Trump and Ross played for fools by China

May 13, 2017

In 2016, the U.S. trade deficit with China was $347 billion.  The deficit in manufactured goods was $372 billion.  China accounts for over half of the total U.S. trade deficit.  The deficit with China is responsible for the loss of five million manufacturing jobs in the U.S.  and for the downward spiral in Americans’ standard of living.

Throughout the campaign, Trump promised to impose tariffs of up to 45% on Chinese goods to restore a balance of trade.  It’s one of the key reasons he was elected.  In his inaugural address, Trump declared:

“These are just and reasonable demands of righteous people and a righteous public. But for too many of our citizens, a different reality exists. Mothers and children trapped in poverty in our inner cities, rusted out factories scattered like tombstones across the landscape of our nation, an education system flush with cash but which leaves our young and beautiful students deprived of all knowledge. And the crime, and the gangs, and the drugs that have stolen too many lives and robbed our country of so much unrealized potential. This American carnage stops right here and stops right now.

“Right here and right now.”  Yet, four months into his administration, details of his plans for trade with China are beginning to emerge, as reported in this Reuters article.

The United States and China have agreed to take action by mid-July to increase access for U.S. financial firms and expand trade in beef and chicken among other steps as part of Washington’s drive to cut its trade deficit with Beijing.

That’s it?!?!?!?  Beef and chicken!?!?!?!?  So instead of “right here and right now,” what we get instead is that, six months into his administration, we might be able to sell China a few more hamburgers?  And what do we get in return?  Chicken imports.  Who in their right minds would eat chicken imported from China?  We can’t even feed our pets dog food from China for fear that it’ll kill them, which has actually happened.  And we supposedly got some cooperation from China in reining in North Korea.  Doesn’t Trump realize that China and North Korea work together to blunt any action on trade?  Maybe that’s what we need – some puppet state to develop nuclear weapons to threaten China.  Then we can agree to pull in on their reins if China will just agree to some heavy tariffs.

What will the next 100 days of negotiations yield?  A side order of fries?

As has always happened following trade negotiations with the U.S., Chinese President Xi must have been rolling in the aisle with laughter on his plane ride home from Mar-a-Lago.  Trump and Commerce Secretary Wilbur Ross were played for total fools.  This is beyond pathetic.  It’s an insult to Trump’s supporters and all American workers.

“This will help us to bring down the deficit for sure,” U.S. Commerce Secretary Wilbur Ross said at media briefing in Washington. “You watch and you’ll see.”

Oh, we’re watching, Wilbur, and I already know what we’ll see.  Nothing.  The trade deficit with China will, if anything, get worse.  America’s been suckered yet again.


Economic Data Still Stuck in “New Normal” of Globalization

May 6, 2017

Three major economic reports were released in the past week, each of which I usually write about separately.  But there was nothing particularly noteworthy about any of them.  Taken together, however, they paint a picture of a U.S. economy that’s still stuck in the “new normal” that characterizes globalization (trading freely with all nations, regardless of whether it makes any sense) – stagnation, an imbalance in the supply vs. demand for labor that puts downward pressure on wages, and a host-parasite relationship between the U.S. and the overpopulated nations of the world.

First quarter GDP was announced last Friday, and it came in at a measly 0.7%.  Expressed in per capita terms, it rose only 0.09%.  Over the past ten years, per capita GDP has risen at an annual rate of only 0.6%.  That’s very close to no growth at all and explains a lot about Americans’ sense that the country is headed in the wrong direction.  Population growth and free trade with much more densely populated nations has become a significant drag on the economy.

Speaking of trade, that data was released Thursday.  Here’s a chart showing the monthly balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.  The deficit in manufactured goods continues to hover near its record worst level.  In fact, it was the second worst quarterly figure ever, down by only $1 billion from the record level of $177.1 billion set in the previous quarter.

