GM Cutbacks Due to Offshoring, Not Tariffs

General Motors is having a very good year in 2018. That’s right. You read that right, a good year. Maybe even an excellent year. In Q3, its earnings performance knocked it out of the park. Wall Street was expecting earnings of $1.25 and the carmaker delivered $1.87. On the Oct. 31^st conference call with investors, CEO Mary Barra (pictured) was bullish on the full-year outturn, forecasting the company’s outcome this way: “We expect full-year EPS [earnings per share] to be at the top of our previously-communicated guidance range with potential for further upside..”

But, if you read the news, you might ask: didn’t GM announce the shutting of five auto plants in November, and the likely layoff of up to 14,000 workers in the US and Canada due to the tariffs? That’s drastic surgery. Isn’t GM hurting?

Top Five Cases of Huawei IP Theft and Patent Infringement

Last week, Canadian authorities arrested the Chief Financial Officer of Huawei, Sabrina Meng Wanzhou. The US government alleges that she was involved in a plot to circumvent US sanctions on Iran by using a dummy company, secretly owned by Huawei, to sell networking equipment to Iran. 

Some of the US and European press have labeled Huawei a Chinese “national hero,” praising the company as one of China’s top technology companies. The reality is that Huawei has been a leading player in stealing western technology by blatantly using it without paying royalties for patents. Huawei also hires western engineers to gain access to their confidential knowledge, and often directs engineers to steal documents from US and other western technology companies. 

The Tariffs Are Working

Since January, the Trump administration has implemented five major tariff policies, on the solar panel, washing machine, steel, and aluminum industries, as well as the so-called Section 301 tariffs affecting $250 billion worth of Chinese imports, chiefly in intermediate manufactured goods. 

And so far, the evidence is that the tariffs are working. Economic growth is up, inflation is under control, many of the tariffed industries are enjoying strong recoveries in output, profits, and employment. And as optimism spreads across manufacturing, other manufacturing sectors are also enjoying better growth than they’ve seen in years. 

Experts Say China Telecom Diverted US Internet Traffic Through China

Three Internet security experts have accused state-owned telecom giant China Telecom of diverting internal US Internet traffic through China. The purpose, apparently, was corporate espionage. 

US Manufacturing Resurgence is Broad-Based

Manufacturing employment in the US has now shown year-on-year growth of more than 250,000 employees for six consecutive months, the largest and most sustained manufacturing job growth we’ve seen since 1998. Manufacturing employment may finally be on the path to a real recovery from the severe downturn that began in 2001, when we lost 1.47 million manufacturing jobs in a single year. 

The British Economy and the Brexit Vote Explained in Two Charts

In the course of doing my day job, which involves writing about the US economy and international trade, I came across two stunning charts on the British economy which I would like to share with my British readers and anyone else who is interested. These two charts put a sharp spotlight on the performance of the British economy in recent years and go a long way towards explaining the Brexit vote of 2016. 

US-Mexico-Canada Deal is a Conceptual Breakthrough But Details Will Be Critical

Key USMCA architects: US Trade Rep Bob Lighthizer (c),
Canadian Foreign Minister Chrystia Freeland, Mexican
Economy Minister Ildefonso Guajardo.

US-Mexico-Canada Deal is a Conceptual Breakthrough But Details Will Be Critical

The three magic numbers for understanding the new US-Mexico-Canada trade agreement (USMCA) negotiated by the Trump administration are 16, 16, and 6. Those numbers provide insight into a trade agreement that is conceptually revolutionary in the context of previous US trade agreements.  Donald Trump was elected president by voters who wanted him to shake up the bureaucratic world of trade and take unilateral US action where necessary for the betterment of US citizens, and he is doing just that.  He has corralled Canada and Mexico into accepting major modifications in concepts and goal that neither of those nations wanted. 

On Donald Trump, Elizabeth Warren, Corporate Short-Termism, and Populism

Here’s my favorite story about corporate short-termism: it’s the late 1990s, the Internet boom is in full swing and it’s the last day of the quarter. The CEO of one of the largest computer networking companies is standing on the company’s loading dock, supervising his men as they frantically load boxes of product onto trucks for delivery to customers. A friend of the CEO strolls past the loading dock and shouts over the noise to the CEO: “How is the quarter looking?” The CEO looks at his watch, which reads exactly noon. He shouts back to his colleague: 

Update: Tariff Job Gains Exceed Losses by 20:1

11,100 Job Gains vs. 514 Job Losses So Far 

We’ve had a very positive response to our CPA Tariff Job Creation Tracker, published earlier this week showing gains of 11,100 jobs in four major sectors affected by tariffs. Following requests by readers, we’ve now expanded it into the CPA Tariff Job Tracker (TJT) to track both job gains and job losses. 

The Untold Story: Tariffs Are Driving Job Creation

It’s just six months since the first of the Trump administration’s tariffs went into effect and the job gains are already visible.

Overexposed

Summary: This article looks at China’s heavy dependence on - or overexposure to - the US for their trade surplus and their exports. It examines different ways of counting the China trade surplus, finding that on one alternative measure it could be as much as twice as large as China’s own published reports. Finally, reasons for the disparities in different trade data reports are examined.

