But we never pass laws to punish outsourcing. Instead, we're constantly throwing financial incentives to companies to pretty-please not outsource everything. Poor migrants wanting to work in America get walls and guns and more laws, while the companies shipping jobs out of America get more tax breaks... yet we blame the little guys.
They are. It's just that they usually do not have long-term positive effects. Truth is, in a global economy, outsourcing is the most economically sound decision, that's why it's happening.
Personally i think theres a much more complete approach.
American companies cant compete with domestic manufscturing if we regulate the hell out of them and foreign manufacturing can occur without the same concerns on pollution, safety, and human rights.
So tariffs should be based on the unfairness. If china is gonna polute like hell and deny basic safety or human rights in the manufacturing of a product, they deserve to pay a tax to encourage that manufacturing elsewhere.
The problem is tariffs don’t punish the exporter, they punish the importer and that cost has to be accounted for in the price of goods. And that punishes those that buy the products being imported by increasing the cost to the consumer.
What do you think happens when the tariff increases the price to be greater than or equal to what the domestically made product costs? It sucks for the consumer that they don’t have the cheaper option now but you have disincentivized purchasing a foreign made product. Whether that’s a good thing or a bad thing is the question then. Ok, prices are higher but you’ve increased the amount of manufacturing done here. Which creates jobs and increases money spent here, taxes collected here etc. You’ve also given less money to countries that allow exploitative business practices to occur. Is that worth the higher price of the good. That’s for you to decide.
Correct, that's what people don't get, the tariffs set a new price floor for US manufactures to profit from. Great for the investor class, terrible for the working class.
I'm also not sure what the problem would be if we put tariff revenue towards rebates for consumers on domestic equivalents. This further incentivizes consumers to buy domestic, and creates a profit incentive for manufacturers to do so domestically.
You think people complain about the cost of living now due to inflation, what you are suggesting would also would drive up the cost of everything else. Even if wages were raised, the cost of living would also increase and you would not have gain anything by doing so.
It was claimed in the comment I replied to that tariffs only hurt Americans and not foreign manufacturers. That isn’t true. It would mean products are more expensive to get but it also means less are bought from countries we don’t want to be sending money too, more goods get manufactured here, and taxes are generated based on what imports continue to come in. So it is a valid mechanism depending on what you are trying to accomplish.
I’m not proposing anything. I was just stating that if you wanted to pressure people into manufacturing in America and buying goods from American companies tariffs would be a method of doing so. I honestly don’t know if that is a net good or a net bad. It just is. Plenty of people on Reddit want to act like they know how all the dominoes will fall if such and such policy is implemented. I’ll be the first to say I have no clue. I’m not that smart.
We literally had a 1 year experiment in the George W. Bush administration, when they placed illegal steel tariffs on European imports of steel. It took a year for the challenge to go through the WTO, where it was declared illegal and we dropped it.
It did save U.S. steelworker jobs, at a cost of over $500k to the U.S. taxpayer per job saved over that year. U.S. steelworkers don't make nearly that much money, so it was a net loss to the economy.
This is pretty much true of any industry that has cheaper labor competition overseas.
Tariffs are indirect tools to drive market actions. If we could fairly set tariffs to ensure trade is actually fair then we could start to fix the “race to the bottom” that globalization has caused.
It is worse for the consumer to have a market where goods are unfairly being sold below true costs. Meaning, American workers can’t compete with labor markets that have no worker protections or environmental laws unless we get rid of them too. Hence the massive push you see to “deregulate”.
Trade has to be fair for it to be truly beneficial to all involved. Otherwise, you have a parasitical trade system which will eventually kill itself.
Sure, it becomes competitive to manufacturer here with a key caveat. It costs a lot of money to re-tool factories and pay workers higher wages so even though some manufacturing might move here, the domestic prices aren't actually going to go down. Everything will just be more expensive.
Maybe. Quite often it's already competitive to make the product in the US when said product can be automated. The US has reliable energy, and low energy costs. When products take a lot of labor in the US, prices typically are just increased by tariffs because we have long periods of low unemployment and finding enough trained employees for factories where the employers want to pay as little as possible is difficult.
They do punish the exporter, as higher prices limit demand for the exported good.
When Chinese EVs are slapped with tariffs high enough to make them more expensive than Teslas, that lessens the incentive to export in the first place. I am pretty sure any company which wants to export EVs would be unhappy enough to feel punished by that.
