Trump’s Steel And Aluminum Tariffs Are A Failure
It's been just about fifteen months since President Trump imposed tariffs on imported steel and aluminum. Not surprisingly, those tariffs have not had the effect the President claimed they would.
Fifteen months ago, President Trump launched his trade war by imposing tariffs on steel and aluminum from China and a number of other countries. Those tariffs were later expanded when the President, in a move that many described as bizarre at the time, lifted the exemption that had applied to steel and aluminum from allies such as Canada, Mexico, and Europe, absurdly citing ‘national security’ as the justification for his move. At the time, the President claimed that the tariffs were necessary to protect America’s metals industries from unfair foreign competition. While the President did eventually lift the tariffs on steel and aluminum from Canada and Mexico as part of the agreement that led to the U.S-Mexico-Canada Agreement (USMCA), those imposed on China, Europe, and the rest of the world remain in place. Not surprisingly, The New York Times finds that the policy has largely backfired and that its the American consumer that has ended up paying the price for the President’s decision:
President Trump’s tariffs on imported steel and aluminum were supposed to revitalize American producers and handicap foreign competitors. What happened shows the perils of using trade policy to revive struggling industries.
The tariffs, which took full effect a year ago, have spurred a handful of domestic investments and the reopening of a few idled plants. And the metals industry has added a few thousand additional jobs.
But the tariffs have also forced Americans to pay more for steel and aluminum than other consumers around the world. American- and foreign-owned companies operating in the United States have had to scramble to navigate a complex government process to source materials they need to manufacture their products.
Mr. Trump abruptly removed the tariffs on imports from Canada and Mexico, narrowing the amount of imported metals subject to the 25 percent tax on steel and 10 percent on aluminum.
The metals tariffs, however, remain in place on imports from geopolitical rivals like China and Russia, as well as on allies like Europe and Japan. But analysts suggest their power to rebalance global production, in order to favor American workers, has effectively peaked.
Mr. Trump does not see it that way. He has repeatedly hailed the tariffs as reviving iconic blue-collar industries. “To protect our national security, we also imposed a 10 percent tariff on foreign aluminum and a 25 percent tariff on foreign steel,” he told a crowd in Pennsylvania recently, “and what that’s done for your aluminum and steel in this country is incredible.”
Industry statistics and stock prices suggest a more complicated story. Shares of America’s largest aluminum and steel makers have plunged over the last year. There are fewer aluminum production jobs in the United States than a year ago, while steel mills have added only a few thousand jobs. In April of this year there were 381,000 Americans working in the primary metals industry, which includes steel and aluminum. That’s up from 376,400 a year ago — a 1.2 percent gain — and down from 398,000 in April 2015.
Steel production barely increased over the past year. Aluminum production has risen more, but it remains more than 40 percent down from where it was in 2015. The United States produced 890,000 metric tons of aluminum in 2018 — barely more than Iceland, well below Norway and less than 3 percent of the output of China.
Executives at foreign-owned metals producers, which were supposed to bear the brunt of America’s tariffs, say Mr. Trump’s levies have largely been an annoyance and, ironically, a hindrance to their operations in the United States. They say tariffs have not changed the competitive landscape in the global aluminum or steel business.
(…)
Since Mr. Trump imposed metal tariffs on trading partners last spring, aluminum prices worldwide have fallen nearly 20 percent. That is attributable in large part to China’s government-supported smelters, which poured additional supply into the global market, as well as falling demand for aluminum in Europe and other large economies. Production costs also declined worldwide.
Aluminum prices in the United States have fallen substantially less, by about 9 percent, according to data compiled by Harbor Aluminum, an industry analysis firm. The premium that American consumers pay for aluminum, compared to what others pay on the global market, has doubled since the administration began the government investigation in 2017 that ultimately authorized the metal tariffs. Today, American manufacturers that use aluminum in their products pay 22 percent more for the metal than their international competitors, including countries like Norway and Canada.
(…)
No companies have announced plans to build new primary aluminum smelters in the United States, and analysts don’t expect them to, even if the tariffs remain indefinitely, because high American electricity costs make such investments unattractive. Century’s revenues climbed last year but its earnings declined, and it has lost more than 50 percent of its stock price since June 2018. A rival, Alcoa, has posted only slightly better results.
