The problem is that factories take years to build, many forms of agriculture take years to yield results too.
So when the tariffs can change every day and you don't know if they'll be around in 5 years, do you commit millions to building something that doesn't pay off until 5 years from now?
> The problem is that factories take years to build
Nobody's even building them right now. CAPEX and industrial investment have declined in recent months. (!!) They may even drop further. So it seems that if the aim is to revitalize America's industrial base, the present strategy isn't working, but is having an opposite effect.
Which is funny because US industrial investment was on a tear pre-tariff as companies near/on-shored at historic rates. Not only were tariff's not needed, they've effectively shut down their intended goal.
This chart is a pretty astounding look at how successful Bidenomics was at achieving this and how catastrophic Trumponomics is already turning out to be:
Credit to prior on-shoring should go to Covid 19 and the Chinese government's heavy handed response to it, not any US policy or administration.
Talk to anyone in industry and they'll say "we on/near shored because Covid supply chain problems taught us a lesson" or something along those lines. Those investments were just starting to bear fruit in the past few years.
Edit: And before anyone tries to put words in my mouth, this is neither an endorsement of "Trumpenomics" nor a dispute of the prior commenter's statement about them.
The difference between on- and near-shoring is pretty important, and I'm going to bet the trillion dollars in incentives played a far, far bigger role than the delta in people's resilience estimations between putting a factory in Mexico vs the United States.
Credit should go to all factors, but sorry it's foolish to think orchestration of a trillion dollars into exactly these sectors wouldn't play a huge role.
>The difference between on- and near-shoring is pretty important,
Of course. I don't think many saw coming that we wouldn't be on friendly trade terms with Mexico and Canada.
> and I'm going to bet the trillion dollars in incentives played a far, far bigger role than the delta in people's resilience estimations
Which have you seen companies respond more swiftly to, opportunities to make money, or disruptions in their existing ways of making money? Which gets the CEO on the phone faster, a potential business deal or a prod outage?
Just about everyone experienced the latter during Covid. "Yeah we'd love to do all the electrical for your covid construction boom fueled McMansion development but switchgear is back ordered 18mo, sorry", and so on and so on across many industries. And they're all real salty about it.
I'm sure the incentives added fuel to the fire, but the way the Chinese economy stayed disrupted for longer really pained a lot of people in the US who depend on stuff from there to make money here.
Depends on if the outage impacts the entire industry/sector or just his company. If the former, it's relatively fine because stock performance is going to be similar to competitors and investors won't be asking too many questions. Might be some wailing and gnashing of teeth but not too much action in the form of spending money on the problem.
I don't think many companies in my estimation took too many lessons from the COVID supply chain crises. If they did, the lesson was to simply outwait things. Everyone was having similar problems and you didn't be the single one of your sector to have re-shored production at triple the expense while your competitors simply spun back up once the Chinese factories got back on-line.
If it was such a compelling thing that was already happening we'd be seeing a lot more 'low value base component' manufacturing coming back, such as electronic components like resistors. So far from my basic understanding of the subject it's all the stuff quite high up the value chain instead. At best some things got near-sourced or moved around, with the raw inputs seemingly still coming from China in the end either way.
It would certainly be interesting to find some actual data here though.
The IRA added huge incentives towards factory construction in certain areas. Biden also maintained strategic tariffs on certain industries (as opposed to the blanket tariffs Trump is using.) I understand that people with specific political preferences would like to believe these incentives didn’t work, but there’s every reason to believe the simpler explanation: incentives like this do work. We should be learning from these results instead of denying them.
Companies started shifting plans as soon as the election result was decided in November. Many started stockpiling Chinese imports then. Additionally many have paused Capex due to the economic uncertainty:
The tariffs were not a surprise after the election. The President said he was going to enact crushing tariffs, so this was effectively predictable since early November.
> if the aim is to revitalize America's industrial base, the present strategy isn't working
The issue is that the aim clearly isn’t to revitalize the industrial base. If it were, then the tariffs wouldn’t be removed after negotiating with other countries. Since other countries can make deals to reduce the tariffs on their products, then it’s clear that the aim isn’t to get Americans to build things at home. The tariffs are clearly some kind of brinkmanship game to pressure other countries into making concessions.
> 10% for everyone tariffs were not paused, nor can they be negotiated away
But "everyone" doesn't mean everyone because everything on this list is exempt from the global 10% tariff and recriprocal tariffs (https://www.whitehouse.gov/wp-content/uploads/2025/04/Annex-...). Categories have been added to the list after influential people called the President. So even the 10% for "everyone" tariff can be negotiated away if you give the President something he values.
