How Trump’s trade policies will affect manufacturing

Senior Fellow David Dollar speaks with Brad Setser, the Steven A. Tananbaum senior fellow for international economics at the Council on Foreign Relations, about a range of trade issues, including the manufacturing deficit, currency issues, U.S.-China trade tensions, whether President Trump’s tariffs could affect manufacturing, an update on the proposed USMCA trade agreement, and what effect auto tariffs will have on manufacturing.

Brookings.edu

U.S. Manufacturing Can Take The Punches – It Is Stronger Than You Think

The December drop in the ISM (Institute for Supply Management) Manufacturing Index seemed to bring the bad news that many feared and yet wanted to see—like a scary scene in a horror movie. The one-month fall was eye-catching: 5 percentage points, the sharpest since the end of 2008. It lined up well with concerns over weakening global growth and subpar stock market performance. It bolstered fears that the trade war with China has started to take a toll on U.S. economic activity. And it provided fuel to the argument that the Fed should stop hiking interest rates. Economists in investment banks and research institutes will be busy updating their recession probability models.

But something in the data does not quite add up. We should be careful not to rush to see just what we want to see.

Forbes

Taxpayers Always Lose Industry’s Shell Game With Jobs

When General Motors announced that it was idling five plants in the United States and Canada last week, there was shock in two American cities.

One was Warren, Ohio, where G.M. builds the Chevrolet Cruze at its Lordstown assembly plant. Folks in the industrial heartland are no strangers to this kind of betrayal. But after forking over $60 million in state and local incentives in the last decade, they believed they had done enough to get G.M. to maintain Lordstown, which has built 16.3 million vehicles since 1966.

The other shocked town was Washington, D.C., where President Trump learned that thousands of the manufacturing jobs he had promised — a promise that had helped him win the state of Ohio in 2016 — were being killed. Mr. Trump reminded G.M.’s chief executive, Mary Barra, that the federal government had propped up the company to the tune of $50 billion in loans and other assistance during the Great Recession. He told her to shut a factory in China and move the work to Ohio.

The New York Times

The Secret to the Auto Industry’s Success

The longer the good times last in the auto industry, the messier the crash.

U.S. light-vehicle sales likely totaled 17.3 million last year, unexpectedly topping 2017’s result and just below the 2016 record of 17.5 million, according to a late-December estimate by data provider Edmunds. Final sales numbers for 2018 are due Thursday. Profits in Detroit have also held up surprisingly well, given the cost pressures unleashed by President Trump’s tariffs on steel and aluminum imports.

The industry’s secret: New vehicle prices are breaking records, averaging almost $38,000 in November, according to Kelley Blue Book. Consumers aren’t buying more new vehicles, but thanks in part to a bubbly secondhand market, the ones they are buying are bigger, more expensive and more profitable for auto makers.

The Wall Street Journal

Critics are once again predicting the US auto industry is going to tank, but they should be careful of what they wish for.

Automakers reported December and full-year auto sales for the US on Thursday, and they were robust. The total for 2018 was 17.3 million new vehicles, slightly beating 2017’s tally and marking the fourth straight year that automakers have notched a result above 17 million.

The news was almost immediately followed by a quick round of commentary about how the good times are finallyover. Bloomberg’s Don’t Be Fooled: The US Auto Sales Party Is Coming to an End” headline was emblematic. Everything from excessive reliance on “fleet” sales to rental-car companies to rising interest rates to the ebbing effects of the Trump tax cut were cited as reasons for the market to slide in 2019.

Business Insider

Lt. Gov. Randy McNally: Tennessee poised to lead the nation | Opinion

When the 111th General Assembly begins on Tuesday, much will be new. We will inaugurate Bill Lee as our governor. Glen Casada will be elected speaker of the House. Over 30 members of the General Assembly will be new.

Change can be intimidating and even chaotic. But it can also be energizing and refreshing. New leaders bring fresh perspectives and ideas. It will be an exciting opportunity for renewal as Republicans continue to build on their success.

The Tennessean

How Will the Shutdown End?

This week, the third shutdown of the federal government in 2018 became the first government shutdown of 2019. For more than two weeks now, a partial shutdown has dragged on following President Donald Trump’s refusal to sign a spending bill passed by both a majority in the lame-duck Republican House and unanimously in the GOP-held Senate.

The reason for Trump’s intransigence is simple: He wants any spending bill to include $5 billion to pay for a wall on the Mexico-U.S. border—the central policy goal of his 2016 campaign and which he consistently promised that Mexico would pay for.

Politico.com

BUILDING A BETTER FUTURE FOR RURAL RESIDENTS STARTS WITH HIGH-SPEED INTERNET

In 1935, only 11% of America’s rural homes had electricity. That low figure prompted President Franklin D. Roosevelt (FDR) to create the Rural Electrification Administration, which would serve as a loan agency to cooperatives in an effort to provide electricity to rural America.

“FDR spoke of rural electrification and what it meant to people in those communities. He said it was ‘a modern necessity of life – not a luxury. That necessity ought to be found in every village, in every house, and on every farm in every part of the United States,’ ” says Secretary of Agriculture Sonny Perdue.

Agriculture.com

In An Opportunity Zone, Is The Tail Wagging The Dog Or The Dog Wagging The Tail?

At the beginning of the 1998 film Wag the Dog, the opening caption says: “Why does a dog wag its tail? Because a dog is smarter than its tail. If the tail were smarter, it would wag the dog.” When I was watching this movie recently, it made me think of Opportunity Zones (OZs) and a question I have: Is the dog wagging its tail, or is the tail wagging the dog when it comes to Opportunity Zone Fund investment opportunities? Are the tax benefits being sold as a great opportunity, or is the real estate investment opportunity within a zone being sold?

So far, except for maybe two proposals, I have seen the tax benefits being sold with no mention of specifics on any of the projects or the locations of where they want to invest. It is this type of marketing that will get many investors into trouble, primarily because there are no requirements as to who can start an Opportunity Zone Fund, meaning “no real estate experience is required!”

Forbes

How Investors Can Ensure Their Opportunity Zone Investment Is A Smart Deal

While the term “Opportunity Zones” may sound familiar now, it’s a relatively new term, and plenty of investors still know little about what they are and how to use them to their benefit. Whether you’re considering your first property investment or your thousandth, it’s smart to understand what they are, and whether this is the right program for you.

Opportunity Zones were created as a result of the 2017 Tax Cuts and Jobs Act, and are now in all 50 states as well as Puerto Rico, American Samoa, the Northern Mariana Islands, the Virgin Islands and Guam. By definition, they are distressed areas that now enjoy a federal tax incentive designed to promote long-term investment in those areas that require help rebuilding. Tenants have moved out; buildings and areas are in disrepair. These blighted areas are generally not attractive to commercial institutional investors.

Forbes