More Economics

There are a lot of people in the world and to a company everyone represents some sort of customer, either a current one, or a potential one.

Customers come in many different categories and some have money to spend and others do not.

Customers in the United States generally have had more money to spend than customers in most other countries, although not as much more as they once did.

Businesses ultimately make money by selling their product and if you make it hard to reach the people who live outside this country they will be at a disadvantage.

If you consider our relationship with China you will note that they sell much more here than we sell there despite the fact that they have a population that exceeds ours by a factor of three.

Its not that hard to explain since despite their population advantage we have a much higher per capita income level, so we can buy imported items and to a large extent they can buy less.

At least at this time.

China has a growing economy as do we, but they clearly have more growth potential than we do as they create more higher paying jobs (higher paying for them),  This means that the potential customers in China are turning into real customers at a faster and faster pace.

The United States is a much more mature economy so any increase in consumption has to be tied to increases in income.

To engage in a trade war with China at this time provides other countries, say European ones a great opportunity to exploit that growing market and disadvantages us.

Will a certain percentage of goods we import from China start being produced here?  Well unless we can find a different lower cost producer some will, but they will cost more, reducing our buying power.

Will the huge potential Chinese consumer market be filled with American goods?  Well it not as likely as it was before we started this trade war.

We all will get to pay more and will help our competitors exploit the Chinese market.

Of course we already conceded much of Asia by withdrawing from the Trans Pacific Trade Pact.

Good economics?  Not really.

Future Markets

We live in a world that is in most respects much smaller than it was say a hundred years ago.

Of course it is effectively the same size but between physical and virtual movement we have become neighbors to people who live in what used to be remote locations.

This is a wonderful thing in almost all respects as we can break down barriers that separated us and led to conflicts, wars and economic distress.

This globalization however increases the level of competition for everybody.

Competition drives out the weak performers and allows the most efficient to survive, assuming of course that it is a fair competition.

In some cases of course, those who lose out are going to be unhappy.

The answer of course is to become more competitive but that can be difficult and instead we see a desire to restrict the competition.

However once the box has been opened it isn't easily closed as we see rising incomes in undeveloped countries making them the markets of the future.

America is a big market but it is not the only one and certainly not the fastest growing one.

Engaging in a trade war is going to block our industries from the big growth markets while increasing certain prices here.

The global market will survive with America playing a smaller role and America will survive, but the pain will be worse in America with future consequences as we lose markets to eager competitors.

We see Harley Davidson moving production to keep its European opportunities.

The past is gone but the future is coming, and we need our products capturing future opportunities if we want to create jobs and opportunities.

Tariffs don't work.