Which suggests it isn't just a way to get foreign countries to negotiate, but also a way to get domestic companies to negotiate with him, possibly in a way to increase his personal power.
There is no "aim". The tariffs are something Trump has been "wanting to do" for decades, and now that he has almost absolute power and is surrounded by sycophants, he gets to do whatever he wants. This is a flex. A way for him to "play hardball" with the rest of the world but without any clear notion of what the next step us. He's said that other countries will have to "pay a lot". What does it even mean? There is no plan. There is no ask. There is no endgame. His cronies are too afraid of him to tell him that this is a terrible idea, and now that he owns it, he'll sooner go down with the ship than admit he was wrong.
I think the aim of the tariffs changes depending on President Trump’s mood, what the market is doing, what the press is saying, and who he spoke to last.
If you believe certain business cycle theories, the way an economic downturn starts is when businesses no longer see the need for additional new capacity. So there's declining CAPEX. Then the 40% of the economy that is CAPEX-related takes a downturn. Even though the 60% that is consumer goods is still for the moment going at full capacity, the CAPEX-related part suffers layoffs. That in turn affects the consumer spending part of the economy.
So if CAPEX is declining, the downturn has already started. (I mean, I guess the article's headline already told us that...)
The strategy of the US has been Hegemony. Friendly foreign partners were intended to take over industries we did not want in our own backyards for political, diplomatic, economic, or environmental reasons. For a stint in college I was an International Relations major and this was 100 series education. At a basic level this is discussed as the “Pollution Haven Hypothesis.”
A political/diplomatic example is rebuilding the Japanese Steel industry after WWII so they could regain self sufficiency. Until we decide to shoot ourselves in the foot hard enough we’ve had a consistent trading partner in high quality steel ever since.
The current “strategy” is painful because it has the weight of the past 60-70 years working against it.
I dunno. This reads to me like an attempt to retroactively justify the effects of US policies that were aimed at a different purpose. I don't think I've ever seen an American politician say that they'd prefer for industry X or Y to be located in a different country.
I don't think either of these policies intended or caused other countries to "take over industries we did not want in our own backyards". In the 50s and 60s the US still ran consistent trade surpluses.
A lot of businesses now have to face that to survive, they need to increase their market share or profit margin by double-digit percentages when they probably don't have double-digit numbers there to begin with :\
And double-digit increases are what they have been working toward the whole time, they know how to do it, that's how they have managed to get by, even though they know it will takes years. These are great business operators, they know they'll make it if they persevere, they just don't know how many years.
And these were the businesses that were shrewdly operating successfully in the USA in difficult markets with slim margins, even if they were leaning to any extent on cheap foreign materials, labor, or even weighted more toward robust domestic commerce in general.
Prevailing in situations that "average" businessmen aren't quite up to.
How do you think the less-skilled operators are going to feel? They know who they are. Lots of times their businesses are totally dependent on the majority of Americans overall being "richer" than most. And in less than 100 days really, that's been brought into question more times than in any other previous decade. With things like over-taxing and currency exchange taking their toll at the same time commerce itself as a source of prosperity is receding, this is going to make them some of them the most nervous of all.
Trump has always been foolish with money, after his first term the US can no longer afford lots of things that were affordable under all previous presidents, you can't make this up.
When a recognized business-bozo-in-chief can remotely do more percentage damage in one day than a business owner can make up for in one year, might as well give up now, or at least take a sabbatical. Trump can't last forever, and anybody who replaces him may not be any wiser or less misguided, but at least would be more stable & trustworthy.
However, doing something like declaring election fraud, having Vance not certify the vote, and then in chaos, remaining in power, its totally doable, granted he has legal immunity.
The things is, they are doing so much illegal shit that they know if Dems get in power, people will go to prison. So everyone around him has as large incentive to go along.
We are both suppressing international trade of consumer goods and making it harder and more expensive to build out the infrastructure to build consumer goods in the US.
There's a chance the tariffs will be rejected by the Supreme Court within a year, a chance something political happens within the next two years (senators and representatives will turn on Trump as soon as he becomes a liability in the next election), and new management will be here in four years.
Too much is in flux to make an expensive decision that won't see value for years. There'd need to be grants to jump start construction.
That might be a good time for him to move to whatever his Reichstag fire will be and make sure he stays on. The argument could be that this sort of long term development requires a firm and constant leadership for a long time.
Part of Trump's genius tarriff plan was closing trade deficits.
Except trade deficit is just mostly a measure of how much countries choose to park the returns on their goods/services in your own country as investment in capex, domestic investments, etc. It is the foreigner choosing not to take the dollar or exchanged goods back to their own country, but to invest it in your own country.
You literally kill capex by killing the trade deficit.
