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GELFAND’S WORLD - There is a certain enjoyment in being able to look out my back window and see the entrance to Los Angeles harbor. There is the Angel's Gate light, the only green one on the west coast. There is the breakwater, memorialized at the outset of the previous century by one of the earliest films ever made. There is a lot of blue-green water and the occasional whitecap.
What there isn't, at the moment, is a ship. Haven't seen much of any shipping in nearly a week. We've seen cruise ships, but the central function of the Port of Los Angeles -- moving container cargo ships -- has been way down compared to half a year ago.
Maybe it's not all a matter of the threatened tariffs. Maybe it's not even -- entirely -- a function of Trump's unpredictability, which by now must look like a lot of waffling to the international crowd. But a lot of it has to be what the pundit class refers to as chaos, and economists refer to as uncertainty.
Whatever you call it, there is a lot of it going around and it is having an effect on the U.S. economy.
I'll pause a moment for a bit of I Told You So. Conservative radio hosts used to talk patronizingly about Econ 101. Typically it would be something about some small rise in the minimum wage, and the radio jock would explain ever so condescendingly that this would inevitably raise the price of hamburgers and hardware store items and ultimately lead to ruinous inflation and job loss.
Now it's curious that modest raises in the minimum wage did not, in general, lead to that ruinous inflation, or even much of an increase in hamburger prices at McDonalds. It is interesting that in the real world, the talk radio version of economics doesn't always come true.
But it was also true that the legislative efforts to raise the minimum wage were carried out with plenty of input and the execution of the new rules always came with plenty of two things: advance warning and certainty.
Business owners and consumers alike were told that the new minimum wage would go into effect in 9 months and a day, or whatever the statutory moment would be, so there was a chance for advance planning, investment in automation, or whatever else the business owner thought would maintain profitability.
The current approach involves a witches' brew of threat and bluster along with some real tariff mongering along with some backtracking on the tariffs along with some still-damaging tariffs left in existence. And nobody seems to know whether Donald Trump means for these tariffs to remain, or intends somehow to negotiate some settlement if only Xi et al will make him an offer or the Europeans will come begging, hat in hand.
Is the current Trump approach consistent with what we are now observing? In other words, can we blame a trade slowdown on the tariff scare?
An initial thought is that doubling the price on things so that they go from "easily affordable" to "painfully expensive" is not going to be good for sales. Since importers live and die on how much markup they can enjoy on their sales, it makes sense that they are going to be sensitive to every threat to their supply chain.
This implies a couple of additional questions: (1) Is there really a slowdown in Asian exports to the United States and (2) Is the slowdown the direct result of Trump's election?
I suspect that the answer is pretty easy, considering the recent history of Asian-American trade, but let's let Gene Seroka, the director of the Port of Los Angeles, have a crack at it. Seroka has been making the rounds of news programs, and some of his answers can be found on the website of the port. You can see one here. Seroka not only nails the current uncertainty on tariffs, he also points out the dire economic effects that are sure to result: loss of local jobs for dockworkers, loss of income for the large force of truckers, and loss of sales around the country.
The problem for the American people is that a modest loss in income in this area will reverberate throughout the economy. You can refer to the multiplier effect of a decrease in the local economy and then you can think about an expanding recession -- and it's all been provoked by Trump's fiddling with trade and the American workers' income stream.
It's actually kind of eerie -- we've become used to seeing the giant container ships going in and out of the Port of Los Angeles, but things are awfully quiet out there. Lots of green water, and not a lot of the black and red striped ships. In the local economy alone, we can take note of port pilots, tugboat crews, the dockworkers who run the cranes to unload containers, and the dockworkers who drive the machines which haul the containers around and deliver them to other truckers who will take them out to warehouses in the Inland Empire.
All those jobs carried salaries, and those salaries resulted in an infusion of cash into the national economy. Remember that every purchase by one of these income-earners at Walmart enriches the stockholders, as part of the sum total of purchases all around the country. Every time we reduce peoples' income locally, there is that ripple effect on the national income.
In his most recent interviews, Trump seems to be coming around to the realization that he is provoking a recession due to falling trade levels. In true Trumpian fashion, he is defending this effect as leading to future wonders. The question that the rest of us are entitled to ask goes like this: Is there any possibility that the tariffs will actually result in renewed manufacturing in the United States? If so, how much? Will it be a return to the once-robust auto parts industry in the heartland of Indiana and Ohio? Could this happen in anything less than 8 or 10 years?
And one other question which the world seems to be answering for us as we speak: Will foreign countries lie down and allow us to dictate the terms of American renewal to them, or will they defend their own interests vigorously? The answer is implicit in the statement of the question.
This just in: A one hundred percent tariff on foreign-made movies? What could that even mean? Does it imply that when you go to a twelve dollar movie that it will now cost you twenty-four dollars, with half going to the federal government? I wonder how long it is going to take Trump supporters to understand that the guy has no idea what he is doing.
Addendum
I guess I'm one of the few people who looks favorably on Trump's latest idea to reopen Alcatraz as a federal prison. I think it will be an appropriate place for him and for many of his appointees, starting the day after he is no longer in office.
(Bob Gelfand writes on science, culture, and politics for CityWatch. He can be reached at [email protected])