The actual impact of Trump’s metals tariffs have been known for some time, of course. Within just a few months after the announcement of the tariffs in March of last year, and their expansion to cover foreign sources such as Europe and Japan in May, it was apparent that the tariffs were not having the impact that the President asserted they would when he imposed them. For example, just months after the tariffs were announced, the price for those products, including from domestic sources unaffected by the tariffs, increased. This had the impact of raising the cost of doing business for industries that rely on these materials, such as carmaker and appliance manufacturers many of whom have in turn found it necessary to pass those cost increases on to consumers, to cut back on hiring or planned business expansion, or both. In subsequent months we’ve learned that the tariffs have led to increased prices for goods in which steel and aluminum are significant products including cars and appliances such as washers and dryers.
In addition to the alleged positive impact of increased tariffs on the economy, which as we have seen is basically non-existent, the President also likes to brag that his policies have resulted in saving American jobs and in bringing manufacturing jobs back to the United States. All of the available evidence indicates that this too is largely untrue. So far at least, there is no evidence of any major American steel producer having announced that they would be bringing jobs back to the United States, or that they would be increasing hiring the wake of the President’s tariffs. Indeed, as The Washington Post reported in early May, the tariffs that have been imposed have cost Americans nearly a million dollars for each job allegedly saved or saved:
President Trump has shown little interest in removing the steel and aluminum tariffs he imposed more than a year ago despite growing evidence Americans are paying a hefty price for these tariffs and increasing pressure from Republicans in Congress to remove them.
U.S. consumers and businesses are paying more than $900,000 a year for every job saved or created by Trump steel tariffs, according to calculations by experts at the Peterson Institute for International Economics. The cost is more than 13 times the typical salary of a steelworker, according to Labor Department data, and it is similar to other economists’ estimates that Trump’s tariffs on washing machines are costing consumers $815,000 per job created.
“It’s very high. It’s arresting,” said Gary Hufbauer, a senior fellow at the Peterson Institute who did the steel tariff cost calculation. “The reason it’s so high is that steel is a very capital-intensive industry. There are not many workers.”
Trump has said repeatedly that the metals tariffs are necessary for national security, for well-paying jobs and for leverage in trade negotiations. There was hope among Republicans and business leaders that Trump would remove the tariffs — at least on Canada and Mexico — once the negotiations over the U.S.-Mexico-Canada trade agreement, known as USMCA, were done. But the tariffs remain, a warning sign for Chinese leaders who want Trump to remove his tariffs on their country’s products as part of the deal the two sides are negotiating.
Supporters of Trump’s tariffs, such as the Alliance for American Manufacturing, counter that more than 12,700 well-paying jobs have been created or saved at steel and aluminum factories since the president put this policy in place in March of 2018. They also point to substantial amounts of investment in U.S. metal mills that should benefit the nation for years to come, including $1 billion that was just announced at a U.S. Steel plant outside Pittsburgh
“Congrats to @U_S_Steel for investing $1+ BILLION in America’s most INNOVATIVE steel mill. 232 Tariffs make Pennsylvania and USA more prosperous/secure by bringing Steel and Aluminum industries BACK. Tariffs are working. Pittsburgh is again The Steel City. USA economy is BOOMING!” Trump tweeted last week.
Many economists and business leaders point out that jobs in steel-using industries outnumber those in steel production by about 80 to 1, according to experts at Harvard University and the University of California at Davis.
Trump has claimed that other countries are paying the tariff bill, but evidence shows the tariffs are taxes paid by Americans. U.S. companies that buy metals are either absorbing higher costs or passing them along to consumers. General Motors and Ford said Trump’s tariffs have cost them $1 billion each.
“The consumer pays for this in the end. They just don’t always recognize it,” said James Knott Jr., chief executive of Riverdale Mills in Northbridge, Mass., which makes wire mesh products for everything from fences to commercial fishing nets. “These 232 tariffs protect my foreign competition rather than protecting me.”
(…)
[E]Vidence is growing that the metals tariffs are starting to bite. Last year U.S. manufacturing companies went on a hiring spree, adding the most new employees in more than two decades as the strong economy caused demand to rise. But since the start of the year, manufacturing job growth has cooled. From February to April, U.S. manufacturers added 12,000 net new manufacturing jobs, the weakest gains in the sector since before Trump took office.
Hufbauer and Euijin Jung of the Peterson Institute calculated that every steel job saved is costing U.S. consumers over $900,000 because U.S. companies have been paying about 10 percent more for steel since Trump’s tariffs went into effect. The total additional cost to the economy is about $11.5 billion a year.
