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global trade has made the USA incredibly rich but
what is good for America isn't always good for
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Americans globalization has let big businesses
pull revenue from Global markets it's giving
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consumers cheap products subsidized by poverty
wages and investors access to foreign capital from
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around the world the best part is all we had to
give up in return was stable productive jobs that
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previously defined the American middle class for
some reason some people have decided this wasn't
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actually a very good deal and that workers need
a way to reach gained some of the power they once
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had it is genuinely a very reasonable idea that
has United people on both sides of the political
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aisle which is why it's kind of a shame that we
are doing it in the stupidest way possible I'll
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be announcing the tariffs on Canada and Mexico
for a number of reasons number one is the people
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that have poured into our country so horribly
and so much number two are the drugs fentol and
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everything else that have come into the country
and number three are the massive subsidies that
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we're giving to Canada and to Mexico go in the
form of deficits Canada will be responding to
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the US trade action with 25% tariffs against $155
billion worth of American Goods late last week
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president Donald Trump formally announced plans
to plac Broad 25% tariffs on Mexico and Canada
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and increased tariffs on China by an additional
10% despite being one of the central focuses of
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his campaign this somehow still came as a shock
because most people really were not expecting such
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a large change to be enacted so quickly just
2 days later though an agreement was met with
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both Canada and Mexico to delay these tariffs in
exchange for additional border security assistance
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this might seem a bit weird to you because trade
policy and border security are normally two
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separate issues but according to the initial White
House Press release announcing these tariffs they
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were actually primarily just negotiating tactic to
get Canada and Mexico to cooperate on these issues
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so if military personnel forming on our border
is all we wanted its mission accomplished now
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no matter what side of the aisle you fall on and
even if these tariffs weren't explicitly meant to
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protect American jobs it has started discussions
about who really wins from fighting a trade War
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if you have been paying any attention to this
whole circus you probably have been told a dozen
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times that tariffs are just attacks paid by local
businesses on imported goods which will normally
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just get passed directly along to the consumer
that means they are really just another invisible
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tax on average American consumers and therefore
this whole thing is just a bit dumb now that's not
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wrong it's true that if these tariffs or some
other version of them do eventually go into
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full effect you are going to pay more for
most products and therefore this whole thing
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can just be dismissed as the orange man being
Reckless with the global economy but hot take
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alert there actually is more to this discussion
even if they don't realize it anything that both
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Bernie Sanders and Donald Trump can agree on is
probably worth looking into a bit more deeply
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and if they can resolve three big problems it
could be a step in the right direction for most
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working Americans even if it's not done for the
right reasons the first big problem is putting
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the genie back in the bottle America's biggest
source of imports is now Mexico a combination
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of tariffs on China and the investments into
production facilities down South has just given
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them the lead and they are highly dependent on it
according to the global data firm cppi and visuals
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from the organization of economic complexity we
make up 76% of Mexico's exports which are now
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mostly cars car parts and basic Electronics
according to glass door Ford Motor Company
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employees in Mexico City are earning between the
equivalent of $10,000 for basic Line work and
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$25,000 a year for highly technical production
roles combined with less strict environmental
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safety and business regulations it's hard for a
unionized plant in America to compete with that
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now labor costs are only a small part of the
total cost of assembling a car you also have
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to add the cost of materials and components the
shipping cost and the am expenses of researching
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designing and tooling for a particular model
so this means even small tariffs could make
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it cheaper to make big items like cars here in
America which would give American workers more
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negotiating power over pay and benefits but
it needs more time or else it's just going to
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hurt everybody a lot of our imports from Mexico
are components that our workers need to do their
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jobs a wiring harness is a bunch of cables that
connect all the electronic features in your car
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together they are an integral part of assembling
modern Automobiles and American factories import
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almost all of them from Mexico without this
component local manufacturers can't make cars
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so they are just going to accept a tariff and pass
the additional cost along to Consumers without
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actually making any additional jobs this can also
let other cars which are not made in America raise
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their own prices because the competitors will be
forced to do the same thing the thing is America
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can make these wiring harnesses here at home and
doing so will create good union jobs for lots of
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people but companies can't build a new Factory in
30 days it takes time now this is just one example
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of one product but similar problems are playing
out in every important dependent business across
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the country right now big immediate changes like
this don't really help anybody now that's just
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the first reason and it's only a small part in the
bigger problem that workers businesses investors
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and trade Partners just don't know what the is
coming next so it's time to learn how many works
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to see who is going to win history's dumbest trade
War this week's video is sponsored by brilliant
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idea of winning a trade War really comes down
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to who is actually going to win globalization is
an unbelievably complicated issue with thousands
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of different variables that have all made the
world what it is today the dominance of the US
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dollar cultural exchange digital connectivity and
the end of the Cold War cross border intellectual
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property rights foreign aid debt markets and big
International organizations have all shaped our
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lives but it's a lot easier to focus on the much
more tangible action of global trade because we
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can physically see junk get loaded into shipping
containers and S into our ports without accounting
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for these other variables though even the most
well thought out tariffs in history aren't
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going to do very much to reverse the winners and
losers of globalization so who are they exactly
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several major economies have been able to develop
extremely quickly by focusing on producing exports
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for the global market the biggest consumer in that
market by far being America large multinational
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companies have also benefited from being able
to produce their products more cheaply and sell
