Zero Progress on the Reducing the Deficit Despite Tariff Revenue

Thanks for the compliment!

In my opinion, we CAN compete with China in some areas. But we are very far behind in many areas that matter. And sadly, we are falling further behind.

Take manufacturing. Here are the top 3 manufacturing countries.

China 28% of worldwide manufacturing

USA 16%

Germany 6%

We are still a significant player. But we are losing ground each year and China is still accelerating.

Why? Chinese Central Planning. I know. All central planning countries in the past century were disasters. But China is making it work. That’s because they aren’t trying to control everything. Just trying to direct everything. I won’t go into detail because that would take too long.

The way for the US to respond is to identify what is truly strategic and then create a plan to deal with it. Tariffs may be appropriate in some instances, but I strongly disagree with Trump’s tariffs on almost everything. That is counter productive. It also pisses off all our trading partners whom we need to be working with (not against) on strategic imperatives.

One example. Rare earth’s. China planned 20 years ago to become dominant in both production (60% market share) and processing (90%). They identified this as a strategic imperative (one of many that they have). They subsidized their production and processing to get to where they are today. And they have invested heavily in production in other countries, developing trade partnerships, to the exclusion of other countries like the US. Now that they dominate this industry worldwide they can dictate terms and prices.

Mish has been warning about rare earth’s for years and I’m sure many in the military, tech and manufacturing have been sounding warning bells as well. Yet here we are, caught flat footed as we literally watched China work this for 2 decades. There is plenty of blame to go around.

The question is what to do about it now? The answer is to do what China did. Subsidize production and processing of rare earth’s in the US because the private sector won’t do it, as there is no profit in it. Subsidize domestic manufacturing of magnets and other products that use rare earths.

Strike deals with our trading partners to help them produce and process rare earths’s as well.

Purchase as many rare earth’s from anyone in the world who is willing to sell them to us and stockpile them while we build processing facilities.

The best time to do all this was 20 years ago. The second best time is now. And until this happens, we will be at China’s mercy in trade negotiations. It was asinine to start a trade war with China when we are in such a weak position.

Eventually, if we are successful, rare earths will become plentiful and cheap and critics will complain about how much the government overspent on subsidies for this industry that now produces an abundance of these cheap materials. Such is the price of successful strategic planning.

The same goes for anything else considered strategic. Steel, aluminum, copper, uranium, potash, energy etc.

I fail to understand why we are putting tariffs on strategic things we must import.

Let me give you a time-saving tip. Don’t bother wasting your time talking about past Presidents and assigning blame to them. I really don’t care. That’s ancient history.

The only President that matters is the current one and what he is doing.

And while you seem to like that he “wants” to move America in the “right” direction, that is what every President says. The key is what actions they take.

Here are the actions I would like to see.

Working together with our friends, allies and trading partners to counter China. Instead,Trump has been ignorantly attacking our allies, putting tariffs on them, and pissing them off.

Doing everything possible to lower costs and increase production for all our strategic industries. Instead Trump placed tariffs on many of their imported inputs, raising their costs.

Lowering electricity prices because many strategic industries, like aluminum smelters, are uncompetitive due to high electricity prices. Instead Trump is actively trying to reduce electricity production from renewables, which add more new electricity each year than all other sources combined. This will result in much higher electricity prices.

We need to subsidize strategic industries to encourage production (like aluminum, copper and steel). Instead, Trump placed tariffs on these imported metals, hoping to encourage more domestic production by forcing prices higher and making them profitable. This does not guarantee more domestic production, because companies are reluctant to build new production facilities that take 5-10 years to build, if there is no guarantee tariffs will remain in place in 10 years. Meanwhile, those higher prices will hurt all domestic manufacturing that uses those metals.

Unlike you, I don’t see many positive actions by Trump. In fact, I see most of his actions as counter productive to what he says his goal is.

You are welcome David. I keep my expectations low. And I am well aware that no one in power is listening to me. Which is why most of my time is spent taking advantage of whatever the situation happens to be,
rather than trying to change the situation. The only “pontificating” I do is here, on Mish’s blog. But it isn’t a complete waste of my time as I also gain valuable insights from many here. There is always more for each of us to learn.

Lol! I do not take Trump’s word as gospel. I rarely believe anything he says. All I am doing is pointing out that his actions rarely match his words. And I will continue to do that, in spite of your protests.

It is his dumb f*ck cult supporters who seem to believe every word is gospel.

Hahahaha!