Current Affairs

It won’t be the tariffs that Trump will regret, it will be the way he is going about negotiating at the top table that will challenge his ideas and arguments. Honda and Toyota, are already manufacturers in the United States and may find themselves in an advantageous position, but that really does not tell the whole story. Americans will realise that the good old steel and auto-makers will not have it their own way, they will have more competition than they realise when markets de-value the currency of the states affected by tariffs.

America first is an old adage, Trump is doing to allies what he always intended to do and that is spoil the world economy while in the process of making America more expensive to live in. The numbers do not really add up, the tariffs are always on the consumer and companies like Toyota and Honda continue to manage their market share across the US with products that are technically more advanced and more efficient than home grown manufacturers.

Trump’s policy will move manufacturing to China and satellite countries where costs are less prohibitive than in Japan or South Korea. The made in Japan and South Korea logo will continue to play a part in manufacturing, but the guaranteed quality of their products will be standard bearers for the products that they export from satellite manufacturers into the US market. The idea that the products will be twenty five percent more expensive does not really challenge these manufacturers, they will pass on the cost to other countries and continue to manufacture within the same portals. In the interim, this may give US manufacturers more room for their products, but the reality is that US manufacturing has been hamstrung by the same arguments that have always been an issue….. the ability to manufacture at cost and bring the same manufacturing quality to the markets as Europe or Asia.

It is the idea of chips that haunts most consumers, the concept that large scale chip manufacturing is outside the United States. The largest chip manufacturer, (TSMC) Taiwan Semiconductor Manufacturing Company, has of course opened a factory in Texas, but the bulk of the worlds supply of chips is exported through Taiwan. Though there are security fears and geopolitical battles being played out in the region, the process of manufacturing chips is very much within Asia, as is the manufacturing of X-boxes, controllers, computers, phones and tablets, which mainly takes place in South Korea, Japan and China.

Though the most valuable companies in the world are in America, the reality is that they produce, manufacture and export their designs to China, South Korea and Japan, even though the chips that go into these products have been produced in China, South Korea and Taiwan. Though the US leads the design in the chips and products that are on the shelves, the manufacturing is skilled and demands a qualified workforce that is economically viable.

If Trump can bring the high tech sector back to the United States, he would have won a colossal battle that is hard to imagine at this point in time. But the United States does have skills in the high tech sector, but unfortunately this is in the armaments sector, which is largely funded through government procurement contracts Whether the US will be able to build a manufacturing base from this sector will challenge how Trump imagines the high tech industrial revitalisation in US tech manufacturers.

Nvidia is the most valuable company in the world according to the NAZDAQ. Its valuation sits at $4 trillion dollars and though it designs the most complex chip sets, its valuation is dependent on the Artificial Intelligence market gaining traction. It is very much a valuation set in the future and though it produces great products, it is not necessarily going to take a world share in AI chip sets, when countries such as China, the United Kingdom, Germany or other countries are readdressing their own economies and are reviewing and investing in the AI world. Whether the sector will grow as much as NAZDAQ’s valuation, is dependent on the semi-conductors necessary for the growth of this sector. Bubbles do form and though the tech sector hasn’t experienced a bubble since the late 1990s, there are questions whether there will be a re-evaluation of the business’ in this sector.

Trump has challenged the green movement, which has been put on hold after Trump’s big beautiful bill passed in Congress, which means the capital expenditure for tax cuts and reconfiguring the US economy towards oil has challenged the green tech sector. Where America stands in the coming years is a question for the president, but the idea that the US is being re-configured is as much a fallacy as the tech market managing to continue on an upward trajectory when America is re-jigging its manufacturing base towards fossil fuels.

In light of the elements that now make up the US economy, Trump is pushing for an industrial base, which challenges the cheap products that have been sold in the US. The question whether he can save the steel makers, auto manufacturers or even the green sector is dependent on the ability of the US to focus investment in these markets. The US markets have been investing in green manufacturing since the Covid pandemic, which enabled the US to come out of the pandemic before other countries.

Whether Trump understands what he is doing to the world market is challenging manufacturers who are trying to plan for the future of their industry. If successful and manufacturing bases move to the US, Trump will have been successful in his presidency. But the question of whether there will be a subset of arguments that accept tariffs and the consequences of the costs involved, may lead manufacturers to set their market share in the US at a price point that accepts tariffs. Though the US treasury will be wealthier on the collection of tariffs, the US consumer will be hard pushed to manage in an economy that is spiralling through inflation.

 Though Trump is bravely trying to reconfigure the US economy, there are so many questions that need to be asked and those questions come to the fore when tax payers are being asked to foot the bill for tax cuts and ideas that are designed to push more investment into the markets. There are advantages in reconfiguring an economy, but the danger signs are there and that is whether the companies that Trump wants to invest in the US will want to move part of their manufacturing base to the United States. It is a question that is very much in the air, but there are so many questions that come to the fore that are so dangerous for the US economy at this moment. But the main question is that a country that is so leveraged with debt can play a vital part in the world economy when there are pressures such as off-setting that debt for investment to come into a country that is leveraged to the hilt.