The New York Times article quoted at the top of this post goes on to note that the tariffs have apparently had very little impact on foreign steel and aluminum manufacturers. An executive at one of Norway’s largest manufacturers, for example, stated that his company has barely been impacted by the American tariffs, that it has not lost a significant number of customers due to those tariffs, and that these tariffs are far down the list of things that he is concerned about when it comes to a list of things impacting his business. This puts the lie to the claim that foreign producers would bear the burden of the tariffs.
Meanwhile, as noted, the impact back home here in the United States has been largely negative. While there were a handful of jobs added in the domestic metals industry, the numbers are minimal at best and are far outweighed by the costs that have been imposed on the economy, most of which are being borne by American consumers and American businesses. Finally, the imposition of the tariffs have not led to any announcements or plans on the part of American metals manufacturers to vastly expand their domestic business. As noted, this is in no small part due to the fact that, even after taking the tariffs into account, importing steel and aluminum into the United States is still more profitable than trying to revive a metals industry that is far off its peaks in employment and factories from where it was decades ago, and that’s not going to change because of Trump’s misguided trade policies.
The fact that Trump’s metals tariffs are not achieving their alleged goal is, of course, not surprising. Anyone who has taken even just an introductory College or High School course in basic economics could have predicted how all of this would turn out. Going all the way back to the days of the father of modern economics, Adam Smith, it has long been recognized that trade wars, tariffs, and protectionist trade policies are bad for the economy and do not deliver either the economic benefits or the job and industry protection that they offer.
As Smith and those who followed in his footsteps argued, and as subsequent history has clearly demonstrated, tariffs and protectionist trade policies actually have the effect of increasing prices for consumers, making it harder for domestic businesses to compete in international trade due to the inevitable retaliatory tariffs imposed by targeted countries, and benefiting certain domestic industries while harming those that would benefit from the lower costs and higher supply that would result from lower tariffs and more open trade.
There is also plenty of evidence to show that tariff increases have other impacts such as slowing economic growth and increasing international tensions. This last point is emphasized perhaps most emphatically by the use of the term “trade war” because that is effectively what is happening when two nations start imposing retaliatory tariffs on each other. Such policies in the past have also increased tensions in other respects and arguably played a role in the tensions that preceded the many wars that once ravaged continental Europe, including World War One.
I’m not suggesting, of course, that this idiotic trade war that the President has launched will lead to war, but it certainly isn’t going to lead to a more benign and peaceful world either. With respect to America’s relationship with China, for example, it has the potential to lead to increased tension between the two nations on issues that have nothing to do with trade as well as a breakdown in efforts to gain Chinese cooperation on issues such as the situation on the Korean peninsula. Similarly, the tariffs on Europe and Japan are likely to further strain relationships with our most loyal and important allies, something that this President has specialized into the detriment of America’s vital national interests as I have noted here, here, and here.
Donald Trump is famous for saying that “trade wars are good and easy to win,” The truth is that they are bad, and everyone loses.
If the industry would have guts they would just put a sticker on every items “you pay X$ more on this item due to tariffs”.
Look Doug, nothing you said was a lie. But no one beyond the top 20% income bracket in this country cares. Working-class Heads of households in this country have been losing for decades. You need a dual income household to provide the same lifestyle a single earner could provide 50 years ago. SOMEBODY was winning under the global free trade system–but it wasn’t Main Street. Now, Beltway elites and group thinkers want the people that got screwed to feel outraged that Trump raised the cost of doing business for them and stock prices fell–its not gonna happen. Everybody losing is always going to be more palatable to the human psyche than just me losing. If only Trump could bumble his way into punishing Banks for stealing the interest on American savings to force them into the Market….
Consumer prices are going to go up…big deal. Americans need to consume less and save more money anyway.
Democrats are missing a golden opportunity to redefine a “New Deal” to the American worker.
Trump is in the third year of his presidency. By now we all recognize that his statements are not tied to observable facts; they are not intended to. Coal mining is not a growth industry, steam-powered catapults are not better on aircraft carriers than electromagnetic ones, and trade wars are not easy to win. His statements are intended to aggrandize him and channel the frustrations of his supporters into actions that will benefit him. That’s it; that’s all. He has been very successful.
@Jim Brown 32:
And it’s OK that Trump’s strategies are pushing consumer prices higher ???
