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Trade deficit or investment surplus?

Are trade deficits bad? So says Donald Trump. Well I have a trade deficit with Kroger, Publix, Lowes, Amazon and Walmart. I have a trade balance with the University of Tennessee where I teach one class this semester. I trade them my services for payment for the class. However, I do not have a trade surplus with any other entity since I have retired from the boards of not-for-profits. There I supplied by service on their boards for no monetary compensation. As a consequence, for most of my retirement years I have been in a trade deficit. I have generated little if any income and live almost solely on my retirement accounts. My trade deficits with Amazon, Kroger, Publix, Lowes and Walmart have not made me worse off. As a matter of fact, they have made me better off. I am not hungry. I have been able to do home improvement chores and where else can I buy salsa, yogurt, light bulbs, rv antifreeze and jigsaw puzzles under one roof but Walmart?

So if my trade deficits have not made me worse off and to the contrary have made me better off, then why does Trump insist that trade deficits make the country worse off? The man is confused as evidenced by his wanting to increase foreign investment in the US while eliminating the deficit. Didn’t he crow that Taiwan Superconductor was investing $100 billion in the US? Where did they get the $100 billion? Trump loves to announce more foreign investment in the US and signed a National Security Presidential Memorandum (NSPM) aimed at promoting foreign investment. SoftBank CEO Masayoshi Son announced a $100 billion investment over the next four years with a promise to create 100,000 jobs focused on artificial intelligence and related infrastructure. Where did he get the money? The United Arab Emirates committed a 10-year, $1.4 trillion agreement with the U.S. that will sustain existing investments in AI infrastructure, semiconductors, energy, and American manufacturing. Where did it get the money? Trump announced a $500 billion private investment in AI infrastructure led by OpenAI, Oracle and SoftBank. Nvidia said it would invest hundreds of billions of dollars over the next four years in U.S.-based manufacturing operations. Total foreign pledges total over $1 trillion dollars. How did they get the $1 trillion? 

Trump is ecstatic and preening about proclaiming the success of his bringing business back to America. But his goals of attacking trade deficits as bad and encouraging foreign investments is contradictory. Pray tell where did the foreigners get the money from to invest in the United States? The answer: trade. When we buy foreign goods and services we pay for them with dollars. Some entities will accept dollars while with others we have to buy their currency by exchanging dollars. The foreigners are now in possession of dollars. What can they do with them? They can buy American. They can purchase US goods and services, US financial instruments, invest in US businesses, buy real estate or some other US product. But the point is, they must repatriate those dollars. So much of Trump’s touted $1 trillion in foreign investment in the US comes from the purchases of foreign goods by US customers. Some economists predict that the attack on trade deficits by Trump will lead to less foreign investment in US financial markets, causing stock and bond markets to fall in value. There would also be decreases in foreign investments in other sectors of the US economy. All this occurring while Trump is crowing about increased foreign investments caused by his tariff threats. Am I the only one who sees a contradiction here?

Maybe we should tell Trump that a trade deficit was really an investment surplus.

Lawsuits everywhere – except where they really matter

The excesses of the Biden Administration were tempered by the republican AGs who filed 133 suits. Well 19 democrat AGs have sued over Trump’s order on federal elections. Other suits by democrat AGs include suing RFJ, jr over canceled health research, suits over plans to eliminate several federal agencies, suits over federal grants freeze, over education department firings, over DOGE access to sensitive data and over birthright citizenship among others. So far over 143 lawsuits have been filed by the democrat AGs and this does not include all those filed by private organizations over immigration and transgender rights. All of the democrat lawsuits are aimed at protecting their constituents deemed to be threatened by Trump’s actions.

However, to my knowledge no lawsuit has been filled by a democrat AG on perhaps the most important issue – the imposition of tariffs. In fact, only two lawsuits have been filed to date. The first is by a conservative legal group over Trump’s power to impose tariffs on China. The group called the New Civil Liberties Alliance filed suit that Trump lacked the legal authority under the International Emergency Economic Powers Act (IEEPA). The suit argues that Trump had “misused” emergency powers, “usurped Congress’s right to control tariffs and upset the Constitution’s separation of powers.” The lawsuit asks a judge to block implementation and enforcement of the tariffs and undo Trump’s changes to the U.S. tariff schedule. The organization said it “does not quibble” with Trump’s declaration of an opioid-related emergency, “but it does take issue with his decision to impose tariffs in response, without legal authority to do so.” The suit was filed in Florida.

