Donald Trump said he plans to announce tariffs on imported semiconductors over the next week, adding there would be flexibility with some companies in the sector.
So the components will pay tariffs. The phnones and computers will not. This will bring manufacturing back.
Ho Hum.
Of course the whole thing is nuts anyway. By far the largest part of an iPhone’s value is the IP. Which is owned in California. After that, the processing chip, mebbe the screen. Both in Taiwan?
China gets the assembly work. Bit out of date now but a decade back that was about $8 of value per phone.
By value an iPhone is manufactured in CA more than anywhere else. But tariffs must be imposed upon China?
Everyone has a boner for 1970s manufacturing, and it’s either been replaced by robots or its really shit pay.
I used to think it was a bit homo, the idea of muscular sweaty men doing things, like a Jean Paul-Gaultier ad but it’s mostly about soft men who want to be seen as real men. But actually, most manufacturing jobs in the west aren’t like that. You have robots or machines to do the grunt work.
Agreed, tariffs are at best a blunt weapon with lots of secondary and tertiary etc side effects.
But there is a real problem. And that is essentially every element of high-volume manufacture has been exported from the USA (and UK). It takes some long time to rebuild that capability domestically, and if you don’t rebuild you’re at the mercy of the places which do build the stuff. Perhaps that’d be ok if the places that could and did do the manufacturing were numerous and not naturally united, but the fact is the advanced semiconductors come from Taiwan and the rest comes from China. Who isn’t an honest player and seems to have dreams of world dominion.
So what practical steps could re-establish modern manufacturing – initially for electronics – in the West?
Re-establishing should be a benefit in competition and in cost – the cost of labour in such products should be extremely low. The ridiculous environmental stuff can be reduced by not doing any of it on the West coast. Then you’re left with establishing a ‘robotic’ manufacturing supply chain, which should have upsides for other manufacturing domains. Including the equivalent of the Raspberry Pi in manufacturing – low cost, low capacity machinery for the individual and small company/academic institution etc. Which can build a populace used to doing such things – good for a rich environment of invention and potentially a good source for further advancements.
But how to get there?
Seems to me one starts small and cheap and expand up the scale until you can take on bigger and bigger stuff. You might want to add some friction to importing stuff which can be done domestically – so perhaps tariffs on simpler things, but not too big – you want domestic to be preferred, not the only possible choice.
And perhaps the tariffs are like VAT. You surcharge the value-add of what China does: they receive chips and IP and assemble them; the value add is on the assembly, not the IP. Similarly, the chips are surcharged on the value add – which is quite a bit more, because it includes R&D and capital investments for ~1nm fabs – which are bloody expensive.
Badly explained, because hardly a well-thought out coherent proposal. But the idea of starting domestically in modern manufacturing of electronics at the cheap end and going for volume, moving up the value chain as capabilities improve and imposing tariffs only on things that can be done domestically, and then only at a ‘nudge’ level might work. Plus it has the advantage that Europe is structurally unable to do it.
And it’s affordable (in principle). Start with cheap good PCB assembly and say 28nm semiconductor (you can do amazing things in 28nm – just not as amazing as 2nm..). Most electronic products that aren’t portable supercomputers could be done in 14-28 nm… Automotive, industrial control. Raspberry Pi’s etc etc. But environmental BS would have to be markedly lowered in cost – and that’s where government could help.
Rambling thoughts of a Monday…
And all for way less than the bullshit-producing “AI”, and it could turn a profit, too.
BlokeInTejas,
“But there is a real problem. And that is essentially every element of high-volume manufacture has been exported from the USA (and UK). It takes some long time to rebuild that capability domestically, and if you don’t rebuild you’re at the mercy of the places which do build the stuff. Perhaps that’d be ok if the places that could and did do the manufacturing were numerous and not naturally united, but the fact is the advanced semiconductors come from Taiwan and the rest comes from China. Who isn’t an honest player and seems to have dreams of world dominion.”
What’s the scenario here? China decides not to invade Taiwan and not sell chips to make iPhones? And worst possible case, people have to carry around a 3 year old model? Or are you thinking about the chips that go into weapons, which are almost certainly not this year’s ARM Core (I have no idea what they use in military stuff, but typically, these sorts of applications want mature, proven tech).
If you look at the US’s bipartisan policy, under Trump, Biden and Trump again, it’s to kneecap the Chinese in high tech.
This seems to be the real policy, if Pres T can bring some good news to his voters that’s gravy, but the overarching goal is Stop China.
The reason for this goal is AI. The Americans have convinced themselves AI is The Next Big Thing and might confer war-winning advantages on the market leaders.
I think that’s a mistake and what we call AI – large language model chatbots that lie a lot – are more like the next Metaverse or the next Virtual Reality than the next Internet. But kneecapping the Chinese high tech industry brings other challenges such as what relationship do they think they can have with China? If they’re not allowed to compete in trade, they may eventually decide to compete using missiles.
Western Bloke: “What’s the scenario here? ”
Well, “undefined bad”.
