One way to prevent U.S. manufacturing companies from moving their production out of the U.S. is to place a high import tax or tariff on their products. The economic theory is that the high tax or tariff will raise the price of their products to approximately match the price of similar product made in the U.S. Thus it will cancel out the advantage of lowering the cost of manufacturing by moving production out of the U.S. The basic point is to prevent U.S. job loss by companies moving production out of the U.S. Preventing good paying jobs from leaving this country will make our economy stronger, and that will help all businesses and consumers.
Preventing jobs from leaving this country can be done by either a “carrot or stick” approach. The use of import tariffs to prevent job losses is called protectionism and it is a “stick” approach. It is pure economic punishment. A “carrot” approach would be to lower taxes and roll back regulation on U.S. companies, so they can lower their prices and incentivize consumers to buy more of their products. This is done on the theory that taxes and regulations are somewhat excessive, so taxes and regulations can be reduced without harming anyone.
Proponents like to regard the punishment as being inflicted directly on the companies that want lower their manufacturing cost by moving production out of this country and then selling their cheaper products back into our domestic markets. However, the punishment actually falls on the U.S. consumer. They are the ones who directly pay the import tariff if they purchase a product that bears that tariff.
There is also the complication of applying import tariffs. Going forward, our government can apply it only to companies who move production off shore. Then this is an active punishment for those companies and a threat to the other companies who consider moving their production off shore in the future, but have not done so yet.
But what about the companies that have already moved off shore? Should they be exempt? Would that be fair? Why not levy the import tariff on all companies that move off shore or are already off shore? Not only would that prevent jobs from being outsourced in the future, but it would have the additional benefit of inducing companies that have moved to bring their manufacturing back to this country. Isn’t that the best outcome? And also, wouldn’t basic fairness require this? As a company, when your competitor moves off shore, you have to move off shore in order to compete with your competitor. If the government lets your competitor move off shore, but then bans you from moving off shore, your company will be destroyed by its inability to compete.
And also, what about products inported into this country by foreign manufacturers native to foreign countries? Our companies often cannot compete with their lower cost manufacturing, so should we extend our 35% tariff to their products as well as those made by U.S. companies manufacturing in foreign countries?
In any case, the main problem with the tariff remedy is that a 35% tariff across the board raises the price of the cheapest U.S. products by 35%. At the same time, it reduces the domestic competition to lower prices, or not raise prices for domestically manufactured products. So the consumer either buys the imported product with the price inflated by the tariff; or they buy domestic products with an equally high price due to the higher industrial wages in this country. Either way, it amounts to a very large price increase on consumers that will affect most of the typical household goods that they buy.
So if a tariff is placed on all imported products to price them on par with domestically made products, it will bring all the lost jobs back to this country. This will raise incomes and help the economy. However, it accomplishes this by raising product prices on the consumer, which lowers incomes and hurts the economy. What is the better of these two choices?
Euclid So if a tariff is placed on all imported products to price them on par with domestically made products, it will bring all the lost jobs back to this country. This will raise incomes and help the economy. However, it accomplishes this by raising product prices on the consumer, which lowers incomes and hurts the economy. What is the better of these two choices?
I haven't thought about how this would affect the railroads.
If paying for higher wages, worker protection, and environmental protection hurts the economy, can we conclude that higher wages, worker protection, and environmental protection hurt the economy?
Are the benefits to the consumer and corporate profits a result of externalizing these costs to other countries and people who will have to deal with polluted soil, water, and air, adverse health effects, etc.?
I remember some years ago watching the head of the US Chamber of Congress testifying before some congressinal committee. He enumerated what needed to be changed so that companies could be "competitive" and keep jobs here. Things like eliminating the minimum wages, eliminating laws allowing collective bargaining, eliminate laws regarding pollution, consumer protection, product and food safety. And of course reduce or better yet remove taxes.
