global trade has made the USA incredibly rich but what is good for America isn't always good for Americans globalization has let big businesses pull revenue from Global markets it's giving consumers cheap products subsidized by poverty wages and investors access to foreign capital from around the world the best part is all we had to give up in return was stable productive jobs that previously defined the American middle class for some reason some people have decided this wasn't actually a very good deal and that workers need a way to reach gained some of the power they once
had it is genuinely a very reasonable idea that has United people on both sides of the political aisle which is why it's kind of a shame that we are doing it in the stupidest way possible I'll be announcing the tariffs on Canada and Mexico for a number of reasons number one is the people that have poured into our country so horribly and so much number two are the drugs fentol and everything else that have come into the country and number three are the massive subsidies that we're giving to Canada and to Mexico go in the
form of deficits Canada will be responding to the US trade action with 25% tariffs against $155 billion worth of American Goods late last week president Donald Trump formally announced plans to plac Broad 25% tariffs on Mexico and Canada and increased tariffs on China by an additional 10% despite being one of the central focuses of his campaign this somehow still came as a shock because most people really were not expecting such a large change to be enacted so quickly just 2 days later though an agreement was met with both Canada and Mexico to delay these tariffs
in exchange for additional border security assistance this might seem a bit weird to you because trade policy and border security are normally two separate issues but according to the initial White House Press release announcing these tariffs they were actually primarily just negotiating tactic to get Canada and Mexico to cooperate on these issues so if military personnel forming on our border is all we wanted its mission accomplished now no matter what side of the aisle you fall on and even if these tariffs weren't explicitly meant to protect American jobs it has started discussions about who really
wins from fighting a trade War if you have been paying any attention to this whole circus you probably have been told a dozen times that tariffs are just attacks paid by local businesses on imported goods which will normally just get passed directly along to the consumer that means they are really just another invisible tax on average American consumers and therefore this whole thing is just a bit dumb now that's not wrong it's true that if these tariffs or some other version of them do eventually go into full effect you are going to pay more for
most products and therefore this whole thing can just be dismissed as the orange man being Reckless with the global economy but hot take alert there actually is more to this discussion even if they don't realize it anything that both Bernie Sanders and Donald Trump can agree on is probably worth looking into a bit more deeply and if they can resolve three big problems it could be a step in the right direction for most working Americans even if it's not done for the right reasons the first big problem is putting the genie back in the bottle
America's biggest source of imports is now Mexico a combination of tariffs on China and the investments into production facilities down South has just given them the lead and they are highly dependent on it according to the global data firm cppi and visuals from the organization of economic complexity we make up 76% of Mexico's exports which are now mostly cars car parts and basic Electronics according to glass door Ford Motor Company employees in Mexico City are earning between the equivalent of $10,000 for basic Line work and $25,000 a year for highly technical production roles combined with
less strict environmental safety and business regulations it's hard for a unionized plant in America to compete with that now labor costs are only a small part of the total cost of assembling a car you also have to add the cost of materials and components the shipping cost and the am expenses of researching designing and tooling for a particular model so this means even small tariffs could make it cheaper to make big items like cars here in America which would give American workers more negotiating power over pay and benefits but it needs more time or else
it's just going to hurt everybody a lot of our imports from Mexico are components that our workers need to do their jobs a wiring harness is a bunch of cables that connect all the electronic features in your car together they are an integral part of assembling modern Automobiles and American factories import almost all of them from Mexico without this component local manufacturers can't make cars so they are just going to accept a tariff and pass the additional cost along to Consumers without actually making any additional jobs this can also let other cars which are not
made in America raise their own prices because the competitors will be forced to do the same thing the thing is America can make these wiring harnesses here at home and doing so will create good union jobs for lots of people but companies can't build a new Factory in 30 days it takes time now this is just one example of one product but similar problems are playing out in every important dependent business across the country right now big immediate changes like this don't really help anybody now that's just the first reason and it's only a small
part in the bigger problem that workers businesses investors and trade Partners just don't know what the is coming next so it's time to learn how many works to see who is going to win history's dumbest trade War this week's video is sponsored by brilliant brilliant is an Interactive Learning platform designed to help you truly understand complex topics in math data science programming and even AI instead of passive learning Brilliance lessons are all about getting Hands-On and solving real problems making learning six times more effective than just watching videos each course is built by experts from
Top institutions like MIT and Google so you know you're learning from the best their data science courses for instance use real world data sets from platforms like Airbnb and Spotify giving you practical insights while you learn I recently took Brilliance creative coding course and it's been a game changer for building problem solving skills it's super interactive and each lesson builds directly on the last so you feel your progress as you go brilliant's also perfect for fitting learning into your day whether you're on your computer or just have a few minutes with your phone try everything
brilliant has to offer for free for 30 days by visiting brilliant.org howmoneyworks and if you like it you'll also get 20% off an annual premium subscription the idea of winning a trade War really comes down to who is actually going to win globalization is an unbelievably complicated issue with thousands of different variables that have all made the world what it is today the dominance of the US dollar cultural exchange digital connectivity and the end of the Cold War cross border intellectual property rights foreign aid debt markets and big International organizations have all shaped our lives
