One of the things incoming President Trump has promised to do is apply tariffs to vehicles (among other things) not made in the USA – ostensibly to encourage the manufacturing of vehicles in the USA. The underlying argument in favor of tariffs being that imported vehicles have an unfair competitive advantage because labor (and regulatory) costs are lower outside the USA – which is absolutely true.
Why else do you suppose GM and Ford and Ram have manufacturing operations south of the border? Hecho en Mexico? Then bring north of the border and sell here? The answer, of course, is that it’s cheaper to manufacture vehicles south of the border – which is another way of saying more profitable, as the vehicles manufactured outside the USA aren’t cheaper to buy in the USA on account of having been been manufactured in Mexico.
Note the distinction.
Tariffs – which is just another way to say taxes – will do what the application of taxes always does: It will make the taxed item cost more rather than less.
If Trump follows through on his promise, what will happen is that vehicles will cost more rather than less. Not just those made outside the USA, either. A kind of rip tide will be created that increases the costs of vehicles, generally – irrespective of where they’re made. This will not make America great again.
But it will make vehicles even more expensive. Again.
There is another option but it is not likely Trump will choose it because it isn’t protectionist (or corporatist) and Trump is exactly that. He may mean well. But meaning well isn’t worth much when the outcome is terrible; viz the “beautiful” drugs that many Trump supporters don’t fault him for pushing . . . because he meant well.
So – what’s the other option?
The free market.
If one were allowed, Americans would be able to buy any of a plethora of low-cost vehicles, among them the Toyota HiLux Champ you may already know about – and know you’re not allowed to buy in the USA because the federal government says this little pick-up is “unsafe” – which it is not. But it isn’t compliant with every Federal Motor Vehicle Safety Standard (FMVSS).
The distinction is significant.
A vehicle that hasn’t got turn signal lights the exact size and placement as specified by the FMVSS – or just two rather than six airbags – is not compliant.
But is it in fact unsafe?
Most people hear “unsafe” and they automatically think a vehicle so described is defective in some way; that it is likely to crash because its wheels fall off while it is moving or the brakes fail when applied or something along those lines.
But – in the context of the FMVSS, to which new requirements are regularly added – any vehicle that does not comply with all of the latest requirements is “unsafe” per the regs and for that reason illegal to sell (as a new vehicle).
That this is absurd is easily proved.
Just consider whatever it is you’ve got in your garage right now. It is probably not not brand-new and if it is more than about five years old, in all likelihood, it would not be compliant with the latest FMVSS requirements and so illegal to sell again – as a brand-new vehicle.
Does your not-new vehicle feel unsafe to you? If it does, why are you still driving it? Even if what you are driving is brand new and so fully compliant, it won’t be as soon as the next FMVSS “standard” is issued. That might be next year. It absolutely will be within the next two or three. Should you stop driving it then? Because it is no longer “safe”?
The FMVSS is just a tool by which cars are made more expensive to purchase – kind of (a lot like) the way tariffs are used to make cars more expensive, using a false premise to trick people into accepting it.
So, one thing Trump could do – rather than impose taxes (whoops, “tariffs”) would be to get the federal government out of the “safety” business altogether. Courts exist to deal with claims having to do with defective or shoddy products and any harms they cause people who purchased them.
Our “safety” is none of the government’s legitimate business – in a free or even sort-of free society.
Because the government is not our parent – and parents are the only people whose concern for the safety of their children is legitimate. Grown adults are not children and if they wish to purchase a new vehicle that is not “compliant” with every line of the latest FMVSS, that is their right. More to the point, there should be no such thing as the FMVSS at all – for the same reason that there should be no such thing as a federal rulebook decreeing that bell bottom cords are illegal to sell because they are out of style.
So what if a basic little truck like the HiLux Champ doesn’t have six or even four air bags? Or any, for that matter. No one is forced to buy it. Ergo, no one if forced to put their “safety” at “risk.”
The point is that people ought to be free to buy it if they are ok with it. If they prefer a $13k vehicle that meets their needs over a $30k vehicle that complies with government edicts.
That is a much better argument for Trump to make than the one he’s making – which will only make vehicles even more expensive than they already are.
And imagine the effect on the price of other vehicles if vehicles like the HiLux Champ could be sold here. There would be market pressure to lower the cost of vehicles generally – on account of the mere availability of lower cost alternatives.
That is how a free market works.
As opposed to one in which the government decrees what people are allowed to buy – and applies taxes (whoops, tariffs) to the vehicles it does not want them to buy.
Assuming it allows them to be bought at all.
. . .
