The end result of Trump trade policy

Ironically, the Trump Administration’s policy on globalization & jobs will produce the very effects it’s trying to prevent

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Higher input costs

Most of why American businesses offshore manufacturing is because unit labor costs are lower abroad. The Trump administration can eliminate all the tax arbitrage it wants, but US labor cannot compete with Mexico given our higher domestic standard of living — which is something I don’t think we’re willing to compromise. Therefore, repatriating that manufacturing would invariably increase input costs.

“Give a man a fish, and you feed him for a day; show him how to catch fish, and you feed him for a lifetime.”

They’re also contributing to our secular slowdown in labor productivity:


You can impede our trade, onshore these jobs, and increase national income on Day 1. Beautiful… except, you cannot stop other countries from competing with us in the external sector. If America becomes insular — even if isolated sectors are forced to repatriate manufacturing capacity in the name of jobs — she will become a high-cost producer relative to foreign competitors. The international community will eat her lunch.

Creative destruction

So, tech destroys jobs then, right? Well, it depends. It’s creative destruction, wherein: certain jobs become obsolete, but the reallocation of that labor is the key. How fast that flywheel spins determines the marginal benefit of such technology.

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