Presumably that was what the talk about a "Mar a Lago Accord" was about.
But if one is planning on default, it is a mistake a) to hint at it in advance and b) not to increase the debt to be defaulted on as much as possible. If this is it the Administration is, not surprisingly, incompetent nits irresponsibility.
The simplest explanation for Trump's hatred of the US trade deficit is that a figure in negative dollars means he thinks the US is losing money, like it's a business losing $100 billion a year or something.
100%. We really need to popularize another term to describe this thing because the American people have latched onto the negative connotations of deficit and now just think trade is bad.
When he sells something, it’s usually a scam of some kind. So he thinks that buyers in commercial transactions are usually getting ripped off by people like him.
He cannot fathom the idea of mutual interest via trade.
Also he’s a moron who can’t be told anything, and won’t be told anything by the people surrounding him now.
True - a crook or a con man always thinks everyone else is just like they are, much as someone with paranoia tendencies assumes everyone else out there is out to 'get' them and so enters every relationship or transaction with an attitude of needing to gain the advantage on the other guy first, before he does it to them.
If you think there’s a “natural” amount of trade between two countries, that is by default balanced, and you think that tariffs are one of a number of kinds of distortions, that all affect trade linearly, then it would make sense to choose tariffs numbers that are proportional to this deficit percentage.
But I don’t know why you would think any of the parts of that, and even if you did, I don’t know why you would think the constant of proportionality should be precisely 1.0.
I mean as it was mentioned in a few videos on YouTube it's like me getting angry that I have a deficit with my grocery store that only I buy groceries from them and they don't buy any from me. The beauty of globalization and human progress is specialization otherwise we would all be hunter/gatherers. Modern societies take specialization on steroids.
I do understand that targeted tariffs for important industries do make sense. But I seriously don't see the advantage of fighting to bring back low value manufacturing jobs at all. For my country - India, it does make sense to grab some of those low value manufacturing since they are low in the value chain. But a rich powerful country like America, you are supposed to innovate and create and let others do the relative low value work of actually building the thing. You have already climbed up the ladder why intentionally go down again! Trying to bring back manufacturing, I just don't get it. Where are the workers? Who will go back from relatively high value service to manufacturing.
All of these economic policies seem foolish and hard-headed to me. The optimist in me still wants to believe that he is just fooling around and will take it back but then again with each passing day that hope is diminishing.
Your questions about why the obsession with low-paying manufacturing jobs are spot-on. I'm very American, and about as baffled as you, but maybe I can help explain it a bit.
A key element to understanding all this is that it just happens to be that a handful of states that lost a lot of manufacturing jobs over the past few decades are important 'swing states' in the electoral system. Most states are pretty solidly with one party or the other so there is a lot of pandering to swing state voters. Those voters have very bad and wrong economic ideas, but we have leaders that agree with them now.
Thank you, Noah. I feel so much smarter (I wish you had been my macro-econ professor - but I don’t think you were alive that long ago). This is why I give you money. I will pass this article on to my baffled friends. I finally understand the “logic” of “liberation day”.
But I feel so much poorer all of a sudden. I’d weep for my country but I have a premonition that it is going to get a lot worse. Because you cannot reason with stupid. <ugh>
I'm glad you got it all figured out and a YouTuber, and now we can sane wash this behavior. These people cannot be trusted, and we keep trying to back into reasons as to why this may possibly make sense...
Even this video which is actually somewhat informative still relies on the fact that there is some plan that makes sense or end up with the US in a better position than today. This administration and the previous Trump admin do not inspire this level of long-term thinking or plan. Additionally, the current actions still do not seem to follow some big plan.
> If I had my choice, we would summon the political will to do a VAT but it ain't gonna happen.
I do agree with you doing a VAT.
> Has to be ugly and figured out along the way.
But here is the thing, it didn't have to be ugly and figured out along this way. This is worse than Brexit.
