Drudge Retort: The Other Side of the News
Thursday, July 15, 2021

Paul Krugman: What's the current state of the U.S. economy? A quick summary might be "booming with bottlenecks." And some of those bottlenecks reflect the mess created by Donald Trump's trade policy.



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More from the op-ed...

...When Trump took us into a trade war with China, there was clearly a lot he and his advisers failed to understand about modern world trade. Among other things, they didn't seem to grasp that modern trade consists not of simple exchanges of goods -- they sell us cars; we sell them aircraft -- but of complex supply chains in which the production of a given item often involves activities spread across the globe.

Given this reality, the structure of the Trump tariffs was, well, stupid: They focused mainly on intermediate inputs like semiconductors and capital equipment, which American companies need to compete in the world market. As a result, multiple studies have found, the tariffs actually reduced U.S. manufacturing employment.

But Trump's trade policy wasn't just poorly conceived. It was also erratic.

Nobody knew which products might face new tariffs or whether the tariffs he had imposed would remain in place. And in high technology, especially semiconductors, Trump began imposing export restrictions, again in an erratic fashion (and with an apparent lack of awareness that, in many cases, China could simply turn to other suppliers).

As I wrote at the time, the problem was less that Trump was a self-proclaimed Tariff Man than that he was a capricious, unpredictable Tariff Man. And this messed up business planning, especially in semiconductors....

#1 | Posted by LampLighter at 2021-07-15 10:59 AM | Reply

" there was clearly a lot he and his advisers failed to understand about modern world trade."

No surprise there, Pete Navarro has always been an anti-China kook.

#2 | Posted by LegallyYourDead at 2021-07-15 12:28 PM | Reply

"As a result, multiple studies have found, the tariffs actually reduced U.S. manufacturing employment."

Womp womp.

Republicans still can't figure out Republicans did this on purpose.

#3 | Posted by snoofy at 2021-07-15 01:04 PM | Reply

Idiot Trumpers cheer the death of the US economy.

#4 | Posted by Sycophant at 2021-07-15 03:04 PM | Reply

The only thing Trump did well was bamboozle some already gullible people... everything else he touched turned to poop.
I would prefer a blindfolded monkey throw darts at a board to make decisions then let Trump back in the White House.

#5 | Posted by 503jc69 at 2021-07-15 09:30 PM | Reply

Not making our own chips is a major national security problem. It could take years to become self sufficient.

#6 | Posted by TenMile at 2021-07-15 09:32 PM | Reply

#6 Capitalism is a national security problem.

Adam Smith wrote about Wealth of Nations.
Now we talk about Wealth of Corporations.
The ship has lost its rudder.

#7 | Posted by snoofy at 2021-07-15 11:09 PM | Reply | Newsworthy 2

I had to click on the link just to find out what type of "chips" the article was talking about.

Well played.

#8 | Posted by sentinel at 2021-07-16 12:04 AM | Reply

Foiled, again
Just what kind of "chip" did you imagine?

Cow chips?
Potato chips?
Fish and chips?

#9 | Posted by Chieftutmoses at 2021-07-16 12:19 AM | Reply

One of the latter two. It makes more sense in the context of the shortages of high demand items in the past year.

#10 | Posted by sentinel at 2021-07-16 12:25 AM | Reply

Here I thought we were talking about Lay's.

#11 | Posted by jpw at 2021-07-16 01:02 AM | Reply

Not making our own chips is a major national security problem. It could take years to become self sufficient.

More than just computer chips.

You can add critical medicines and medical supplies to that list as well.

#12 | Posted by jpw at 2021-07-16 01:03 AM | Reply | Newsworthy 2

Hiring only the best sycophants since the campaign of failure started in 2015. At this point I'm surprised the escalator didn't break down. If it had, the orange fascist would have just stood there, not knowing how to operate his feet...

