To approach the issue of tariffs, it is necessary to start from an
assumption, namely that economic and financial interests dictate theagendas of administrations and governments of all kinds. In this
mechanism, it is necessary that the various "leaders" are relegated to
the role of mere executors who have as a reward a reward in terms of
personal power and social status. In light of this, a common thread can
be traced that links the actions of the various US presidents, from
Obama to Trump's second term. Obviously, each administration operates
according to the image it gave itself during the election campaign, but
regardless of the methods, strategies can be used as compasses to
understand the current orientation. And all compasses, from Obama to
Trump via Biden, point in the same direction, that of reshoring, albeit
with mixed fortunes.
This concept has a diametrically opposed meaning to that of offshoring,
it is a strategy to re-internalize some crucial production phases. Let's
immediately clear the field of do-gooder readings, as this procedure was
not made necessary only for the purpose of bringing work back to the
middle and lower-middle classes of the United States, because they were
concerned about the fate of the poor people. It all presupposes a very
simple calculation: people without work cost too much and do not
consume. This implies a huge outlay for unemployment benefits and
reduced consumption, which in the country of the "consumer-oriented"
economy par excellence leads to contractions of GDP, but above all to
lower tax revenues. Incidentally, let us remember that the federal
government collects most of the tax revenue from wage withholdings and
direct payments based on income, which weigh for 49%, plus Social
Security and Medicare taxes (Social Insurance and Retirement Receipts)
for about 36%.
Another economic reason is to be found in the "power" of the production
of goods. Classic economic studies suggest that a single job in
manufacturing has the potential to create two and a half in other
sectors of the economy; industry pays the state 20% more than the
service sector for a similar set of employee skills, stimulating
consumer spending and exports. So if industry languishes there is no
work to tax and no GDP growth, which also works against debt because if
GDP contracts or does not increase proportionally to debt the markets
get scared.
But it is not, as was said, the pure spirit of charity that moves US
strategies. Lower tax revenue, lower GDP and higher social spending
reduce the investment power of the various administrations, on which
many of the revenues of big corps are calibrated. Paradoxically in the
country of the free market and economic ultraliberalism, without the
mammoth public investments everything would tend to slow down.
It should also be noted that the reshoring strategy cannot be reduced to
domestic political needs alone; there is another reason that must be
sought both in the strategic nature of the production phases of some
specific products and in the risks of global transport. These may seem
like secondary reasons. But being excessively exposed to the risks of
having strategic technologies produced in other countries or having to
face delays or losses due to closures of maritime routes that are
crucial for transport (see the attacks on navigation in the Red Sea) is
starting to become unacceptable in this historical phase. Let us also
take into account the ambiguity of being a competitor of China but
producing significant technological components within its borders.
Therefore, adding these problems together, we obtain a more than
convincing incentive to activate a series of policies aimed at bringing
many production phases back within safe borders.
This process started with President Obama's first term in 2010 with the
launch of a specific "Make It In America" plan, which included among
other things "a law to hold countries accountable for unfairly
manipulating their own currency. The creation of a national
manufacturing strategy, so America can have a complete roadmap on how to
strengthen its manufacturing sector and create more jobs. The creation
of an infrastructure bank to facilitate efficient investment and
financing of infrastructure projects, so more Americans get back to work."
Now it should also be remembered that Obama intervened during the big
recession; therefore, liquidity injections to save the banks were not
enough, it was necessary to revive the industrial machine to create
income from work, given that the consumer credit system was frozen.
In Trump's first term, the issue of reshoring remains and, in perfect
continuity with his predecessor, some specific initiatives are being
undertaken. Although the President has stated that the era of US
offshoring is "over," the reality is that the United States had not yet
begun to address the root causes of the growing trade deficits and the
decline of the manufacturing sector. Decades of trade, currency and tax
policies that have incentivized offshoring, combined with a total
failure to invest adequately in infrastructure and good jobs at home,
have contributed to growing inequality and an erosion of the middle
class. To obviate the need for a mea culpa of the system, the tycoon, as
usual, has poured fuel on the fire about the dangers of a huge and
growing trade deficit and the economic threat posed by China. The
initiatives undertaken in the first term have failed to address the root
cause of the problem, the uncompetitive US production costs due in part
to an overvalued dollar and an inadequately skilled workforce but with
costs higher than Asian competition. By failing to adopt an effective
industrial policy, he consequently failed to make significant progress
in overcoming the trade deficit and the economic threat posed by China
that he himself had helped to magnify. In short, his strategy focused
almost exclusively on tariffs and the search for bilateral agreements.
In this, Trump seems to be more of a politician from the 1920s than a
contemporary one.
This process then continued with the work of Biden who, on February 24,
2021, signed an executive order that called for creating more resilient
and secure supply chains for essential and critical goods. Biden also
picked up where Trump left off, with a series of sanctions against
China, this time on human rights issues. A new season, lasting a year,
was prepared to strengthen strategic industrial assets such as defense
and public health, as well as information technology, transportation and
supply chains for food and agriculture. The goal was to create a US
industrial sector less subject to future trade conflicts or
"tit-for-tat" sanctions, in turn reducing the dependence of
multinationals on China's skills, innovation and manpower. The Biden
administration has attempted the softer reshoring route, with tax
incentives for those who did not relocate, for those who relocated or,
better yet, for those who would invest in the US from abroad.
In his second term, Trump preferred to act with the club of tariffs. And
here we open a reasoning that tries to keep both the reshoring path and
the tycoon's ambitions in balance. If on the one hand, the insane
tariffs imposed and then retracted create confusion in the markets and
put pressure on the European Union, which has little or nothing of
unity, on the other hand they should attract the attention of some
competitors and create some room for maneuver for negotiations. In
reality, it seems that the tariff war should be analyzed almost entirely
in an attempt to redefine which hubs of global value chains should be
relocated in a strategically favorable position, if not in the USA at
least in non-hostile countries, the EU, Canada, Mexico and perhaps
Greenland. A strategy to force the least collaborative to redefine their
corporate production plans with regard to the location of plants
currently established in "undesirable" areas.
This strategy of pressure for disinvestment is inherent in the threat of
double or triple-digit tariffs, and looking at the numbers, they seem to
describe the level of exposure to risks of some production chains. For
example, China with tariffs of 100% and above represents the area in
which it is most inadvisable to produce, for obvious reasons of
competition and competition of a commercial and geopolitical nature. In
the EU, tariffs are double-digit, and it is likely that there are
eminently commercial reasons (the Boeing or automotive supply chain for
example). On the others, I believe that the duties instead serve to push
certain governments to welcome with favorable tax treatments some
companies belonging to star-spangled holding companies.
In the great global landslide that is redesigning international
balances, this process of revision of productive globalization carried
out, in a more or less evident or more or less vehement manner, by the
various US administrations has a logic entirely inscribed within the
process of capitalist reproduction oriented by neoliberal theories,
which see competitiveness as an indefinite reduction of production costs
and competition as strategies to slow down the adversary. In a phase of
profound instability and financial volatility, attempts are being made
to re-establish more solid productive bases in an attempt to relaunch
domestic consumption. I believe that it is within this scenario that the
events of the last two decades must be analyzed.
Jammy
https://umanitanova.org/la-clava-dei-dazi-usa-le-varie-velocita-della-rilocalizzazione/
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