Trump Kills a Lincoln

The Lincoln Aviator is made in Chyna, which made it a target for Trump’s taxes on things made outside the U.S. – where it costs less to make things because regulatory compliance costs are lower. Trump applied punitive taxes – they are called “tariffs” to make the rubes think they’re not paying them – to the tune of 52.5 percent, which has made the Aviator cost more to sell here. Which makes it harder for Lincoln to sell it and make money on it. So it will no longer be made in Chyna, according to news stories.

It will be made here.

Ford CEO Jim Farley says “Lincoln is a quintessentially American brand, and Ford is America’s automaker. This wasn’t necessarily the easiest path. In fact, it’s a path most of our competitors aren’t choosing to take. But Ford builds in America because we believe in America, and we’re betting on that belief again.”

Cue the Lee Greenwood song?

Maybe not.

Has anything been done to reduce regulatory compliance costs in the United States? How about – and this is perhaps becoming even more important than regulatory compliance costs – energy costs? It takes energy to make things. Thanks to Trump’s catastrophic decision to start (and lose) a war with Iran, energy costs in American are higher and thanks to data centers and their draw on the grid, electricity costs are higher, too. All forms of energy cost more here in the land of Freedumb. In Chyna, they were smart enough to increase the amount of energy available to – as the Pakleds on Star Trek put it – make things go.

The Pakleds were presented as Space Tards – but the Chinese are not Pakleds.

Trump seems to be, if you go by what he says and does.

Punishing Americans – by raising the cost of things – doesn’t help Americans.  This is what the taxes styled “tariffs” do. At least, it is what they do when nothing is done to lower the cost of making things here. If nothing is done about that, all that happens is the cost of everything goes up. This business with the Aviator can be used to make the point. The tariffs force Ford – Lincoln’s parent – to stop making the vehicle in Chyna, where it costs so much less to make it that Ford can still make a tidy profit selling it here after factoring in the cost of shipping it all the way from Chyna. Instead, they’ll make it here – where it will cost more to sell because it costs more to make – and the price has to reflect that. The pro-tariff argument is that Americans will be able to afford to pay more because they will be earning more at “good paying” jobs, such as those at the plant (in the U.S.) that makes (will make) the Aviator here rather than in Chyna.

This makes no sense at all. More specifically, it doesn’t take into account the higher manufacturing costs (due to regulatory compliance costs) that can’t just be absorbed by the manufacturer. To believe this is possible is to believe in something as dumb as the Free Lunch.

There is also another, more silent aspect worth examining. It is that by eliminating the lower-cost things made outside the U.S., the lower-cost competition is eliminated. Put another way, the availability of imported thing “a” that costs less than domestically manufactured thing “b” acts as an incentive to reduce the cost of domestically manufactured thing “b.” Once that incentive is taken away, there is no incentive at all for the manufacturer of thing “b” to reduce costs. If anything, there is an incentive to raise costs, because that’s what generally happens you take away the less expensive alternative. What happened to the cost of health insurance after the government eliminated lower-cost alternatives such as catastrophic care coverage?

What are people (who need whatever the thing is) going to do when the less expensive made-in-Chyna (or Korea  and all the other places where it costs less to make things) aren’t available anymore? Their choice is to pay what it costs – or not. Of course, if the price is higher than they can afford to pay, they won’t buy.

To be clear, this is not say it’s a good thing that Ford or any other vehicle manufacturer is making vehicles in Chyna rather than here – nor is it an argument for continuing to make them there. Obviously, it would be better for America if such things were made here – assuming they can be made at a cost Americans can afford. That is not likely to happen unless Trump – or whoever comes after him – addresses the problem of manufacturing costs, which are a function of regulatory compliance costs.

If Trump were as focused on dealing with that as he is on his social media meme’ing we might actually get more affordable things that are made in America again.

. . .

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