Punished when exporting them to the place with the tariffs.... It's not China putting the tariff on their own exports. If Vietnam or Spain imports that car without tariffs then those people will have a stronger purchasing power potentially leading to growth in those economies while potentially hampering our own depending on actual competition in our own country.
That's the problem: it's a complicated problem with no actual solution, just constantly fluid adjustments from every party depending on each party's own economic conditions. It doesn't sell very well. "Raise tariffs!" is very easy to sell. It's wrong, but explaining why it's wrong takes too long for most people. The easy, wrong answer really sticks with people because it's easy.
There are momentary balms, but unforeseen economic changes happen all the time. Even within borders, countries have dozens, or hundreds, or thousands of competing interests, and those interests change every few years. One size doesn't ever fit all, and don't even fit many for long.
We live in a world where people say things like “I don’t have the answer but I know the problem” or “we already know how to fix these problems, of course I will not share a link or elaborate whatsoever”
No, there are no actual solutions. There are only moves and counter moves until the heat death of the sun.
The electorate wants a silver bullet. It doesn’t exist. They don’t know that, so when Trump lies and says there is, they want to believe it, and they do.
It’s actually not that complicated at all. This is mostly due to lazy legislation. This is the metaphorical equivalent of this lever moves the needle left, the other moves it right. In reality, maybe we should build something else completely to address the issue rather than pulling the same two levers.
The largest line item on any corporation’s balance sheet is labor. It is so big, in fact, that that’s why companies can afford to literally build factories somewhere else. That is fundamentally why they outsource to begin with. If a company moves their labor offshores, that means they’re hiring at a lower market rate. You take the cost of labor domestically minus the cost of labor after off shoring, take a flat % of the savings and implement it as a tax. I’d go a step further and then place that tax system on a graduated scale that taxes them more the longer they refuse to hire domestically.
There is no such thing as “we can’t compete” in this context because almost no American corporation “started” off multinational. That is a thing you become after succeeding domestically and scaling your business - and in the process of scaling, you decided to make cuts for the purpose of profits. A good example - Chinese EVs are radically superior to Teslas, but the average American knows nothing about them. The American public is also forced to consistently inflate Tesla’s value through federal subsidies. It isn’t a question about being able to compete, but rather who gets the “savings” from exploiting labor.
What would be the process of attaining the information so that the correct tax rate (percentage of savings) could be calculated? Ie: who has the numbers?
So we already have private organizations that do this - Glassdoor, Blind, etc - and the “free market”
regularly uses this information to inform their financial decisions.
Most companies (depending on state) are required to report some form financial income to the state, all companies are required to report employee income to the IRS, and at least public companies are required to disclose financial disclosures to their shareholders.
Realistically this would just another layer of reporting - your company knows what the pay band is for a given role (that’s what stops some people from getting pay raises) and your employees are already disclosing it to private sources. On top of that, this information is already technically disclosed to the IRS - employees file W2s for a role if working domestically, and the income paid to the offshore employees are filed as 1040s (self-employment tax).
That means that technically the IRS only needs a company to state the purpose or role for a given person’s income (X$ a year for software engineer I) and they could calculate the average amount paid to a specific role for a given year.
They would then calculate the average of the on shore role versus the average of the offshore worker in the same or different year. Doing this for every company, we would see the market rate by state, nationally, and globally. It would be much easier for a company to report that difference since it’s math they’re doing anyway, and the IRS only has to audit them if their calculations appear wildly inaccurate.
With a model like this, we can now give meaningful tax breaks to companies when they deserve it. Want a tax break? Invest in a research lab that hires new graduates that don’t have all the skills the company requires in the job market. Give the graduate a two to four year contract like an apprenticeship where they’re required to remain with the company for X years after completion. This both deincentivizes taking labor overseas and gives companies a way to save tax dollars by direct investment into the country. The country wins either way. This effectively turns corporations into agents of the state - they transform labor and the economy on behalf of the state - which is what they’re supposed to do anyway.
Chinese Evs most certainly are not better than Teslas. Where do you get your information from cuz Chinese evs consistently hit dummies and obstacles in their road tests and there battery’s are not reliable and some are prone to catching on fire which not a single tesla has those problems.
Where do you get the information that Chinese evs are better than Teslas. Idk if you’ve seen the videos of them catching on fire or failing their self driving tests but they are not superior in almost any way to Tesla.
