He Just Doesn’t Get It

There’s a wonderful mythology, which I have blogged many times before, the underlies Donald Trump’s economic policies: foreign competition (trade imbalance) and high taxes stifle job-creation. He does seem to like to attach his tax reform gift to the rich who didn’t need it as the cause of a solid stock market and lower unemployment rate. That the upward economic trend line is just a rather direct and linear extension of the post-Great Recession recovery that actually began years before Donald Trump even ran for office, and certainly long before that mega-drop in corporate taxes, seems to fall on his deaf ears.

The numbers seem to tell us that the job market was largely unaffected by that tax cut, but companies have instead used those windfall resources to pay their shareholders extra dividends and to buy back their own stock to drive their share price higher. That’s just moving numbers around, but the resulting cutbacks in social programs, particularly in healthcare, have just increased the cost of living for most of us.

Foreign competition and trade imbalances are the issues of the late 1990s and first few years of this century. Hardly issues for the current era. Trump’s obsession with bring manufacturing jobs “back to the United States” mistakenly equates that effort to more and better jobs here. But while manufacturing is “re-shoring” like never before (the tariff war might stop that dead in its tracks), that trend is about automation not foreign competition. Those who own automated machines make the money… and they don’t need to hire expensive labor instead.

Just as coal is not going to re-accelerate as the energy-driving fuel of the future – it’s dirty and demand for the stuff has been plummeting for decades – manufacturing jobs are rapidly vaporizing too. Oh sure, some really specialized manufacturing jobs might remain, but over the next five or six years, you can expect an average 20% to 25% fewer jobs in this sector, depending on specific skill, even as we bring more manufacturing back to the U.S.

“Manufacturing jobs once provided a ladder to the middle class for millions of Americans, but opportunities for a lifetime career on the assembly line have been declining for years due to technological changes and outsourcing. And we might not have hit bottom yet.

“The statistics bureau provides data for a variety of manufacturing and factory jobs, and the outlook is bleak for nearly all of them. The number of forging machine setters, operators, and tenders will shrink by 21% by 2024. Cutting-machine jobs will decline by about 21%, as well. Jobs for model makers and pattern makers will fall by 22%.

“But not all manufacturing jobs are vanishing. In the next decade, companies will need to hire more people for highly skilled manufacturing jobs, including those who can operate and program computer-controlled machines. The number of jobs in this area will grow by 18% to 204,700.” CheatSheet.com, July 5^th. But Donald Trump is telling the world that our trade imbalance is a direct result of employment-killing foreign competition, and no a word about what his billionaire cronies are really doing to kill jobs: installing lots of artificially intelligent automation and getting rid of people. In addition to decimating manufacturing jobs, automated systems will tank clerical, sales, research, financial, legal and even medical jobs at every level of education and expertise.

The setting of high tariffs to control imports has really never worked in the modern era. The infamous Smoot Hawley Tariff, imposed by the feds in 1930 to create more U.S. jobs by making foreign manufactures more expensive, actually killed a struggling job market and extended the Great Depression by years. And in today’s world, where there is a mixture of components from different countries, the manufacturing process is anything but simple to attack with nation-specific tariffs.

Watching Harley Davidson being forced out of the U.S. because the hike in steel and aluminum prices because of the Trump tariff has an even sadder component. While they have to keep prices stable to continue their European sales (bikes would cost a couple of thousand more each if they were made in the U.S.) – about 15% of their business – that so many Harley buyers are staunch Trump supporters could decimate their core business here in the U.S. Trump loyalists could stop buying Harleys… and bankruptcy could be just around the corner.

Likewise, construction costs have skyrocketed, bringing many building efforts to a grinding halt. Any companies that use steel and aluminum – from appliance makers to the automotive industry – are likely to see sales plummet from the higher, tariff-driven costs.

Then come the resulting layoffs, and even foreign companies like BMW (which has a huge factory in South Carolina) and Toyota (with plants in Kentucky and Indiana) that brought auto manufacturing jobs to the United States by the thousands will be forced into cutbacks. Retaliatory tariffs are equally likely to hurt American companies, particularly Trump-supporting farmers in the Mid-West, as countries like China simply stop buying those exports altogether (bye, bye, soy beans).

And China has more than a few dirty tricks up its sleeve that simply make it really difficult for Americans trying to do business there. They are not retaliatory tariffs, but they have the same impact. Stories abound as vital fruit and vegetable containers lie idle pending some delay in inspection… rotting in their boxes… and thus have to be sent back. Inspections, delays, enforcing nit-picking rules and challenging even minor errors in forms are China’s “unofficial” reply to Mr. Trump’s attempt to bully them into trade and tariff concessions.

Citing the necessary statutory requirement of a finding of a national security threat, the only way the law allows the President to set such tariffs, the Trump administration has clearly labeled Canada and Europe as such national security threats… turning allies into enemies. Republicans are now “whatever Trump wants” automatons, even though it has always been a core GOP value to foster “free trade.” Could this trigger another big recession? Especially if Trump holds his current line? I would be shocked if that did not happen, although it might kick in after the November elections.

I’m Peter Dekom, and you have to know that, while reasonable concessions are possible, there is a growing international movement to oppose Trump policies at every turn.