The second lawsuit was also filed in Florida and was by a small company. Simplified, a stationery company, filed suit to stop the Chinese tariffs saying that the increased tariffs cause it financial harm. It too is challenging the use of the International Emergency Economic Powers Act to impose the tariffs. Simplified says that “Trade laws authorize the President to impose tariffs “only on industries or countries that meet specified criteria, and only under specified conditions, after following specified procedures. They also “require advance investigations, detailed factual findings, and a close fit between the statutory authority and a tariff’s scope.”

The Wall Street Journal says that Congress has given the President discrete authority to impose tariffs of up to 15% only for as long as 150 days to remedy “large and serious” trade deficits. Mr. Trump used IEEPA to circumvent those limits.” Trump has clearly violated the law. It is curious that the democrat AGs did not initiate any suits on this issue. Also the Congress has done absolutely nothing except that the democrats passed a resolution in the Senate wanting to claw back the president’s power to impose tariffs unilaterally. Only Rand Paul amongst the republicans has the guts to oppose Trump on tariffs. However, with all the moaning and teeth gnashing about Biden’s abuse of power, one would have hoped that there would have been enough angst on both sides of the aisle to rein in Trump’s excesses which singlehandedly have plunged the world into economic chaos.

Trump’s Tariffs: Stupid, Stupider and Stupidest

The Wall Street Journal called Trump’s tariffs “dumb”. I called them “stupid”. And then he rolled out his plan for all to see. Now the Journal is calling them “dumbest” and for me, is “stupidest” even a word? Let’s recount. First, he said he was going to impose a 25% tariff on Mexico and Canada until they stopped the flow of illegals and fentanyl. Both were threatened equally even though most of the influx comes across the southern border. Strangely, China, the source of fentanyl was only hit with a 10 percent tariff threat. Mexico and Canada took steps but the Trump lied. Now he wants to impose the tariffs to force manufacturing to move across the borders and into the states. I had called the “stop illegals and stop fentanyl” demand a ruse. And it was. Trump then openly said that he wanted to bankrupt the Canadian economy and force Canada to become the 51^st state. Strange because that would have put more democrat senators and representatives in the Congress. Trump said that the only way to avoid the tariffs was to move production to the US.

Trump then said that he was going to impose reciprocal tariffs on all our trading partners to equalize the tariffs across the board between countries. Then came the great reveal of “Liberation Day” where the reciprocal tariffs were not reciprocal at all. Rather Trump’s new tariffs were a mixture of tariffs, the trade (goods) deficit and “currency manipulation.” The result was that when Israel announced that it had lowered all its tariffs to zero, the Trump “reciprocal” tariff was not zero but 17 percent! This was because, I presume, that we run a deficit with Israel. Therefore, in order to get their tariff down to zero, Israel must tell its companies not to sell any more goods to the US when the amount sold equals to the amount purchased by the US. This is beyond dumb. This is beyond stupid. This means that because the trade deficit in goods (which ignores the trade surplus in services) is $1 trillion, in order to eliminate Trump’s tariffs, American’s must stop purchasing foreign goods. And this is supposed to make America great again?

I read somewhere where the total amount of tariffs on Chinese goods was 64 percent. When asked about how could China get the tariffs lower, Trump officials said that China needed to stop the flow of fentanyl.  Trump accused China of subsidizing chemical companies to export fentanyl and of providing a safe haven for Chinese criminal organizations that launder the revenues from the opioid trade. A statement from the White House said “Despite multiple attempts to resolve this crisis at its root source through bilateral dialogue, PRC officials have failed to follow through with the decisive actions needed to stem the flow of precursor chemicals to known criminal cartels.” The Chinese, of course, denied being complicit in the fentanyl trade. But really? In a country as tightly controlled as China do you seriously think that the government does not sanction the fentanyl trade? The drug and its damage to China’s enemies in the west are surely part of China’s overall strategy to weaken western economies. What do you want to bet that Xi and his cronies are getting wealthy off the fentanyl trade? There is enough money there to bribe hundreds if not thousands of western partners.