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Some thoughts in no particular order:
-The real issue behind why not much is Made In USA is a burdensome regulatory climate. While no one wants any more Love Canals or Centralia Mine Disasters, many regulations no longer make sense. Another reason is that manufacturers face a greater risk of lawsuits.
-Speaking of lawsuits, the upside of having such an aggressive plaintiffs’ bar is that civil torts do far more to “regulate” environmental, health, and safety concerns than any regulatory framework out there. In fact, one reason why, for example, the E.U. is far more heavily regulated is because the E.U. lacks a robust civil tort system. That said, civil torts for the most part actually punish companies who actually do wrong—not companies that might do wrong.
-Market pressure does indeed work. In fact, it happened some 40-odd years ago when German and Japanese cars came to America and changed the kinds of cars the Big Three made and sold in their wake.
-I think Donald Trump is using tariffs as a negotiating tactic to get concessions from other countries. Remember, he’s a hard-nosed real estate developer from New York. His M.O. is making you deals you can’t refuse. Will he actually implement tariffs? Maybe, maybe not.
I’m sure Trump’s playing the negotiator game now. No one is moving anything anywhere, except maybe moving production out of China. But that Chinese it won’t be on-shored, that’s for sure. If it goes anywhere I’d say Eastern Europe has the best shot at becoming the next “workshop of the world.” Putin will settle the war, the Neocons will get to keep Kiev, and the lands east of Germany will begin buying energy from Russia and turning it into consumer goods. Heck, maybe Turkey will get in on the act now that they’ve got control of Syria. Or maybe Israel will tie up with Iran and finally finish up the Wes Clark 7. Still have that pesky problem of Eastern Europe being highly dependent on Russia for raw materials, but that’s still solvable if everyone keeps themselves civil.
Or if someone wants to go play in Africa. Labor’s difficult, as always, but lots of stuff there too.
Ultimately there will be some onshore production resuming, but don’t look for tons of factory jobs to come from it. If anything there will be far fewer manufacturing jobs than there are today. Apple is a great example. They are getting closer all the time to a single slab of silicon that does it all. The next iPhone is rumored to contain an Apple designed cellular modem. If this is true then it will likely be a generation or two away from adding the cell modem to the A-series die and integrating it into the A-20. Simplifying the circuit board, reducing parts count and therefore labor. Put all the effort into designing the chip, not running the factory.
Even if Uncle gave in, Toyota’s dealers wouldn’t allow the HiLux Champ to hit US streets in large numbers with $16k sale prices.
How many Ford Mavericks actually got delivered outside of fleet deals for $20k?
Hi Roscoe,
I wonder about that… in that there is profit in volume. Henry Ford understood this.
Maybe because it is Christmas and I am just a grouchy middle aged woman, but I am at a point that complaining and doing nothing about it really grates at me. I am fine with people venting and then doing something about it…we all have to let off steam. I am tired of whining followed by zero action.
An example of this, my sister calls me grumbling how her MIL has taken over her traditional Christmas breakfast. Apparently, her MIL doesn’t like my sister’s cooking deeming it “too fancy” for their family’s tastes. This is also followed by how her in-laws constantly show up late after the event is to start…usually a hour or more. What is my advice to my sister? Then don’t do it. Don’t make Christmas breakfast. My sister is aghast at this idea. My response was “why are you trying to appease people who will never be appeased?”
Back to the discussion at hand though. Why do we care if Trump raises tariffs? Are any of us going to go buy new cars? Of course not. They are little surveillance trackers. If Trump allowed Chinese cars to flood the market would anyone here buy them? Also, doubtful. Why? Because these vehicles are already available to us if they are 25 years old or older. Are they cheaper? Nope. Does anyone think Chinese vehicles in the US market are going to be significantly cheaper than anything sold by GM or Ford? If yes, I have a beautiful piece of Pennsylvania beachfront property I would like to sell.
We have affordable cars in the US. Are they new? No. Do they need some TLC? Yes. They have all of the qualifications we are looking for though. No cameras, roll down windows, manual cassette players, etc. We can go buy one at anytime. We can buy a 2008 Audi TT for $11k all day long or a 1990 Dodge Ramcharger for about $13k. Affordable vehicles. Not only that but it doesn’t look like every other cookie cutter out there.
On the flip side why are we sitting back and hoping someone or something is going to come along and make us content? It isn’t and they aren’t. When do we take the bull by the horns and tell government and the auto manufacturers to kiss our ass by not even caring what they build because we ain’t buying?
‘I am tired of whining followed by zero action.’ — Raider Girl
Fair enough. Actually I’m not whining about Orange Man Bad’s antics, merely observing. His shoot-from-the-hip hubris will create opportunities, which can be seized with actions.
