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00:00President Trump campaigned on returning manufacturing growth to the United States.
00:04And the White House, I looked this up, says that they are surging forward with unprecedented momentum.
00:09Are they?
00:12No, I don't think you could say that.
00:15Manufacturing output had been declining actually quite steadily going back to even before Trump.
00:20It did go up in January, but that's one month.
00:22And I don't think we can draw any conclusions from that.
00:25But essentially, our manufacturing continues to go down.
00:29And for the most part, manufacturing employment goes down.
00:33Productivity has been bouncing around a bit.
00:34We can talk about that.
00:35But no, there's not yet.
00:37And to be fair to the president, I think you have to say not yet any sign that his policies
00:43have changed the trajectory of manufacturing in the United States.
00:46Some of the challenge may be timing.
00:47It takes a while to build a plant that you end up and running.
00:50What kind of time horizon, you know manufacturing well, are we looking at to really grow manufacturing?
00:55Oh, certainly a few years.
00:57But the question is, is anybody actually doing this?
01:01And I don't know.
01:03I would say anecdotally, I haven't heard anybody say, you know, CEOs that they're rushing out to build plants here
01:10because of all this.
01:11There's obviously a huge boom in construction going on in data centers, which don't manufacture things.
01:17But it's a capital investment in the U.S.
01:20But I don't have any sign or any idea that the number of car plants in this country is increasing
01:26because of what Mr. Trump has been doing.
01:28An important tool for President Trump in his toolbox on manufacturing are tariffs.
01:34And he certainly has imposed a lot of tariffs.
01:37How does that fit with the manufacturing?
01:39Can we bring back manufacturing through tariffs?
01:42We can bring back some of it.
01:44Even Alexander Hamilton advocated for tariffs in a different set of circumstances.
01:49The idea was to nurture young industries in the U.S. by using tariffs to protect them.
01:54And so there was something to be said of it.
01:56But Keynes actually advocated, surprisingly, for tariffs in the Depression, but partly because the pound was so overvalued, it was
02:03the only way Britain could end up not being flooded with imports.
02:06So there are places and roles for tariffs.
02:09But you really want to use them to protect an industry that would ultimately become very competitive globally, not as
02:15some kind of permanent way to offset the fact that other countries can perhaps make things cheaper and better.
02:21There's another function that President Trump seems to be using tariffs for, which is to extort or command negotiations with
02:29foreign countries to make investment.
02:31I mean, if we have Stellantis saying $13 billion they're going to invest, Japan is saying $500 billion they're going
02:37to invest.
02:37Is that a way to bring manufacturing back by basically getting countries and companies to agree they're going to come
02:42invest in manufacturing plants here?
02:44I have no particular reason to think it is, because the tariffs are imposed on companies.
02:50The companies are separate from the countries.
02:53So the countries can't really say to the companies, go build a plant.
02:57The companies might do it if they felt that the tariffs drove them in that direction, no pun intended.
03:02But I don't see any real evidence that that's having much of an impact.
03:05What about particularly in automobiles?
03:08I mean, we've talked about automobiles before.
03:11What is the prospect of having more automobiles manufactured in the United States, either by U.S. companies or by
03:16foreign companies?
03:19I think right now we've kind of put a bit of a speed bump in front of automobiles.
03:24For four years we told them, build EVs, build EVs, build EVs, and we backed it up with tax credits,
03:29and they all rushed around to build them.
03:31Now you can see them all taking these large charges to essentially either get out of or modify their EV
03:36business because the Trump administration is anti-EV.
03:40So we haven't really done the auto industry any great favors.
03:43There's also a story this week about Ford, I think, losing $900 million because of tariffs.
03:50I'm not sure whether Trump understands this or not, but when you put tariffs on auto parts, you're actually hurting
03:55what we call the OEMs,
03:57the original equipment manufacturers in the U.S., because the parts become more expensive.
04:01We're seeing auto manufacturers overseas struggle, particularly in the U.K. and Germany.
04:06Does it matter whether the company is owned by a foreign country?
04:11I mean, why don't we just let BYD come and manufacture automobiles in the United States?
04:16The first part of the answer is, do we think they want to?
04:19They have their whole ecosystem, just like Apple moving iPhone assembly out of China.
04:24They can do it, but it's much more expensive.
04:26I would think from our point of view, you're right.
04:29People sometimes get confused between companies and jobs.
04:32I mean, if you want jobs, then you want the plants to be built here.
04:38And conversely, having a U.S. company build a plant in some other country doesn't help us in terms of
04:43jobs.
04:43If we want to talk about how do we get more economic progress here, the idea would be to make
04:48more things here rather than somewhere else.
04:50When we talk about tariffs, it may have effects on companies or even potentially on countries in negotiating.
04:57It also has effects on consumers.
04:59I mean, what is the price to American consumers of keeping out very inexpensive BYD automobiles?
05:05Well, this is something that has not gotten the kind of attention it should get.
05:08And the rough math is we sell 16 million cars here a year.
05:13BYD could sell, and they make only EVs.
05:16So it would be EVs here at, I think, conservatively at $10,000 less than a comparable U.S. car.
