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EKS, we've "known" each other a long time now... let's just agree to disagree -- neither of us will change our minds, looks like, so why continue discussing something we'll never resolve until it is far back in hindsight -- if I'm still alive.
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Many of the supply chains are moving from China to Mexico, which we could say is "America-adjacent". Most maquilladores are located within 3 miles south of the American border. We can't ship our homes, restaurants, and hotels to Mexicali, so the gardeners, housekeepers, and chefs working illegally at our homes restaurants and Trump resorts come to America.
The fact that wages just 3 miles south of the US border are 53% less than the wages in rural China, explains why supply chains began to move from China to Mexico six years before Donald Trump was elected. - fortune.com
Also for a lot of products, the faster turn-around time from Mexico is really important compared with 5 week container-ship time from China.
Wages in urban China are now 20 Yuan per hour, ($2.89 per hour), while even in Liaoning, rural noutheastern China the minimum hourly wage is 10.50 Yuan / $1.52 per hour - or (China $18.24 for a 12 hour day). statista.com .
In my opinion the primary problem we need to solve with China is enforcement of US and European intellectual property, and the disclosure of communist party subsidies to China's various businesses - so we can set appropriate countervailing tariffs. The Commerce Department's "Listed Entities" is a lot more effective than 25% tariffs, but even applying both I assume China won't agree.
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are you aware us soybeans are being sold to the bean crushers in brazil, and the us beans have more protein in them than the brazilian beans? that is because the soil in the soy bean growing areas of brazil is not as good as the us soil. the crushed beans from the us are being shipped to china. soybean volume for feed for pigs in china is way down anyway, due to the devastating african swine fever that is reducing the pigs by 25 to 35% (maybe more). i would say if things don't get better in the pork area in china(and they won't), the chinese, who have to have their pork will cause the government to buy a lot of us pork.
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Agricultural products from the US land raw materials like steel from China are pretty fungible.
The immense firms Cargill and Louis Dreyfus buy and process soybeans in both America and Brazil, so it's inevitable American soybeans continue to flow to China.
The diversion just means more costs, and thus lower prices for US farmers.
The largest American pork grower and processor, Smithfield Foods, based in Smithfield, Virginia was bought by WH Group of China in 2013 for $5 billion and has huge operations in Mexico as well.
If Smithfield can't sell US pork in China due to tariffs, they will be selling them the pork from their Mexican farms, along with Mexico's largest pork producer, Granjas Carroll. - reuters.com
Trump eliminated steel and aluminum tariffs on Canada provided they institute tracing to avoid these metals from China from being sold in the US as Canadian, but like soybeans and pork, it won't be possible to completeley eliminate this.
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My guess is that manufacturing (employee) wages will be a smaller part of the cost of production in the future so it will not be a significant factor in the value chain (as it it now or in the past).
The value proposition decision will be to make those products as close to the end consumer as possible (w/i miles not in other Countries) as transportation/logistic expenses will be the largest component in the value chain. It is critical we invest now in our human resources as the new labor force will need to know how to build/manage and maintain these next generation manufacturing technologies.
As an example, look at oil exploration/drilling and or mining where more technology is used to find and extract the resource. I have followed many mining companies and they are investing large amounts of capital in automation, specifically smart autonomous mining equipment and it's working. Driverless Trucks/Cars and delivery vehicles are all in stages of development. Kroger has test sites (in AZ) for autonomous delivery of groceries and prepared meals.
The big political 'bomb' that must be addressed are all the 'unfunded' pension liabilities at the Federal, State and local levels and how that will be financed in the future. Interactive map of pension liability by state.. (Looks like Alaska, California and Illinois the worst at $25k per person unfunded. Tennessee appears to be the lowest by far (actually not a surprise to me but the gap with the rest of the pack was)
Unless pension funds around the nation continue to earn 7% or more per year on their investments, it’s likely that taxpayers will be on the hook for trillions of dollars of promises to government unions. These promises have been made by politicians past and present, resulting in pressure to increase taxes and cut government services. (Negative interest rates will just make the problem worse)
I do agree w/ your view on enforcement of intellectual property for China but also for every country/business/individual that does not license and/or follow the copyright rules.
Tariffs are but one way to enforce compliance. Even my example of local recycling where we send containers full of our garbage to China and get boxes in return really s/d be processed locally and/or by the manufacturer providing in-store collection. Local/State and Federal policies could promote better recycling through taxes and/or manufacturing guidelines.
We live in interesting times and change is good.
FWIW, I do not agree w/ a Carbon Tax but do like the general discussion (by all groups) on solutions to use our resources more efficiently.
Have you noticed the big investments that Exxon has made in Solar. So the market forces are working.
I continue to look for investment opportunities in companies that are developing (profitable) solutions to many of these social/environmental manufacturing problems. But sometimes you need broad action through Executive Order(s) to effect change.
Good Investing
EKS
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Yes, my 1st cousin grows 1,600 acres of beans and 1,200 acres of corn in SW Ohio. He’s losing his ass in this tariff tit-for-tat and gets a fraction for his beans of what he got 2-3 years ago. Weather in Ohio didn’t help. He is not winning in this trade war.
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The trade war is not the only reason grain prices are down. They were headed down long before Trump was elected. . Brazil, for example, has been producing more and more soybeans and there has been an oversupply.
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Are you saying the tariffs have had no effect beyond what was trending for other issues? My cousin said prices had been squeezing him, but the tariffs have slashed his income a lot more and a lot more quickly. The bailouts they got covered about 15% of his losses last year my cousin tells me and this year is looking worse. Like a lot of macro-economics, things are way more complicated in the real world.
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The woman, Zhang Yin, who created "America Chung Nam" and China's "Nine Dragons Paper" recycling industry while her husband was a student in the US became wealthy while eliminating a huge part of our trash problem. en.wikipedia.org Very little of this waste ever came back to industrialized nations as cardboard boxes because the US and Japanese exporters would never have accepted this low-quality cardboard. These boxes enclosed lower-value products consumed in China or exported to Africa and other markets.
The paper and plastics contaminated with food and other substances created massive environmental pollution problems in China, so as of January China no longer accepts paper waste with any contamination.
This has left the western world with huge trash problem, with paper and plastics which were formerly sent to China now being sent to landfill.
Only a few very determined cities like Los Angeles are employing hand-sorters to separate clean paper from contaminated paper - and sorting shredding and washing plastic waste so it can be sent to China. This labor intensive process costs far more than the revenues received from the sale of the used paper and plastic.
No US paper maker wants this mixed clean paper waste as even the bleaching creates environmental problems. When you buy "recycled paper" or "paper with recycled content" the paper manufacturer is referring to the trimmed "scraps" from their paper being sent back into the slurry before it leaves their factory.
Even the more demanding label "post-consumer recycled paper" is not what you think it is. Because the "consumer" in this case is the box or paper cup manufacturer who trucks their scraps back to the paper factory.
I have a fraternity brother who founded a company which buys clean plastic and paper and adds more new plastic to extrude into that odd "plastic lumber" embossed with a wood design used in playground equipment and bus benches. It 's a profitable but marginal business and about the only potential American user for our mountains of clean waste.
China's major cities have "recycling containers" through-out their cities to give them that trendy "green look" of a modern world-class city and none of this material is recycled but all of this waste is burned or buried.
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