I think @Jim Brown has it right. Trump voters won’t care. First, they won’t know because Fox won’t tell them. Second, if they do notice a price going up they won’t connect it to the trade war. The damage done is long-term, and largely to Trump’s constituents, but making self-destructive choices is de rigeur for the white working class in this country. Five years from now when soy bean farmers are still struggling to rebuild a market Trump destroyed won’t have a sudden awakening when they realize, ‘My God, I was screwed by Trump!’ People don’t re-examine their choices, they just go in search of new scapegoats.
@Bob@Youngstown: Its not about OK or Not Ok. There will be a hidden benefit–the fact that the avg Americans live paycheck to paycheck without saving for a rainy day is as irresponsible as not vaccinating your children. We have to think broader than Trump– in other words: “What cultural adaptations need to take place in our society to position America to dominate the 21st Century?.” Consumerism is a relic of the later 2oth century and the ‘aughts. People with environmental sympathies should most be able to appreciate the damage it causes–but frankly its become a virus on American culture.
As long a food, housing, gas, and entertainment keep place with inflation–no one is going to feel sorry for business and industry connected with imports–especially billion-dollar retailers who thrive off cheap imports and cheap labor that needs government subsidies to make it from check to check.
Trump has set up a dilemma where it appears, to a person of modest intelligence (e.g. most people), that Democrats are on the side of multinational corporations, communists, and underemployment. This requires not a frontal assault but a flanking maneuver. But there Democrats go—charging headlong into machine gun emplacements.
@michael reynolds: Absolutely. The combination of anger, frustration, and helplessness compels the lower class in other culture to detonate suicide vests to get even. Trump is that vest–he’s doing EXACTLY what they want: wage war to American finance and industry. They didn’t vote for Trump to negotiate a payment plan or slide the payment dates to the right. They voted for a bat swinger–they sent him to break an arm and send a message. Outcomes dont and wont matter for a while.
What Dems need to understand is that this is a “cold” civil war. The Republican party is not in the mindset of negotiating terms–they are aiming for domination. Whenever you have a person or organization that casts agreed upon norms to the wind–that person or organization is at ‘war’. War can be violent or non violent–but it is conflict and must be treated as such. The only strategy is to dominate the other combatant(s) and re-establish or design new norms that will keep the peace.
The Democrats have no strategy to prosecute this civil war. They still think in terms of the 90s when the Republican party was in competition but not conflict with the Democrats. The Liberal wing is the only tribe with the gumption to fight but their zeal is misguided and frankly, there are not enough of them to take on their own party let alone the Republicans.
The problem for Democrats is not Trump voters. There is not that many of them anyway–its the Trump-adjacent voters. These are people that hate Trump but like that the Ivy-league credentialed globalists and Think-takers are being challenged by him. These people are not White trash–they are reasonably well off people that THINK they are middle class (but are upper lower-class when you look at an income/wealth distribution chart.) They don’t like Trump at all–but they will not oppose him because they do not identify with Democrats.
If we sliced up the voter population (vice actual) by Married/Single and White/Non-white, the Republican party has devised an identity strategy to appeal to Married/White voters –the largest and most dedicated voter bloc. The Democrats on the other hand–have a strategy devised around Single/Non-white voters–a smaller and, frankly, more finicky voter bloc. If we only sliced by Church/Non-church goes–guess who still has the advantage with the larger, more dedicated voter bloc? Not Democrats.
Maybe Biden will be able to score a Haymaker and save the Democrats arse like Obama did–I don’t think its going to happen but one can hope. But this party has ALL the traits of a crumbling institution in terms of organization, long term planning, and vision. The Republicans may be all the bad people say about them–but they know how to plan, they play to win, they know how to message, and they target people that actually go out and vote.
In other words: Fire Still Hot.
This whole sorry episode gives rise to a question: is imposing tariffs in a free trade world akin to bringing a knife to a gunfight?
@Jim Brown 32: Great. You are able to lay out everything the Democrats are doing wrong. Now maybe you can attempt to tell us what you think is the right thing to do. Complaining about how everyone else is doing it wrong while never laying out a path you believe in is worse than meaningless. It’s what Pearce does.
@Jim Brown 32:
Just sounds dismissive. (As in American’s shouldn’t give a F***). Yea, were all good with prices for agriculture products, autos, fabrics, electronics, drugs etc increasing 10%, why not make it 20 or 30 %. And while we’re at it let’s lower the minimum wage …. yeah, that will get American’s to consume less. But I don’t see how that encourages American’s to save more.