In essence, for the US to be competitive they stated that it needs to turn itself into a third world country. I was shocked. Not that the mouth piece for business would think that way, but that they would actually come out and say those things. I suppose they felt safe doing so because it was on C-Span and most people would rather watch the adventures of the latest celebrity du jour. That and many don't care if manufacturing jobs go away. They don't want (for themselves or their children/grand children) to do any type of work that might cause them to get their hands dirty or break a sweat.
There never will be enough carrots for some business people no matter how many bunches you throw at them. They will always find a reason for more.
I actually think that the railroads would rather have manufacturing done out of the country. If it returned to the US, they probably figure most finished product, as well as inputs, would move by truck.
Jeff
jeffhergert I remember some years ago watching the head of the US Chamber of Congress testifying before some congressinal committee. He enumerated what needed to be changed so that companies could be "competitive" and keep jobs here. Things like eliminating the minimum wages, eliminating laws allowing collective bargaining, eliminate laws regarding pollution, consumer protection, product and food safety. And of course reduce or better yet remove taxes....Jeff
I remember some years ago watching the head of the US Chamber of Congress testifying before some congressinal committee. He enumerated what needed to be changed so that companies could be "competitive" and keep jobs here. Things like eliminating the minimum wages, eliminating laws allowing collective bargaining, eliminate laws regarding pollution, consumer protection, product and food safety. And of course reduce or better yet remove taxes....Jeff
World business is already decrying that 3rd World employees actually want to get paid enough to feed their families and are now looking to the 4th World for thier slave labor.
Never too old to have a happy childhood!
Jeff H said [in part] :"...There never will be enough carrots for some business people no matter how many bunches you throw at them. They will always find a reason for more.
I actually think that the railroads would rather have manufacturing done out of the country. If it returned to the US, they probably figure most finished product, as well as inputs, would move by truck..."
Sounds like a reasonable resource for that kind of comment. IF Yhe hmanufacturing jobs WOULD return here(THe USA) and those plants would start back up...That would seem to put the railroads a a disadvantage at that point.
All those nice, point to point through jobs would be dipped into a sea of 'local' service operations, which would be underfoot of the 'long distance trains'. I would gues that dewell time in yards, and enrot delay would be a constant headache for those dispatch personnel charged with 'getting traffic over the road'.
It might even result in a flurry of new construction to 'unclog' bottlenecks resulting from new business with switching jobs that would be required to go agains the flow of traffic to drop and pick up? Just my
Congress should carefully examine the effect of previous high tariffs, such as the Smoot Hawley Tariff--which brought economic troubles to our nation as other nations increased their tariffs on our products.
Johnny
I have no idea whether this talk of a 35% import tariff is just posturing for negotiation or if it will be actually put into effect under the assumption that it will bring back manufacturing. If it is the latter, it is mighty strong medicine, and if it backfires by pricing consumers out of the market, it could wreck the economy.
But yes I agree that the larger potential problem is an international trade war. The problem with tariffs is that the targets always retaliate. They don't just go along with it.
History proves that trade wars can degenerate into shooting wars. Is there any wonder of why all the General's are being appointed to cabinet positions?
Think about it this way. China exports close to 800 Billion dollars a year to the USA in finished goods. Now they charge us for importing materials into China a 45% tariff anything that they can produce in China. So our companies just have everything made overseas. Then to really make things fun for our companies the Yuan the Chinese currency is worth 10X's more in China than they say it is overseas. You see how they screw us over on building things. They also steal designs flat out ignore patents and will reverse engineer anything they want and then sell the knock offs cheaper than the ones they are making for you.
So if the USA starts a trade war with China what will not be coming over from there. Things like Toys black pipe fittings cheaply made tools some consumer electronics clothes and other goods. Not exactly things we will die if we do not get. Regardless of what the tech geeks think if they do not get the latest I Phone.
