Trump's Trade Policy - Striking the Right Tenor

The Smoot-Hawley Tariff Act of 1930 is widely regarded as the tipping point that sent the world into the Great Depression. Punitively high duty rates were applied to all import shipments into the USA. (If you are interested, the law was never repealed and the high duty rates remain in the US tariff book under Column 2, picture below). The world quickly retaliated and protectionists barriers caused markets to dry up, prices to skyrocket, and rewarded inefficient bloated domestic industries. The result was a worldwide economic disaster.

Snap Shot of the US Tariff and Duty Rates

The other end of the spectrum is a TPP style trade deal where national sovereignty, regulations, and duty collection are sacrificed on the altar of "free trade". Trump rightly called the Congress and the Obama administration on the carpet for this disastrously crafted agreement. (Note in the picture, Free Trade Agreements have duty rates listed under "Special" above).

With the election of DJT, the pendulum seems to be swinging back. The balance is usually somewhere in the middle. Decades of bad trade policy can not be undone quickly - to try and do so will be a disaster. Before we institute punitive tariffs, we have to rebuild our manufacturing base, we have to encourage companies to build factories in the US, and we need to make sure we have a workforce ready to take on the jobs.

It is interesting to note that modern factories are mobile, especially compared to the abandoned relics of the 20th century. Factories can be relocated in today's world. After the 9/11 attacks, I had a unique job of driving around NC/SC to visit and tour manufacturing facilities, Plant managers were so kind and took pride in escorting me through the premises to explain their processes.

What became very apparent to me was the modernity and leanness of the manufacturing process. Drive around industrial parks in this nation, you won't see belching smokestacks and railroad tracks behind hulking red brick manufacturing plants, you will see non-descript buildings, quietly producing all manner of products.

Modern Manufacturing Facility - Lincolnton NC

So consider, if you are an American company that has relocated light manufacturing in Mexico, it is not that difficult to move back to the US. An improved business environment, repatriation of money, and the threat of increased US Tariffs is EXACTLY the correct environment needed to swing that pendulum firmly in the middle, where it belongs.

Getting Back Together with Newt Gingrich

Abigail and Dolley readers, I have had a ton of fun this year "dating" the candidates.  At one time or another, I entertained them all, as I wrote about in Dating the Candidates.  I am pleased to announce that I am sporting a big ole engagement ring and have made my choice:  Newt Gingrich.  As my previous blogs have covered, Newt and I go way back and I initially rejected him out of hand (Newt Gingrich - The Candidate I Did Not Want to Like).  He IS like an old boyfriend that you get back together with, one where you know his flaws, one where you know his mistakes, but one where you decide the good far outweighs the bad.

Your best friends are quite skeptical, your Mother is heartbroken, and your Father looks across the dinner table and sends him "You better be good to my daughter" looks.  You try to convince them that you've made the right choice and if they love you, they will give him a chance.  In the end, it's his responsibility to convince them, not yours.  Newt is smart enough and articulate enough to win them over.

Why have I come to this conclusion?  Well, I have been leaning this way for several weeks and have watched all of his interviews and speeches - I mean all of them, since he announced.  I have read just about every news article written; at least the ones written by people who don't believe that conservatives are minions of evil.  I have researched the 21st Century Contract With America.  I have dug into the dirty laundry. and looked at the high profile mistakes, missteps, and scandals.  I've prayed about it.

What finally convinced me?  I have to say it was the video embedded below.  I have worked with manufacturers and distributors my whole career.  As a salesperson, I have watched manufacturing sputter and in the case of furniture, textiles, and woodworking, all but die in the great state of North Carolina.  My livelihood depends on a healthy manufacturing environment and at the end of this video I was imagining the big fat commission checks that were going to grace my bank account if this man becomes President.

Alas, I am not merely voting my pocketbook.  I have chosen to support the candidate with the best ideas, the clearest understanding of the issues facing the country, and the greatest experience and credentials in the field.  If you have not already done so, I encourage you to give Newt a serious look.

Manufacturing in America

Abigail and Dolley readers I have had a wonderful opportunity in my new position to sit and visit with business people from across the spectrum.  While confined to a geographic region, these business folks hail from companies large and small and cover the gambit of industries represented in the Southern USA.  I thought I would share some of the insights I have gathered on these conversations.