Kinda, but domestic capex is overwhelmingly more important than foreign investment in almost every country, and the US is absolutely included on that set.
So, on practice, you won't find a correlation here.
Fun fact: The GDR (East Germany) had a massive coffee problem because of dollars (scarce). So they heavily invested in Vietnam for coffee production. It took 10 years for the coffee to be produced, and the GDR collapsed before. After German reunification Vietnam became one of the biggest coffee producers.
Yes. And even if we could wave a magical wand and materialize a whole new city (or region) with thousands of new factories and also a workforce complete with training, and housing for them, and new universities to continue the training for them and their children, and new power plants to supply the power and water needs of this new region as well as a transportation infrastructure to support all this new economic activity. New airports, new rail networks, and new shipping ports. Even if all that could happen instantaneously, the result of all these new Made-in-USA goods would still be astronomically higher prices for all Americans. The US is one of the most expensive places to live in the world, and all these factories have to pay those high prices both for their construction and for their ongoing operations. (I'm assuming here the magical wand only speeds time. It doesn't produce investment capital out of thin air.) So protective tariffs would need to continue on indefinitely so all these people could keep their very expensive jobs and all Americans would be paying the bill for it, forever.
I saw a study years ago that compared US made vs foreign made products and found that most imports had US made alternatives that were not substantially more expensive. Walmart made a big push to increase their percentage of US sourced products a few years ago. With the increase in automation, the labor costs aren't as much of a differentiator.
I'm not sure this small price difference will continue since I assume a reduction in imports might result in greater demand domestically and those factories might not be able to easily scale to absorb the shift.
Survivorship bias. The only US made goods left are those that can compete with foreign production. You cannot use those remaining as evidence that all goods could be US made without significant price increases.
>With the increase in automation, the labor costs aren't as much of a differentiator
and unsurprisingly, the imported goods are the goods that are still heavily reliant on labor cost.
If automation was possible, it would be the preference of any business to use that over human labor, simply for the consistency of output and ability to control cost factors. I do believe this to be the case in most instances.
Thats why car companies have long advocated for tariffs on imported vehicles (and is one tariff we have consistently held for a long time).
Yep! Though I guess that weirdly does get us back to some version of the 1960s/70s America these tariffs are supposed to revive: Where things were expensive (relative to buying power) but you bought them forever and might even know the people who made them.
If people will be happy to buy locally-made furniture for triple the price and having it last longer is a different question.
Nobody is going to invest in a factory that's only profitable under this tariff regime because it's all based on Trump, who notoriously changes his mind or may die or get overridden after the midterms. What if Trump wakes up tomorrow and says "you know what? I had a man to man with Xi Xinpeng and now the trade war is off!"
I am not against repatriating manufacturing, but it's something that needs to be done with thought and strategy. This trade war is worse than Biden's Afghanistan withdrawal.
> This trade war is worse than Biden's Afghanistan withdrawal.
"Biden's"? That's comparing an 100%-Trump fiasco with an 80%-Trump fiasco.
If we're gonna blame Biden for not breaking the US/Taliban ceasefire agreement and drawing things out... Then we need to talk about how it was Trump who made the agreement abandoning the Afghan government, Trump who negotiated that aggressive May 2021 deadline to land at the beginning of the next term [0], and Trump who had to be stopped by his staff from triggering a far-worse instant "fuck y'all, we bail" just days after he lost the election in Nov 2020. [1]
This isn't going to go away with a new administration. Global trust in the US is broken. Even this idea that things will swing wildly back when an administration changes is part of the problem. There's no going back from this, the US has permanently lost its position in the global order. Even our allies are looking elsewhere now.
I agree, which is good, because the US cannot be trusted to vote for adults (based on observations and the evidence). But punitive tariffs can go away under different governance, so some relief, but to your point, we're not going back to how things were because of the self inflicted trade harm.
If people are unhappy with the outcome of harmful, irrational policy, they should feel empowered to riot. The government and representation is supposed to work for the people, after all. Accountability is important in governing systems.
If it's only inconveniences like $65 coffee that sets touchy people off enough to storm the Capitol or something, that's definitely not a riot. It's been fully proven by the party in power to be a legitimate demontstration of opinion.
Empathy. If well-off people were to fully understand the situation the rest of us find ourselves in, and the increasing likelihood that it will eventually become a problem for them, too, they'd put all of their HOA-busybody/PTA-pearl-clutcher/campaign donor might behind solving the issue. They are currently in "ignore it, it doesn't effect me, it's not my problem" mode, heavy.
The factories would be more expensive because the materials and machines are also affected by tariffs. And you obviously can't rely on the tariffs to remain that way, Trump is far too flaky, hopefully not in power forever and the tariffs are just too damn stupid to remain. The harm they cause will be quite obvious soon.