What does China lose over 800 Billion a year in Hard Currency to pay for things like Oil Grain they import close to 70% of all their wheat 90% of their Oil massive unemployment we are talking about hundreds of Millions of people out of work. It would make the Great Depression we had in the 30's over here look like a speed bump. What could happen War between China and the USA. Forces wise we have them outclassed above and below the seas they do out number us in Men however we have them dominated in the air.
The PRC is not going to want to start a fight with the USA in either trade or with armed forces. They need us more than we need them. Their whole economy is based on flooding our shores with cheap made goods. We shut them out and their whole house of cards will collaspe.
Import taxes would likely have the intended affect of discouraging foreign imports while incentivizing production in the United States. To what extent would be anyone's guess. So those long hauls from Asia will be replaced with shorter hauls from Peoria. The net affect of shorter hauls will benefit trucking at the expense of rail. Worst case scenario for the railroads: All those double stack trains hauling containers to and from the ports may become a thing of the past. Hopefully there's a plan B.
Ulrich Import taxes would likely have the intended affect of discouraging foreign imports while incentivizing production in the United States.
Import taxes would likely have the intended affect of discouraging foreign imports while incentivizing production in the United States.
AnthonyVI haven't thought about how this would affect the railroads.
It doesn't seem that DJT has thought through the impact on the US either.
C&NW, CA&E, MILW, CGW and IC fan
Less stuff coming in will shift production here to meet consumer demand. The products you use have to be made somewhere, and if a 35% import tax discourages imports, then that serves as a de facto incentive to domestic manufacturing (and that's the whole point.. Trump has been saying that all along).
Ulrich Less stuff coming in will shift production here to meet consumer demand. The products you use have to be made somewhere, and if a 35% import tax discourages imports, then that serves as a de facto incentive to domestic manufacturing (and that's the whole point.. Trump has been saying that all along).
It is certainly true that a 35% tariff will dramtically reduce imports, but there is no certainty that the loss of imports will be compensated for by products made here. It may eventually evolve into that in 10-40 years. Then we will be an economic island with no imports and no exports.
One can't assume that a 35% import tariff will lead to 35% price hikes. Higher labor costs here can be offset by lower transportation costs and automation. And some industries (like textiles) can forgo there 500% markup by shifting production from overseas to here too, with little price impact on the end consumer. I don't think we'll become an economic island, but there's something to be said for regionalization verses globalization. Right now (IMHO) globalization has gone too far.. when a simple snow shovel comes to us from India or China. Come on.. where's the logic in that? We can make those here and reduce our carbon footprint in the process. And so on for thousands of other cheap consumer products.
schlimm AnthonyV I haven't thought about how this would affect the railroads. It doesn't seem that DJT has thought through the impact on the US either.
AnthonyV I haven't thought about how this would affect the railroads.
That may be true.
What also may be true is that those who propose new rules and regulations haven't thought about the effect that these have on the US.
There is an old expression: "You can't value something unless you are willing to place a value on it."
We in the US have to decide whether we value worker protection, clean air, etc. and are willing to pay for it. Anything else is wanting your cake and eating it.
Ulrich One can't assume that a 35% import tariff will lead to 35% price hikes. Higher labor costs here can be offset by lower transportation costs and automation. And some industries (like textiles) can forgo there 500% markup by shifting production from overseas to here too, with little price impact on the end consumer. I don't think we'll become an economic island, but there's something to be said for regionalization verses globalization. Right now (IMHO) globalization has gone too far.. when a simple snow shovel comes to us from India or China. Come on.. where's the logic in that? We can make those here and reduce our carbon footprint in the process. And so on for thousands of other cheap consumer products.
Nevertheless, why would a consumer want to pay $25 for a snow shovel made in the U.S. when they can buy one from China for $15 assuming that the consumer sees the same level of quality and life in both shovels? The logic is in the $10 savings.