Yet even if China did take tough action to stop the flow of fentanyl, Trump’s “reciprocal” tariffs would not vanish. They would not go away even if China reduced its tariffs to zero. Again look at the example of Isreal. Since the US runs a trade deficit with China, Trump would still keep his tariffs in place until that deficit goes to zero. The same is true for Mexico and Canada. Even if they reduce the flow of fentanyl to a mere trickle, Trumps tariffs will stay in place until the trade deficit goes to zero and production is moved into the US.

This is sheer lunacy. I once wrote that Trump was Herbert Hoover who signed the Smoot-Hawley tariff act that help plunge the country into the Great Depression. Well both Smoot and Hawley lost when they ran for re-election. Hoover lost and the republicans lost 100 seats in the congress.

Unless Trump stops this madness, look for the democrats to take back the House and possibly the Senate in 2028.

What happened to the University of Tennessee’s Critical Race Collective?  Parts of the University of Tennessee were all into the extremes of diversity, inclusion and equity as exemplified by its Critical Race Collective. That was a group of professors from across disciplines committed to the mantra of “anti-racism”. It was part of a larger national group focus on developing “knowledge justice tools for dismantling white supremacy and oppressive hierarchies as they manifest in spaces of work, education and society.” See their website at https://crtcollective.org. The website is telling with pictures of Marxists like Angela Davis and Che Guevera prominently displayed. 

Perhaps it was because of the dictates from the Trump Administration that the University of Tennessee’s webpage for its Critical Race Collective has been taken down. I wonder if it has just gone underground rather than gone away. Again, I am amused by white leadership at most universities and businesses embracing a racist Marxist movement intended to sow resentment and distrust amongst the races. Consider that the University’s now defunk website listed these five tenets of critical race theory that it adhered to:

1. Centrality of Race and Racism in Society: CRT asserts that racism is a central component of American life.

2. Challenge to Dominant Ideology: CRT challenges the claims of neutrality, objectivity, colorblindness, and meritocracy in society.

3. Centrality of Experiential Knowledge: CRT asserts that the experiential knowledge of people of color is appropriate, legitimate, and an integral part to analyzing and understanding racial inequality.

4. Interdisciplinary Perspective: CRT challenges ahistoricism and the unidisciplinary focuses of most analyses and insists that race and racism be placed in both a contemporary and historical context using interdisciplinary methods.

5. Commitment to Social Justice: CRT is a framework that is committed to a social justice agenda to eliminate all forms of subordination of people.

The university also sponsored CRT seminars on the application of critical race theory to “research, teaching and scholar-activism.” Sessions included Assessing Systemic Inequity: Diversity, Whiteness, and Teacher Education, Black Travel Movement: Systemic Racism Informing Tourism, and How toDisrupt Racism and Anti-Blackness in Academia. Although the university has pulled down many of its CRT websites, they still exist at the usual suspects, the departments of education, sociology, and sadly at the medical center. For example, on the website “Critical Race Training in Education” is 

“Students in the Master’s of Social Work program were urged to attend trainings that separated the students by their race, provided by the White Accountability Group and the Black, Indigenous, Multiracial People of Color Affinity Group.” Isn’t it ironic that the left is now segregating us by race?

All this is interesting because in 2021 the governor signed a bill prohibiting CRT from being included in school curricula. Yet a year later the University of Tennessee announced the creation of its Critical Race Collective seeking to integrate social justice and anti-racism into various aspects of the school. It was criticized by Sen. Marsha Blackburn “Critical race theory is a dangerous agenda that teaches that we are either oppressors or victims. It has no place in our schools, and it creates a false narrative of division that pits Americans against each other. We should be bringing folks together and students should be taught to be independent thinkers. In Tennessee, we believe in equality, civility and opportunity for all.” Yet the university went ahead and created the Collective to “enhance research and scholarship capacity in this area of study and identify current racist policies and practices on campus.”

