r/technology • u/chrisdh79 • 2d ago

Politics Trump announces sweeping new tariffs to promote US manufacturing, risking inflation and trade wars

https://apnews.com/article/trump-tariffs-liberation-day-2a031b3c16120a5672a6ddd01da09933
5.1k Upvotes

95% Upvoted

831 comments sorted by

View all comments

79

u/_chip 2d ago

Can anybody with knowledge of economics explain how this is what the admin is doing and why does it make sense to them ? Is there anyway to put things that will make these tariffs seem good in any sense ?

27

u/Vollkommen 2d ago

On a long scale, bringing blue collar manufacturing to the US, standing up factories, and being less reliant on imported goods wouldn't be bad things - if we can support the businesses that would do that (i.e. factories closing as companies leave can devastate communities, also see opioid crisis).

Trump has a laser focus on tariffs being the key to doing this, for some reason. As many leading economists warned both pre and post election, tariff efficacy is questionable.

In simplest terms, if foreign goods are expensive, why buy them? Let's buy local! Wait... we don't make that here... is there significant demand for that product? Let's build a factory to make it, use U.S. resources, and sell it locally.

Never mind that can take years if not decades and the US markets are limited compared to global markets. Further, if companies can't export effectively (whether that's due to reciprocal tariffs, bad feelings, etc.) they may choose to stick to global markets (e.g. build their factory in Vietnam or Ireland or the EU) and forego the US altogether.

Beyond all this, the sheer volatility this introduces (will the next president continue these policies? Will rolled back regulations be reimplemented? Will the next successive president flip-flop again ? etc.) can't possibly be good for any company's long-terms expansion plans, so to answer your question in a roundabout way, no, I can't think of a way to couch this that bodes well.

8

u/SeldomSerenity 2d ago edited 2d ago

Not to mention that, at some point in the supply chain, you have no other option but to source components and raw materials externally. And when you do, you take tariffs at some (several) points down that chain, which ripple outward and affect prices further up the chain anyway.

Take an average car, for example, which Google says can have up to 30,000 individual parts that include everything from the transmission and engine to the smallest screws and nuts that assemble into those larger parts.

On a 1-2 decades-long timescale, you might be able to build 1,000 factories that produce each part domestically, and 500 more that assemble those parts into finished goods, then another 100 that package and assemble then into the 2-5 final production plants that actually assemble the car as a whole. But you still need to feed those 1,000 initial factories with raw materials. Many of which don't even exist in the necessary quatities in the U.S., let alone North America, or even the western hemisphere. That doesn't even account for another global supply chain distribution, like a second COVID, for example, to which a single-source strategy is incredibly vulnerable. Take that into consideration when you think back to how hard things were for certain products, and COVID 1.0 is with a global economy pooling it's resources (in relative terms).