I don't like the effect globalization has on our manufacturing sector, but how can you say it has gone too far? Where do you draw the line? As long as some countries have a lower standard of living than the U.S., their products will be lower cost than ours. Selling their products to us will raise their standard of living. Us losing manufacturing to them will lower our standard of living. That is how the line gets drawn. Our standards of living will eventually equalize and we will both manufacture and sell to each other. In the meantime it is rough sailing, and a tariff is not much of a cure if a cure at all.
Some CEOs have said they cannot find trained workers for some jobs here. Our post-secondary education (voc-tech in particular) needs to work more closely with employers.
schlimmSome CEOs have said they cannot find trained workers for some jobs here. Our post-secondary education (voc-tech in particular) needs to work more closely with employers.
Translation - They can't find college educated Engineers willing to work for minimum wage. They can't find journeymen machinest and tool and die makers that will work for minimum wage. They can't find any skilled tradesmen that will work for minimum wage. It's all about the Benjamin's!
BaltACD schlimm Some CEOs have said they cannot find trained workers for some jobs here. Our post-secondary education (voc-tech in particular) needs to work more closely with employers. Translation - They can't find college educated Engineers willing to work for minimum wage. They can't find journeymen machinest and tool and die makers that will work for minimum wage. They can't find any skilled tradesmen that will work for minimum wage. It's all about the Benjamin's!
schlimm Some CEOs have said they cannot find trained workers for some jobs here. Our post-secondary education (voc-tech in particular) needs to work more closely with employers.
While I think Balt's post has a lot of truth, there is a shortage in some skilled trades. Mostly because most young people are steered toward 4+ years of college and away from a vocational/technical type education. It makes me laugh when I read in the paper that many in the education system are beginning to realize that many may benefit more from vocational training, but still end up stressing the 4 year college over voc-tech schools.
One of my favorite editorial cartoons had a young male in work style clothing who was taking welding classes meeting another young male dressed as a hipster (I think) pursuing a liberal arts degree. The hipster had a condescending look and attitude towards the other guy. Below it had future average earning potential for both. The welder was $50K per year and in demand. The hipster was $30K, if he could find a job in his field. I think the message was that too many people look down on the potential of skilled trades as a career, not to mention the people who do them.
And the trade school guys aren't buring American flags. I guess the hipsters feel entitled to do so with thier expensive degrees in lesbain dance theory and gender studies.
Around here, vo-tech (at least for high-school aged kids) is used as a dumping ground for those that don't want to be in any type of school, period. It's not right, but it is what it is.
But while the trades pay a decent paycheck, your body also pays a hefty price. That's the little thing nobody ever addresses. Even us - walking on ballast all shift? That isn't exactly great for us.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.
Randy Stahl And the trade school guys aren't buring American flags. I guess the hipsters feel entitled to do so with thier expensive degrees in lesbain dance theory and gender studies.
Man that's a lot of generalizations.
jeffhergert BaltACD schlimm Some CEOs have said they cannot find trained workers for some jobs here. Our post-secondary education (voc-tech in particular) needs to work more closely with employers. Translation - They can't find college educated Engineers willing to work for minimum wage. They can't find journeymen machinest and tool and die makers that will work for minimum wage. They can't find any skilled tradesmen that will work for minimum wage. It's all about the Benjamin's! While I think Balt's post has a lot of truth, there is a shortage in some skilled trades. Mostly because most young people are steered toward 4+ years of college and away from a vocational/technical type education. It makes me laugh when I read in the paper that many in the education system are beginning to realize that many may benefit more from vocational training, but still end up stressing the 4 year college over voc-tech schools. One of my favorite editorial cartoons had a young male in work style clothing who was taking welding classes meeting another young male dressed as a hipster (I think) pursuing a liberal arts degree. The hipster had a condescending look and attitude towards the other guy. Below it had future average earning potential for both. The welder was $50K per year and in demand. The hipster was $30K, if he could find a job in his field. I think the message was that too many people look down on the potential of skilled trades as a career, not to mention the people who do them. Jeff
60 minutes had a piece about a poor area getting a factory by getting the local community college to train them. good jobs, but not what BAlt was saying.