If the US is dependent on China for a majority of the things it needs, China can choose to do something nasty to the USA as and when it chooses. Why it would do that, I cannot tell you, but it appears to be building arms on a grand scale and to be flexing hither and yon.
Even if China does not do something nasty as and when, the reality is that once ‘robotic manufacturing’ is a known art with a robust supply chain, you can bootstrap your way up the capability chain of manufacturing at surprisingly low cost and quite (by historical standards) quickly. Thus the standard ‘comparative advantage’ sums don’t work quite as well as they used to. That is, the perhaps relatively small benefits to building all your own shit rather than importing it are worthwhile benefits…
The big impossibility here is of course all the environmental stuff in the USA. But that’s fixable. If envirocrap is important, it must be fixed or charged for wherever it occurs; this would put costs of imports from China (and others) up quite a lot….
BiTiN – China can choose to do something nasty to the USA as and when it chooses. Why it would do that, I cannot tell you, but it appears to be building arms on a grand scale and to be flexing hither and yon.
Yes, going back to 2016, the heavily favoured US presidential candidate, Mrs Hilary Clinton, was openly bragging about the US plan to “contain” China through a ring of missile bases. I assume the Chinese have TVs, so they saw it too. Imagine if senior Chinese politicians were elected on a “contain America” ticket.
Then there’s all the clever people talking about Thucydides’ trap in relation to China. That must be slightly alarming, to be told your economic growth is bringing you into inevitable armed conflict with the US military.
And the US military, plus the Royal Navy when feeling brave because they think the Americans will defend them, has been annoying China with freedom of navigation missions sending warships near their coastline. Given China’s history of foreign warships loitering off their coast, this is a great way to piss them off.
It’s possible we’re blundering into another WW1 here, a disastrous outcome that makes everyone lose, bigly, much more than they could ever have “won” from international conflict.
It’s also possible China is about to go into a deep recession and suffer regime change, I don’t have a crystal ball just two massive brass ones.
As the US clearly sees China as a potential military threat I find it even harder to understand their laissez faire attitude to the abject surrender of the Chagos.
We have Starmer paying for the privilege (rather like the traitorous fish-faced cow gleefully paying the eu a leaving fee) of giving away the archipelago in the questionable belief that a hostile regime already deeply in hock to China will stick to their commitment regarding the strategically vital Diego Garcia base once the first few heavily front-loaded payments have been made.
John – I suspect the Trump administration has enough fights on its plate at the moment. Economic showdowns with China, the EU, the dangerous situation in the Middle East, and trying to bully Ukraine and Russia into stopping that war.
The Two Tier regime has avoided getting into public fights with The Donald, so they haven’t annoyed him into hitting back.
I’m expecting The Donald to tell the Mauritians “Molon labe”
@BlokeInTejasInNormandy – “Seems to me one starts small and cheap”
But small is not cheap. Small is expensive due to economies of scale. You need to start small, expensive, but catering to a niche market. Then as you get bigger, you can spread into a broader market.
– “If the US is dependent on China for a majority of the things it needs, China can choose to do something nasty to the USA as and when it chooses.”
Not quite. It’s like the saying that if you owe the bank a million pounds and cannot pay you have a big problem, while if you owe the bank a billion pounds and cannot pay the bank has a big problem. If China is sufficiently successful at selling a huge amount of stuff, then it cannot go to war with its customers as that would bankrupt its businesses.
BiW – look at Chagos from the White House pov. The British government is a reliable sidekick, even if they currently need tard wrangled into stopping the Scrappy Doo act over Ukraine. One thing that’s consistent about Trump is – oddly, given how he’s presented- that he rarely starts fights. He reacts, pugnaciously, to people he thinks are disrespecting him or threatening or ripping off the USA.
Two Tier has been smart since the US election (after their foolish decision to participate in the campaign). The British government doesn’t want to fall out with the Yanks, sending Lord Kaa of Youngbums to Washington is their sincere idea of giving the special relationship the white gloves treatment. And it’s working.
The Americans are no doubt as amazed as we are that giving away valuable free real estate to Mauritius also means we must pay them handsomely for the privilege. Surely you meant the other way around, buddy? But they have their 99 year lease and the muscle to protect their interests. Anybody who looks funny at Diego Garcia gets to live, briefly, in a Tom Clancy novel, irregardless of “legalities” invented by faggy foreign lawyers in a pretend court. God bless America.
Given Trump’s view that anything less than obsequious fawning is disrespect, and normal trade relations between consenting buyers and sellers are ripping off the USA, the distinction between this and simply “starting fights” is not at all obvious. If he has been pictured as an ignorant, irrational, thin-skinned and narcissistic bully, I think he has been quite fairly and accurately portrayed.
DC – If he has been pictured as an ignorant, irrational, thin-skinned and narcissistic bully, I think he has been quite fairly and accurately portrayed
Yes, TDS is the reason people keep misunderestimating President T.
Like a simple magician’s trick where the audience is too busy seething at the magician to see where he palmed a coin.