The struggle to reduce America’s trade deficit with China is still in its beginnings, but the early signs are that America may be winning the battle. 

The US Should Sign a UK Free Trade Agreement Now

The Trump administration should make it a top priority to sign a free trade agreement (FTA) with the United Kingdom as soon as possible.  Although Donald Trump and many of his key advisors are rightfully highly skeptical of FTAs, the UK at this moment presents a different sort of opportunity. A US-UK FTA would be good for the US economy, good for the international economy, good for US foreign policy, potentially good for the UK economy, and ultimately (although they may not admit it) good for the European Union.

Breaking from the Cage: Italy’s Not-So-Secret Plan For Leaving the Euro

Paolo Savona

The Trojan War was caused by Prince Paris’s brutal kidnapping of Helen, wife of the King of Troy, said to be the most beautiful woman in the world.  Last week, the greatest crisis in Italian democracy since 1945 was triggered by the nomination of an 81-year-old semi-retired academic economist, Paolo Savona, as Finance Minister in the new Italian populist government. Savona has advocated that Italy quit the euro currency. For a couple of days, Italy was on the brink of the peacetime equivalent of the Trojan War, a dispute between an unelected president and an elected Parliament. The populist parties that won the election attacked Italian President Mattarella for frustrating the right of the election victors to name a government of their choosing. The president countered that Italy could not leave the euro without a referendum. 

Free-Trade Economists Begin To See the Light on Trade and Globalization

The great economist John Maynard Keynes once observed that people who think themselves practical and realistic are often slaves of “some defunct economist.” One long-dead economist who is poised to become very defunct is old David Ricardo. His free trade views have dominated thinking on international trade for decades. But the tide is beginning to turn among economists, as some highly respected academic economists move away from their doctrinaire position that all free trade is always good everywhere and begin to acknowledge that free trade and large trade deficits have inflicted substantial harm to the US economy. 

Top Ten Cases of Chinese IP Theft

Industrial espionage has been going on for centuries, but experts agree China’s espionage campaign is on a different scale from anything we’ve seen in history. It has been going on at least since the 1990s and there is no sign it is letting up. Targets include an incredibly broad range of US companies, embracing civilian as well as military technology, with a special focus on the telecom and Internet sector. In 2009, National Security Agency Director General Keith Alexander called Chinese IP theft “the greatest transfer of wealth in history.” He put the value of cyber-theft of US trade secrets and intellectual property (IP) at a stunning $250 billion a year and called it “our future disappearing in front of us.” 

The China Endgame: Let’s Build USA 2025

President Trump has just made what could be the biggest gamble of his presidency: he’s betting that he can make a significant difference in the US economy by taking action against Chinese mercantilism. As usual, the hordes of commentators in the liberal media, conservative establishment, and the economics profession have misunderstood his goals and objectives.

US Notches Dismal Productivity Performance in 2017

The productivity figures for the US economy in 2017, published by the Bureau of Labor Statistics (BLS) last month, show the US economy continuing to underperform on productivity growth, one of the most important metrics for the long-term health of the economy. The labor productivity of our non-farm business economy rose just 1.2% in 2017, a pathetically low figure considering GDP growth last year was respectable, and should have put a tailwind behind productivity growth. Yet the productivity performance for 2016 was even worse. In that year, productivity actually fell by 0.1%. Over the five years 2013-2017, labor productivity growth averaged just 0.76% a year.

How Facebook Can Help Rebuild US Manufacturing

In a highly polarized nation, Facebook has accomplished the amazing achievement of getting itself intensely disliked by both right and left. The right detests it because its newsfeed has demonstrated a distinctly progressive bias, reflecting the worldview of the majority of its 25,000 youthful employees, while the left resents it because it is seen as the prime social media tool by which the Russians attempted to influence American voters to favor Trump.

Solar Industry Gears Up For More US Production As Tariffs Take Effect

Safeguard tariffs imposed by President Trump on imported solar cells and panels have been in effect for just over a week, but already we’re seeing moves to boost US solar production in response. No fewer than nine solar manufacturing companies are planning to launch or expand solar manufacturing in the US, according to our latest information. This is great news for the US solar industry, because it shows that tariffs can produce the intended effect of boosting a US industry, and with it jobs and research and development. It further suggests the US has the opportunity to regain its leadership position in this critical industry. 

How To Make China Pay For US Solar Industry Expansion

Later this month, President Trump faces one of the biggest trade decisions of his presidency. By Jan. 26^th, the president must decide whether to levy duties on solar cell and module imports, and what level those duties should be. The International Trade Commission (ITC) found in September that the industry has suffered injury from imports from China and elsewhere, and unanimously recommended that duties should be levied. The two complainants, struggling solar manufacturing companies Suniva and SolarWorld, have each said the recommended duties are not high enough to save the manufacturing industry, while the solar installers’ trade association, the SEIA, has loudly protested that duties could have a negative impact on industry growth.