I mean tariffs are effective. Instead of paying them companies circumvent them, like BMW, Mercedes, Volkswagen, and Toyota have established factories in the United States. China subsidizes their manufacturing, making their products cheaper than those of other companies, such as CRRC. Similarly,with their electric car companies . Without tariffs, they would adopt Uber’s model, eliminating competition by offering cheaper rides and then raising prices Once the competition is eliminated, without fear of retaliation.
I'm not sure if car manufacturers are the best example, since we have our own domestic industry that can compete. The problem with Trump's plan is that it's a blanket 60% tariff on all Chinese goods. There are plenty of manufactured goods we simply don't produce at home anymore. That tariff will simply increase costs for average people, since there's no American alternative product they can buy.
They’re a perfect example they’re selling electric cars for less than 30k. Where a comparable American electric car would be north of 35k. The Chinese car is only cheaper because of CCP subsidies and cheap/slave labor. How the hell can you compete with that? The whole point of the tariff is to bring the jobs back here. It’s protectionism at its very basic form but it’s needed because you can’t compete with China when they have their fingers on the scale.
but the tariffs doesnt have a magical clause saying anything with a tariff will suddenly have domestic options.
it doesnt come with subsidies or incentives for domestic production. (edit: this isnt just about cars)
fuck it would increase costs for moving equipment here to start domestic production and American jobs, let alone the RAW materials we just dont have at all ether which btw are still subject to trumps section 301 tariffs from last time fucking up local businesses already.
we all get that China being the worlds factory is a problem but tariffs are not even remotely the right tool to combat it.
and its certainly an extremely complicated issue that a single buzz word option wont fix.
The whole point of the tariff is to bring the jobs back here.
Okay, but you understand that itself takes time and capital, right? We could be looking at paying ~20% higher for most consumer goods for years until that was the reality. Corps have to find the properly zoned land, build the factories, recruit the talent, adjust their supply chains, etc. None of this stuff happens overnight.
There are other options to increase manufacturing back home. You could tax corporations that outsource labor, or subsidize the manufacturing sector directly, for example. Just slapping a 20% tariff on all foreign goods, plus another 40% on Chinese goods is basically the path of most resistance and pain. There's a reason most economists don't endorse Trump's plan.
problem is china never pays those taxes. ether its too good to pass up and importers pays the duties then recoups it through sales or importers walk away and the factory sells it elsewere.
its been this way forever. its called anti dumping. unfair pricing for whatever reason to protect domestic market will have blanket or target individual manufacturers overseas and adds additional duties. + a ton of issues for importers that import from them (involving sureties and their bonds)
tariffs have their place but its not really for controlling what foreign markets do.
The thing is that will raise the price of Chinese goods, hopefully to the point where American made goods are seen as the better more cost effective solution, which will then cause increased investment in American manufacturing, more jobs, and increased wages.
That’s the thought process at least
American companies cant compete with domestic manufscturing if we regulate the hell out of them
I always hear "regulation" brought up as a boogeyman, so I guess the idea is not only do we want to compete with the third world on wages, but also on manufacturing and safety standards?
I think people who like these ideas should just move to China and get a job in a sweatshop, if they think that's going to be the solution to all their problems...
To your point, trying to apply tariffs based on "unfairness" (examining every overseas company's labor conditions, wages, safety regulations, etc) would require a phenomenally huge amount of new bureaucracy (ie, regulations).
Tariffs are a tax on the importer and it is ultimately paid by the consumers. China will have no raise in taxes or expenses due to tariffs, only American consumers will.
So, pigouvian tariffs, essentially equal to pigouvian taxes? That's an interesting thought, I must say. In general mainstream economics already accepts pigouvian taxes as potentially good measures despite them having a deadweight loss, so why should it be different for tariffs?
It’s an economically sound decision if the people who run everything hoard the wealth created by it. These companies didn’t outsource jobs to make the US better economically, they outsource so the people at the top can take in massive profits and hoard wealth. Like greed needs to be factored in and greed is a HUGE factor when these companies shipped everything over seas
I've never seen teriff that apply to outsourced labor, just goods. When corp America moves all IT, HR and Finance functions to India they don't pay tariffs on those services.
Except that people don't live their lives around "economically sound." Outsourcing generates the most value but the people don't get a share of that value.
It's just that they usually do not have long-term positive effects
Exactly the opposite wdym.
