makes investment on capital better and as such productivity gains offset difference in wages.

[Fahrenheit]

I seem to recall Republicans losing their collective shit over Democrats and specifically President Obama "picking winners and losers and killing the free market" over the past several years. Now Trump talks tariffs, uses the presidency as a bully pulpit to tweet about un-American companies, and get his goon VP to cut a sweetheart deal with Carrier in a publicity stunt.

Let's add that latest nugget of blatant hypocrisy to the rest shall we?

Executive orders are suddenly a good thing. Despite Trump's biggest one getting shit on by Judges nominated by both Democrats and Republicans in short order.
The Trump clan racking up $20M in security/travel expenses in one month. FYI, Obama and family cost approximately $85M over all eight years.
Trump and his ilk harping on President Obama for playing golf. When Trump has played more holes of it than days he's been President so far.

I'm no Democrat, but FUCK these people are maddening.

[Delana]

And the question ultimately is: for what gain? You said protectionism would be the best thing to do. Why? Basic economic theory suggests that it will only cause inefficiency and lower wealth overall. There were reasons why most countries in the world gave up on protectionism, and those reasons usually involved mutual gain. There are other means to get more people employed in the US. Just a majority of the EC did not vote for them.

For what gain? Maybe to get back to where we were before NAFTA, when the middle class was strong, and the lower class wasn't being told that every year was its last year. Free trade involved gain for the top half of the US economy. Mostly on the coasts.

Convince me why we should maintain the policy that got us here. Assuming that we're not interested in the global optimum policy, and we're happy to do what's in America's best interest.

As far as I can tell all free trade offers is doom for the American working class. That's not a very attractive policy.

[Kiri]

Nah I just like to remove the elegant english of discussion regardless of the topic. It is something I find annoying in dicussions.

a) We do not really import that many auto parts from Mexico or raw resources, for the most part Mexico is just the country we assembly the car. See data, click on 2017 https://one.nhtsa.gov/Laws-&-Regulat...(AALA)-Reports. And even then, we can tax assembled cars and not auto parts. China does this quite frequently.
b) The idea is to increase the price of producing elsewhere and incentivising companies to stay. So a well thought out border tax should prevent further outsourcing. The incentivising things to stay makes investment on capital better and as such productivity gains offset difference in wages.

Regarding a), I was only talking about a proposed general border tax because that was the proposal in the room. Taxing assembled cars only is a different thing and would be more effective, yes.
Regarding b), this only increases the cost of producing elsewhere for products meant for the American market. While it will incentive companies to produce for the American market in America, producing for other markets is still cheaper in other locales and American exports still compete with cheaper cars produced elsewhere. Some of the manufacturers that moved some capacities back to the US do that, too. They still produce cars in Mexico, just not the cars meant primarily for the US market.
The investment on capital does not increase though compared to current investments - manufacturers just off-set an artificial cost. Without actual subsidies, they still have a loss in productivity (keeping labour margins the same, i.e. no automation).

Mind you that I agree that a well thought out border tax can fulfill the goal of job creation in America, I agree on that. However, great care has to be taken when doing so, in order for the fiscal impact to be net-positive for the US. I still dislike it in general, as it causes a net loss for the world economy, just like any protectionist policy. That is why I consider it a second-best solution at best.

For what gain? Maybe to get back to where we were before NAFTA, when the middle class was strong, and the lower class wasn't being told that every year was its last year. Free trade involved gain for the top half of the US economy. Mostly on the coasts.

Convince me why we should maintain the policy that got us here. Assuming that we're not interested in the global optimum policy, and we're happy to do what's in America's best interest.

As far as I can tell all free trade offers is doom for the American working class. That's not a very attractive policy.

Harking back to what I said in response to Mystic Snow, this is not about the current situation being better than the prospective one (at least when the border tax is competently implemented, i.e. not in the form that was proposed so far). The problem, as you correctly identified, is that free trade dis-proportionally benefited the big companies in particular. That is not necessarily the fault of globalization and trade as much as it is the fault of the US economic system and its brand of capitalism. These problems are not going to go away just because the US returns to a more isolationist and protective policy.
Most research that I have seen, such as from the congressional research service ( https://fas.org/sgp/crs/row/R42965.pdf ) concludes that the job loss stemming from NAFTA was not as alarming as some feared (and others want people to believe). The middle class suffered more from automation and agglomeration than globalization, it is just that globalization enhanced the latter effects. For example, globalization severely supported the research that allowed for better automation. However, that level is already reached - and frankly it will continue, protectionist stance or not, as networking will still continue. Thus, a lot of the jobs are not coming back, from these pre-NAFTA times.
That is why, in essence, my problem with the 'protectionism to bring back jobs' narrative is not as much the protectionism itself. It is that it is an insufficient and inadequate answer to the problem, as it does not combat the root causes.
The question is not: is the current situation better than a protectionist stance?
The question is: is a protectionist stance a better salation for the middle class than, say, retraining programs.
Trade is about comparative advantages and disadvantages. Compared to, say, Mexico, the US has a comparative disadvantage in manufacturing, while it has advantages in other areas. Protectionist policies simply subsidize that disadvantage, potentially reducing the overall profits for everyone involved. Retraining former manufacturing workers so that they can work in fields where the US has an advantage, can potentially increase profits overall.
Now, do I believe that every country should fully specialize? Of course not. I am an economist, but also a realist. But I do believe that America's stubborn insistence on having strong manufacturing represents a step backwards, rather than forwards. Believe it or not, the globally optimal policy can coincide with America's best interest. It is just that America sees its own best interest through a very local lens. The people on the coast do not see that strong manufacturing is in America's best interest. Those in the rust belt do. Neither of them speaks for the whole of the American people.

I am an outsider to that, though, so all that I am offering is my perspective and opinion, which I at least perceive as relatively neutral.

[Gestopft]

Free trade involved gain for the top half of the US economy.

As far as I can tell all free trade offers is doom for the American working class. That's not a very attractive policy.

Less that the top half, really. There are two major problems with trade and globalism as it pertains to our economy:
1) Most of the benefits have gone to the top, and
2) The loss of jobs/decline of the middle class.

Our solutions are either to a) reverse policy or b) restructure existing policy

One of the primary solutions for a) is that of protectionism: tariffs etc. to promote companies moving back, and therefore bringing jobs back. This solution has a few problems, though:
-Foreign wages are still well below those here, a competitive advantage that isn't easily overcome
-Assuming you can make it more cost-effective to bring back factories, reshoring is time-consuming and expensive
-The cost of the tariffs would be passed onto the consumer, harming an already damaged working class
-Trading partners would likely counter with tariffs of their own, hurting our companies that export
-Many of the jobs lost were union jobs: there is no guarantee that the returning jobs would be of the same quality, and finally-
-Even if we bring back the factories, we won't bring back the jobs. Automation is killing more jobs than outsourcing. We can bring back factories (in fact, some have been coming back), but more and more, robots are going to be doing the jobs

We need to accept that the days of a strong manufacturing workforce are over. We can produce more with fewer people, and we have automation to thank and/or blame for that. I would suggest, in fact, that a bigger problem than jobs leaving is that the (mostly service sector) jobs that replaced them aren't as good. We need to look at solution b)- using policy to create an economy that helps better spread out the prosperity brought in by a global economy. We need to focus on making the jobs that we do have better, invest in retraining of displaced workers, and look forward to the jobs of the future economy- not pine for an bygone economy that isn't viable anymore.

[Thepersona]

Rednecks would die w/o f150s

I effing love f150 or chevys silverados tho. They're pretty hard to maneuver and park