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them in multiple markets across the world and
wealthy asset owners have also won because they
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got to finance this industrial boom move their
Capital freely around the world and benefit from
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foreign investors pumping up their existing asset
markets the losers have largely been the groups
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that weren't as globally mobile so instead of
capitalizing on new Global markets they had
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to compete with them smaller local businesses and
of course Above All Else unskilled or semiskilled
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workers you probably already have an idea of the
people that have been left behind by globalization
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small town communities in the r felt that don't
have as many job opportunities as major employers
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went out of business or moved jobs elsewhere
now I am going to implement a zero tolerance
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to Zoomer commment policy but as someone who grew
up in and went to college in Ohio the expectation
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was that anybody that completed their degree
could immediately move out of the state to one of
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the big cities that had become part of the global
economy rather than just the American economy now
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obviously I am now just a worthless influencer so
no major loss there but by losing other educated
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young workers these local areas are falling even
further behind and the big Global cities that
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people need to move to aren't exactly winning out
of this either and if they Remain the only places
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where young workers from across America and the
rest of the world can get ahead then it's going
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to be incredibly hard to fix it the reason why
a finance bro in New York or a tech worker in
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California can be paid enough to compensate for
the spiralling cost is that they are providing
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a service that can be leveraged across the global
market whereas a factory worker is producing Goods
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that are competing with the global market so if we
reverse course on this whole free trade business
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it should reverse course on the winners and losers
right well no the strangest group of winners and
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losers has been the American Consumer one of the
reasons why we can get away with being so reckless
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on trade is that everybody wants what America has
and what America has is consumers there are a lot
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of us even our basic jobs pay well compared to
other countries and we love to buy [ __ ] it
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might not feel like it but a lot of the products
you buy are a lot cheaper than they used to be
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easy to transport appliances like fridges TVs
personal electronics and computers have all become
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significantly cheaper over time part of this can
be explained by advances and Technology but a lot
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of this is down to Big Global Supply chains that
have been hyper optimized to get consumer junk
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to your doorstep as cheaply and conveniently
as possible the most extreme incarnation of
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this process has been online retailers like wish
Sheen and Teemu that directly ship consumer junk
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that almost seems too cheap to be possible
because a lot of the time it is the way that
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these companies have been able to effectively get
these Goods into the American Market is by taking
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advantage of a small loophole in our trade policy
the Dom Minimus value exemption let shipment into
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the US avoid duties taxes and tariffs as long as
they are worth less than $800 the intention of the
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law was to let people mail stuff to friends
and family without having to deal with the
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paperwork and expenses of tariffs typically paid
by International businesses but good intentions
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didn't stop these companies from building their
businesses around taking advantage of this simple
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carve out normally imports from Big manufacturing
Nations like China are all shipped together as one
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big order that is then moved to a warehouse and
distributed here by American retailers but by
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shipping everything one by one these companies can
get their orders under the $800 limit and avoid
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paying the taxes they really should be it's much
much less cost effective to ship things like this
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but the savings on import duties more than make up
for it according to US Customs they process over
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4 million of these packages every single day with
more than half of them originating from China so
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it's safe to say this exemption has not really
been used as intended if you don't value your
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time at all go to Teemo and try to find a product
worth more than $800 you probably won't be able to
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do it because their business model falls apart if
they have to properly compete with retailers like
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Amazon now this whole game could be considered
a win for consumers if you consider a two pack
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of bluetooth speakers in the shape of an astronaut
for $20 a win but most consumers can only consume
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because they are also workers and for most people
little consumer wins like this are not worth their
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worker losses they come with you probably didn't
hear as much about it but in between everything
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else that was going on this exemption was
also stopped and a lot of small businesses
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lost their [ __ ] mind this was a blow to the
Chinese retailers whose whole business model
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doesn't really work without this loophole and drop
shippers who couldn't get their products in the
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same way but for the average American worker this
is a good thing thing if slowing down a million
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packages of consumer junk every day is the price
we need to pay for more jobs in America then it's
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absolutely worth it the only question is will it
American companies like Walmart and Amazon will
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benefit if this rule is upheld and yeah obviously
they are far from perfect but they do at least
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employ more local workers than Temu longterm
moving in the direction of fair trade rather
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than totally free trade means we can regain local
jobs and capabilities but it will be a long-term
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process one of the most important details that
people Overlook when arguing for or against
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trade protections is that most people these
days don't actually work in jobs making stuff
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most of our economy is in the service sector and
thanks to communication Technologies things like
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entry-level Administration customer service and
it have been outsourced just as fast as the people
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who make stuff that can be physically shipped
across the world if our definition of winning
00:12:51
is getting American jobs back there are more
effective strategies as I was writing this the US
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Postal Service started processing to Minimus pack
packages again and by the time you are watching
00:13:01
this that could have changed or there could be
totally new policies and that's the final and
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most serious problem to win any War there needs to
be a coherent strategy businesses right now don't
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know what is going to happen next which is making
it really hard to react accordingly if it's made
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clear which Industries are going to be targeted
for onshoring and those Industries can provide
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good jobs then businesses will either Supply them
or someone else will blanket rules that change
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day by day means everybody is just going to sit
back and wait which means hiring and investment
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freezes which doesn't really help anybody now the
bonus problem with this whole situation is that we
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have become incredibly dependent on just a tiny
handful of companies and no matter which way we
00:13:42
have to go from here they have a plan to make sure
they win even if everybody else loses go and watch
00:13:47
this video on how we let that happen and make sure
to subscribe to keep on learning how money works
