HN Reader

Surprised there isn't mention that a big part of the tariff strategy is to throw the equity markets into chaos in an effort to drive down the price of the 10-year bond. There was a panic last night because the 10 year bond price started going up as stocks were trading down, which is not supposed to happen. It would be truly disruptive if the whole game gets blown up by a lack of buyers for US debt.

Ben Thompson was a leading industry commentator in the 2010s. He was well suited for those times. Less so for these, perhaps.

This essay seems to be built on a flawed analogy.

Clayton Christensen’s model of disruption (or models, counting his low end version) involves innovation by both the incumbent and disruptor. The disruptor’s innovation is immediately appealing to the low end of the market while the incumbent is focused on the high end.

His example of Hong Kong factories manufacturing Fairchild chips doesn’t fit this template even though he claims it does. It’s just targeting the low end of the market with lower prices. That’s just basic business competition, it’s not disruption as he defined it in this piece.

Side note, I’ve never been a big fan of his giant block quotes, especially when he does not bother to summarize them much. It’s asking the reader to connect to the dots and arrive at the insights he is supposed to be providing.)

Talking about the merits of these tariffs kind of misses the point. The person who wrote this article is very smart. I am sure they are smarter than I am. He has produced a pretty solid analysis of trade policy. But in articles like this people ascribe their own motivations and goals to the tariffs that aren't actually there. Buried in this article is the assumption that the motivation of tariffs and trade policy is to maintain competitiveness with China in manufacturing for both economic and security reasons.

This may be important to the author but it isn't a top priority for the administration. Competitiveness with China and onshoring manufacturing are certainly talking points but they is not stated as the primary motivation for the tariffs. The administration characterizes trade imbalances as countries taking advantage of us. The tariffs are targeted based on trade imbalance. If manufacturing was the goal why apply tariffs to things like raw materials? If competition with China is the goal why apply tariffs to South Korea or Japan, pushing them closer into China's orbit? These are just not the goals of the tariffs and neither their rhetoric or actions suggest that they are.

People have a hard time dealing with values and motivations that are wildly different from their own so they construct all sorts of parallel explanations and defend those instead. But talking about these explanations is non sequitur. It is like the administration adopted a policy of jailing all Capricorns and only Capricorns and people started writing think pieces about how the criminal justice system would be more efficient if they focused on programs to reduce recidivism.

I think this misses the point. The president and his closes aides are fascists. They aren't economics professors and diplomats trying to play some game, they're people who look towards the future and see that this world is going to end for a number of reasons. Productive capacity in China, climate change, the decline of patriarchal white supremacy, the facade of a 'rules based order', international payments and finance systems, &c.

Defending a world that is inevitably on the way out is for suckers and weaklings. And boy howdy do they despise the weak. How do you clean out the weak from finance and start preparing a command based war economy?

Volatility, the violence of markets. Move fast and break things. Then there's chaos under the heavens and the situation is excellent, or however the maoist saying goes.

At least to me this looks like trying to get advantages in an expected world war. Sensitive businesses need to die and release labour that can be transfered to a war industrial economy, and the plainly weak people need to die so the people that cares for them no longer have to and can labour with something else like pregnancy or trauma medicine.

Elon Musk is surprisingly not fully on board with this, either he doesn't understand the team he joined or he's started having second thoughts when his stocks crashed. I'm guessing the former, and that he to some extent joined the fash to look cool and manly, and liked it when he got to be on the world stage throwing about their taboo, highly recognisable signals. But now he doesn't find it exciting and refreshing to watch the world burn, he likely doesn't have his own vision for it.

None of the others are into deep sophisticated reasoning. It's not how they think. Mainly they lust, and the thinking they do is to dress up their lust in a way that doesn't turn public speeches and statements into moments of intimacy and vulnerability, because that would be effeminate and look weak.

The war they expect is north versus south, and not east against west. When the climate refugees come and the equator is unlivable, the far north will be the attacked home of the supreme humans, the masters of the future.

To me (European), there is no strategy behind these tariffs other than Trump's thirst for a dominant display. Just to show that he can, that he has the cards.

He introduces a shocking measure and then wants to humiliate the affected by letting them beg for relief. Submission. In a speech yesterday he literally said that "countries are coming to kiss his ass" and he clearly took great joy in this validation of power.

What he forgets, and so does this article, is that due to the above tactics this isn't a USA vs China situation. It has become a USA vs everybody else situation.

And surely "everybody else" is working on alternatives.

> using trade flows to measure the health of the economic relationship with these countries — any country, really, but particularly final assembly countries — is legitimately stupid

A simple way to see this is you have can a system of three countries, A, B, and C, where A only exports to B, B to C, and C to A. All have net neutral trade, but are in a deficit with someone.

Can anyone give a manufacturing example for the phenomena for which he uses Uber? It seems off to use a gig economy company in this article with its tariffs/manufacturing focus.

> There is one other very important takeaway from disruption: companies that go up-market find it impossible to go back down, and I think this too applies to countries.

There's a lot of talking past each other here. This observation, framed a bit differently, is precisely the argument for radical disruptive change. If there's a structural ratchet mechanism, where outsourcing a particular kind of manufacturing work means the US can never do it effectively again, doesn't every tick of the ratchet pose significant risks?

Sure, but aren't we past rational debate on this point? Not only are the new trade policies irrational, it's quite possible that they're intentionally irrational as a bargaining or maneuvering tactic. We're not going to reason or argue our way out of this one.

As I commented yesterday, there's a playbook for reshoring that's being totally ignored:

First you invite industry to reshore via subsidies and preferential access to government contracts. If necessary, the government must directly invest in new firms. (They already do this in a very small way with In-Q-Tel and others, so it's not totally beyond the pale. For a time there was even a US Army VC firm.) If you talk to a Chinese factory owner or mine boss, many of them will tell you that they got their start with a >$2M direct investment from their government.

Second you gradually tighten the screws on foreign finished products, not industrial inputs like metals, plastics, ores, etc.

Third you streamline export paperwork requirements and relax things like ITAR.

Then, when that's all humming along and the factories are working, you can launch blanket tariffs to protect your nascent industries, if need be. But you must exempt necessary industrial inputs from tariffs.

It's possible that personnel problems can, to some extent, be solved with automation.

But, anyway, the playbook's being torn up and read backwards, so it's all moot. We're just going to have to ride the tiger and see what the world looks like in a few months.

A jumble. Really one of his least coherent pieces.

I find amusing that people still want to rationally discuss this thing.

What the U.S. is doing is just Brexit 2.0. If reason didn't work with Brexit, why would it work with this?

The best each one of us can do is to isolate ourselves from the disaster.

My 2 cents in wake of recent news:

It's all a scam, Trump is literally stirring the pot to manipulate the stock market and to enrich his fellow billionaires. This is the same man that started his presidency with a crypto rugpull less than 6 months ago. No wonder DOGE went so hard after every stock market regulatory agency so hard.