Trump’s Trade Wars With China Set the Stage for the Current Chip Shortage Crisis
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27 Comments
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2 years ago
Linking Trump’s trade policies (which are my opinion’s #1 argument against Trump) to chip shortages seems too Texas-marksmanshippy. (Shoot the arrow and paint the bullseye around where it landed.)
Monday morning quarterbacking and explaining what already happened are easy. But, who predicted chip shortages? Apparently not those idiots whose job it is to build and use chips. Fools, all of them. Am.I.Right? Hey, while you’re up could you toss me a beer. 🙂
Is Japan low on chips? Korea? If so, was Trump moonlighting there?
2 years ago
Maybe in the future old cars without electronic will be very sought after, not only anymore by collectors .
2 years ago
An example of the chip shortage and it’s downstream effects.
Last night over beers after hockey, one of the guys on the team mentioned he went into a Jeep dealership to buy a new Wrangler. He had looked online on several sites and saw the MRSP for the model / options he wanted was 43K. Knowing there is a car shortage due to chips he was fully prepared to pay sticker price and have no haggle room. The only dealership with the model he wanted had one coming in yesterday (Tuesday) so he pre-arranged with the sales guy all the details regarding his trade in value / financing etc. He and his wife went in yesterday to test drive and liked the car. When the sales guy showed him the contract price he near fainted on the spot. 62K was the asking price. In there was a line item for 9K called premium pricing. He asked the guy what that line item was and was told it meant he got the car right now as opposed to being put on an indeteriminate waiting list. He said thanks, but no thanks and left while the sales guy tried to talk him into changing his mind and he even got a followup call from the dealership asking what went wrong (as if they needed to ask).
Another guy said he just got back from a 2 night stay in Nashville during which time he rented a car. Said he had to call 5 places to find a car and the only one left was a Corolla. $440 for 2 days rental, or $220 a day. For a car you can normally rent for 30 bucks a day or less!
Crazy markups right now in the car industry due to chip shortages.
2 years ago
One of my children had to go from Philly to New York on short notice. No problem finding a car. Another is visiting my parents in Palm Beach County. No problem with finding a car. Granted it’s not the best time to buy a car if you must have all the electronics but if you just want transportation there is no problem.
2 years ago
Maybe it’s just Nashville. He did mention he wasn’t renting from the airport (he flew into a private airport).
The prices though are crazy high. I just checked Palm Beach county (PBI) where I happen to live and it’s 80/day to rent here compared to 30-35 normally. Same with Dallas (DFW) where I regularly fly when we visit the misses parents.
2 years ago
They came in regular airports so I assume there was a wealth of cars to rent. My daughter and her husband and their two kids flew into WPI two days ago to visit my parents. They mentioned when we Skyped today that they had no problem to find a car. Florida is always a good place to rent cars I find. So many people are moving there these days. I love Palm Beach County. It’s got everything.
2 years ago
Those aren’t chip shortages. Those are rental car companies that sold their fleet. New cars are now priced higher because they expect the rental car companies to come crawling back in the wake of sold fleets and higher prices from Uber and Lyft. Covid caused a lot of dislocation in many markets because business models weren’t made for no business for a year.
2 years ago
Premiums on cars in short supply are nothing new. In 1976 I tried to buy a Honda Accord for $4622. There was a 12 month waiting list. I put my name on the list, but shopped some other dealers. I could have gotten one immediately for 6300 from another dealer, $1000 extra, plus every deal-installed option (extra side molding, luggage rack, right mirror, etc). I waited.
This time around, consumers can get in on the excess profits. Got a used car you don’t need? My 2.5 year old car is worth about what I paid for it. Not bad, if I could buy something else.
2 years ago
An excellent contribution, Mish.
A complete shift in explanations.
2 years ago
If we import 1/2 of the chips from China than before Trump’s tariffs. then one would expect that there would be a surplus of chips in Europe with a corresponding drop in prices but we didn’t get that. Europe has the same chip shortage as the US. China did not, send the excess chips to Europe. China may have hoarded some but why is there now such a shortage of chips in China that they have a growing problem with fake and counterfeit chips? Something doesn’t add up here. Perhaps someone could explain it to me. Could it be more a problem of a supply bottleneck brought on by covid disorganization?
2 years ago
My guess is they lowered production in response to lowered demand because of covid. Inventories dropped. Now, outside of a few political hack scientists, covid is over and not only do they need to ramp up for demand, but they also need to replenish inventories. I suspect they’ll overshoot production and we’ll have a glut in 2022. Same as what typically happens. Same is true for other products.
