> Of only end products. The "largest manufacturing base" is misleading when majority of inputs for your finished goods are dependent on imports.
Isn't it easier to figure out how to manufacture screws given steel than to figure out how to manufacture airplanes given screws?
> The right way to have gone about this was to first build the manufacturing capacity in US before imposition of tariffs.
But what's the incentive to do that if there are no tariffs? You either need a reward for doing it (subsidies) or a penalty for not doing it (tariffs). But the US government is already running unsustainable deficits, so there is no money for subsidies unless you want to pay higher taxes or cut some other spending, and good luck convincing people to do either of those things.
> There is no reason for exporters to lower prices when tariffs only set a new normal.
If China charges $100 to manufacture something that the US would have to charge $120 to manufacture and then you put a >$20 tariff on it, China could keep charging the same prices, but that would make it cost effective to make it in the US. To prevent that from happening they would have to lower the price, and therefore have the incentive to.
Now suppose it would cost $200 to manufacture in the US and the tariff is 50%. Can China just keep the price where it is and make the customer pay $150? The customer has a finite amount of money, so if they did then the customer would buy a new phone every six years instead of every four years. Meanwhile the $1000 phone just became cost effective to manufacture domestically, because 50% of that is more than the $100 increase in manufacturing cost, so they lose that business too. What response to this do they have other than to lower prices?
Isn't it easier to figure out how to manufacture screws given steel than to figure out how to manufacture airplanes given screws?
> The right way to have gone about this was to first build the manufacturing capacity in US before imposition of tariffs.
But what's the incentive to do that if there are no tariffs? You either need a reward for doing it (subsidies) or a penalty for not doing it (tariffs). But the US government is already running unsustainable deficits, so there is no money for subsidies unless you want to pay higher taxes or cut some other spending, and good luck convincing people to do either of those things.
> There is no reason for exporters to lower prices when tariffs only set a new normal.
If China charges $100 to manufacture something that the US would have to charge $120 to manufacture and then you put a >$20 tariff on it, China could keep charging the same prices, but that would make it cost effective to make it in the US. To prevent that from happening they would have to lower the price, and therefore have the incentive to.
Now suppose it would cost $200 to manufacture in the US and the tariff is 50%. Can China just keep the price where it is and make the customer pay $150? The customer has a finite amount of money, so if they did then the customer would buy a new phone every six years instead of every four years. Meanwhile the $1000 phone just became cost effective to manufacture domestically, because 50% of that is more than the $100 increase in manufacturing cost, so they lose that business too. What response to this do they have other than to lower prices?