but it's a lot easier to focus on the much more tangible action of global trade because we can physically see junk get loaded into shipping containers and S into our ports without accounting for these other variables though even the most well thought out tariffs in history aren't going to do very much to reverse the winners and losers of globalization so who are they exactly several major economies have been able to develop extremely quickly by focusing on producing exports for the global market the biggest consumer in that market by far being America large multinational companies have
also benefited from being able to produce their products more cheaply and sell them in multiple markets across the world and wealthy asset owners have also won because they got to finance this industrial boom move their Capital freely around the world and benefit from foreign investors pumping up their existing asset markets the losers have largely been the groups that weren't as globally mobile so instead of capitalizing on new Global markets they had to compete with them smaller local businesses and of course Above All Else unskilled or semiskilled workers you probably already have an idea of the
people that have been left behind by globalization small town communities in the r felt that don't have as many job opportunities as major employers went out of business or moved jobs elsewhere now I am going to implement a zero tolerance to Zoomer commment policy but as someone who grew up in and went to college in Ohio the expectation was that anybody that completed their degree could immediately move out of the state to one of the big cities that had become part of the global economy rather than just the American economy now obviously I am now
just a worthless influencer so no major loss there but by losing other educated young workers these local areas are falling even further behind and the big Global cities that people need to move to aren't exactly winning out of this either and if they Remain the only places where young workers from across America and the rest of the world can get ahead then it's going to be incredibly hard to fix it the reason why a finance bro in New York or a tech worker in California can be paid enough to compensate for the spiralling cost is
that they are providing a service that can be leveraged across the global market whereas a factory worker is producing Goods that are competing with the global market so if we reverse course on this whole free trade business it should reverse course on the winners and losers right well no the strangest group of winners and losers has been the American Consumer one of the reasons why we can get away with being so reckless on trade is that everybody wants what America has and what America has is consumers there are a lot of us even our basic
jobs pay well compared to other countries and we love to buy [ __ ] it might not feel like it but a lot of the products you buy are a lot cheaper than they used to be easy to transport appliances like fridges TVs personal electronics and computers have all become significantly cheaper over time part of this can be explained by advances and Technology but a lot of this is down to Big Global Supply chains that have been hyper optimized to get consumer junk to your doorstep as cheaply and conveniently as possible the most extreme incarnation
of this process has been online retailers like wish Sheen and Teemu that directly ship consumer junk that almost seems too cheap to be possible because a lot of the time it is the way that these companies have been able to effectively get these Goods into the American Market is by taking advantage of a small loophole in our trade policy the Dom Minimus value exemption let shipment into the US avoid duties taxes and tariffs as long as they are worth less than $800 the intention of the law was to let people mail stuff to friends and
family without having to deal with the paperwork and expenses of tariffs typically paid by International businesses but good intentions didn't stop these companies from building their businesses around taking advantage of this simple carve out normally imports from Big manufacturing Nations like China are all shipped together as one big order that is then moved to a warehouse and distributed here by American retailers but by shipping everything one by one these companies can get their orders under the $800 limit and avoid paying the taxes they really should be it's much much less cost effective to ship things
like this but the savings on import duties more than make up for it according to US Customs they process over 4 million of these packages every single day with more than half of them originating from China so it's safe to say this exemption has not really been used as intended if you don't value your time at all go to Teemo and try to find a product worth more than $800 you probably won't be able to do it because their business model falls apart if they have to properly compete with retailers like Amazon now this whole
game could be considered a win for consumers if you consider a two pack of bluetooth speakers in the shape of an astronaut for $20 a win but most consumers can only consume because they are also workers and for most people little consumer wins like this are not worth their worker losses they come with you probably didn't hear as much about it but in between everything else that was going on this exemption was also stopped and a lot of small businesses lost their [ __ ] mind this was a blow to the Chinese retailers whose whole
business model doesn't really work without this loophole and drop shippers who couldn't get their products in the same way but for the average American worker this is a good thing thing if slowing down a million packages of consumer junk every day is the price we need to pay for more jobs in America then it's absolutely worth it the only question is will it American companies like Walmart and Amazon will benefit if this rule is upheld and yeah obviously they are far from perfect but they do at least employ more local workers than Temu longterm moving
in the direction of fair trade rather than totally free trade means we can regain local jobs and capabilities but it will be a long-term process one of the most important details that people Overlook when arguing for or against trade protections is that most people these days don't actually work in jobs making stuff most of our economy is in the service sector and thanks to communication Technologies things like entry-level Administration customer service and it have been outsourced just as fast as the people who make stuff that can be physically shipped across the world if our definition
of winning is getting American jobs back there are more effective strategies as I was writing this the US Postal Service started processing to Minimus pack packages again and by the time you are watching this that could have changed or there could be totally new policies and that's the final and most serious problem to win any War there needs to be a coherent strategy businesses right now don't know what is going to happen next which is making it really hard to react accordingly if it's made clear which Industries are going to be targeted for onshoring and
those Industries can provide good jobs then businesses will either Supply them or someone else will blanket rules that change day by day means everybody is just going to sit back and wait which means hiring and investment freezes which doesn't really help anybody now the bonus problem with this whole situation is that we have become incredibly dependent on just a tiny handful of companies and no matter which way we have to go from here they have a plan to make sure they win even if everybody else loses go and watch this video on how we let
that happen and make sure to subscribe to keep on learning how money works