The April employment report was released yesterday.  The headline numbers were that the economy added 211,000 jobs and unemployment fell to 4.4%.  No one noted that the employment level rose by a more modest 156,000 and unemployment fell because, once again, the growth in the labor force was understated at only 12,000 (while the U.S. population grew by 171,000).  Each month, as the unemployment rate ticks downward, economists proclaim the economy to be at “full employment.”  And each succeeding month, the economy adds more jobs and the unemployment rate drops more.  How can that be?  Here’s a chart of the “labor force backlog,” the cumulative amount that the government has under-reported growth in the labor force in order to make unemployment look better than it really is:  Labor Backlog.  (It’s the yellow line on the chart.)  Note that the “backlog” remains near its highest level at about 5-1/2 million workers.  Were it not for this “backlog,” an honest reading on unemployment would have the figure at 7.2% – a far cry from “full employment.”  It’s no wonder that, in spite of all of this supposed strength in labor market, there’s been no corresponding upward pressure on wages.

What does it mean when you put all of this together?  It means that the approach taken by President Trump to date – jawboning foreign leaders on trade and CEOs about manufacturing in the U.S., and making idle threats about tearing up trade deals and implementing “border taxes” – has done absolutely nothing to improve the economy.  No surprise.  These are exactly the same results that the same tactics employed by past presidents for decades has produced, which are no results at all.

Trump has seemed to be backing away from his promises on trade.  He’d better not, or he’ll find himself dealing with a recession before his first term is up.  His voters tolerate his less appealing aspects on the hope that he’ll follow through on his promise to “Make America Great Again” by fixing our trade mess.  Failure to do so won’t be tolerated.


Trump’s “Faulty Trade Math?” Accuser’s math is faulty.

April 29, 2017

http://www.reuters.com/article/us-usa-trump-trade-analysis-idUSKBN17U2SL

This is rich!  In this above-linked op-ed piece (which isn’t identified as such but, rather, is presented as a factual report), the author takes Trump to task for “faulty math” regarding trade policy.  But it’s the author of this article whose math is “faulty” at best, or deliberately misleading at worst.  First, let’s consider some of the statements leading up to his “math.”

In the case of Mexico, the American companies that exported a quarter of a trillion dollars of goods and services to that country last year would be out a customer, and likely cut jobs.

Those American companies that tried to replace the $323 billion in Mexican imports would likely do so at a higher cost — assuming they are in the United States to begin with.

They would be in the United States if similar policies are applied to other countries, which would only make sense.  Then, yes, the domestic manufacturers would likely replace those Mexican imports at a higher cost.  But the author conveniently ignores the fact that the increased demand for labor in the U.S. would drive wages up even faster.

“Americans seem to really like guacamole,” Noland said, “but the idea that we are going to have giant greenhouses and lots of avocados and limes – the fact that we are purchasing them from the Mexicans rather than producing them at home tells you producing them at home is more expensive. We can stop trading with the Mexicans, and have $60 billion less in consumption.”

Seriously?  This is the argument for not bringing a million manufacturing jobs back from Mexico?  Avocados and guacamole?  If they cost 20% more, people won’t buy them?  They’ll just consume less?  They won’t serve onion dip at their parties instead?  Come on!  How much of your disposable income do you spend on avocados and guacamole?  How much more income would you have to spend on them if your wages went up?

By the statistics most widely accepted among economists, the U.S. position with the rest of the world has been steadily improving as investment flows into the country from abroad and supports millions of jobs.

This is an outright lie.  The flow of capital investment has been negative for decades.  While some investment dollars do come into the U.S., far more have left, making net investment a big drag on jobs.

OK, now for the “faulty math:”

Even if Trump achieved his wildest success, and eliminated the United States’ $500 billion trade deficit solely through increased exports that boosted gross domestic product on a dollar-for-dollar basis, it would do little to dent the estimated $7 trillion in government deficits his tax plan is projected to generate over the next decade.

Alan Cole, an economist at the Tax Foundation, said that every dollar of gross domestic product generates about 17.6 cents in federal government revenue, meaning the $500 billion trade shortfall would translate into just $88 billion in new taxes.