Thing is, I could actually see and argument for trying to reduce Chinese imports as part of a containment strategy, but that would require things like joining TPP and cutting tariffs on other trading partners to work.
Raising tarrifs more or less equally on everyone just ends up with the same mix of trading partners as you started out with, just the US consumer paying more for it.
@Jim Brown 32:
You need a new washing machine when you need a new washing machine. You don’t save money by not buying a washing machine — dragging stuff to the laundromat is expensive (time and money).
Steel tariffs are hitting the durable goods more than the consumable goods.
Now, if it was plastic tariffs…
What would this new “New Deal” look like?
If you didn’t see the solution in my posts…it’s because you read to respond not to comprehend. But to recap:
1. Forget about Trump– except to counter punch him when he attacks.
2. Make Immigration and Trade the crown jewels of the Democratic Platform. Prioritize Main Street benefit over Retailers and Shareholders. A close 3rd issue of emphasis is the police state.
3. Open the Democratic tent to pro-lifers who have concerns about Gov’t overreach into family planning. I specifically used family planning because ‘woman’s right’ is divisive, alienates men who vote, and has become a dog whistle to mean [single] women’s right to choose. That makes married women disinterested sympathizers or energized opponents.
4. Deprioritize the majority-minority strategy during campaign signaling and handle our issues with actual governance after the elections.
Americans today are less interested in a hodgepodge of policy prescriptions of HOW (i.e healthcare, infrastructure, dreamers, etc) than they are the general narrative of what America 4.0 is going to be like to live in. This is what allowed Trump..and frankly Obama as well…to be shallow on specifics for many initiatives. If people buy into the vision, they are willing to experiment and risk failures when implementing.
@Jim Brown 32:
But, what does that mean?
Immigration and Trade are currently the Crown Jewels of the Republican Platform, but I suspect you mean something different.
You are proposing a list of vague concepts. Break that down into policies and actions that people and candidates can do.
This, for instance, could mean anything. Change human nature? Ignore large parts of the base? Keep the brothers on the down low? Use more narrowly targeted messaging?
@Bob@Youngstown: Let’s be honest about how much profit importers are pocketing. There was a reason it was worth it to speed money to offshore entire operations to China. Most of these industries aren’t working on thin margins which means some of their costs will be absorbed.
Strategically thinking however, consumer prices absolutely should take a back seat to the US being the active economic engine which is financing China’s exploitative pursuits in the middle east, Africa, and to a lesser extent south America.
Do you think from a national security perspective to have our country’s manufacturing and consumer supply chains MOSTLY dependent on a communist competitor? A competitor that is stealing US technology and using it to develop and export the most sophisticated state surveillance capabilities and techniques in the world? Supply chains and export partners need to be diversified to avoid any 1 country…ESPECIALLY a country diametrically opposed to human rights..undue influence in our economy and politics. This situation is entirely due to failure of our leaders and unchecked shareholder capitalism which know no nationality or values.
@Jim Brown 32:
Eh what? This innumerate blithering is difficult to parse.
@Jim Brown 32:
So tell us: Name specific importers , their profits and margins.
BTW, is it just you have a problem with american importers or is it all importers?
@Gustopher: The Republicans have the most resonant 2 issues with the broadest reliable voting demographics. I would think a frontal assault on these issues is in order. It’s what primarily the candidates should be talking about. Trade interest to the voter is really about under employment. Stump on a trade policy that speaks to reducing it. Democrats can’t do anything about the racist undertones driving immigration anxiety. But they can acknowledge and should address that undocumented immigrants do more than pick crops and clean toilets. They have moved vertically into many trades and work on margins that is hard for Americans to compete with. Including my preferred demographic, Black men. All American should be for H1B visas if it allow us to poach the world’s best an brightest tech minds. When it’s being used to import mid and low-level tech workers so companies can save labor costs….it’s become a racket that no voter will question it being reigned in.
Candidates don’t need the specifics of broader narratives. That appeals to left brained voters that are wired for linear logic. That voter is the minority. The policy is the easy part,there is no shortage of think-tankers, lawyers, and industry SMEs that can craft a path to achieve an outcome. Of course, the consensus needed to pass and implement legislation is another story.
As for campaign signaling for the current Democrat coalition. There won’t be a paint by the numbers plan that will survive first contact with the campaign stump. Fundamentally, Democrats need to peel voters out of the male, married, church-attending demographics to blunt this country’s rightward lurch.
