Yesterday, President Trump announced Liberation Day. That's when the Tariff Fairy comes to your country and sprinkles upcharges on all of your imported goods. Imports from good countries get small tariffs while imports from naughty countries get great, whopping tariffs. The Tariff Fairy uses this handy chart.
As I've written previously, my mind was shaped by the Wall Street Journal and conventional Republican talking points for decades, so I can't be sure that I'm seeing things clearly or if I'm engaged in Pavlovian reaction to this. "Tariffs are bad!" says the WSJ. It's drilled that into my head for years.
But are they?
As Thomas Sowell says, there are no solutions, only trade-offs. For someone like me, a knowledge worker and a member of the investor class, they may be very bad indeed. SP500 futures are down about 3.5% as of this writing. At a lull in my employment, I took the time yesterday to watch Trump's Rose Garden speech about the tariffs. It became clear, as it has from listening to him and JD Vance, that he's not looking out for people like me. He's looking out for the people that used to work here.
That's an old blue jeans factory in Hattiesburg, MS. When you drive through small- and medium-sized towns across the US, you see lots of places like that. I was in Montgomery recently and the place looked pretty beaten-up. San Diego does, too, but San Diego got trashed by progressive leniency in the War on Drugs and permissive attitudes towards crime. Hattiesburg and Montgomery got dry-gulched by the countries on the Tariff Fairy's Naughty List.
I remember the first time I took a business trip to Philly. As I drove the freeway past one massive, abandoned factory after another, I felt vaguely nauseous. It was like visiting a post-apocalyptic city from a dystopian movie. I half expected to see Anthony Zerbe shaking his fist at me through one of the broken windows.
The men that worked there didn't have advanced degrees and they didn't check the SP500 every day to see how their portfolio was doing. They had wives, children, homes and boats on trailers. Nowadays, they have fentanyl.
The chattering classes don't come from that world. The people who shape our, my, opinions aren't potential factory workers who have seen half of their family die from overdoses while the local mill's roof slowly collapses. Because the chattering class doesn't associate with that kind of scrofulous riff-raff, they don't have a visceral compassion for them.
I have some amount of interaction with that riff-raffery in my social life and at work and feel a bit of kinship towards them. My dreams of a vacation home in Alabama fade with every drop in the SP500 and every day of partial employment, but it's a vacation home, not a wife and family.
Women don't want to marry a man who earns less than they do. For a guy of average intelligence with a high school diploma, that blue jeans factory in Hattiesburg is a ring on his left hand and a colicky baby to comfort at night. It's a boat with an outboard on a trailer and a weekend drinking PBRs and fishing on Hennington Lake with family and friends. It's Little League and cookouts and walking your little girl down the aisle to where a nervous young man who also works at the jeans factory awaits her with adoring eyes.
Maybe that's the point of the tariffs. Maybe the tariffs aren't such a bad gamble after all.
5 comments:
The problem with those abandoned factories is that the building wasn't the valuable part. What was valuable was the machines and tooling, and the expertise to install, run, and maintain them. And those things are gone. Like you can see in your pictures, those buildings are empty husks. The owners stripped out and sold everything that had any conceivable value. The only reason the buildings proper are still standing, is their scrap value wasn't high enough to make it worth the effort to pull them down. And they are on land that nobody wants for anything else, for any of several reasons. I've been involved with people who were "refurbishing" abandoned buildings to make them functional again, and usually they spend more than they would have by starting from nothing. On top of everything else, they frequently inherit massive legal liabilities due to chemical contamination by the previous owners.
The hollowing out of US industry has been going on since at least the 70s. These abandoned buildings are of no value in bringing it back. The skilled workers who used to run them are dead, retired, or long since moved away. Using tariffs to jack up prices is of extremely limited value if there is no one left in town with the skills, abilities, or money needed to create a business that could take advantage of the higher prices. Everyone just ends up paying an extra sales tax to the federal government, and things get worse.
Incidentally, that handy "tariff chart" isn't what it says it is. They way you get those numbers is to first go to this table of US trade balances with various countries:
https://worldpopulationreview.com/country-rankings/us-trade-deficit-by-country
Then take the first column (our trade deficit with that country) and divide it by the second column (our total trade with same), and multiply by 100 to get a percentage. That's it. It is just the percentage of their trade that is in excess of what we sell to them. It doesn't say a damned thing about what level of tariffs they are charging on our goods, it just says how much more stuff they sell us than we sell them back. Some of those countries may be accomplishing this deficit through tariffs, but most of them are doing it just by being able to make and sell stuff cheaply, and then not having enough money to buy things back in return.
Tim, points well-taken. You are spot on with all of that. When I was in Hattiesburg and saw the place to take those photos, I thought the same thing. I thought it would be a good use of government funds to return the land to at least an industrial-use vacant lot. The problem is that EPA regs say that if you tear down such a place, it needs to be left in perfect, residential-level purity. That's way too expensive so no one does it either in Mississippi or Pennsylvania or Ohio or ...
I had heard the same thing about the tariff chart. Sigh.
Still, my point in this post is that Trump and his henchmen aren't working to make life better for people like me, they're working to make life better for Joe hardhat. If they wanted to make my life better, they would have ditched the whole tariff thing. If he'd done that, I might be closing on a house in Dixie next week.
"they're working to make life better for Joe hardhat"
Well, that's what they want us to think, at least, and it is probably the most charitable interpretation of what they are doing.
But, unless they follow up with something other than just tariffs, it's not going to work. The tariffs might make it easier to sell goods at a profit, but they are also making it more expensive to buy the machines and tools and parts needed to start a new factory, and raising the cost of living of your potential employees so that they are going demand more pay.
Like you said, if they even convert "brownfields" into places that the new genration of factories can be constructed, that would help. As would investing in startup companies so that they can afford to buy the equipment needed, install it, bring in the people to operate it, and then get it all running. The question is, are they doing that, or showing any particular indication that they plan on doing it in the future?
Tim, I couldn't agree with you more. The atmosphere, the gestalt, of a city peppered with abandoned factories is utterly demoralizing and depressing. After reflection, I think these tariffs were a terrible idea. I plan to post about that next.
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