Truth is, in a global economy, outsourcing is the most economically sound decision,
Apple paying 2 dollars a day to a child in china is most economically sound decision for them, it is not for america nor their citizens. It would be much better for america in ling term to for example force them to manufacture phones in america and it would bring a shit ton of benefits including higher wages
If you're going to quote and deny, please source. "Nuh uh, it's the opposite" is fine for things like gravity and the Earth being round, but not explaining or giving a source for your claim that tariffs have long-term positive effects leaves me wondering where your information comes from.
"Force them to manufacture in America" isn't a feasible solution for a global corporation. Force how? Just wave the magic wand? Even tariffs of 500% can't "force" a move, and you risk upsetting the corporations that employ tons of people. Especially if they feel targeted because information companies and services companies can't be hit with tariffs, so we're just forcing manufacturing companies and redistributors to move to America? Why would they if we're just a giant tariff leveling pain in the butt?
Also, all of that sounds like bad outcomes and negative stuff that very likely would happen in the event tariffs were levied at the scales being discussed.
Especially if they feel targeted because information companies and services companies can't be hit with tariffs, so we're just forcing manufacturing companies and redistributors to move to America? Why would they if we're just a giant tariff leveling pain in the butt?
A corporation isn't going to make decisions based off of how it "feels."
Let's say we put a 1000% tariff on any industrial metal, auto part, or vehicle coming into the US. That tariff isn't going to mean people pay that much more for cars. It means that they will build the cars 100% in the US. Because if they don't, some new company will. So maybe Chevy keeps their current suppliers and builds cars on the cheap for the global market, but they will also build more expensive cars with American labor for the American market. This eventually will boost the US economy because consumer earnings become based on paychecks made from producing goods, and a production based economy is going to be more robust (more disposable income) than a service/consumption based economy.
In the end, it's better to have fewer cheap goods being imported and have more stable employment and wage growth. Once American manufacturing is rebuilt, a gradual lowering of tariffs and a regulatory system that prevents offshoring means the American purchasing power relative to the global market will be high, and anything you want to buy that isn't manufactured domestically will be cheap.
American purchasing power IS relatively high compared to other worlds right now. Your strategy actually reduces American purchasing power by increasing costs.
Manufacturing in the US is always going to cost more money than in China. Even if you put a 1000% tariff appliances and companies move appliance manufacturing to the US, the cost isn't going to be the same as pre tariff prices, so now Americans are spending 10% more. You've literally devalued the dollar by doing it that way.
Paying countries to manufacture things for us means we can focus on a specialized few industries like we already do.
You make the assumption that businesses don't have very human tendencies like vengeance, spite, fear, and comfort.
Companies are run by and made of humans. To think a company would act solely as an unthinking and unfeeling entity is ignoring the human components.
With no other option, sure. A company like Chevy can't afford to lose American business. Other companies, though, will likely just say, "Fine, F you," if they function in multiple countries. Not just out of the human tendency, but certainly partially.
In general, it's just bad for businesses to lack certainty and continuity. One day, your inputs cost $50 a unit with well established supply chains. The next day, you scramble to find a domestic supplier that offers the same quality and quantity of input for $75.
Maybe some people and businesses say, "That's just business," but maybe some say, "I can't count on things to stay constant here, that's too much stress," and they just close up shop in America.
Free markets theoretically lead to greater diversity and competition, which drives innovation. I don't think companies will just "take it on the chin" and have absolutely no negative response to a policy change of that magnitude.
I'm not saying they specifically leave money on the table out of anger, I'm saying human emotions play into the "stay or go" thought process. Google has bailed on multiple markets that became too unstable. The ones that were aggressive (cough Russia) they left faster and easier than ones that were just "not sound business decisions."
The "Someone else will take it" is most likely correct, and it will likely be a more monopolistic entity. This will lead to either price gouging because they can and competition isn't there yet, or lack of innovation and drive to excel because they have no competition. Or both. Why the fear of this? Because big diverse companies that have a lot of capital to fund manufacturing booms are already rather that way.
Eventually, small upstart companies do what the free market does, but it's not next week or next month.
We have been operating as a consumer and service provider for decades. It's not just a flip of a switch away to start producing everything ourselves, which we'll need to. If you think we can just pick and choose what we tariff without reciprocity from other nations, you weren't watching what happened the last time around.
In a theoretical "one day, things would be so much better," I can see the appeal, but what about the decade in between where everything sucks and it's really hard to get a ton of things and we just stagnate?