@Bob@Youngstown: I have a problem with American industries that thought it was a good idea to outsource their labor overhead to foreign countries for nickles on the dollar and import finished goods for sale in the US and pocketing the difference. They made the already well off–obscenely well off.
And seriously, why would I put that sort of technical information in an internet post for peoples eyes to glaze over? Either my claim is credible or it isn’t… Im not here to convince anyone– but to share my perspective the way I see it. However, anyone that has done the most cursory research into starting an import-based business quickly learns that even retail marked down 30-40% is still making a profit for the retailer.
@Lounsbury: Then try harder to keep up
@Jim Brown 32: I think your thoughts here are only half formed — you are identifying things that are wrong, but you haven’t worked out how to fix them, or how to communicate them.
Outsourcing, savings rates, identity politics that end up excluding rather than including, immigration, racism — all things that are problems, sure. But you’re making a few jumps the rest of us aren’t seeing.
You’re sounding like James Pearce, and you don’t usually sound like James Pearce.
I largely agree with you on identity politics that end up being checking off one box for every group in the Democratic coalition. The Democrats have done a poor job of explaining why transgender/black/gay/women’s rights are my rights. I haven’t seen any of our 43 candidates who have really cracked that nut.
(ok, I’m bi, so I get why gay rights are my rights, but the phrasing worked)
I don’t have any good ideas on how to sell that message, and how to make that bit of identity politics inclusive rather than exclusive. I think the answer involves a broad vision of equality under the law, along with a reminder that tolerance comes from tolerating, not approving.
(On a related note, a little while ago my twitter feed was filled with people saying “trans women are real women” and being all smug and posturing, and they just irritated me, and I’m basically on their side. Apparently, it’s not enough to think that trans people are real people, who should be addressed with their preferred pronouns, treated with equality and respect, have access to healthcare, and be left alone to enjoy their lives as they see fit. I don’t care what bathroom they use, so long as they use a bathroom. God, some people are their own worst enemies)
——
Where is James Pearce? I haven’t seen him in a bit. I know he frustrates some people, but he’s basically a good guy. I hope he’s doing well.
@Jim Brown 32:
Well, if you can’t/won’t back up your claim (” how much profit importers are pocketing” ) then it remains just a myth.
Say what you will, voters are focused on:
(1) Availability of jobs (preferably in their hometown) that pay well enough to raise a family
(2) Out of pocket costs for healthcare including drugs
(3) consistent costs of essential commodity goods (i.e. food, gas, utilities)
(4) being treated with respect (fairness and rights)
Of course, there is going to be some segment of the voting public who will blindly follow a leader who undermines those interests.
Finally, IMO I’m not convinced that the american voters (all of whom are consumers) give a second thought about buying a product from a (formerly) Communist country. (todays Chinese are just better capitalists then we).
Anybody think that prices will go back down later on? Anyone? Even if Trump ends his stupid trade wars and takes the tariffs away, there is no chance in hell that the US consumer will wake up one day and see that they are suddenly paying less at the Walmart or the Lowe’s. And maybe this is the whole point. A nice (unneeded and yet much appreciated) gift to the multinational corporations. Just a touch of whipped cream on the cake they got with the Trump tax cut bill.
@Jim Brown 32: I am afraid I cant keep up with the wave of economic illiteracy and sheer blustering pull-it-out-of your ass assertions.
Merely on the bank thing it is difficult to tell at what level your innumerate illiteracy is touching insofar as the assertion is incoherent. Like most of your assertions so far, although doubtless profoundly believed to be true for some emotional return.
@Bob@Youngstown:
I would not say that. They are a nation that has an economic benefit from a structural demographic moment. A huge scale of working age labour, large amount of capital deployable into productive infrastructure (and not so productive, viz the Ghost Cities), and just bloody big so they have enormous economies of scale.
Economies of scale and large productive base can compensate for all kinds of sins as the USA demonstrates relative to the embedded inefficiencies in its federal system.
@Lounsbury:
Saying that the Chinese are more effectively utilizing their demographics to compete in the capitalist arena would have been a better, and more accurate, depiction of my sense.
I don’t anticipate that Chinese demographics will be changing any time soon, and they are certainly applying those demographics to their advantage. If the US had comparable demographic advantage, the US would apply the same tactics.
I’m generally reacting to @Jim Brown 32’s alarm of national security supply chains. It’s not hard to imagine that China’s concern about their national security supply chain would prompt the Chinese to subsidize their vital industries. (Much the same way the US subsidizes agriculture as an example).