So despite the criticism from the state’s governor and senator, the UT collective was established and only now with the advent of Donald Trump threatening to cancel federal funding, has the University of Tennessee’s critical race collective disappeared from sight or again has it just decided to go sub rosa until the next democrat becomes president?

Do as I say (not as I do)

Remember Lord Acton’s famous line “power tends to corrupt and absolute power corrupts absolutely”? Dune’s Frank Herbert wrote

All governments suffer a recurring problem: Power attracts pathological personalities. It is not that power corrupts but that it is magnetic to the corruptible.  

Both are true. Power does corrupt people but power also is “magnetic to the corruptible.” Harold Black’s 9^th Law is that “Any person desiring public office is not to be trusted.”

In another case of what goes around, the democrats were all atwitter over Trump’s firing on Biden appointees to “independent agencies”. The ruling by the US Court of Appeals upholding the Trump’s firings used as precedent Biden’s firing of a Trump appointee to something called the Administrative Conference of the United States. Strange that the democrats who supported the Biden firing would now be against it – not. 

I once wrote that I thought that tariffs were the province of the Congress and the president could only impose them under emergency powers. Well Trump did exactly that and invoked emergency powers to declare his rash of tariffs. There is a resolution before the Senate to revoke the emergency powers edit on Trump’s Canadian tariffs. All the democrats are on board and Rand Paul is a co-sponsor. Three other republicans – the usual suspects – Mitch McConnell, Lisa Murkowski and Susan Collins are expected to join him. Of course, the resolution will not see the House floor and Trump would never sign it. Trump of course is outraged. But again the democrats should be careful of what they wish for. If passed, it would limit the power of a future democrat president. Don’t they ever think of this? BTW, I still contend that any “emergency” proclamation should have to get two-thirds approval in both the House and the Senate. So much for checks and balances.

The much watched Wisconsin Supreme Court contest went to the progressive who crowed about beating the world’s richest man. She didn’t say that George Soros was among her biggest contributors. The pundits are saying that the Wisconsin Court will re-gerrymander the gerrymandering done by the republicans when they were in power and give the democrats two more seats in the House. Lest one forgets, the redrawing of North Carolina districts gave the republicans two additional House seats this past election.

Trump’s spokesperson, Karoline Leavitt, held up a chart showing high foreign tariffs. There was the 100% Indian tariff on agriculture, the 700% Japanese tariff on rice and the 270% Canadian tariff on dairy. Not surprisingly, the charts are misleading. Actually Japan allows 770,000 metric tons of rice to be imported at a very low tariff then the higher tariff kicks in. The same is true for Canadian dairy. Of course, if the quota were higher, even more would be imported at the low tariff. The Indian tariffs are not tied to quotas. Rather in India 43 percent of the workers are employed in agriculture with small farms being predominate. Contrast that to the US where only 1.6 percent are employed in agriculture. The Indians want to protect their small inefficient farms from American agriculture even at the cost of higher food prices. It is doubtful if India will remove those tariffs regardless of whatever action is taken by Trump. The question is whether the Japanese and the Canadians will remove their quotas.

But the US does the same. If the White House reporters were doing their job they would have asked Leavitt about sugar. Brazil has complained for years about the US quotas on sugar. The National Taxpayers Union Foundation says that it costs Americans billions a year more in higher sugar prices. Like the other tariffs, sugar is assessed a tariff of 0.66 cents a pound until the quota is reached and then assessed a tariff of 15.36 cents a pound effectively stopping all sugar imports into the states.  