That part is true but, as free trade advocates tend to do, he’s presented only one half of the equation.  That annual trade deficit of $500 billion (actually $800 billion if talking about manufactured products) is a drain on the economy.  If every dollar of that deficit isn’t re-injected into the economy in some way, the result is a permanent recession.  Since we’ve already noted that capital investment is also a net outflow, the only way left to re-inject that money into the economy is through federal deficit spending, in all its forms.  Grants for education, for police and fire, for infrastructure. safety net programs like welfare and medicaid, health care premium support under the Affordable Care Act, student loans … the list goes on and on.  All of this federal spending is made necessary by the trade deficit drain of money from the economy.

So, not only would restoring a balance of trade produce an additional $88 billion in new federal revenue (nothing to sneeze at and it would likely be more than that), but it would also cut federal spending by $500 billion.  That’s a net impact of nearly $600 billion per year – enough for the federal government to balance its budget.  And it would likely pave the way for cuts to personal income tax rates, saving all of us a bundle.

The case for free trade made by its advocates often reminds me of the commercials we all see on TV for the local casinos.  Everyone gathered around the blackjack table or the crap table pumps their fists and high-fives their friends as they celebrate another win and rake in their money.  Everyone’s winning and having a great time!  “Casinos are a big boost for the local economy,” we’re always told when some development group wants to build a new one in your community.  The casino owners and a few surrounding hotels and restaurants are winners.  You’re not.  If you’re someone who frequents one of these places, you’re a loser.  You may not want to admit it, but you are – you’re a loser.  Don’t feel bad.  Everyone who goes there is a loser.  Everyone who owns a business where you’d spend your money if you hadn’t lost it at the casino is also a loser.  Casinos are a net drag on the broader community, siphoning away money that people need for other things.

It’s exactly the same with a trade deficit.  Global corporations are winners.  The rest of us are losers.  But they want you to think that free trade benefits you in ways that are just too difficult to understand or quantify.  Remember Enron, the huge “energy trading company” that was such a darling of Wall Street back in the ’90s?  No one could figure out exactly how they made money.  Enron executives condescendingly sneered that their business was just too sophisticated and complicated for most investors to understand.  And lots of otherwise-intelligent people were sucked in.  Eventually, the whole thing collapsed spectacularly and was exposed as a giant scam.  Investors had been played for fools.  That’s exactly the same scam free traders are running when they tell you that it’s not just a matter of money in versus money out.

If trade deficits don’t matter, why is it that countries like Mexico, China, Germany, Japan, South Korea and others are so adamantly opposed to taking their turn at it?  It’s because they know the real math.


Weak Headline Number Masks Strong March Employment Report

April 8, 2017

The Bureau of Labor Statistics yesterday released its employment report for the month of March.  The headline jobs number was weak.  “Only” 98,000 jobs were added in March – about half of what was expected.  But unemployment dropped by two tenths (a fairly big drop) to 4.5%.  The data underlying the unemployment figure was quite strong.  The “employment level” (the number of people reporting being employed in the household survey portion of the report) rose by 472,000 in March.  (It rose by 447,000 in February.)  And the labor force grew by 145,000 – outpacing the growth in the general population for the fourth month in a row.

Last month, Trump hailed the strong February employment report as “real,” as opposed to the “fake” reports produced by the Obama administration.  (The Obama administration did lean heavily on claims of a shrinking labor force to prop up its unemployment figures.)  Was that claim just bluster or has the reporting methodology actually changed for the better?  It’s two early to tell but, at least for the second month in a row, the BLS claims that the labor force grew (as it actually does, of course) and the numbers seem plausible.  Time will tell.

Per capita employment (the employment level divided by the population) climbed above 47% for the first time since November, 2008.  (Here’s the chart:  Per Capita Employment.)  The “detachment from reality index” – my measure of how much the unemployment figures were distorted by the “mysteriously vanishing labor force” tactic used by the Obama administration – fell to its lowest level since January, 2013.  (Here’s the chart:  Detachment from Reality Index.)

This is great news, but it has more to do with a burst of confidence among consumers (likely driven by a burst of confidence among investors which has driven the stock market higher) in the wake of Trump’s election.  The fundamentals of the economy haven’t changed.  The trade deficit is as bad as ever.  And interest rates are on the rise which will pull the economy down if Trump isn’t able to make headway with tax and trade reforms.  And the jump in stocks that have propelled the economy has already stalled, now waiting to see if expectations of Trump policies actually materialize.

