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The shifts in global trade and employment will forever be used by tariff opponents or proponents to reconfirm what they believe — and what they believe is rooted in individual reward, not facts or theories.

The Great Disruption

Disruption is thought to be a good effect of new products and technologies, but investors and analysts have a different reaction when their plans or forecasts are “disrupted”

When I wrote a column about the global trade contretemps now roiling currency and stock markets and unsettling manufacturing supply chains, I was confident in my view that the threat of tariffs would come to nothing. There were too many civil priorities and commercial interests at risk in such a decision. Tariffs, you see are not logical in a free market. They are simply penalties applied by a third party to discourage otherwise compatible partners from an agreed transaction. Tariffs are coercive, and unjustly appropriate some of the profit or advantage that the two parties gain by their deal. 

That was four months ago, and I was wrong. I expected I had made my last comment on tariffs and the possibility of trade “wars.” I was wrong about that, too. My plans were disrupted. 

Proponents of tariffs explain that such penalties correct distortions in global trade that have unjustly changed the nature of the U.S. economy over the past half century, generating an extraordinarily high “trade deficit” and, relatedly, putting millions of individuals out of well-paying jobs, limiting their economic opportunities or consigning them to less rewarding occupations.

On the first point the advent of tariffs on imports of steel, aluminum, lumber, etc. have failed in the stated mission. The U.S. trade deficit rose 7% from May to June, to $46.3 billion. Despite the tariffs, more goods and services are being brought in to the U.S. than are being shipped out. 

But it’s the second point that truly matters to the tariff proponents, who will argue that the economy is now adding new jobs at a faster rate than has been seen in a decade. The U.S. Bureau of Labor Statistics reported 248,000 new jobs added in June followed by 157,000 new jobs in July. The total number of U.S. manufacturing jobs increased by 37,000 in July.

The statistics suggest to me that the shifts in global trade will forever be used by tariff opponents or proponents to reconfirm what they believe — and that what they believe about tariffs and trade is rooted in individual reward, not in market dynamics or theoretical consistency. 

I’ve written that message before too. My opinions don’t change, but the information changes. Some things become more important, others are forgotten. It’s a market economy, after all. We have to adjust.

Everyone has been wrong about this subject for four months, but changing plans, adapting, is the only advantage individuals have in a market economy. It’s fine to develop a strategy and work to implement it, and sometimes that approach is rewarding. The proponents of bi-lateral trade and import restrictions waited 40 years or more to see their message get the full-throated endorsement it has now, but even that is no assurance that their ideas will take hold or their program “succeed.”

I learn a lot about planning by listening to the conference calls that various manufacturing firms host for investors, a routine that allows analysts to put executives “on the record” and execs to shape how the markets perceive their work. Both sides put great emphasis on the concept of “disruption”: what product or capability is available to alter the status quo, to force the market to change its evaluation of the company? Disruption is fine, you see, when it is something you can initiate and “control.” 

When your expectations, your rewards are being disrupted, it is unjust, illogical, and dangerous. That’s not simply the nature of market economics. That’s human nature. 

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