Although many think the US has few if any retraints on trade such is not the truth. Prior to the president’s announcement on global tariffs, the US imposed quotas on steel from Argentina, Brazil and South Korea. On aluminum products from Argentina. On brooms, whiskbrooms, ethyl alcohol, milk and cream, olives, mandarins, tuna and upland cotton. Then there were tariff rate quotas on the following. A question is whether these tariffs and quotas are still in effect

• Animal Feed 
• Articles Containing Over 10 Percent By Dry Weight of Sugar 
• Articles Containing Over 65 Percent By Dry Weight of Sugar
• Beef 
• Blended Syrups 
• Canadian Cheddar Cheese 
• Card Strips Made from Cotton 
• Chocolate 
• Chocolate and Low Fat Chocolate 
• Cocoa Powder 
• Cotton [Staple length > 28.575mm but < 34.925mm] 
• Cotton [Staple length 34.925mm or more] 
• Dairy Products 
• Dried Milk and Dried Cream 
• Dried Milk, Dried Cream, Dried Whey (in excess of 224,981 kilograms) 
• Fibers of Cotton 
• Harsh or Rough Cotton 
• Ice Cream 
• Infant Formula 
• Milk and Cream 
• Milk and Cream (Condensed or Evaporated) 
• Mixed Condiments and Mixed Seasonings 
• Mixes and Doughs 
• Peanut Butter and Paste 
• Peanuts 
• Raw Cotton 
• Sugars 
• Tobacco 

What is the saying about persons living in glass houses?

Happy Liberation Day! 

Today Trump’s tariffs are to go into effect for Canada and Mexico. When asked if the tariffs would apply to intermediate goods travelling across the borders, Trump said yes. So there will be double, triple, quadruple counting. Trump’s tariffs on Mexico and Canada should – one would hope – be modified before it runs the small auto parts companies out of business. As it now stands, the parts will be assessed with the 25% tariff each time they cross the borders. I am certainly no supply chain expert but the supply chain of automobile parts looks a lot like a Rube Goldberg machine. Consider the manufacturing of pistons and its travels through Canada, Mexico and the US. First, the aluminum is shipped from Michigan to Ontario. The piston is cast and sent back to Michigan and then sent to Mexico to be finished. The piston is sent to Wisconsin to get assembled with rods and rings and sent to an engine plant in Michigan. It is put in an engine and sent to a vehicle assembly plant in Ontario. The vehicle is then shipped to the US as a Canadian export. 

There was a total of six border crossings. If the parts manufacturer has to pay a 25% tariff at each crossing then the price of the automobile will be inflated by those costs as well as the 25% on the finished product. One should note that the companies involved in making the parts are not the big automobile manufacturers. The company making the pistons in the example from the Wall Street Journal is Linamar which would pay a tariff each time the piston goes across a border into the US. One would assume that Linamar would pass the final cost onto the vehicle manufacturer who would then incorporate the cost into the final suggested price of the vehicle.

So first we have the tariffs on steel and aluminum. Then there will a tariff at each part of the supply chain that crosses borders. Then there is a tariff on certain parts such as engines and transmissions. Then a tariff on the assembled vehicle. So it seems to me that the final price of the automobile/truck will be higher than just the 25% imposed on the vehicle.

Of the Big Three, the least biggest loser is Ford, having the least production outside the country with most of its parts and plants in the country. The biggest winner, however, is Tesla which manufactures all of its cars and parts sold in the country manufactured in the US. I wonder why I haven’t seen the conspiracy theorists jumping all over this one, claiming that Trump is putting in his tariffs to help his buddy Elon Musk and Tesla?

Do you feel liberated?

Cover the children’s ears! The democrats are speaking.

What’s with this spate of foul language coming from the democrats? All the f-bombs and s – words. They must have some focus group that tells them to curse. Jasmine Crockett is leading the way cursing at every opportunity. She has become the younger generation’s Maxine Waters.

After the state of the union address she said “Somebody slap me and wake me the f -k up because I’m ready to get on with it.” She obviously doesn’t think that it is a bad look, but it is. Crockett has no shame. Remember when she said that Byron Donald was skin folk but not kinfolk? She said that he had been “whitewashed” by his white wife. If she said the same about Kamala Harris being married to a white man, I missed it. Also remember the back and forth with Nancy Mace that looked like it was going to come to blows? Or how about mocking her governor Greg Abbott as Governor Hot Wheels? 