I hope that what appears to be honesty with the factors that make up the employment report (based on a scant two months’ of data) continues.  But without the “border tax” that Trump promised, the good numbers won’t.

By the way, for some time now, the Federal Reserve and others have been proclaiming the economy to be at full employment.  If that were true, then how does the economy continue to add jobs at a faster rate than the growth in the labor force, and how does the unemployment rate continue to fall?  It’s because they were all sucked in by the “detached from reality” employment reports produced by the Obama administration.  The fact is that an honest reading of unemployment (one that grew the labor force in proportion to population growth) has unemployment at 7.3% – nowhere even remotely close to “full employment.”


Closing the Book on Obama’s Trade Policy

March 8, 2017

The U.S. trade deficit for the month of January was posted yesterday by the Bureau of Economic Analysis.  It was horrible.  President Trump took office on January 20th, but he can hardly be held responsible for any of the January results.  This is all on former President Obama.

How bad was it?  The overall trade deficit rose to its worst level in nearly five years – $48.5 billion.  At $62.1 billion, the deficit in manufactured goods just missed its all-time worst reading of $62.5 billion set in March of 2015.  As you can see from this chart, if the trend in manufactured goods continues, we’ll have a new record very soon and, without the change in trade policy promised by President Trump, it will likely get worse from there:  Manf’d Goods Balance of Trade.

Then there’s the export numbers.  In January of 2010, lacking the courage to take on the problem with imports, President Obama vowed to double exports in five years in an effort to turn the U.S. into more of an export-driven, Germany-like economy.  It never happened and never even came close.  In January of 2017 – seven years after Obama made that promise – total exports, at $192 billion – remained below the October, 2013 level.  Worse yet, exports of manufactured goods were below the level reached in September, 2011 – up only 26% from when Obama made that promise.  And that increase was due entirely to global economic recovery from the 2009 recession and had nothing to do with any real improvement in America’s export position.

So that closes the book on Obama’s trade policy, which was a total failure.  Actually, if President Trump follows through on his promise of tariffs (or border tax, or whatever you want to call it), this closes the book on a seven-decade-long experiment with free trade and globalization, begun in 1947 with the signing of the Global Agreement on Tariffs and Trade that, by any measure of its effect on the American economy, has been a complete disaster.

  • America’s trade surplus dwindled until we ran our last trade surplus in 1976.
  • 41 consecutive years of trade deficits has yielded a cumulative deficit of $14.4 trillion.  During that time, the national debt, which is closely linked to the trade deficit, grew by $19.4 trillion.  In 1976, the national debt was only $0.5 trillion.  Virtually all of our national debt is due to the cumulative trade deficit since 1976.
  • During this period, family incomes and net worth have declined, our infrastructure has crumbled, and our nation has been bankrupted.  The manufacturing sector of the economy has been gutted.  More than ten million manufacturing jobs have been lost.  The United States, once the world’s preeminent industrial power, has been reduced to a skid-row bum, begging the rest of the world to loan us money to keep us afloat.

This is all on you now, President Trump.  You own it.  You’ve promised to straighten out this mess.  America is watching and waiting.


Student Visas

February 24, 2017

The subject of student visas aggravates me as much as illegal immigration (although we’re finally getting some great news on that front).

Why?  “What’s the problem with student visas?” you might ask.  For most, the topic probably conjures up images of foreign exchange students coming to the U.S. to experience life here and return home to spread the news about what a great place the U.S. is and to help spread our value system around the world.  Or maybe you envision students coming here for an education that can be put to work back home in some underdeveloped country, helping to raise living standards there.  But the reality of the situation is nothing like this.  The student visa program boils down to money.  It’s a system designed to suck trade dollars back into the U.S. economy and to prop up inflated tuitions.