For instance, on a combination of four fundamental valuation measures (price vs earnings, revenues, dividends and book value), this is the biggest stock market bubble in history.
https://www.hussmanfunds.com/wp-content/uploads/comment/mc241218e.png
Several actions follow.
In my position on a non-profit board, I just recommended cutting back our investment allocation from 40/60 to 20/80 bonds/stocks. I’d go to zero myself, but some would view that as too extreme.
Short selling is dangerous. But there’s a once in a lifetime opportunity here to bet against Big Gov goofballs who literally believe they’re ushering in a new golden age. Here’s the mind-bending shocker: that golden age already is receding in the rearview mirror.
Except for my wife’s mother, I don’t allow the in-laws in the house for the holidays.
Problem solved.
Got lucky cuz I adored my late wife’s parents and the adoration was reciprocated.
Her mom is still alive & I call her once a month plus at holidays. Spent the morning & afternoon with her a few weeks ago.
The SILs and BILs I could take or leave. Not bad people just, other than my wife, we had nothing in common. Seeing them at holidays & the occasional get together was enough.
Hi RG,
The thing I was trying to convey is that a tax is a tax – no matter what it’s called. Trump is promising to raise taxes – and that is going to cost us all, whether we buy a new car or not. Businesses, for instance, will have higher costs as a result of these taxes – and those costs will be passed along to us.
By the way, I’m grouchy today, too. It’s 22 degrees and I am going to have to deal with that blankety-blank heater core after I get off the air with Bill Meyer!
The problem as I see that almost everyone wants good jobs where they live. If you look at the original “The Price is Right” game show with Bill Cullen he mentions where the prizes came from. That being companies all across America. Now of course most things are made offshore and those jobs are long gone. Is it safe to say that you might have more stuff than in the ’50s but is your life and retirement any better? If people are working less money is spent on bread and circuses for the indolent thereby possibly resulting in lower taxes for those that do work. How many other jobs are created by just one factory? From part suppliers to machine shops?
I get the feeling I’m not expressing this right but hopefully you get the gist of it.
‘Standing before you today, I can proudly proclaim that the GOLDEN AGE OF AMERICA IS UPON US!’ — Donald J Trump
https://x.com/TrumpWarRoom/status/1870887140512665727
Sad to say, Orange Exuberance has crested before he even takes office. It’s all downhill from here.
This hubristic preening is Trump’s version of George W Bush’s ‘Mission Accomplished’ speech on an aircraft carrier in May 2003. [Last I checked, ‘we’ are STILL in Iraq 21 years later.]
Now’s a good time to buy a big golf umbrella, as a shield from the coming ‘golden showers.’
Jim: Now’s a good time to buy a big golf umbrella, as a shield from the coming ‘golden showers.’
Eek!!!
I don’t know what the proposed tariff rate is. And it doesn’t matter & in the end just makes already near unaffordable cars/trucks even more unaffordable. Will GM et al start offering up 120-month loans for those who can’t handle the 96-month payment?
Trump’s tariff is a red herring to the right just as the “make corporations pay their fair share” bullshit is to the left.
All costs are passed down to the consumer. Was fixin’ to say everyone knows this but, as Mark mentioned below that 12 years of government education / indoctrination, that’s probably not true anymore.
‘Tariffs … will make the taxed item cost more rather than less.’ — eric
Thank you.
In the 19th century, the US fedgov (then spending only 2-3% of GDP, with no welfare state) got a big chunk of its income from tariffs. But even dramatically higher tariffs can’t pay for Social Security and Medicare and a trillion-dollar-a-year global military empire. That’s delusional.
Kindleberger, in his book The World in Depression 1929-1939, published this ‘spider web’ chart of global trade literally spiraling down the drain in the wake of Hoover’s Smoot-Hawley tariffs:
https://www.princeton.edu/~pkrugman/tradespiral.png
Tariffs are the snake oil of economic quack doctors. In today’s economy, already teetering on the brink of recession, tariffs are the economic shock that will kick it into the gutter.
The Orange Oracle doesn’t see this coming. He’s going to walk straight into the trap set for him, slap tariffs on everything that moves, and then preside over Depression II. He will be vilified as Hoover II.
Worse, Trump’s Folly will set the stage for the 21st century Frank Roosevelt to emerge from the Democrat party in 2028. He/she/zhe will offer a different flavor of snake oil — a full socialist takeover, with large dollops of ‘free’ central bank digital currency and a guaranteed basic income for all. Prepare for post-Trump nirvana, comrades!