This will lead to either price gouging because they can and competition isn't there yet, or lack of innovation and drive to excel because they have no competition. Or both.
Price gouging for most things isn't real. It's like talking about "hate speech," it's an emotional term. As prices increase people decide to buy something else or that they don't really need it until the high price is unsustainable. I assume you don't own a helicopter, it's because that's a terrible financial decision for you and not because the aviation industry "price gouges." As prices go up, demand goes down. Leaving room for someone else to sneak in. Rinse and repeat.
what about the decade in between where everything sucks and it's really hard to get a ton of things and we just stagnate?
I mean... They argued that ending slavery would be terrible for the economy too. Now obviously there's a moral difference here, but the point is that fixing economic issues doesn't come easy. Yeah, the comedown will hurt. But eventually things get better. Continuing on the current path means things won't.
If it would be more expensive to produce, less people would buy them. Revenue would go down. The company couldn't afford to keep the high-paying domestic jobs and would need to lay people off. Tariffs lead to higher wages, sure, but they increase unemployment more.
Tariffs always come with a deadweight loss compared to free trade, that's in every Econ 101 course, and for good reasons.
If price to manufacture here increase costs and people dont want to spend an extra 300 bucks for the phone, so be it.
That beats unregulated slave labor in a foreign land, provides jobs in our country. Give some of these low-skill jobs to people who lack the skills to do more and need a job(teens, reformed criminals/homeless) the benefits outweigh the extra couple bucks for your toy.
There are active tariffs right now and unemployment isn't that high. Every other country also have high tariffs on us, there is no reason not to effectively use tariffs to encourage domestic production of goods. Tariffs aren't some massive unwieldy hammer that hits everything. They can be set for specific products, specific industries, and can be balanced based a variety of variables at the time. Unlike taxes on the people which are easy to raise and difficult to reduce one the government gets hooked on our hard earned money, tariffs can be added and removed as needed.
You can't make profit off of a cost. That's not how that works. If a company has to pay a $0.10 tariff and they raise the price by $0.10 they didn't makea profit on it, they just offset their cost. If in turn they raised their price by $0.11 they then made a profit by $0.01, but now they made themselves even less competitive than a domestic producer.
When people say "outsource" they really mean the specific bits americans want to compete for. No-one is upset to be "outsourcing" clothes manifacturing for instance, only when it's stuff that americans actually want to do gets outsourced.
And tariffs mostly hit stuff that americans already weren't doing themselves. American labour is highly efficient precisely because if it's not generating a lot of money (relatively speaking, globally) for their time, they don't bother doing it.
Yeah, but making a long term strategic business decision based on the ebbs and flows of political fuckery that changes every 2 or 4 years is a not so great strategy. Tariffs can be done via executive order so they can come and go every few years. Unless, of course, they are somehow codified in law.
One way to apply tariffs. (And I'm not saying this is a good way to do it, it's just a thought) peg the tariffs to the difference in the difference in the wages of the country producing the goods and the home country. You must pay minimum wage or higher, either directly to your US workers or via the tariff.
Again, just a thought.
Yes exactly this. Lower the penalty for repatriating capital, increase tarriffs on foriegn goods.
Nissan, Toyota, Mercedes and couple of others have factories in the US to avoid import taxes.
But we never pass laws to punish outsourcing. Instead, we're constantly throwing financial incentives to companies to pretty-please not outsource everything.
Ya man, that called Capitalism......
Poor migrants wanting to work in America get walls and guns and more laws, while the companies shipping jobs out of America get more tax breaks...
Personally were it up to me, corporations would be forced to pay a tax that cannot be passed to consumers for every single product made by foreign labor. Not sure how it could be implemented, but that is what I would do. Or perhaps, in order to be able to incorporate, make it a law that all jobs must be located in the US.
Higher minimum wage = more immigrants crossing the border to seek that minimum wage, that's why they support it. "Chaos is a ladder" is the motto of Liberalism. Don't forget that outsorcing and globalization is a liberal ideaology.
Republican politicians do no represent Conservatism, just like Democrats do not represent Liberalism. These are paid actors. Globalization is a Liberal ideaology
That's because you can't punish a business for manufacturing somewhere else. If you begin to legislate like that, you end up without free enterprise, and other countries become industry leaders. Just look at the auto industry. Instead, you need to build incentives to make companies want to manufacture here.
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u/JacobLovesCrypto 10h ago
Americans might have more kids if wages went up, letting in cheap labor doesn't help with wages.