Let’s begin with some data.  Here are the statistics for non-immigrant visas issued from 2011 through 2015.  (The data for 2016 is not yet available.)  Student visas are primarily “F” visas.  “M” visas are for vocational students.  Taken together, they totaled nearly 700,000 in 2015.  These are “non-immigrant” visas, but don’t be fooled.  A large percentage of these students receive immigrant visas (leading to permanent status) almost automatically upon graduation.

Where do these students come from?  About 280,000 came from mainland China.  75,000 came from India.  28,000 came from Saudi Arabia.  27,000 came from South Korea.  17,600 came from Vietnam.  An equal number came from Mexico.  17,000 came from Japan.  The rest are spread across the remaining nations of the world.  The significance of this list will be discussed later.

To get an idea of what the student visa program is really about, take a look at this web site, which provides information for foreign students for how to apply:

https://www.studyusa.com/en/a/33/how-to-get-your-u-s-student-visa

What it boils down to is this:  you have to explain why you want to study in the U.S. and, more importantly, you have to prove that you can pay for it.  There’s no student loan program here, at least not through U.S. agencies.  If you can get scholarship money from your native country, fine, but regardless of how you get the cash, you have to be able to pay your way.  You must also declare your intent to return to your home country when you’re finished with your studies.  But that’s a formality, one easily skirted when you actually get your degree.

In 2015, over 677,000 “F” visas were issued.  223,000 applicants were refused.  In other words, about three quarters of all applicants are accepted.

Now, let’s take a look at some interesting findings about the student visa program published in a study by the Brookings Institution in 2012.  Here’s the link:

https://www.brookings.edu/interactives/the-geography-of-foreign-students-in-u-s-higher-education-origins-and-destinations/#/M10420

“From 2008 to 2012, 85 percent of foreign students pursuing a bachelor’s degree or above attended colleges and universities in 118 metro areas that collectively accounted for 73 percent of U.S. higher education students. They contributed approximately $21.8 billion in tuition and $12.8 billion in other spending—representing a major services export—to those metropolitan economies over the five-year period.”

Got that?  They paid full tuition and living expenses, bringing over $33 billion into the economy.  And that was through 2012.  In 2015, when 25% more visas were issued than in 2012, that figure rises to over $42 billion.

Two-thirds of foreign students pursuing a bachelor’s or higher degree are in science, technology, engineering, mathematics (STEM) or business, management and marketing fields, versus 48 percent of students in the United States.

Remember how tech companies claim that they depend heavily on immigrants to provide the advanced skills that they need?

Forty-five (45) percent of foreign student graduates extend their visas to work in the same metropolitan area as their college or university.

In other words, these students then go on to become the H1-B visa workers that the tech industry (and many others) claim that they need.  So the “non-immigrant” nature of student visas, and the declaration of intent to return to their home country, is truly a joke.  Here’s further evidence that student visas are used as the pipeline for H1-B visas:

http://www.h1base.com/content/f1visa

These companies who claim that they’re dependent on immigrants for the skills they need are trying to pull the wool over your eyes.  What they need are STEM graduates and they get them from American universities.  They like the fact that foreign students contribute to a glut of labor that helps to keep their payroll costs suppressed.  When Apple claims that, if immigrants aren’t allowed to travel freely to work in the U.S., then they might need to relocate to where they can have easier access to immigrant labor, that’s a “crock” and they know it.  Go ahead, Apple, move to Yemen or  Iran or Libya or one of those other countries, and let’s see how successful you can be there.  What you really need are the STEM graduates of American universities.  You won’t find them in those other places.  But what you will find are poverty, illiteracy and oppressive governments.  But you say you can do better there.  So prove it.  Just leave.  Go ahead.  Go.