What is the best case scenario here? Even if the tariff war ends next month, wouldn't production/shipping etc take weeks/months to recover? How are small businesses with limited cash flow expected to survive in the interim?
The most scary thing are medicines, medical equipment etc. Healthcare is going to become even more expensive, no?
Above everything else, why would other countries/allies/trading-partners trust the U.S govt again? I just can't comprehend how this is good for anyone, other than those with spare cash to buy up distressed assets
The best case scenario is that governments make agreements to accept more US exports, the trade war ends, and in a couple years conventional wisdom remembers this entire episode as a cautionary tale about crazy policies countries sometimes pursue when their trade balance gets too out of whack.
Is that the most likely resolution? No, I don’t think so, I’m still holding most of my money out of the stock market. But doing lots of business with countries whose current government isn’t trustworthy isn’t an unheard of scenario.
Even if they did get built they only make economic sense if there's still the tariffs or something drastically changes the cost formula (eg: automation that's simultaneously very adaptable to new products like a hoard of people) but more realistically the tariffs have to remain in place forever to keep the factories.
Welcome to Argentina, a country where we live on a roller coaster of shifting policies, economic turmoil, and ongoing corruption. While it's clear that not all countries are alike, it's interesting to observe what emerges from this kind of system.
Argentina's people seem to have dealt with this through mass tax fraud, hiding money in crypto/cash/real assets, insubordination to law, and electing a self proclaimed anarcho-capitalist. Somehow they've managed to thrive in a lot of ways, and not only that they can deal with an arbitrarily incompetent government through self-resilience.
> Argentina's people seem to have dealt with this through mass tax fraud, hiding money in crypto/cash/real assets, insubordination to law, and electing a self proclaimed anarcho-capitalist.
It is not black or white when there is not real [power of] law enforcement.
Precisely. Seems fairly likely the tariffs will be gone 5 years from now one way or another. Who in their right mind would build a business based on those tariffs still existing into the future.
factories also require relative stability to justify the upfront investment. If a person is so inclined, they would be raising money today to build a US factory that may open after Trump is out of office.
Personally I'd want one hell of an insurance policy to cover the risk of all that money being wasted when I finally open my doors and have to compete with overseas manufacturing that may no longer be burdened by these tariffs.
> do you commit millions to building something that doesn't pay off until 5 years from now?
This is exactly the kind of short-termism that got us to where we are now. Why is it so hard to think on a 5-10 year timeline? This is country-level ADHD. Anything worth building requires long term investments. People in the past used to spend their life building cathedrals that they knew would never be finished in their lifetime, and now you're questioning whether it's worth investing in something that has an expected ROI in 5 years!
But what if 2 years in all the tariffs are cancelled and you go bankrupt?
if you want people to think long term you need long term stable policies that won't change the next time someone else sits in the oval office or Congress changes hands. you need to commit to a strategy.
I think this may be missing the difference in differential risk.
If I live in a place with constant uncertainty, taking one uncertain bet over another makes little difference.
If I instead live in a place of relative historic stability with (real or perceived) short-term uncertainty, it makes a lot of sense to wait until the relative stability has returned.
Entrepreneurs in Ukraine have other options. Instead of building a restaurant or factory they could sit on their money for a few years until the war ends.
And do you think that is an equal differential in risk compared to someone in the US doing the same? I can think of at least a handful of reasons why that may not be the case.
>> Not willing to take risks to build something great.
8 of the top 10 companies in the world we're started in America in the last fifty years. If you were try to guess where the next world beating companies are going to come from I am sure some will come from China, Europe, South America, but still most from the US. The US still puts the world to shame in putting capital at risk on new ideas.
The ROI isn't 5 years, it's more that it won't generate any returns for 5 years and those returns might not pan out depending on policy change. If you build an American factory and right as it's getting up and running, the next administration rolls back all tariffs, you're left with massive debt and everyone undercutting your prices.
Risk. It's called "doing business". Anyone who has built anything great took risks because they had a vision and believed in it. They weren't "rent seeking" and looking for guaranteed returns.
What bank is going to finance a loan for a new factory whose profitability is predicated on this trade policy remaining stable for the next decade? Even if you as a business owner have appetite for this risk, the bank won't.
Even if all those factories were built instantaneously, it still results in made-in-usa prices for all Americans for everything coming out of those factories, along with protective tariffs forever. A factory can't be constructed or operate going forward in the US for the same price as in China. The moment any president drops tariffs, all those factories will shut down immediately.
So when the tariffs can change every day and you don't know if they'll be around in 5 years, do you commit millions to building something that doesn't pay off until 5 years from now?