05:23And so you're talking about $160 billion a year that consumers in the U.S. are paying because we feel
05:31it's important.
05:31I don't want to, I'm not meaning at all to be sarcastic about this, that we feel it's important to
05:35have an auto industry in the U.S.
05:37We could just open the doors.
05:39We have 100% tariff on them now, as you probably know.
05:42We're going to take the tariff off, open the doors, and consumers will be amazed at how inexpensive and how
05:48good these cars are.
05:49So that would be great for consumers, at least in the short term.
05:52What are the strategic disadvantages to the United States, either economically or even in terms of national security, of doing
05:59that?
05:59It would be great for consumers in the short run and in the long run.
06:01And I don't think that the economic impact of all that would be a negative for the U.S., might
06:06even be a positive.
06:08But I do think there's a really important question that I don't have a great answer to, which you alluded
06:12to, which is the strategic imports.
06:14Obviously, everybody knows that in World War II, we took these auto plants and they started making planes and tanks
06:20and all this other stuff.
06:22I don't think we're going to be fighting a war like that again, and hopefully at any time in the
06:27foreseeable future.
06:28But the question is, do you want to have that kind of industrial capacity in case we have another COVID
06:34and we want to make N26 masks or whatever?
06:37And so that's the dilemma we face.
06:40How much do you want to pay to have all this manufacturing capacity here in case we need it someday?
06:45As you probably know, manufacturing jobs now pay less on average than service jobs.
06:50So the idea that these, you know, the romantic idea that these are good jobs and sort of lose these
06:55manufacturing jobs would be bad for America, you know, the everyday Americans is false.
07:00We would need to replace them with other jobs.
07:03But these jobs themselves are not that great anymore.
07:06And by the way, also, they have trouble hiring people because people don't want to work on an assembly line.
07:10They can't check their iPhones.
07:11They can't do this.
07:12They can't do that.
07:12You know, the American work culture has shifted and being on an assembly line is not considered a particularly great
07:19way to live your life.
07:21Which raises a broader question.
07:23Should we be focused on manufacturing as manufacturing to begin with, particularly in an economy that increasingly has gone to
07:28services?
07:29Again, it's a debate.
07:31And I'll make a point on the other side, which is that there is a strong view, and I'm not
07:35expert enough and I'm not sure you could quantify it,
07:37that having manufacturing near the R&D centers, near the corporate headquarters, so there's much more interaction and you can
07:44try things out and so forth.
07:47Yeah, there's people argue for that.
07:49Now, on the other hand, if you buy an Apple phone, as you know, it'll say design in Cupertino, made
07:53in China or made in wherever.
07:55And so Apple seems to have done pretty well without having any manufacturing to speak of in the United States.
08:01But that's another question that people debate in terms of how much manufacturing do we need to have.
08:06I think, I do think, if we're going to focus on some manufacturing, which I'm not against at all, it
08:12should really be industries of the future, not industries of the past.
08:15I think the Chips Act was generally considered to be a success.
08:19It cost $50 billion, but we've got a bunch of chips factories here, and they're building more and more in
08:24Arizona and elsewhere.
08:26That's the kind of stuff we should be doing, not trying to preserve some auto parts supply chain.
08:33It does raise the question about productivity.
08:35If the measurement is output, you could have the same output or even more output with much fewer employees.
08:43We had that in farming in this country over the last 100 years, for example.
08:47Should we be focused on that total output, and aren't we just increasing productivity so we shouldn't worry so much
08:51about the employment?
08:52You always want to increase productivity.
08:55Productivity growth is the only way an economy can actually grow, and people can ultimately earn more money.
09:00And what happened in farming is that, yeah, we had half the country as farmers 100 years ago, and now
09:06we have 2%.
09:07And farming, we're producing more and more agricultural products.
09:10But those people got jobs.
09:12They came to the cities, went to work in these manufacturing plants, and they got jobs.
09:16So we need to be sure there are jobs for these people who may eventually find that productivity has outgrown
09:22them.
09:23That's the only thing we need to worry about.
09:25The rest of it will take care of itself.
09:26We also heard from President Trump this week that if Kevin Walsh does his job right as chair of the
09:32Fed, assuming he's confirmed,
09:33that we'll have 15% GDP growth or better.
09:36How realistic is that?
09:39It always surprises me that a president who lives his life in business can know so little about economics.
09:46Economic growth is a function of two things.
09:48How many people are working and how much each of them actually produces.
09:52The number of people working isn't going to change.
09:54It's going to go up a little, down a little, whatever, but it's going to be a couple percent here
09:58or there.
09:58So the other 13% has to be people being more efficient.
10:02I don't know about you, but I feel like I'm pretty efficient now, and I'm not sure I could drive
10:05another 13% efficiency out of what I do all day.
10:08So it's all fantasy.
10:10I think, in all seriousness, I do believe AI is a potential game changer.
10:16I do believe we could get to GDP growth because of productivity growth that we haven't seen in a while.
10:22It could be three.
10:23It could be three and a half percent.
10:24It's not going to be 15%, but three or three and a half percent would be great.
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