2 November 2024:
I recently read the report of the American “Consumer Technology Association” (CTA). The CTA is ‘kind of a big deal’; it is a trade association representing the $297 billion US consumer technology industry.
A copy of the CTA’s report is linked here.
The logic underpinning Trump’s policy is that by imposing tariffs on imported goods, American companies would stop importing and start manufacturing domestically.
Companies like Apple, for example, are going to be “incentivised” to close their factories in Asia and build factories on US soil, for the domestic production of their devices, because the burden of the tariffs will mean that Apple is better off doing so.
It is noteworthy that whilst Trump did impose tariffs during his first term, they were arguably modest and covered only certain goods. Contrast this with the new proposed tariffs; they are eyewatering (including a 60% tariff on Chinese goods) and cover pretty well everything.
So, is Trump’s plan going to succeed?
I am incredibly sceptical; I think it’s more likely to destabilise the US (and Global) economy and cause rampant inflation and unemployment.
This is because economic principles tell us that any tariffs which the US imposes will be passed on to US consumers. This means that the cost of basic goods will skyrocket. This, in turn, will cause less spending by consumers (and worsen the average consumer’s basic standard of living).
Not to mention, factories take a long time to build!
What of the cost in human capital, too? Doubtful companies like Apple will ever return manufacturing to US soil, yet with reduced consumer spending, they will no doubt be incentivised to exploit cheaper human labour to further reduce prices and increase consumption.
And then you’ve got Elon Musk as Trump’s proposed appointment for the proposed “Department of Government Efficiency” (or DOGE, like the meme and cryptocurrency that Musk promotes).
Alarm bells are ringing!