A look at Harley-Davidson and other companies — and their workers — struggling with the multiple trade wars that Trump has started.
Harley-Davidson, Blaming E.U. Tariffs, Will Move Some Production Out of U.S.
The iconic motorcycle manufacturer said that the move was the “only sustainable option” to maintain its business in Europe, an increasingly vital market.
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One article (which sadly I didn't take time to read) noted that companies are revamping their supply chains. It's easy to see why. In a free trade environment, you have a wider amount of places in which you can produce your goods. When trade borders spring up, then you have to produce your U.S. goods in the U.S., your EU goods in the EU, your Canadian goods in Canada, and so forth, resulting in a reduction of economies of scale and thus increasing prices.
I have been an observer of the global dynamics of imports and exports among nations. Trade is ultimately interconnected. Some fundamentals matter. Cost of goods are impacted by material cost, and labour cost. Low cost goods are typically produced with lower wages sustainable only in an environment of lower standards of living. In the case of trade between EU and USA, I presume it is influenced by the abundance of some kind of raw material. Tariff based protection is a means of countering lower cost of material or labour from other countries. It is natural to face a reaction of countering tariff with tariff. These make local production costlier for import dependent industry, and market prices unsustainable for export oriented industry. Gradually the cost of living would go up. The otherside of the coin is the lowering standard of living. When a nation enjoying a high standard of living embraces globalization, it will get low cost goods, but lose employment opportunities for the locals. When it seeks to protect jobs, the costs will go up. The whole problem seems to be how to eat the cake and have it too. Isolation can protect a local bubble. But soon like illegal immigration, another problem of illegal imports, aka smuggling, will start growing. The imbalance will tend tor educe over time till a natural balance is established at some other cost and standard of living base.
+Sowmyan Tirumurti And a lot depends upon the particular goods/services being sold. Europe has high wages, so it’s a better market for Harleys than Bangladesh.
Supply and demand definitely mean that free trade drives labor toward cheaper markets, reducing those sorts of jobs in more expensive markets.
On the other hand, tariffs and other protectionism inevitably drive up the price of goods to the public at large. And that increasing inflation puts pressure on salaries to increase. Inflationary spiral returns from the 60s-70s.
There are no easy answers. But at least in a free market global economy there's a minimum of friction, which means the greatest gains — and, if there are forces against accumulation of wealth, there's an opportunity for lost jobs to be replaced through retraining with better ones.