Trump’s Call To Make Everything In America Isn’t Working
However, the Trump tariffs are illustrating the law of unintended consequences, to the delight of Australians
The Gist
Trump's trade war with China escalates as he threatens to raise tariffs amidst market fluctuations.
- China's export restrictions on rare-earth products prompt a strong US response.
- Australian beef exports surge due to US tariffs on Brazilian imports.
- Concerns grow over US manufacturing's response to tariffs and immigration issues affecting workforce availability.
The most momentous event of the last week has been the Gaza ceasefire. It has brought respite for Palestinians from genocidal slaughter and famine, and brought 20 hostages back home to Israel. The peace deal is still fragile, and could unravel.
Some Palestinians are still getting killed, as Israeli Defence Forces personnel ward off Palestinians from a line they have drawn on Gaza’s map, and as Hamas fighters punish deemed collaborators and deliver rough law and order measures in the unpoliced territory. However, aid trucks are streaming in, and journalists, hitherto barred by Israel, are trickling in to see for themselves how bad things are.
Trump Is Keen On His Nobel
Some terms of the peace deal are yet to be implemented. No security force comprising peacekeepers from the Arab states and Turkey has assembled in Gaza. Hamas has not disarmed. The Peace Committee, to be headed by US president Donald Trump and including former British prime minister Tony Blair and representatives of the Palestinian
Authority remains an idea. The Palestinian state that is supposed to be formed, as part of a Two-State solution, remains as nebulously notional as it has always been. And, direst of all, Hamas has been unable — unwilling, say the Israelis — to deliver 19 of the bodies of the 28 hostages who had died in captivity. Hamas says it needs help to retrieve the bodies from the rubble into which most of Gaza has been converted. Israel says this is violation of the peace deal and will restrict supplies to Gaza.
As of now, Trump is keen to keep the truce in Gaza going. He might have missed the Nobel Prize for peace this year, but wants to keep his claim for the next year’s going strong.
Trump continues his attack on Democrats for the government shutdown that continues. His attempt to send troops, federalised National Guard forces stationed in different states, after the courts blocked deployment of regular soldiers, to different Democrat-run cities is heating up the political discourse at home.
Tariff War On China
Abroad, his trade war with China has intensified. After China announced refinements to its export restrictions on rare-earth products, Trump threatened to increase tariffs on imports from China to 100%. When the markets tanked, and, according to Paul Krugman, the Nobel-prize winning economist who has turned commentator on politics and policy, after bitcoin prices fell, eating into the value of the Trump family’s cryptocurrency fortune, Trump changed his tune.
The tariffs have been threatened for the beginning of November. Trump hopes to meet Chinese president Xi Jinping in South Korea before the end of the month at the Asia Pacific Economic Cooperation forum, scheduled to be hosted by Seoul.
Aussie Cows Cash In
The Trump tariffs are illustrating the law of unintended consequences, to the delight of Australians. When China decided to cut back on the import of soybean and corn from the US, it was a given that farmers in Brazil would benefit, stepping up their exports of these products to China. This was expected. What was not is the boom in Australian beef exports.
Brazil would have met the additional demand for imported beef arising from the drought-induced shortage of domestic meat production in the US, in the normal course. In the Trumpian course, the 50% duty the US has levied on imports from Brazil means that Brazilian beef imports are too pricey for American consumers. Australia has stepped up beef exports to the US, and to China.
The Trump tariff of 25% on steel imports has restricted British steel exports to the European Union. Less EU steel now goes to the US, and so the EU feels the need to keep out non-EU steel producers from its market.
Tata Steel’s UK subsidiary does not feel this pain in full measure, however, because its biggest plant, the one at Port Talbot, is already out of operation. It is undergoing a prolonged heart-transplant operation, replacing its traditional blast furnace with an electric arc furnace. The blast furnace burns coal to reduce iron ore, and so falls foul of the EU’s green commitments. The electric arc furnace is more sustainable, recycling scrap and using electricity as its form of energy used.
When Will Trump Chicken Out?
Another unintended consequence of Trump’s steel tariff is that US manufacturing refuses to respond to all the tariff incentives Trump has been plying it with. Setting up a new plant involves a lot of steel. And no one is sure when Trump would chicken out (Trump Always Chickens Out, goes the TACO slur) and how long these tariffs would last. The crackdown on immigration means that worker availability for new manufacturing units cannot be taken for granted, even if highly automated plants do not need many workers.
Even as Trump keeps harping on making everything in America, US firms keep flouting this call to arms. Google has decided to set up a large — 1 GigaWatt to begin with — data centre in India, its largest outside the US so far. It will come up in Vizag, with Adani joining in, and Airtel setting up a Cable Landing Station for Google’s undersea data cables, besides inter-city and intra-city data networks.
Power Guzzlers
If anyone wondered why data centre capacity is measured in terms of power, this is because the processing power and memory that can be marshalled at the same data centre can change dramatically, with constant upgrades in technology. What remains more or less constant is the power consumed in maintaining the humidity, ventilation and air conditioning (HVAC) of the data centre, besides in running the processors. The more the data is stored and processed, the higher the heat that needs to be dissipated with power.
Other companies are entering the data centre race in India. Indian regulation seeks to store Indian digital data inside India. Indians generate a fifth of the global digital data, but have only 3% of the data storage capacity. That means a lot of catching up to do, just to store the extant scale of data generation. When India begins to get serious about artificial intelligence (AI), the demand for data centres would go up even more sharply.
While this is a welcome development, it could turn into a curse, unless the demand for additional power that data centres generate is concomitantly addressed.
Brains Behind Growth
Earlier this week, the Nobel Prize for economics was announced. It went to three economists who have studied the role of technological innovation in generating economic growth. While Robert Solow won the prize in 1987 for identifying the key role of technology in America’s rapid economic advance, he had not explained how or why technology itself gets developed and deployed in production.
Joel Mokyr, a Dutchman who works Northwestern University in the US, Peter Howitt, a Canada-born economist at Brown University, in the US, and Frenchman Philippe Aghion, who works in France, won the prize for identifying the societal conditions required for largescale, routine adoption and innovation of technology, and the quantitative relationship of the process with savings, interest rates, employment, research spending and other economic variables.