> In the meantime, I'd advise not retaliating and conforming to whatever it is that Trump wants for the time being to try and avoid a trade war for the good of the world. Think of it as payback for all the decades of US subsidies, which will continue into the future if that makes you feel better. Hopefully, things will change in 2029.
See, this is the type of comment that doesn't work well in foreign policy, reality or just in interpersonal relationships in general. Other countries are nationalistic as well, and they are allies. You can't tell them, their citizens, and corporations to sit back and not do anything and just be taken advantage of. Some of the countries on the list aren't even places that could ever hope to buy more from the US. This is a clown administration. And the fact that you read this article and still consider everything going on as appropriate payback for years of US "subsidies" is part of the problem. For example a country like Japan is one of our biggest foreign investors and allies, and yet they are being punished harder than Afghanistan under the new tariffs. It makes no sense, we basically helped write their constitution and didn't want them to have a nuclear umbrella, or have more in the way of defense and we as the global policeman and US have benefited more than other countries from the system we put in place.
I'm a US citizen btw, so I have no idea why you are saying I need to pay more for the world order put in place by the US lol. Trump and his team are showing that they aren't good faith negotiators, I know you seem to believe this pain will be worth it in the long run, but the short term pain can also put us a generation behind in most sectors as well. There are no simple answers to most things, and we can barely predict foreign policy and economic outcomes a year in advance, let alone years or decades. These moves are washing decades of US soft power down the drain and also creating a pay to play model. It's not good for the world. And telling countries to just let themselves be bullied isn't good either, they can choose to create their own blocks or pivot towards China, this will make the US weaker, unless Congress decides to grow a pair.
Noah, your first comment that there are "real problems with trade deficits, but Trump does not know what they are" is a great summary of this self inflicted disaster. To solve the fiscal problems the US can only be solved by serious, thoughtful solutions implemented by smart people over a long period of time and involving some shared sacrifices by all the American people.
Instead we have really dumb people, with no really thought wanting immediate results. The end results beyond utter destruction of the US global reputation and relationships with historical allies and partners will be a recession that will be very difficult for the country to claw it's way out of given our current fiscal situation.
In Trump’s world, everyone should be their own dentist. Raise their own chickens. Manufacture their own iPhones. Write their own contracts. Just do it all themselves. Because buying something from someone else is a ripoff. They are stealing your productive capacity! Robbing you of your dignity!
It seems that a key part of the Mar-A-Lago Accord is "restructuring" US debt (100-year, 0% interest rate treasuries anyone?), and yet, many commentators do not take it seriously. Obviously asking sovereign nations to foot the bill with no returns is untenable but it doesn't mean that this administration won't try it. Look at the chaos and mess with the tariffs. Bessent is not the adult in the room, folks. He is, frankly, a failed hedge fund guy (money under management as well as the number of investors) has plunged; to me, his first visible act was a visit to Ukraine where he demanded that Zelenskii sign a contract (not a proposal!) that was extortionist (in essence blackmail). His "explanations" of this "malignantly stupid" (as several economists have called it) tariffs are downright bizarre and frightening in their ignorance.
In terms of your discussion, Noah, please address the issue that manufactured goods as a % of GDP has pretty much remained constant for quite a few decades through the period you discuss. It turns out we can still manufacture goods, but they are generally in advanced factories with lots of robotics and other technology-driven infrastructure. If factories "reshore (and there is a huge question of exactly which industries will do that and who they will be able to hire at what salary/benefits levels)," it won't be to build the plants of 20 years ago! I mean, Apple announces $500 million of investment which will create only 20,000 jobs (and most of those highly technical). Ditto to all of those semiconductor plants.
The other thing that gets done with the money the foreign countries get from the US is that they reinvest it into US equities and property. More than a third of the stock market is foreign owned. But it’s kind of great that they reinvest the money we loan them in the US. It’s like when the Japanese were buying up Pebble Beach and Rockefeller Center—the title changes hands, but it’s not going anywhere
Recognizing that investment flows exactly offset trade flows, by an accounting identity, means you are playing at a higher level than 99% of the commentariat.