"We are doing very well but we are just waiting to see what this economy will bring..." - this is the overwhelming sentiment among business people.  Company health is solid, there is plenty of cash in the bank, and they have fundamentally changed the way they do business.  Risk and capitol investment are on hold, expansion is not in the cards right now, and even if they wanted to the banks are not lending.

"American manufacturing is returning.  Companies that had previously moved production to China are reopening factories in the USA.  We shipped an order to a factory in Mississippi that has not made this product in over a decade."  This my friends is good news.  The cost of fuel and labor has made the Chinese goods much less attractive.  If you factor in the absolute corruption in the communist run country you get a picture of a collapsing model.  I have written about the labor market in China before (Chinese Manufacturing) and how American workers and firms have a huge intrinsic advantage.

"We are always hiring at the plant but it's hard, dirty work and nobody wants to do it for $10/hour."  Hmmm, this one surprised me.  I guess when you get down to it, unemployment pays about the same wage and a lot of folks figure they are better off waiting for a higher paying job.  The thing about that is the benefits that this company pays equal about $8/hour and unemployment doesn't give you that.  Imagine though, if the income tax rate for corporations was cut to 9% what could happen to wages in this plant.

"Lead times on finished products have gone through the roof and retailers are still making Christmas purchases."  This plays into the first point but is quite telling.  Christmas purchases are usually completed and shipping commences in July - October.  Here we are in mid October and they are STILL buying.  For the first time in a decade, we did not have a peak season surcharge out of Asia.  This is a significant and fundamental change in the business cycle.  Folks are not producing on anticipated demand, they are producing by the order.

The companies that have survived this Great Recession have hunkered down, changed their behavior, mitigated risk, and saved their money.  The weak, inefficient, and poorly run enterprises have been weeded out.  Many misplaced workers are busting with ideas and the entrepreneurial spirit is alive and well in America, just cash starved and waiting for a break.  A repeal of the stifling regulatory climate, tax system overhaul, and new leadership is all that is missing.  November 2012 can't get here fast enough.  When this thing turns and it WILL turn we are going to see an explosion.  I guess I picked a good time to go back into sales...

Chinese Manufacturing and Why the USA Should NOT be Behind

I recently had a very interesting opportunity to learn about Chinese Manufacturing from a gentlemen I met from Qingdao (pronounced Ching-Dow).  We were picking on him for all of the Chinese Holidays and he explained why this was so.  80% of all workers in China are what we would refer to as long term commuters.  Meaning that they leave their families at home in the countryside and come to the city for work.  Only during the two week or one month holidays do they get to go home to see their families.

Guangzhou Train Station

Now from an American mindset, we would get in the car and drive home.  Not so in China, they have to try and get a bus or train ticket.  Eager workers can wait up to a week to try and buy a ticket, many will not be successful.  Traffic jams in and out of the cities can last a week.  Many workers once they finally make it home, will not return to the factories.  Instead they take the money they have saved and open grocery stores and the like in their own villages.  Thus, the highly skilled workers needed for complex manufacturing are always turning over.

Beijing Traffic Jam

This is where the American Manufacturing, workforce, and culture SHOULD be able to kick the Chinese collective butts.  We have an educated, stable, and motivated workforce who can go home every night to their families.  We also are the primary consumers of many of the products the world makes so shipping costs remain constant and are not subject to the massive fluctuations we have seen in International Freight.

So why are we loosing this battle?  I contend we have two problems - Government and Unions.  Both of which are represented as the "answer" to the current economic catastrophe we are in by the party in power.  The Democrats represent bigger and more powerful entities that are in my opinion the most significant impediment to recovery and world competitiveness.

Government suppresses American Manufacturing in a number of ways but primarily with punitive taxes and regulations.  Once again, the Democrats class warfare on the "evil rich" and their penchant for "safety" regulations render it virtually impossible to put out a competitive product.

Unions strangle the ability for businesses to adapt, change, and maximize a skilled work force by ridiculous rules and wages that far outpace the market.  Pensions, lavish healthcare plans, and inflexibility also make it much more difficult to compete.

As I listened to the Chinese gentleman describing the real situation in the Chinese firms, I couldn't help but think that the Democrats actually admire China and if they had their way, we would be just like them.  The American spirit will never be subjected like this though, they have forgotten who they are in their quest for control and power, but the American people have not forgotten.

We will begin to throw off the bonds of regulation, government, and communist unions.  We will begin to rise again and we will not loose our place in the world, no matter what the Democrats would like.  We The People will never submit.