The answer is China.
 

Please note China Is Booming Despite US Tariffs.

Chinese industrial production broke records this year as its factories churned out more cars, machinery and chemicals than ever before. Despite the disruptions of tariffs, the country’s trade surplus in goods has set a record, as growing shipments to Asia, Europe, Latin America and Africa offset the hit from Trump’s levies on direct sales to the U.S.

China’s surprisingly strong export performance hasn’t been without costs. The economy is battling an insidious phenomenon dubbed “involution,” in which cutthroat competition and ballooning industrial capacity are pushing down prices, profits and incomes.

The data show direct exports to the U.S. did take a hit from tariffs, falling about 19% over the same period. But the decline was more than made up for by sales to other regions, with exports to Southeast Asia up 14%, exports to the European Union up 8%, exports to Latin America up 7% and exports to Africa jumping by more than a quarter.

Some of those exports probably found their way to the U.S., either as parts and components in another country’s exports or simply by being rebadged as non-Chinese to avoid tariffs, analysts say. 

China’s surprise export strength has been aided by factories cutting prices and a weak currency, especially in real terms, which adjusts for China’s lack of inflation.

Trump’s shifting tariff policy has also helped. 

His decision to target all trading partners with tariffs has, for some manufacturers, reduced the incentive to shift production out of China, especially now that tariffs on Chinese imports have fallen back from earlier highs of 145% on some products. Average tariffs on Chinese imports are currently around 37%, according to the Tax Policy Center, compared with a rate of about 20% on Vietnamese imports, another popular country for manufacturing. 

US Trade Isolation

Also note World Trade Grows Without the U.S. By Phil Gramm and Donald J. Boudreaux.

Canadian Prime Minister Mark Carney no doubt expressed the feelings of many of our trading partners when he said the U.S. was “no longer a reliable partner” and that Ottawa must “pivot our trade relations elsewhere.” Canada has responded to U.S. tariffs by launching a trade expansion effort, including a meeting between Mr. Carney and Xi Jinping that Mr. Carney called a “turning point” in Canada-China relations and trade.

In August, Canadian exports to the U.S. were about 10% below the 2024 average, but our northern neighbor is weaving commercial ties with other nations, including China, India, Indonesia and the United Arab Emirates. Canada has reached a new trade expansion agreement with the EU and joined the EU in a defense production partnership.

Meanwhile in Asia, India’s recent easing of tensions with Beijing is fueling exports to China. According to India’s Economic Times, these exports are “helping New Delhi partly soften the blow of steep US tariffs.” India has also negotiated a free-trade agreement with the U.K. and hopes to complete a similar agreement with the EU by year’s end.

Bloomberg reports that “the new contours of global commerce are starting to emerge as governments redraw trade alliances and companies seek other markets to avoid the highest US tariffs since the 1930s.”

As trade is diverted around the U.S., other countries will continue to specialize in producing goods and services for which they have a comparative advantage. This specialization and the trade that sustains it will enhance efficiency and fuel economic growth in those trading nations. America’s economy will become increasingly isolated, to our detriment. Before tariffs, well over half of U.S. imports were inputs used by American producers. Keeping tariffs high will deny these producers access to many of the world’s lowest-cost inputs. Obliged by Mr. Trump’s protectionism to produce goods we could buy cheaper abroad and shielded from the competition that drives peak performance, U.S. producers will become less efficient and less competitive on the world market. [Mish Correction: They already have.]

American firms that relied on export markets to build economies of scale will shrink their operations to match their shrinking customer bases. [Mish Comment: They have to do this because Trump’s protectionism and foolish insistence to build it here makes the US the high cost producer.]

Growth in worker productivity and real wages will fall, and the prices that American families pay for goods and services will rise. U.S. economic growth will slow. [Mish Correction: That’s happening already and it’s also destroying jobs.]

Higher input costs produced by tariffs—especially the 50% tariff on steel, aluminum and copper—will also increase defense procurement costs. American-made weapons and other defense products will become pricier and less competitive on the world market. This is ironic in light of attempts to justify the tariffs with appeals to national security. [Mish Comment: Under guise of national security, Trump is making the US less secure.]

Expanding world trade built the modern world, liberated Eastern Europe, won the Cold War, and expanded America’s prosperity and influence. Building a tariff wall around America won’t stop trade; it will simply divert it. If tariffs remain high, America’s wealth and power will wane while that of other countries will grow.

Mr. Gramm, a former chairman of the Senate Banking Committee, is a nonresident senior fellow at the American Enterprise Institute. Mr. Boudreaux is a professor of economics at George Mason University

Insufficient TACO at US Ports

Trump did a big TACO on cranes needed to modernize US ports. But his timeline was more than a bit off the mark.

Please note Tariff Threat Forces U.S. Ports to Rethink Upgrade Plans

The threat of steep tariffs on Chinese ship-to-shore cranes is upending plans to modernize American ports, even after the Trump administration paused the new duties for a year.

“The order book for Chinese cranes from America has pretty much stopped,” said Tim McCarthy, chief operating officer of Harbor Industrial Services, a Wilmington, Calif.-based company that installs, maintains and upgrades cranes at West Coast ports.