I too know this fact, but I am not sure I fully understand what to do with it. If we are buying goods and then the vendors take the money and buy up our property, equity, and government debt, is that good? It seems like, over time, they would own all our stuff! =)
Krugman likes to point to this fact and say "they're investing in the US", but I think this conjures the misleading image of foreign firms building factories here and employing Americans, which is only a small part of the story.
The thing is, they can’t do anything that’s detrimental to us with most of it. Is there a difference between a Saudi Prince or Swiss banker owning shares if a U.S. company governed by U.S. law and Warren Buffet? Especially true for real property, they can’t take it back to China. They collect dividends and rents like everyone else and for strategic companies, like airlines, majority foreign ownership is prohibited.
For the Treasuries, it’s even better. They are holding IOUs, if they sell a lot, the price goes down, and the Fed has an infinite capacity to purchase and issue debt if they don’t like what it’s doing to interest rates.
If there is a real conflict, all of that U.S. property can be seized with the stroke of a pen.
You write in footnote 2: "This is because the principal and interest on those bonds is specified in U.S. dollars, and inflation makes a U.S. dollar worth much less in terms of real physical goods and services." This is undeniably true if the holder of a bond is only interested in buying physical goods and services in the US, but what if there is a significant mismatch between inflation in the US and anywhere else?
Eventually the IOU has to be paid or you can buy something with it. I suspect Trump hopes those IOUs will buy something. But what do we have that they want? What do Chinese consumers want? High-end chips to make better weapons? Cheap TVs? Cars?
Their cars or EVs are cheaper and apparently have better tech. We really don’t want to sell them anything to make better weapons.
It leaves agriculture, which Trump tried last time, and it didn't work. Perhaps medicines, cigarettes, liquor?
What will happen is less consumption. It is not necessarily a bad thing in and of itself, but those who work giving things to consume will be unemployed. In the end, America will not produce cheap plastic Christmas toys. It is a low-value product with low margins. TV’s that once were $399 for a 50 inch TV, are not going to buy a 40 inch TV for $800.
This is the same AI approach the baby Muskovites plan to use to “reform” government computer systems. The fact is there are government employees working in various platforms, such as cyberterrorism defense, who could run circles around Musk’s myrmidons. And these same government employees could exponentially increase their government salaries if they migrated to the private sector. I recommend Michael Lewis’ books “Who Is Government?” and “The Fifth Risk.”
The difference between Musk’s babies, one who calls himself “Big Balls,” is these government employees have high IQ and EQ and a sense of mission for the benefit of their fellow citizens. We should be thankful such people choose mission over money.
Is there a rural vs. urban element to this? I.E. Increasing manufacturing will be good for rural jobs, even if it’s at the expense of services exports, which will impact cities.
The US is at full employment, so if more washing machines are to be produced here it will be at the expense of some other industry. This would be a less productive use of a city worker’s time, but maybe not of rural workers in a town where the factory could be placed?
The real question is why manufacturing is particularly important beyond its contribution to GDP. The strategic industry rationale I get-- we probably don't want to rely on an island a few miles off China's coast for our microchips, or to rely on foreign shipyards to build our battleships or whatever-- but the "good middle class jobs" part really doesn't make sense to me. Yeah, factory jobs were solid middle class jobs in the 50s and 60s. They were also union jobs, and now they mostly aren't. Wages in manufacturing are, by sector, below the US median.
And the US isn't running persistently high unemployment, so these workers are doing something and not just idling. Moreover, the manufacturing decline isn't mainly the China shock. As Paul Krugman noted, it's mostly automation, and manufacturing-targeted industrial policy might get manufacturing value added from 10% of GDP to... maybe 13%. Which feels like small potatoes. Shouldn't we focus on unionizing Amazon warehouses or something instead?
"to rely on foreign shipyards to build our battleships"
Unless your Congress repeals the Jones Act, this will not happen anytime soon :)))
But it's still a shame to see the builders of Liberty ships in WW2 - for 1 ship every 2-3 days - now have to ask Japan and South Korea to build their ships.
