Subject: Re: Trade deal with China reached
But that has nothing to do with trade policy.

Ah, but it does. The more closely integrated the Chinese economy is with the global economy, the greater the pain that comes in response to military action. When China was more economically isolated, the primary consequence they would face for military adventurism would be a military response. Now, if they were to roll into Taiwan (for example), the response from the rest of the world would not be limited to a military response, but a massive blow to their economy as well.

That's right, we won't. The kind of truck-them-in-from-the-vil and line them up elbow to elbow manufacturing scheme that China employs won't work here. What we would do is handle it via automation and efficiency.

But there's a lot of stuff that can't be handled that way. Or rather, the ordinary application of free market forces would not have it handled that way. The lower end of the value chain isn't going to be located in the U.S., because it is more efficiently done with human labor rather than automation; and the higher end of the value chain "wants" to be located in proximity to their supply chains (and possibly vertically integrated with it), which means that it won't be located here.

Again, it's the tip of the pyramid problem. You can't have the 'critical' products manufactured here unless you also have all of the necessary inputs available here - which means you can't have the tip of the pyramid unless you build the whole pyramid. Which means you have to have government intervention in the marketplace not just in the specific sector of the critical products, but all the things that feed into it - the sectors that make the components and the sectors that make the machinery to make those components and the sectors that make all of the equipment necessary to test those components, and the labor supply to feed into all those sectors. It's a massive undertaking under any circumstances - and if you propose to do it in the face of the Invisible Hand of the Free Market, which is pushing all of those resources into other parts of the economy instead of where you now want them to go, it's going to be herculean. And yes, I know that an Invisible Hand does not have a face. It's a Hand.

And do you think these places don't exist in the United States? We don't have ports with rail lines and what not? We don't have the ability to move goods around from point A to point B?

We don't have the slack capacity to do that materially more than we do now, no. If we wanted to relocate vast swatches of the global manufacturing sector back to the U.S., then all of our rail and port and road systems that have been built to meet current needs will have to be massively expanded to accommodate the new stuff. Because the existing system doesn't have enough slack capacity to handle that.

We see it most acutely today with electrical power and AI. As you point out, we have a massive exogenous demand for more electricity to meet the needs of AI centers - and so companies like Google are considering building their own nuclear power plants to meet that need. Which is something that can happen if the new infrastructure is being driven by market forces. But if you want to force that infrastructure to get built without the spur of the IHOTFM, it's the government that needs to do it.