2 years ago
Many companies saw their sales drop precipitously i 2020 so they dropped precipitously their orders to chip manufactures who cut precipitously their output because their clients cut their orders. Six months later sales surge and companies precipitously order more chips from companies who suddenly have already cut production and now find themselves with all their clients clamouring for chips that the foundries do not have. Result is shortages, inflated prices and fake chips. The fault Dear Horatio is not in Trumps tariffs but in companies themselves having not foreseen what to do when the covid virus retreats as it inevitably would have.
2 years ago
Chips are not like potatoes.
Parts and sub-assemblies and processing go back and forth between continents.
Worse, the supply chains are unbelievably complex and intricate, and product is being renewed all the time.
Throwing a spanner in the works means that the whole structure of planning and anticipating shifts and demands has gotten a hammer to the head.
(There is no head, the organization of supply chains is organic and self-organizing).
2 years ago
Result: Intel, Samsung, TSMC and others are building chip plants in the US. Plus the government is planning the funding 8 more with about $52 Billion. The objective is to get back up to 25% of chips made in country up from the current 12%. The short-term pain is worth the long-term gain.
2 years ago
If true, I agree. I don’t like depending on China, or any international player, for the items we need here. There is a national security concern for sure, in my opinion
2 years ago
I’ve mentioned this before……the semiconductor field is going to lead the pack in re-shoring, according to the pundits I like.
Not sure about Europe and their chip shortage. Certainly there are supply chain issues as a result of things other than tariffs. That’s not the only phenomenon in play.
2 years ago
Europe is behind but they are putting money into chips too. Also as an aside the Dutch company ASML Holding is the number one world leader of machines that are used to actually make the chips so they have some bright spots here and there. They actually have a quasi-monopoly. Trump pressured them to cancel selling their most advanced chip-making machines to China and they caved. The Biden administration has continued that policy. The ASML management is pissed but they can’t do anything about it. The Dutch government won’t give them the export licence and the EU and US are together on this. China is not very trusted these days.
link to bnnbloomberg.ca
2 years ago
ASML is a top player, but there are close competitors: Advanced Materials (after absorbing Tokyo Electron).
China, thanks to boycott, realized it’s dependence in this field, and is trying to catch up fast.
2 years ago
ASML has an 85% market share in semiconductor lithography and their lead is solid for the the moment. I am not familiar with Advanced Materials but I will look them up. Thanks for that.
2 years ago
Advanced Materials was the leader in the past, and I didn’t notice when they switched places. But then, I only care about how much the central banking cartel prints…and makes me poorer by the day.
2 years ago
I am no expert in the field, so have to go by the common sense, and observation of others.
One is that the supply chain has moved to East Asia, so the chips are consumed there.
Other manufacturers, like Samsung have an advantage by building chip foundries next to where they’re used.
How’s the logistics going to work out?
2 years ago
The money has strong bipartisan support and will go through because contrary to reports, on some very important issues both parties see eye to eye.
link to reuters.com
2 years ago
This particular aspect of Trumps trade policy hasn’t panned out, but unilaterally dismissing all his trade policies isn’t fair. China has been trading unfairly for decades. They suppress their currency, impose sanctions on many US goods and their government helps their companies undercut competitive pricing. I don’t think it’s fair to say it’s OK for China to do things and not OK for the US to do the same.
In an ideal world, everyone would let their currency float and it would be survival of the fittest without government support, but we’re far from an ideal world.
2 years ago
I credit a lot of the mistakes to Trump’s faith in Peter Navarro…..who wrote a very hawkish book about China…..ironically, many of its pithiest statements were attributed to a guy named Ron Vara…who turned out to be Navarro himself, using a pseudonym.
Much of what Navarro said about China was true, but the tariffs were the policy equivalent of cutting off our nose to spite our face.
I used to hold Navarro in high regard. His books about investing and the business cycle, written many years ago now, were good and I learned from them.
I still think that many of the original Trump cabinet choices and choices of advisors were picks of Charles Koch, during the brief rapprochement he had with Trump after the 2016 election. Navarro was probably one of those.
2 years ago
Peter Navarro has one idea of how to reverse 30 years of outsourcing that stripped the US economy of her productive capacity.
His might not be the ideal solution, but then what is the right, no pain solution?
The academic quack doctors were wrong once again, but take no responsibility, just like for the ongoing financial calamity.
2 years ago
I have a rental about a mile from Samsung’s local plant and foundry (not yet complete but well along, I think). It’s more than doubled in value, so it’s working for me….I hope it works for Samsung….they also have great dental insurance…..so I’m pulling for them to succeed.
2 years ago
Play stupid games, win stupid prizes.