Crockett is well educated with a degree from Rhodes college and a law degree from the University of Houston. But you would never know it as she tries to burnish her street creds. Consider what she said about Abbott. “We in these hot ass Texas streets, honey. Y’all know we got Governor Hot Wheels down there. Come on now! And the only thing hot about him is that he’s a hot-ass mess, honey! Yes, yes, yes, yes!” Again the language is appalling. If a republican mocked someone disabled, the media would have a field day. But for Crockett, only silence, Didn’t she say to “punch” Ted Cruz?  “I mean, like this dude has to be knocked over the head, like hard, right? Like there is no niceties with him, like at all. Like you go clean off on him.” Of course Trump said diplomatically that Crockett was a “low life” and a very low IQ person. Tit for tat? Crockett said that Trump was “draft dodging dumb dupe.”  She also said, “Unfortunately, we have someone that is occupying the White House, and as far as I’m concerned, he is an enemy to the United States.” She also called Trump “Putin’s ho” saying “I would tell him to grow a spine and stop being Putin’s ho.” She also said “Right now we have a white supremacist that is sitting in the White House. He is backed up by other white supremacists.” Oh and she also called Trump “a career criminal.”

Crockett isn’t a low IQ person. She only acts like it with all the cursing and the hip hop language. Then there was the incident where she and a correspondent had a physical altercation in the halls of the Congress. Maybe that is part of her tough girl persona. 

She also said that Elon Musk must be “taken down” and was chided by Pat Bondi to “tread very carefully.”

Then there was the hearing with the heads of NPR and PBS chaired by Marjorie Taylor Greene. Crocket was her usual erudite self and said “The idea that you want to shut down everybody that is not Fox News is bull—t. We need to stop playing because that’s what y’all are doing in here. You don’t want to hear the opinions of anybody else.” The woman can’t quit cursing. If a man acted like this they would call him a “thug” and yes I know that is a loaded racially charged word. But what is Crockett? A thugette?

I just wish she would chill. 

More Random thoughts #52

Josh Hawley wants a credit card rate cap. Didn’t Trump say the same?  Trump talked about capping credit card interest rates on the campaign trail in the fall of 2024. And now Hawley along with Bernie Sanders, recently proposed legislation that would cap credit card interest rates at 10 percent. Bad idea. Interest rate caps turn out to be anti-poor, harming the people that it is meant to help. People with poor credits will not get loans. They won’t get credit cards either. The left knows this. I was at a hearing once where one advocate said that she would rather the poor not ever borrow if they have to borrow at “predatory” rates.

If Bernie approves of Trump’s pivot toward Putin, he’s not saying. I wonder why?

What’s next? Wage and price controls?

Threaten the auto companies not to raise prices? Sounds like Kamala Harris wanting to enact a federal ban on “price gouging.”  

.Trump is a mercantilist not a capitalist.

The media – including the Wall Street Journal – is after Pete Hegseth. First the Signal snafu which some accounts say was Michael Waltz’s responsibility but somehow Hegseth is targeted instead. Then the Journal says that Hegseth’s wife is traveling with him and is attending high level meetings. Certainly Hegseth knows better. Of course, the media was silent when Jill Biden was chairing cabinet meetings. Then there are the accounts that Hegseth’s brother is along for the trips too. While it seems like there is some nepotism it turns out that Phil Hegseth is senior advisor to the secretary of Homeland Security and liaison with the defense department. But Hegseth needs to tread lightly. Doesn’t he know that each thing he does will be closely scrutinized? 

Should a country retaliate to Trump’s tariffs? Of course, that is the natural reaction. But why should a country punish its own citizens by imposing tariffs on imports? I wouldn’t. Supposed Canada did nothing. In the US, the cost of energy would increase. The housing industry would suffer due to the increased cost of lumber. How would Americans react when their gas prices go up 50 cents a gallon? How would Americans react when what they buy at Walmart  and the price of automobiles go up?

Part two of Trump’s tariffs is the reciprocal part. Here there is some complicated formula to determine what that tariff is for what good in what country. Or maybe it is an overall tariff? Regardless, I would guess that most countries will kiss Trump’s ring assuming that if they lower their tariffs they will not be subject to the overarching 25% rate. But is that true? Lowering their tariffs or matching that of the US will not eliminate trade deficits. The only way to lower trade deficits will be for the US to cut its imports to match the other country’s exports, not matching their tariffs.