In what proportions do you think America's deindustrialization is due to foreign price advantage versus difficulty of buidling in America? The tariffs (as haphazard as they are) certainly increase the awareness of the lack of American suppliers, even for things that are mostly automated.
I’d love to see more exploration of this by @noah. What makes it so difficult to build here, if that is indeed true. High labor costs due to our high expected standard of living? Regulations? Can any of it be fixed? Or is it the inevitable consequence of competing with countries willing to work harder with less luxuries while doing more harm to their environment?
A simple question, which is partially addressed in footnote 1:
- what happens if a US person buys washing machine from Ruimin, and takes payment in:
a) USD and converts these into yuan
b) yuan directly
and then this money is never converted back into USD - but spent in China, converted to EUR and spent there etc. So in aggregate there is an outflow of money is some fashion from US that never returns?
To me the definition "when two countries have balanced trade, it means that they pay each other in currency that gets quickly used to buy some real good or service" seems incomplete as it's not just that there is a payment and currency get spent quickly but that the currency is spent (directly or indirectly) back in the country that original payment came from. If that isn't happening presumably things are not in balance (which might be good or bad) and have impact on the currency / fx rate?
Oh, this is just the second possibility! You're talking about unbalanced trade. A U.S. trade deficits with China has to be matched by accumulation of dollar-denominated financial assets by China (which are usually U.S. Treasury bonds but could literally be dollar bills).
" Or, if someday an irresponsible U.S. leader comes along and defaults on the debt,"
OMG, I just realized the one thing this administration could do that is even worse, and therefore it is just a matter of time until it does.
Yep
Presumably that was what the talk about a "Mar a Lago Accord" was about.
But if one is planning on default, it is a mistake a) to hint at it in advance and b) not to increase the debt to be defaulted on as much as possible. If this is it the Administration is, not surprisingly, incompetent nits irresponsibility.
I mean........maybe? Hard to tell from this vantage point in the middle of the chaos.
The simplest explanation for Trump's hatred of the US trade deficit is that a figure in negative dollars means he thinks the US is losing money, like it's a business losing $100 billion a year or something.
100%. We really need to popularize another term to describe this thing because the American people have latched onto the negative connotations of deficit and now just think trade is bad.
It’s because he himself is a con man.
When he sells something, it’s usually a scam of some kind. So he thinks that buyers in commercial transactions are usually getting ripped off by people like him.
He cannot fathom the idea of mutual interest via trade.
Also he’s a moron who can’t be told anything, and won’t be told anything by the people surrounding him now.
True - a crook or a con man always thinks everyone else is just like they are, much as someone with paranoia tendencies assumes everyone else out there is out to 'get' them and so enters every relationship or transaction with an attitude of needing to gain the advantage on the other guy first, before he does it to them.
Well, would you look at that:
https://x.com/MattBruenig/status/1909048409001975994?t=Rib0rr1YNz9ke6d3ri030w&s=19
Hi Noah, I was doing some research and it surprised me to learn that it all started with a full-page ad featuring an open letter by Donald Trump criticising Japan (and Saudi Arabia) in 1987! https://flaglerlive.com/wp-content/uploads/donald-trump-1987-nyt-ad_edited-1.pdf
I think he was just mad Japanese businessmen were buying up his apartments and always looking for a good deal
https://www.bbc.com/news/articles/c4gp5pw654lo
I am still in utter disbelief that they put the deficit percentage as "tariff" rate!
If you think there’s a “natural” amount of trade between two countries, that is by default balanced, and you think that tariffs are one of a number of kinds of distortions, that all affect trade linearly, then it would make sense to choose tariffs numbers that are proportional to this deficit percentage.
But I don’t know why you would think any of the parts of that, and even if you did, I don’t know why you would think the constant of proportionality should be precisely 1.0.
I mean as it was mentioned in a few videos on YouTube it's like me getting angry that I have a deficit with my grocery store that only I buy groceries from them and they don't buy any from me. The beauty of globalization and human progress is specialization otherwise we would all be hunter/gatherers. Modern societies take specialization on steroids.