#13 | Posted by catdog at 2021-07-16 10:00 AM | Reply

Everything Trump touches dies. How could Republicans think that somebody who failed at running a casino could possibly run the US economy?

#14 | Posted by _Gunslinger_ at 2021-07-16 11:13 AM | Reply

#6 | Posted by TenMile
#7 | Posted by snoofy

Making chips of any technical level happens in South Korea or Taiwan today. They have the tech AND they have the mentality for the work. To me this is a lose-lose situation for the US and Europe in particular. It is POSSIBLE we can convince them to build plants in the US or Europe - with MASSIVE concessions but I don't think they can operate them until robots take the place of people.

That said, the Op-Ed is kind of BS IMHO. Krugman doesn't really understand. He is right - demand for items soared. BUT manufacturing for them did not, there was no capacity and COVID-19 lockdowns shut down many if not most of those manufacturers. They all canceled or reduced chip orders. Chip manufacturing was also cut during the lockdowns. So certainly overall demand is up - but I have not seen a figure on how much and at the same time chip making production fell off and continues to struggle either due to a shortage of raw material (high purity silicon) or lock downs (Taiwan is having a big COVID outbreak).

Chip makers want to ONLY build new bleeding edge plants of the latest dies. The reason is plants cost billions and the bleeding edge chips are the most profitable and in demand (the latest and greatest VCPUs/CPUs in general). While there is great demand for lower tech chips (say automakers are using the tech form 10 years ago - which is plenty fine for almost anything in a vehicle) to make chips. The demand for those plants chips might be high but the profitability is low. Building a new plant for that demand doesn't make sense to the chip makers. However with demand so high, they may be reconsidering that. They are almost certainly "gouging" new orders for profits at this time.

Side note on Chip making. We have the BASE here. Polysilicon manufacturing is a huge piece of chip making - The US is still home to the world's maker of the highest purity Silicon - Hemlock Semiconductor. Now primarily a subsidiary of Corning who has an 80.5% stake as I understand it. It was split between Corning and Dow at the end of the Dow Corning joint venture. Dupont (who now owns Dow) sold it's share of HSC last year - along with a Dow plant that sends virtually all it's output to HSC. Corning Inc. owns 80.5%, and Shin-Etsu Chemical owns 19.5% of HSC. Shin-Etsu Chemical has been a partner in HSC since the beginning (1961), it is why it was a separate business unit from Dow Corning as I understand it. They are also the largest manufacturer of polysilicon in the US. They have a plant in Tennessee they shut down due to China's unfair practices a few years ago (requires a LOT of power and the TVA has cheap power and cheap labor in TN). There are constantly Asians (primarily Chinese) being caught conducting industrial espionage near their plant.

#15 | Posted by GalaxiePete at 2021-07-16 01:08 PM | Reply

Great commentary Pete.

I'm usually in agreement with Krugman but not this time and the last paragraph of his opinion shows he doesn't even agree with his own premise.

If this was all Trump's tariffs why is the shortage worldwide?

4 of the 5 largest chip makers are American and the other is Taiwan Semiconductor, and while they have their production facilities in China they control the production schedule and as Pete said they cut production due to less orders at the same time people were going on a buying spree and pushing up demand.

The part about Trump not understanding $#!t about trade or business in general is correct.

#16 | Posted by ScottE at 2021-07-17 01:18 PM | Reply

As I understand it, the cost of making an IC is in the infrastructure. In other words, the high cost of American labor shouldn't add much to the bottom line.

So why not make them here? Is it those pesky environmental regulations? The labor to design them is already being paid top dollar US wages in Silicon Valley. And it's not like they cost a lot to ship.

#17 | Posted by snoofy at 2021-07-17 01:36 PM | Reply | Newsworthy 1

I'm in agreement with you on this Snoofy.

When a country depends on a hostile trading partner for basic and vital commodities it's going to end badly.

#18 | Posted by ScottE at 2021-07-17 02:14 PM | Reply | Newsworthy 1

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