There’s a mind-numbing amount of information in these links.  Let’s boil it all down:

  • Immigrants currently fill 1.2 million of the seats available in American universities.  That’s a significant percentage of the seats available.
  • Approximately three quarters of foreign students who apply are accepted.  Compare that to the acceptance rate for American students at most prominent universities, where only 10% or fewer attain admission.
  • Why the preference for foreign students?  Because they pay full tuition, propping up the ridiculous rate of tuition increases.
  • Foreign students are given preference over American students because of their ability to pay.  This effectively shuts American students out, especially from STEM curricula.
  • The influx of foreign students actually counts as an export of services.  Can you believe that?  It’s one of the tricks used by the government to draw trade dollars back into the U.S. economy and to keep our trade data from looking even worse than it does.
  • University sports teams have also gotten in on the act, now recruiting foreign students through the “student” visa program, denying athletic scholarships to deserving American athletes.  When it comes time for the Olympics, those athletes, trained in America, compete for their home countries, leaving the American teams thin.
  • Almost half of foreign students then go on to work in America, shutting American students out of those jobs as well.
  • The student visa program feeds into the H1-B visa program, which then begins to feed many of the other immigrant categories such as immediate relatives and family-sponsored preferences.

OK, remember the above list of countries that send the most students?  Did you notice anything about that list?  Did you notice that it includes the countries with whom America has the biggest trade deficits?  That should give you a clue as to where these foreign students are getting the money they need for tuition.  Their parents are getting rich on manufacturing for export to the United States.  What this means is that, in addition to taking your job, they then use your money to pay for their kids to come over here and take your kids’ jobs too!  Can this scheme possibly get any more outrageous?

If you’re an American student who hasn’t been able to get accepted into the school or program of your choice, the student visa program is probably the main reason.  If you’re a recent graduate and find yourself now saddled with crushing student loan debt, you can blame the student visa program for propping up ridiculous tuition rates.  And if you now find yourself struggling to find a job, you can once again blame the student visa program.

The student visa program is an outrage perpetrated on unsuspecting parents and students, depriving them of opportunities to help America out of its trade-created cash crisis, to help greedy universities prop up inflated tuition rates and to help corporations suppress wages with a labor glut.  It has to stop.  No foreign student should be admitted until every last American kid who wants a college education has gotten a seat in a university.  President Trump … please … take a close look at the student visa program and rein it in.


Ford Moving to Mexico; Trump Says He’ll Stop It

September 15, 2016

http://money.cnn.com/2016/09/15/news/companies/donald-trump-ford-ceo-mark-fields/index.html

The above link will take you to an interview conducted by CNN’s Poppy Harlow with Mark Fields, Ford CEO.  If you have the patience to watch it all the way through, it will be immediately followed by further discussion of Trump’s plans to raise tariffs and bring manufacturing jobs back to the U.S.

Trump has long predicted that Ford would be announcing its move to Mexico.  Fields responds that they are only moving its small car production – the Focus and the C-Max (both made at Ford’s Dearborn, MI plant) -to Mexico.  Other models will continue to be made in the U.S.

Ford actually sells six car models:  Fiesta, Focus, C-max, Fusion, Mustang and Taurus.  The Fiesta and the Fusion are already built in Mexico.  Ford’s announcement about the Focus and C-max leaves only two of its six car models that are still made in the U.S. – Mustang and Taurus.  The former is built at its Flat Rock, MI plant and the Taurus is built in Chicago.  Most of its SUVs and trucks are built in the U.S.  There’s a good reason for this.  The U.S. continues to maintain a 25% tariff on all imported light trucks.

The Transit Connect is an interesting exception.  Until 2013, Ford imported the Transit Connect, a vehicle it markets as a commercial van/truck, from Turkey, trimmed out as a passenger van.  It then strips out the passenger interior, removes the windows, and replaces them with metal panels, converting it into a commercial vehicle.  It did all of this to escape paying the 25% import tariff.  In 2013, the U.S. ordered Ford to stop this practice.  Ford still does it, but now it pays the tariff.  It “eats” the cost of the tariff.  It doesn’t pass it on to the consumer.

If elected, Trump has vowed to essentially tear up most trade deals – particularly NAFTA, and will raise tariffs to force companies to re-establish their manufacturing operations in the U.S.  In the case of Mexico, he has suggested a 35% tariff.  During the linked interview, Ms. Harlow asked Mark Shields directly whether he would still move manufacturing to Mexico if that were to happen.  Shields side-stepped the question.  But the answer is obvious.  Of course Ford would not move more production to Mexico if that were to happen.  Quite the opposite.  Production of the Fiesta and Fusion would also return.