I do understand that targeted tariffs for important industries do make sense. But I seriously don't see the advantage of fighting to bring back low value manufacturing jobs at all. For my country - India, it does make sense to grab some of those low value manufacturing since they are low in the value chain. But a rich powerful country like America, you are supposed to innovate and create and let others do the relative low value work of actually building the thing. You have already climbed up the ladder why intentionally go down again! Trying to bring back manufacturing, I just don't get it. Where are the workers? Who will go back from relatively high value service to manufacturing.
All of these economic policies seem foolish and hard-headed to me. The optimist in me still wants to believe that he is just fooling around and will take it back but then again with each passing day that hope is diminishing.
Your questions about why the obsession with low-paying manufacturing jobs are spot-on. I'm very American, and about as baffled as you, but maybe I can help explain it a bit.
A key element to understanding all this is that it just happens to be that a handful of states that lost a lot of manufacturing jobs over the past few decades are important 'swing states' in the electoral system. Most states are pretty solidly with one party or the other so there is a lot of pandering to swing state voters. Those voters have very bad and wrong economic ideas, but we have leaders that agree with them now.
Thank you, Noah. I feel so much smarter (I wish you had been my macro-econ professor - but I don’t think you were alive that long ago). This is why I give you money. I will pass this article on to my baffled friends. I finally understand the “logic” of “liberation day”.
But I feel so much poorer all of a sudden. I’d weep for my country but I have a premonition that it is going to get a lot worse. Because you cannot reason with stupid. <ugh>
I'm glad you got it all figured out and a YouTuber, and now we can sane wash this behavior. These people cannot be trusted, and we keep trying to back into reasons as to why this may possibly make sense...
Even this video which is actually somewhat informative still relies on the fact that there is some plan that makes sense or end up with the US in a better position than today. This administration and the previous Trump admin do not inspire this level of long-term thinking or plan. Additionally, the current actions still do not seem to follow some big plan.
> If I had my choice, we would summon the political will to do a VAT but it ain't gonna happen.
I do agree with you doing a VAT.
> Has to be ugly and figured out along the way.
But here is the thing, it didn't have to be ugly and figured out along this way. This is worse than Brexit.
> In the meantime, I'd advise not retaliating and conforming to whatever it is that Trump wants for the time being to try and avoid a trade war for the good of the world. Think of it as payback for all the decades of US subsidies, which will continue into the future if that makes you feel better. Hopefully, things will change in 2029.
See, this is the type of comment that doesn't work well in foreign policy, reality or just in interpersonal relationships in general. Other countries are nationalistic as well, and they are allies. You can't tell them, their citizens, and corporations to sit back and not do anything and just be taken advantage of. Some of the countries on the list aren't even places that could ever hope to buy more from the US. This is a clown administration. And the fact that you read this article and still consider everything going on as appropriate payback for years of US "subsidies" is part of the problem. For example a country like Japan is one of our biggest foreign investors and allies, and yet they are being punished harder than Afghanistan under the new tariffs. It makes no sense, we basically helped write their constitution and didn't want them to have a nuclear umbrella, or have more in the way of defense and we as the global policeman and US have benefited more than other countries from the system we put in place.
I'm a US citizen btw, so I have no idea why you are saying I need to pay more for the world order put in place by the US lol. Trump and his team are showing that they aren't good faith negotiators, I know you seem to believe this pain will be worth it in the long run, but the short term pain can also put us a generation behind in most sectors as well. There are no simple answers to most things, and we can barely predict foreign policy and economic outcomes a year in advance, let alone years or decades. These moves are washing decades of US soft power down the drain and also creating a pay to play model. It's not good for the world. And telling countries to just let themselves be bullied isn't good either, they can choose to create their own blocks or pivot towards China, this will make the US weaker, unless Congress decides to grow a pair.