Hi Jim,
I don’t expect great things from Trump, but personally, I don’t think tariffs will do all that much. Why? Because people are already not buying. A quick glance around will showcase that the middle class can barely afford Spam much less steak. How do I know this? Because Givenchy handbags are sitting at 50% off. I realize guys have no idea who Givenchy is, but just go with it…their bags never go on sale. Grocery prices have just increased “again” another 10%. Software, cars, houses, etc. have hit another hike. I am looking at financial statements that haven’t looked this appalling since 2009.
The average American is running at max capacity. The credit cards, mortgages, student, and car loans are sucking the breath out of most budgets. There is no room for extras and I don’t see a way out with those in debt up to their ears, including Uncle Sam. Unfortunately, when she falls (somewhere between tomorrow and a century from now) action will be minimal, because you can’t run from an avalanche.
The thing about the US economy is that it was always about the basics being cheap so that you could splurge on something “nice” whatever that might be. When Enron screwed with electricity and everyone in California just accepted the story about $2000 electric bills being the new normal, it sent a message to futures traders and energy producers everywhere. They were leaving money on the table. Food products, energy, housing… all got more expensive just because they could. And much of the reason is because of regulations that favor more costly production. Instead of relaxing housing standards, just make more people eligible for low interest ARMs. Instead of encouraging cheap energy solutions that don’t add CO2 to the atmosphere, such as nuclear and low-head hydropower, just encourage the most expensive solutions available and pray that someone will come up with a viable way to deal with their fatal flaws. And of course all the “virus” outbreaks in the food supply that smacks of “what gets measured” not actually what might be a real threat. Mostly due to the fact that our food system is brittle and so monopolized that any minor issue will lead to a collapse.
Hi RK,
Companies will continue to push price hikes until the purchasing stops. When widgets stop selling and revenue has been decimated then businesses will backtrack and reduce fees.
You make a valid point on the economy being based on affordable needs. Unfortunately, there is zero incentive for this to happen. If people are willing to pay the current price for housing, groceries, and utilities these companies are not going to look at alternative methods where they have to spend money to build the infrastructure and then pass the more affordable savings onto consumers. Why would they? They are getting theirs…to hell with everyone else.
The nice things are going away. That is how it works in socialist and communist societies. Make the day to day needs so expensive that there is nothing left to enjoy. The companies that offer enjoyment will falter and eventually declare bankruptcy. Now, there is nothing to strive for except trying to keep a roof over your head, food in your belly, and a shirt on your back.
Tariffs schmariffs are like head lice, crabs on your scrotum.
The MIC and MIC will double their budgets.
Harvard Schmarvard, what complete idiots inhabit such finely constructed idyllic urban settings. Dumbfuckery right in front of your lying eyes.
The idiots there actually think they are smart!
The most intelligent people are the first to admit how stupid we really are.
Doesn’t take a genius to know that. How dumb do you think people are?
The car companies are going to find out the hard way.
You have to remind yourself that Bibi is a collectivist, he doesn’t do a thing to earn money in any way, you pay for his dumbfuckery.
Plus, he’d rather shoot you.
That’s where the tariffs will go.
The tariff v regulatory argument falls flat on the ears of a populace that can no longer reason. It’s a cartoonish method of thought that is based on, “He bad. He hurt us. I hurt him. You be better.” That is the extent of understanding these day.
Yes, it’s the result of a GovCo indoctrination system that proffers itself as Education. Children are turned over to GovCo for 12+ years to be told what to think, not how to think. This was recognized decades ago by Benno C. Schmidt, Jr., then president of Yale some 35 years ago,
“The most serious problems of freedom of expression in our society today exist on our campuses. The assumption seems to be that the purpose of education is to induce correct opinion rather than to search for wisdom and to liberate the mind….Attitudes on campuses often presage tendencies in the larger society. If that is so with respect to freedom of expression, the erosion of principle we have seen throughout our society in recent years may be only the beginning.”
It will take a tectonic shift in our society to regain what we’ve lost. True, you often don’t know what you’ve got until it’s gone but, if you never knew of a thing’s existence you can’t even have that level of cognition.
Trump graduated from the prestigious Wharton School at the Ivy League U. Penn. But what did he learn there?
‘In 2015, [Trump] threatened his high school, colleges, and the College Board with legal action if they released his academic records,’ recalls Wikipedia. Guess he wasn’t on the dean’s list or nothin’.
More likely, Trump regarded college much like the eminent scholar George W Bush, who said of one of his professors at Hahhhhhvid Business School, ‘He wrote a book. I read one.‘ And Dubya can prove it:
https://tinyurl.com/2u9dhuu8