I just want to know Trump’s end game. He says he wants all that we import from Canada to be produced in the United States. What about Mexico? What about the rest of the world? He hates trade deficits and yet reciprocal tariffs will not eliminate them. Personally I would like to see all tariffs and quotas eliminated worldwide. Most tariffs are simply stupid. And by the way, the country with the highest tariffs is Bermuda. Who has the lowest? Hong Kong.

Baseball is back but unfortunately the Braves haven’t got the message, getting swept by the Padres and are now 0-4.

Liberation Day?

Trump calls April 2^nd “Liberation Day”. That is when his tariffs go into effect. I guess it is obvious why he did not pick April 1^st. Liberation is defined as “an occasion when something or someone is released or made free.” So what are we being released from or made free from?

Trump is putting a 25% tariff on all automobiles imported into the country. That matches the duty on pickup trucks imposed by Lyndon Johnson in 1964 that is still in effect today. I thought that he would cut BMW a deal since their largest plant is in South Carolina. But no. The company has announced that in the short run it will eat the tariff. Its popular M3 is made in Mexico and the average tariff on it will be $10,000. Trump has threatened the automobile makers not to raise the prices of their vehicles. Yet the increased costs of the tariffs will be greater than the profit made on cars sold. Would they then stop importing vehicles from Canada and Mexico because you can’t make up those loses on volume? The tariffs will wipe out both Ford and GM’s profits. Oops.

Trump’s tariffs obsession makes me wonder about his business acumen. He said that the automakers should be grateful for the elimination of Biden’s pivot to electric vehicle production. Yet the automobile industry embraced electric vehicles (both Ford and GM) because it eliminated a large portion of the workforce and would ultimately reduce the cost of producing vehicles because of fewer moving parts. Trump also said that they would benefit from the tariffs because of bringing manufacturing back to the U.S. Huh? Tariffs are generally used to keep the competition out, not encourage them to come into the country. Then Trump got really delusional when he said “You’re going to see prices going down, but it’s going to go down specifically because they’re going to buy what we’re doing, incentivizing companies and even countries with companies to come into America.” Huh? The automakers left the country because of high costs. Bringing all auto production into the states will raise the costs of cars, not lower them.

Trump wants all the automobile companies to move their manufacturing to the US. First, they will have to build the plants which will take a few years even with Trump putting them on a fast track. Second, they will have to find workers. Third, will BYD and Polestar be allowed to build the plants in the US that they were planning to build in Mexico? Fourth, if they shut down the plants in Mexico, the automakers may have to get special work visas to bring the workers in from Mexico to work in the new plants.

I guess they didn’t teach comparative advantage at Penn. That tells us that if Trump were successful in cajoling manufacturing back into the US that the final products will be more costly being produced here than abroad. Consider the apparel industry that has seen a shrinkage in employment from about 925,000 workers in 1990 to less than 84,000 today. BTW, what happened to the displaced workers? Did they all go on unemployment and stay there? Of course not. Regardless, can Trump’s tariffs bring this industry back from Southeast Asia? Doubtful. But what if he did. Would apparel cost the same or more? Consider the t-shirts made by US-based American Giant are sold at Walmart for $12.99 while t-shirts from Southeast Asia are sold for $4.98. The foreign t-shirt can be manufactured abroad and shipped to the US and still cost one-third of the same shirt made in the US. The difference is labor cost which is 3 times more. The same will be true with autos. If Honda decides to make its Civic hybrid in Indiana rather than Mexico or if other car makers move their production into the US, automobiles will cost more. This will lower the real income of the American consumer. 

The avocado industry moved from California to Mexico because of labor. Once that labor flowed freely across the Mexican border to harvest avocados. Then the US tightened up its immigration enforcement stopping the flow. As a result, the workers were forced to stay in the US making them illegals or remaining in Mexico and trying to sneak across the border. The result was a dearth of agricultural workers forcing the companies to move their production into Mexico. Now Trump’s tariffs won’t bring the industry back to California unless he reinstitutes the rules allowing for the free flow of migrant workers. Now won’t that be ironic? Forcing production back into the US and having to import workers from Mexico.