Noah, your first comment that there are "real problems with trade deficits, but Trump does not know what they are" is a great summary of this self inflicted disaster. To solve the fiscal problems the US can only be solved by serious, thoughtful solutions implemented by smart people over a long period of time and involving some shared sacrifices by all the American people.
Instead we have really dumb people, with no really thought wanting immediate results. The end results beyond utter destruction of the US global reputation and relationships with historical allies and partners will be a recession that will be very difficult for the country to claw it's way out of given our current fiscal situation.
In Trump’s world, everyone should be their own dentist. Raise their own chickens. Manufacture their own iPhones. Write their own contracts. Just do it all themselves. Because buying something from someone else is a ripoff. They are stealing your productive capacity! Robbing you of your dignity!
SMH 🤦
It seems that a key part of the Mar-A-Lago Accord is "restructuring" US debt (100-year, 0% interest rate treasuries anyone?), and yet, many commentators do not take it seriously. Obviously asking sovereign nations to foot the bill with no returns is untenable but it doesn't mean that this administration won't try it. Look at the chaos and mess with the tariffs. Bessent is not the adult in the room, folks. He is, frankly, a failed hedge fund guy (money under management as well as the number of investors) has plunged; to me, his first visible act was a visit to Ukraine where he demanded that Zelenskii sign a contract (not a proposal!) that was extortionist (in essence blackmail). His "explanations" of this "malignantly stupid" (as several economists have called it) tariffs are downright bizarre and frightening in their ignorance.
In terms of your discussion, Noah, please address the issue that manufactured goods as a % of GDP has pretty much remained constant for quite a few decades through the period you discuss. It turns out we can still manufacture goods, but they are generally in advanced factories with lots of robotics and other technology-driven infrastructure. If factories "reshore (and there is a huge question of exactly which industries will do that and who they will be able to hire at what salary/benefits levels)," it won't be to build the plants of 20 years ago! I mean, Apple announces $500 million of investment which will create only 20,000 jobs (and most of those highly technical). Ditto to all of those semiconductor plants.
It boggles mind what is happening.
The other thing that gets done with the money the foreign countries get from the US is that they reinvest it into US equities and property. More than a third of the stock market is foreign owned. But it’s kind of great that they reinvest the money we loan them in the US. It’s like when the Japanese were buying up Pebble Beach and Rockefeller Center—the title changes hands, but it’s not going anywhere
Recognizing that investment flows exactly offset trade flows, by an accounting identity, means you are playing at a higher level than 99% of the commentariat.
I too know this fact, but I am not sure I fully understand what to do with it. If we are buying goods and then the vendors take the money and buy up our property, equity, and government debt, is that good? It seems like, over time, they would own all our stuff! =)
Krugman likes to point to this fact and say "they're investing in the US", but I think this conjures the misleading image of foreign firms building factories here and employing Americans, which is only a small part of the story.
The thing is, they can’t do anything that’s detrimental to us with most of it. Is there a difference between a Saudi Prince or Swiss banker owning shares if a U.S. company governed by U.S. law and Warren Buffet? Especially true for real property, they can’t take it back to China. They collect dividends and rents like everyone else and for strategic companies, like airlines, majority foreign ownership is prohibited.
For the Treasuries, it’s even better. They are holding IOUs, if they sell a lot, the price goes down, and the Fed has an infinite capacity to purchase and issue debt if they don’t like what it’s doing to interest rates.
If there is a real conflict, all of that U.S. property can be seized with the stroke of a pen.
Another way to look at it.You are selling off pieces of your country to pay off that credit card
You write in footnote 2: "This is because the principal and interest on those bonds is specified in U.S. dollars, and inflation makes a U.S. dollar worth much less in terms of real physical goods and services." This is undeniably true if the holder of a bond is only interested in buying physical goods and services in the US, but what if there is a significant mismatch between inflation in the US and anywhere else?
Eventually the IOU has to be paid or you can buy something with it. I suspect Trump hopes those IOUs will buy something. But what do we have that they want? What do Chinese consumers want? High-end chips to make better weapons? Cheap TVs? Cars?
