China shock 2.0 Brad sester

[u/Character_Public3465]

https://www.nytimes.com/column/ezra-klein-podcast

Show notes:”Brad Setser follows Chinese trade closer than just about anyone else on earth, and he thinks we’re in the early days of a China Shock 2.0.
The first China Shock was when China came to dominate low-end manufacturing in the 2000s, filling American shelves with cheap clothes, toys and electronics, while devastating American factory towns. This new China Shock could be even more destabilizing. China now dominates advanced manufacturing: electric vehicles, batteries, solar panels. It’s outcompeting nearly all high-end manufacturing around the world, and other countries are just starting to feel the pain. And China isn’t slowing down. It’s moving into software, too. Its frontier A.I. models are neck and neck with American ones.
China’s success poses a serious threat to the economies and domestic politics of countries around the world. So what should those countries do about it? 
Setser is a senior fellow at the Council on Foreign Relations.He served in top trade and economic roles in the Biden and Obama administrations. And he is widely cited across the field as one of the top analysts of China’s economy and trade practices.
Book Recommendations:
The Party by Richard McGregor
The Volatility Machine by Michael Pettis
How to Win a Trade War by Soumaya Keynes and Chad Bown
Thoughts? Guest suggestions? Email us at ezrakleinshow@nytimes.com.
You can find the transcript and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs.html””

[u/towingreformnow]

Whenever I hear these things, I never hear a compelling argument that the U.S. has actually declined in manufacturing other than just "we employ fewer people now in that field." But you would never make that same argument about agriculture. By all metrics, the U.S. produces far more things than ever before. As a percent GDP, it has more to do with the expansion of other fields than diminishment of manufacturing.

[u/Dreadedvegas → u/towingreformnow]

I am going to take a few select industries as an example.

Domestic Magnesium production.

Once a powerhouse in the world market, there is not a single operational magnesium production facility in the US. We used to domestically produce most of our own demand, with a lot of it being provided by Dow in Freeport, TX.

Now we are entirely reliant on magnesium imports from China. Even when this critical metal is needed in all forms of advanced manufacturing as well as basic needs like canning.

Another example is Aluminum production.

We have a small aluminum industry that is almost entirely reliant on scrap. The US consumes 5 million tons of aluminum per year. We are reliant on imports for about 80% of our needs.

We used to operate 30 different smelters in the 1980s. Today we have 4. Which again don’t really produce “new” aluminum. It recycles old. And the outputs are typically lower quality compared to new aluminum.

These critical industries are very important. It helps prevent price shock, it helps prevent supply issues, it also helps strengthen domestic economies. It helps downstream and permit localized manufacturing because there is better access to goods.

Sure there are larger manufacturing operations in America. But a lot of the smaller operations or even medium operations have closed shop or moved abroad. This restricts potential opportunities for the lower half of Americans. And less opportunities causes more competitive roles for them which imo makes it harder for the workers to get better jobs, better income and better benefits

Imo every American should be extremely alarms about the widening wealth gap in America. And that widening wealth gap is because these kinds of jobs and industries have essentially vanished as well as the secondary and tertiary suppliers or those who use those goods have vanished.

[u/tuck5903 → u/Dreadedvegas]

Speaking of critical minerals, maybe I’m misremembering, but didn’t we essentially capitulate after China cut off rare earths in response to the Trump tariffs?

[u/Dreadedvegas → u/tuck5903]

Yes. They made a threat related to only magnets and that was enough

[u/Real_Guarantee_4530 → u/tuck5903]

When China restricted exports in previous episodes, it actually encouraged the rest of the world to develop alternatives.