Late in the interview, Shields cited the huge savings in labor costs for the move to Mexico, saying that it needed to be done to remain competitive in that segment of the market.  Ms. Harlow failed to follow up with the obvious question:  “So you’ll be reducing the price of the Focus once production has moved to Mexico?”  I would have loved to see him squirm and see the smirk run away from his face when he replied that the price wouldn’t change a bit.

Has any company ever cut the price of any product once its production was moved overseas?  Of course not.  They pocket the extra profit.  Which brings us to one of the arguments employed by economists (and cited in the 2nd CNN segment which starts immediately after the Mark Shields interview) that prices will rise and consumers will be forced to pay the tariffs, hurting the economy and cutting deeply into consumer spending.

That’s absolute nonsense.  Consumers don’t pay the tariffs.  The importing companies pay the tariffs.  Whether or not they elect to pass that extra cost along to the consumer is entirely up to them.  As we saw above with the Transit Connect, Ford doesn’t pass it along.  Sure, that would cut deeply into profits.  By far, the smarter alternative is to move manufacturing back to the U.S.

During the course of the interview, Ms. Harlow repeats a myth about tariffs and their role in the Great Depression.  “… the last time a big tariff was instituted in the United States back during the Great Depression, all the economists agree that it made the Great Depression worse.”  I’ve said it many times but it bears repeating here:  that’s factually false and is absolute nonsense.  First of all, no new, big tariff was implemented during the Great Depression.  The Smoot-Hawley Tariff Act of 1930 was a very slight tweaking of the  Fordney-McCumber Tariff Act of 1922, raising tariffs overall from 38.5% to 41.4%.  Following enactment of Fordney-McCumber, the economy boomed during the “roaring ’20s.”

By the time Smoot-Hawley was enacted, the Great Depression had already been underway for a year.  During the Great Depression, America’s balance of trade declined by less than $1 billion while GDP fell by $33 billion.  To blame tariffs for the Great Depression is ludicrous.  But that didn’t stop economists from doing it, eager to make a case for their new, untested theory about “free” trade.

In the CNN piece following the Mark Shields interview, CNN reports on dire warnings by economists that Mr. Trump’s tariffs would have disastrous consequences for the economy, cutting GDP by up to $1 trillion and would result in the loss of 4 million jobs.  Such claims are really puzzling, given the fact that economists know very well that a trade deficit is actually a subtraction in the calculation of GDP.  It’s impossible that bringing back manufacturing would do anything other than boost GDP dramatically.  Merely balancing trade in manufactured goods would be an $800 billion boost to the economy.  That would be a 4% jump in GDP which, not coincidentally, is what Trump has targeted for economic growth.  Any further surplus in trade in manufactured goods would boost the economy even more.  And instead of cutting 4 million jobs, it would actually create approximately 10 million jobs.

Free trade advocates claim that manufacturing jobs don’t matter any more, that most manufacturing is automated and there are few jobs there to be had.  If that’s true, then why do so many badly overpopulated nations with huge, bloated work forces cling so desperately to the manufacturing that they do for the American consumer?  Certainly, automation has improved productivity in manufacturing, but not nearly to the extent that free traders would have you believe.  Consider the production of the supposedly high-tech cell phones like the i-phone.  Their manufacture is about as low tech as you can get – thousands of people assemble the circuit boards by hand in China.

During one of the CNN segments, the reporter comments that “cars aren’t really built from scratch any more.  They’re assembled.  Those plants in Mexico will be assembling them from American-made parts.”  As if the process of assembly requires no effort, and as if cars haven’t been built that way since Henry Ford invented the assembly line.  I can tell you from personal experience, having toured the Dearborn plant where Ford builds the Focus, that it takes a lot of workers to make an assembly plant “tick.”  Watching a stack of sheet metal being turned into a finished automobile in less than 24 hours is truly awe-inspiring.  Having toured both auto assembly plants and electronics manufacturing, I can tell you that an auto assembly plant is far more “high-tech” than electronics production.

Trump’s plans to use tariffs to return manufacturing back to the U.S. is exactly what the American economy needs – and is exactly the thing that globalists fear the most.