Their cars or EVs are cheaper and apparently have better tech. We really don’t want to sell them anything to make better weapons.
It leaves agriculture, which Trump tried last time, and it didn't work. Perhaps medicines, cigarettes, liquor?
What will happen is less consumption. It is not necessarily a bad thing in and of itself, but those who work giving things to consume will be unemployed. In the end, America will not produce cheap plastic Christmas toys. It is a low-value product with low margins. TV’s that once were $399 for a 50 inch TV, are not going to buy a 40 inch TV for $800.
https://www.theverge.com/news/642620/trump-tariffs-formula-ai-chatgpt-gemini-claude-grok
This is the same AI approach the baby Muskovites plan to use to “reform” government computer systems. The fact is there are government employees working in various platforms, such as cyberterrorism defense, who could run circles around Musk’s myrmidons. And these same government employees could exponentially increase their government salaries if they migrated to the private sector. I recommend Michael Lewis’ books “Who Is Government?” and “The Fifth Risk.”
The difference between Musk’s babies, one who calls himself “Big Balls,” is these government employees have high IQ and EQ and a sense of mission for the benefit of their fellow citizens. We should be thankful such people choose mission over money.
Is there a rural vs. urban element to this? I.E. Increasing manufacturing will be good for rural jobs, even if it’s at the expense of services exports, which will impact cities.
The US is at full employment, so if more washing machines are to be produced here it will be at the expense of some other industry. This would be a less productive use of a city worker’s time, but maybe not of rural workers in a town where the factory could be placed?
The real question is why manufacturing is particularly important beyond its contribution to GDP. The strategic industry rationale I get-- we probably don't want to rely on an island a few miles off China's coast for our microchips, or to rely on foreign shipyards to build our battleships or whatever-- but the "good middle class jobs" part really doesn't make sense to me. Yeah, factory jobs were solid middle class jobs in the 50s and 60s. They were also union jobs, and now they mostly aren't. Wages in manufacturing are, by sector, below the US median.
And the US isn't running persistently high unemployment, so these workers are doing something and not just idling. Moreover, the manufacturing decline isn't mainly the China shock. As Paul Krugman noted, it's mostly automation, and manufacturing-targeted industrial policy might get manufacturing value added from 10% of GDP to... maybe 13%. Which feels like small potatoes. Shouldn't we focus on unionizing Amazon warehouses or something instead?
"to rely on foreign shipyards to build our battleships"
Unless your Congress repeals the Jones Act, this will not happen anytime soon :)))
But it's still a shame to see the builders of Liberty ships in WW2 - for 1 ship every 2-3 days - now have to ask Japan and South Korea to build their ships.
In what proportions do you think America's deindustrialization is due to foreign price advantage versus difficulty of buidling in America? The tariffs (as haphazard as they are) certainly increase the awareness of the lack of American suppliers, even for things that are mostly automated.
I’d love to see more exploration of this by @noah. What makes it so difficult to build here, if that is indeed true. High labor costs due to our high expected standard of living? Regulations? Can any of it be fixed? Or is it the inevitable consequence of competing with countries willing to work harder with less luxuries while doing more harm to their environment?
A simple question, which is partially addressed in footnote 1:
- what happens if a US person buys washing machine from Ruimin, and takes payment in:
a) USD and converts these into yuan
b) yuan directly
and then this money is never converted back into USD - but spent in China, converted to EUR and spent there etc. So in aggregate there is an outflow of money is some fashion from US that never returns?
To me the definition "when two countries have balanced trade, it means that they pay each other in currency that gets quickly used to buy some real good or service" seems incomplete as it's not just that there is a payment and currency get spent quickly but that the currency is spent (directly or indirectly) back in the country that original payment came from. If that isn't happening presumably things are not in balance (which might be good or bad) and have impact on the currency / fx rate?
Oh, this is just the second possibility! You're talking about unbalanced trade. A U.S. trade deficits with China has to be matched by accumulation of dollar-denominated financial assets by China (which are usually U.S. Treasury bonds but could literally be dollar bills).