I’m really concerned about a key part of my budget as a non corporately employed individual: all of it. Trump has been throwing a hissy fit on Twitter lately with the President of Mexico. Maybe you’ve seen it. If you’re a supporter of Trump’s trade and immigration proposals, you should know that it could very well result in soaring prices for consumers.
Any Trade War Could Be a Disaster
Trump suggested imposing a 20% tariff on Mexico to pay for his border wall. Great idea right? That means Mexico is going to pay for the wall!
Of course not. American consumers will pay for the wall. When Mexico brings in low cost goods, we get lower prices. When Mexico exports cars, clothes, furniture, fresh produce, and more, that means we get lower prices. Look at where things you buy come from. A huge percent of it comes from Mexico.
The other large portion comes from China. Trump has also suggested imposing tariffs on Chinese goods. If he followed through with both of these proposals, I could easily see a scenario where we’re all going to pay 50% more on everything we buy here in America.
Trump Wants Me to Pay Outrageous Prices to Support Jobs that Shouldn’t Exist
Sometimes it makes a ton of sense to buy an American good or service. Flying in an American Boeing plane, receiving care from an American trained brain surgeon for a rare disease, and eating American almonds makes rational sense.
However, why would you pay $80 for jeans made in America when you could pay $20 for jeans made in Mexico? Should I feel sympathy for the worker in Indiana who lost his $25 an hour job and support his wage by buying American products no matter what?
Of course not. That worker benefits from buying thousands of goods not made in America too. If we became a protectionist country, then eventually everyone is worse off because all we did was decrease our economic growth.
We’re better off as a society from trade and globalization. Propping up a failing Carrier AC plant might be good politics, but its awful economics. These jobs will go away from global competition or automation eventually anyway. Why delay the inevitable? Why impose additional costs on millions of people so we save 1,000 jobs that would’ve ceased to exist in 10 years anyway?
Restricting Immigration is Also a Terrible Idea
When I was a freshman in high school, Hurricane Ivan came through my hometown and wrecked the place. Thousands of homes were damaged, and we needed a massive influx of labor to help fix the devastation.
You know who showed up en masse? Mexican workers, most of whom were probably not there legally. I didn’t hear many people getting upset when 90% of the laborers on their roofs were speaking Spanish and repairing their houses. Why? It’s because without this cheap and hard working source of labor, the cost of roof replacement could be in the tens of thousands. Contractors used Mexican laborers to make more profits yes, but they also delivered their service for a lower price.
Undocumented immigrants care for children, cut grass, harvest crops, clean houses, care for the elderly, build houses, and more. If you scare all these folks away and prevent the entry of new immigrants into America, the prices for all these services will skyrocket.
If You Like Low Prices, then Trump is Really Going to Hurt You
The 10 year treasury bond has risen almost 1% since the summer. The reason? Trump has scared bond investors with talk of trillion dollar infrastructure spending and runaway deficits. Folks are expecting inflation now in a way that they never have in the past 8 years under Obama.
So if Trump renegotiates Nafta and imposes border taxes and other tariffs, Walmart is going to turn into “Low Prices. Almost Never.” When he slows down or even halts immigration, cost for services will soar. Thanks Trump.
Trump is not a friend to those seeking to live a lifestyle of self reliance and financial independence. The workers he’s protecting with his nationalist laws are receiving economic welfare, they just might not feel like it.
Am I being too harsh? Are you scared about the economics prospects of a Trump presidency? Do you buy American? Why or why not?
Great post. Ironically many of Trumps supporters have no idea that they just voted for the guy who will make it harder for them to survive. They’ll have their low paying jobs back and nothing to buy, due to import tariffs.
Good points. It will be curious to see what he follows through on.
It is always fun to hear your perspective, Travis. 🙂
When I graduated college, I saw the world exactly as you do – raised on the vision of “a nation of immigrants” (which I believe makes us great) and “free enterprise” (including free and open trade).
Then I started hearing about foreign governments who maybe weren’t playing fair: either with lower environmental, health, or safety standards than required in the US (e.g., Mexico), or by directly subsidizing an industry (e.g., Airbus being more than 50% owned by foreign governments at one point in time), or currency manipulation (e.g., China). At first, I though “Who cares, it’s like free money for us if they want to make products cheaper for us by subsidizing them. Right?” But how are US companies supposed to compete with that? Or, since lower prices are better for us citizens, should we just abandon any industry which some foreign government decides to subsidize?
I have no answers here because I hate to let go of my “free trade” beliefs. But I have come to believe that productive capacity is strategically critical for the future of our nation. What if, heaven forbid, we find ourselves in the throws of WWIII? It seems like we at least need to bring this topic out onto the “table” and begin a national strategic trade policy conversation. Trump got elected (at least partially) by arguing that previous leadership hasn’t done a very good job on that front. I wonder, how it could be more efficient to harvest lumber (or cotton, or steel,…) in the US, ship it to another country (perhaps even across the Pacific Ocean) where they produce furniture (or clothing, or whatever), and then ship it back to us for consumption. Perhaps if it weren’t for foreign-government subsidization of industries, US industries could have afforded to invest more in modernization and automation to create even-more-efficient value chains (rather than just going out of business). Who’s to say?
I also believe in immigration – we’re a nation of immigrants. Along with our capitalistic free-enterprise economy, the “melting pot” of ideas created by our many different cultures provides an ideal environment for innovation – truly the engine that makes America great. That said, should we have completely open boarders? Is it appropriate to have any immigration policy at all? I think so (just do a search on “Immigration Gumballs” or visit NumbersUSA.com). It seems that we currently have an immigration policy that is poorly enforced. It also seems that politicians have historically avoided the issue. That is, at least, until Trump forced it.
Like him or not, Trump is at least bringing important issues out onto the table rather than continuing the status quo of avoiding them.
The way I look at it is if a country wants to pay billions of dollars to irrationally subsidize an industry, why not let them? American consumers are better for it. If they want to trash their country environmentally to deliver products at super low prices, why not let them? As long as they aren’t pumping unbelievably high amounts of CO2 and toxic gases into the atmosphere, that helps keep our country greener.
And if WW3 happens, we’re all dead anyway. Having a domestic steel or rubber industry won’t help. In fact, most of the industries we subsidize have nothing to do with a national security interest, like Big Sugar in South Florida or Big Dairy in Wisconsin.
And in the absence of high levels of welfare spending, we should absolutely have open borders. The positive economic contributions of millions of immigrants far outweigh any security risk. If we had an Orlando every year (which was done by the son of someone who immigrated here, not a refugee or illegal immigrant), the value provided would far outweigh the cost.
Well at the rate this country is going now no one will know how to do anything. Lets just buy it or pay someone else to fix it. This country was built by craftsman not lazyness. The millennial generation that I am ashamed to admit I am part of is just LAZY.