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Trump is crazy (like a fox)

27 June 2019

This isn't a column about the US president, it's a column about technology but these days the two are linked in a very interesting way.

To date, the USA has been heavily reliant on China for much of the consumer and industrial electronics and other technology it uses.

Odds are that a great deal of the electronics, electrical and other tech gear found in the average US home or office has its origins in China -- even if it's being sold under local branding such as WalMart, BestBuy or Apple. Yes, that's right... as we all know, much of Apple's tech is designed in the USA but actually assembled/manufactured in China.

Trump ran for election on the slogan "Let's make America great again" (or something similar). His stated objective has been to restore the USA to its former glory as "the" world economic superpower by bolstering US-based manufacturing and bringing back many of the jobs that have effectively been exported to other countries where labour rates are far lower.

And you know what... I think he's come up with a very effective way to do that.

I am talking about the tariffs that he's slapping on many Chinese tech imports and the outright bans being imposed on other Sino corporations.

In response to these tariffs and bans we're already seeing a number of big-name companies announcing that they're bringing at least part of their production operations back to US soil.

DJI, the world's leading recreational and professional drone manufacturer has announced that it intends to start building some of its drones in California -- in response to both the tariffs and security concerns from the US government.

Apple on the other hand, has carefully dodged the Sino-tariff issue through plans to move some production out of China to Taiwan. Why not to the USA?

Well this report speaks to the issues that effectively prevent that from happening.

However, with the tariffs set to produce significant price-hikes for many Chinese-sourced imports, a lot of US companies are looking for alternative locations in which to base their manufacturing operations and as often as not, the best option appears to be to relocate to the USA.

So can Trump tax (tariff) his way to making the USA great again?

It's starting to look as if it might just work.

The downside will be, of course, that strong trade barriers raised against imports to the USA could provoke similar responses from the USA's trading partners. Indeed, the NZ government has unwittingly done just this with the proposal of the "Facebook Tax" -- a tariff on any sales made into NZ by US corporates such as Facebook, Google and others.

As I wrote in a previous column, the days of global free trade may soon be over as an increasing number of countries move into "protectionist mode" in an attempt to balance their ledgers.

The interesting thing is that the USA is probably one of the few countries which has the size and scale of domestic economy necessary to become an isolationist economy.

Aside from a few rare-earth elements they could be pretty self-sufficient quite easily, especially as the world's reliance on oil reserves winds down in the face of a growing use of renewables for energy.

I wonder if we've already seen "peak trade" within the ranks of the global community.

What will happen to the smaller countries (like NZ) who rely on free trade for their survival, if economic isolationism becomes the growing trend?

Where will we get the imports on which we so heavily rely and how will we pay for them if the USA simply shuts its trade doors -- followed by Europe, Australia and others?

We might think that NZ is at least self-sufficient in terms of food production but we're not. Mineral deficiencies in our soil means we need to import trace elements such as selenium, cobalt and the like simply to keep our livestock free from afflictions such as bush sickness

We're also highly dependent on technology imports to keep our farming sector ticking along at reasonably productive levels. Tractors, computers, farm-bikes, vet supplies... they're all imported and are not industries we could easily or quickly create for ourselves.

Let's hope we don't see a return to the 1960s, when virtually nothing could be imported into NZ without the procurement of an import license and when "overseas funds" were a scarce and much husbanded resource that were not freely available to the public for personal purposes. However, if key countries raise their international trade shields (as the USA is doing), this is exactly where we could end up.

Yes, the USA may be great (again) but at what cost to countries like New Zealand?

Isn't it great to have allies? :-/

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