Spoke to an economist tonight who advises govts on world trade. I'm not sure many of you'll like his answers but even if you think Trump's a tit, economics doesn't care about personality. So: - US following China's methodology to become manufacturing powerhouse through subsidy, tariff and exports. Unlike China, he has 4 years not 10-20 to achieve it. - Autos will be brought onshore, labour skills shortage plugged by migrants (assuming he sorts out visa issues for willing companies). Timeframe to setup plant from scratch 1-2 years. US auto market too big for big players to ignore. - Short term; domestic price rises, increases in inequality. Longer term, good for USA. Inside 4 years - yes probably - Chance of global recession from tariff wars - reasonably likely But his main point - trade deficit and fiscal deficit is untenable, if USA didn't rapidly change course, its demise would be certain. This is the first administration to do something concrete about it - and his view? Bullish on USA economy by end of 4 year term. Short term chaos (no shit) I can't comment on timeframes for onshoring manufacturing, way beyond my expertise but interesting though.
if he can do it, he will be the most transformative president since FDR. My guess is that he’s less FDR and more Warren Harding.
Most foreign brand cars are already made in US (most sold models for Mercedes, BMW, Toyota, Honda). The fewer selling models will just likely disappear from the US market. There's no point in setting up factories to sell a handful of vehicles. Odd that your economist friend didn't know this.
Haven't got a clue, he's gone home and I'm not your man for USA car imports numbers. But he cited Honda (new plant in Indiana rather than Mexico) - directly as a result of tariffs. Which checks out. As for odd, he maybe wrong but he's apolitical rather than a trump apologist in case you think I'm trying to sneak a political debate into this
U.S. and foreign brands all have models that comprise parts that are domestically and internationally manufactured, no exceptions. So a Honda made in the U.S., Mexico or old Jah-pan will have tariff costs added. Same for Ford, GM, BMW etc etc etc Wonder will tRump put a tariff on Fentanyl shipments? lol Because no doubt they'll still get through. After all supply always meets demand. And nothing creates more demand for drugs than growing levels of poverty. What this stoopid chit will cause.
What you seem to be missing is that India has let Amazon, Google, X, Microsoft, Walmart, Citibank, Visa, Mastercard, Hyatt etc to let them do business in the country. Most of their products can be replicated by Indians locally. Now if tariffs come in the way, more could crop up like the ability to do business by the service companies in the other country. There USA would be a big loser. Those are higher paying jobs than the manufacturing jobs Trump wants to bring home.
Lets then talk real economics. A free trade world would optimize a country's resources including labor resources. Currently USA exports several services which have higher value and imports several products which have lower economic value. Those products with lower economic value can be manufactured and imported from many different countries. So, here the USA has the advantage/option of importing from the lowest cost country. Now USA is proposing to make all those low value items by force from the government(tariff), and not because, it makes optimal utilization of manpower. So, now USA is pushing its resources of land, capital, human resources into less value products, and thereby, hurting access of these resources for its high margin businesses that USA already has. As an analogy, imagine a software engineer making $300K a year and living in a city like SFO now trying to grow vegetables in his backyard because he does not want to give business to some poor farmer.
A very good point and one I didn't make... my economics is rusty. My guess is the 80/20 service to manufacturing in USA is key to tariffs, to shift more of it to manufacturing. It doesn't make sense on today's figures, comparative advantage as you say. But AI is rapidly tearing a giant hole in service sector, so build a strong manufacturing base, and effectively raise taxes at the same time. Cut spend too, and you're addressing the (budget) deficit, which was how we got talking about it. BTW I'm not entirely convinced either. It's effectively deglobalising if that's a word and we're not in the 1900s as Trump alluded to when tariffs were a giant revenue making machine. Economies are much more interdependent. Trump's decimating soft power influence as well at an unknown cost. But he had no axe to grind, so interesting take.
"Trump doesn’t seem to understand how car prices work - CNN — President Donald Trump says he “couldn’t care less” if car prices rise because of his tariffs. They will – whether he wants them to or not. The Trump administration announced last week that it will impose a 25% tariff Thursday morning on all cars imported from foreign countries, including Canada and Mexico. Eventually, tariffs will be placed on imported auto parts, too. Although the parts tariffs are aimed at foreign-made components, those levies could raise the cost to produce cars at US factories, because a significant percentage of the parts used to manufacture the 10.2 million cars built at American plants each year are imported from other countries, according to federal government data. Industry experts estimate that the parts tariffs alone could increase production costs by $3,000 to more than $12,000 per vehicle for cars assembled at US plants. But it’s not just the cost of tariffs could drive up prices. It’s the law of supply and demand. Trump said he expects tariffs to eventually lower American car prices as manufacturers shift production to the United States. That could take years to accomplish with uncertain outcomes. In the meantime, basic economics will weigh on virtually all US car purchases - foreign and domestic, new and even used. Expect car prices that are already near record levels to go even higher once tariffs dramatically upend the car market. Cox Automotive estimates that tariffs will cut North American car production by 10% to 20%. That’s roughly 1.5 million to 3 million fewer cars a year rolling off assembly lines in Canada, Mexico and the United States, most of which are slated to go to US dealerships and showrooms. Also likely to disappear from the US market: perhaps millions of the 3.7 million vehicles being imported annually from Asia and European auto factories that current make up a quarter of the US new car market, according to data from S&P Global Mobility. And the long-ago established economic law of supply and demand means that taking millions of cars out of the supply will drive up prices. “Those directly imported will face a higher cost, and that will cause a shortage,” said Jeff Schuster, global vice president of automotive research at GlobalData. “When there’s a shortage, it drives those prices up.” Prices surged in past supply shortages In this case, history can be a guide. When the United States put tariffs on imported light trucks back in the 1960s, the price of American-made light trucks that were not subject to tariffs, such as pickups and vans, climbed much faster than other car prices, according to Jonathan Smoke, chief economist with Cox Automotive. “In the absence of that competition, the price of light trucks accelerated,” he said. Automakers don’t set or necessarily even benefit from higher car prices. Car dealerships, which are independent businesses, buy the cars wholesale from automakers and then negotiate prices with car buyers directly. And a sharp increase in costs of imports, and fewer cars available at dealerships, will quickly equal higher prices. You don’t even have to go back more than 50 years for proof. The United States experienced this same supply and demand dynamic play out only a few years ago. In 2021, as automakers tried to ramp up production that had been curtailed in the first year of the pandemic, a shortage of parts, most notably computer chips, cut into car production and drove prices up sharply. Soon afterward, almost all car buyers where paying more than sticker price. The average price jumped 17% for new vehicles between January and December of 2021, according to Edmunds’ data. The shortage of new vehicles, coupled with higher prices, sent many typical new car buyers into the used car market. So the price of used cars rose even faster, rising 32% during the same period even though none were affected by the chip shortage." cont. ... https://edition.cnn.com/2025/04/01/business/car-prices-tariffs-supply-demand/index.html