Again I thought with all the business people in Trump’s cabinet that he would not go through with this nonsense. But I guess its more important to some to just go along with the boss in order to be in the Cabinet. They probably know that manufacturing leaves developed countries and is not necessarily related to trade deficits – like Trump thinks. Consider that in Germany between 2000 and 2024, manufacturing jobs fell while the country went from a trade deficit to a trade surplus. Likely they are too afraid to tell this to Trump. 

Trump says that we will get a lot of money from the tariffs. Again he didn’t learn this from his economics courses. The increase in the price of goods will mean that the quantity demanded will fall. Economics says that if demand is elastic then total revenues will be lower. Trump is assuming that demand will stay the same at the higher prices resulting from the tariffs. They taught this at Penn? He needs to talk to Art Laffer. No wonder consumer confidence is falling. No wonder the stock market is moving into correction territory. No wonder the dollar is depreciating in foreign exchange markets.

Liberation Day? Hardly, more like liberation from reality.

Slotkin remains in the House and lovely Qaanaaq

Trump just pulled Elise Slotkin’s nomination for US Ambassador to the United Nations. Privately, I bet she is relieved. The reason given is the republican’s razor thin margin in the House of Representatives. I don’t know if this means that Trump was worried about Slotkin’s New York district electing a republican or not. It could well be that he is afraid that one or two republican house votes might flip and he would not be able to pass his legislation. Another possibility is that he is worried about losing one or more of the open seats created by his picking congressmen to be on his White House team. The seat vacated by Michael Waltz in Florida is running closer than expected. Trump won the district by 30 points but the democrat is within 5 points of flipping the seat. A state senate seat in Pennsylvania in a district Trump won by 16 points just flipped to a democrat. I know that all politics is local but Trump will be soon feeling the heat caused by his inane tariffs and the reaction to his spending cuts.

As to Slotkin, Trump tweeted “We must be unified to accomplish our Mission, and Elise Stefanik has been a vital part of our efforts from the very beginning. I have asked Elise, as one of my biggest Allies, to remain in Congress.” Slotkin agreed saying that she was a team player saying “This is about stepping up as a team, and I am doing that as a leader, to ensure that we can take hold of this mandate and deliver these historic results.” Personally, I think she probably rethought her decision to be US Ambassador and decided it would be better to remain in the congress where one day she might be speaker. The UN is a dead end, nothing position. Anyone can be ambassador but not someone so vital to the party.

Speaking of useless positions, how about being consulate to Greenland? The current consul is Monica Bland who has been in the position since 2013. She is a career foreign service person who speaks Danish, Russian and Serbian. Trump will probably get around to replacing her with a republican that has nothing better to do. This is one of the totally useless jobs littered all over the federal government. Seriously, why would anyone of value be the consul to Greenland? Yes I know that Trump wants to annex it but that is still not reason enough to post someone useful to lovely Nuuk. BTW, the lovely building in the picture is the consulate in Nuuk. I think that speaks volumes about the importance of the position.

Did you know that the US base in Greenland is a Space Force base? The base is ice locked for nine months out of the year. The nearest town is lovely Qaanaaq, population 646, 75 miles away. JD Vance and his wife Usha visited the base, perhaps to console the troops exiled there. A dogsled race was part of the itinerary. The visit was hardly warmly welcomed. Greenland’s Prime Minister Múte Egede said “the upcoming and subsequent private visit of the wife of the United States Vice President and the United States President’s highest security advisor cannot be seen only as a private visit. After closer consideration, however, we have now informed the consulate that we do not want her visit.” Methinks, Mr Egede views the visit as a provocation. Indeed, Danish Prime Minister Mette Frederiksen denounced US plans to visit the Arctic Island uninvited and called it an “unacceptable pressure” on Greenland and Denmark.

Trump must not like Usha Vance.