Shhh, the adults are talking.
jeffhergert BaltACD schlimm Some CEOs have said they cannot find trained workers for some jobs here. Our post-secondary education (voc-tech in particular) needs to work more closely with employers. Translation - They can't find college educated Engineers willing to work for minimum wage. They can't find journeymen machinest and tool and die makers that will work for minimum wage. They can't find any skilled tradesmen that will work for minimum wage. It's all about the Benjamin's! Mostly because most young people are steered toward 4+ years of college and away from a vocational/technical type education. It makes me laugh when I read in the paper that many in the education system are beginning to realize that many may benefit more from vocational training, but still end up stressing the 4 year college over voc-tech schools.
Mostly because most young people are steered toward 4+ years of college and away from a vocational/technical type education. It makes me laugh when I read in the paper that many in the education system are beginning to realize that many may benefit more from vocational training, but still end up stressing the 4 year college over voc-tech schools.
I will take Jeff's statement one step further. In education, there is a bias/bigotry against the skilled trades. From 2009 to 2012 I taught high school math and physics in an inner-city high school. The attitude of the power-brokers was that four-year college was the thing and that working with your hands (and minds) was beneath them. It had to be that you were doing high-level math and science or you were nothing. I spoke up to the higher-ups that this stuff is not for everybody and that people can make a good living in the trades - but this fell on deaf ears.
Graduation rates and government funding were kept high by passing kids along. There was an unspoken pressure to pass kids along sort of like the Code Red in "A Few Good Men." It was clear that the majority of kids who were graduating could barely do anything.
Regarding public trade schools, the ones is my area require the kids to pass the same college prep courses and the same standardized exit exams as regular high school students. This defeats the purpose of a vocational education.
The amazing thing is that those in education speak of multiple intelligences in theory but cannot see it in practice. I have experienced it for real - I have a Doctorate in Mechanical Engineering from MIT and I am now in the trades. (That's a whole story in itself.) I know guys in the business who can barely add but can run circles around me.
I see jobs for welders, machine operators, and other manufacturing plant positions. What is missing is mechanical designers, drafters, and most engineering related to manufactuing. Nearly 100% of job postings related to design and drafting are in the architectural and contstruction field.
ouibejamn Randy Stahl And the trade school guys aren't buring American flags. I guess the hipsters feel entitled to do so with thier expensive degrees in lesbain dance theory and gender studies. Shhh, the adults are talking.
Really?
For the last 14 years I have had the task of hiring railroad employees for all the trades. Not an easy job these days.
Unless you have a similar job what exactly entitles you to BS like this?
Slimm , here is some of Joe Higgan's work in the golden triangle of Mississippi.
http://djournal.com/news/golden-triangle-breaks-ground-workforce-development-project/
One thing of note is Joe is still marketing his factory sites with rail access. We are all paying close attention to what Joe is doing in hopes that we can implement his methods here in Worcester Mass. Here we have the advantage of schools that can easily be adapted to employers needs without the costs and delays of building a new facitlity.
The so called hipsters and millenials somehow feel entitled, how can we compete with other nations if more and more young Americans are somhow above the crafts and tech and science?
How would Joe's method work if everyone only wanted degrees in gender studies and social justice? Few want to get thier hands dirty unless its from burning an American flag.
The biggest problem for me is finding candidates that can pass a drug test and be placed into the random drug pool. Perhaps Joe's plan can work without drug testing but in my industry I cannot allow it. You have no idea how much that narrows my search ! In my last batch of 50 applicants only 11 passed the drug test. I hired 2 from that batch, one is a farm boy from Connecticut and one was an MMA fighter. Both are tech school graduates.
AnthonyVThe amazing thing is that those in education speak of multiple intelligences in theory but cannot see it in practice.
Multiple intelligences is better put as a variety of abilities. Educators' understanding is muddy; application weak.
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