American ports were racing to add taller cranes to their docks to service the larger containerships that have become more common on global trade routes. Bigger vessels that carry more containers reduce shipping costs and help to lower prices for importers and consumers, said Paul Bingham, director of transportation consulting at S&P Global Market Intelligence.

The U.S. estimates that 80% of cranes at American ports were made in China. The Biden administration in 2024 imposed a 25% tariff on the cranes. The Trump administration this year imposed an additional 100% levy over the objections of port operators who warned it would add tens of millions of dollars to upgrade costs.

President Trump recently paused the 100% tariffs for one year as part of a broader trade truce with China. Shipping industry officials say the pause isn’t long enough to risk buying cranes that take a minimum of two years from order to delivery. They add that the shifting trade policy makes it difficult to plan investments.

Only three companies outside of China make ship-to-shore cranes that are available for international purchase, according to the American Association of Port Authorities. Port operators say these cranes cost at least 15% more than Chinese cranes and that the companies combined don’t have the capacity to meet U.S. demand for about 20 new cranes a year.

The Trump administration has been talking to businesses about setting up domestic crane manufacturing in the U.S. Shipping industry officials say establishing a domestic industry would take years and that U.S.-built cranes would cost more than cranes from Asia and Europe.

Trump cannot make up his mind for two days, let alone two years. So forget about modernizing US ports until he is gone.

Then again, Trump’s foolish mission is to make iPhones here, toys here, furniture here, and underwear here, so who needs ports anyway?

Understanding Reshoring

Toys are a great example of the problems in reshoring. Only the Grinch is a Winner.

Donald Trump was right again. “Maybe the children will have two dolls instead of 30 dolls,” he said in April about the consequences of his tariffs. “And maybe the two dolls will cost a couple of bucks more than they would normally.”

When tariffs on China were at 145% this spring, Joann Cartiglia, owner of The Queen’s Treasures, a manufacturer in upstate New York, couldn’t afford to place orders.

Her experience is typical for small and midsize manufacturers with limited cash. Greg Ahearn, CEO of the Toy Association, an industry advocacy group, says he expects shortages of some toys this year. 

Ms. Cartiglia of The Queen’s Treasures is 64 and had hoped to retire in the next two years but no longer sees that as possible. During the summer, she and her husband moved into a camper and rented out their home for extra cash. “It’s the government that is doing this to American entrepreneurs,” she says, her voice breaking.

Richard Goosmann, co-owner of Eugene Toy and Hobby in Eugene, Ore., says most of his 150 or so suppliers raised prices 10% to 20%. “It’s just really hard,” he says. Retailers in turn are raising prices for consumers. Ms. Derse of Learning Express said vendors changed prices many times in response to shifting tariffs, prompting retailers “to re-sticker everything.”

Couldn’t U.S. toy companies avoid all these problems by reshoring factory production? It sounds like a reasonable idea, but it isn’t that simple. Mr. Ahearn of the Toy Association says many U.S. toy businesses would be happy to bring back American manufacturing, but it would be difficult to replicate China’s complex, efficient toymaking ecosystem—especially while keeping costs low.

It often takes an elaborate network of Chinese factories to produce a single doll. One factory may produce vinyl for the head, legs and arms. Another may assemble the torso. A typical doll also gets a hand-sewn wig, hand-painted face, custom-made eyes, clothes and shoes. It then undergoes testing to ensure it’s child-safe.

Even if the U.S. managed to build the factories, it would be hard to find American workers eager to paint the eyes on dolls or stick the wheels on toy trucks. If the point of reshoring manufacturing is to benefit U.S. workers, such a goal is misguided. “Nobody is raising a child with the ambition to work in a toy factory,” Mr. Foreman says.

The national-security argument for reshoring also falls flat. China is a real threat to American security, but toys aren’t the place to decouple the two economies. “It doesn’t matter if Barbie dolls get produced in China,” Meg Reiss, a fellow at the Atlantic Council, told reporters at a national-security conference last month.

One-Two Punch of Economic Ineptitude

Canada, Brazil, India, and South Korea have all forged deeper ties with China as a result of Trump’s policies.

And at home, Trump’s policies are clobbering small businesses.

It’s an amazing one-two punch of economic ineptitude.

Trump Doubles Down on Economic Idiocy

November 28, 2025: Trump Doubles Down on Idiotic Idea of Using Tariffs to Replace Income Tax

Once again, Trump says tariffs can replace the income tax.

To replace income tax with tariffs, Trump would have to charge (and collect) $2.4 trillion in tariffs on $3.27 on imports.

That implies a tariff rate of 73.4 percent on all imports, without a decline in imports.

This is obvious economic idiocy, spouted by an obvious economic idiot.

Related Posts

December 8, 2025: Is Trump Succeeding at Rebalancing Trade With His Global Tariffs?

Let’s discuss with eleven pictures.

December 4, 2025: Challenger Reports Employers Announced 71,321 Job Cuts in November

Announcements imply future, not immediate, layoffs and unemployment claims.

December 5, 2025: Welcome to Tariff Complexity Hell, No One Knows What Trump Will Do

Tariffs are a tax, and complexity adds to that tax.

December 3, 2025 : Small Businesses Drop 120,000 Jobs in November, ADP Total Down 32,000

It’s another grim month according to ADP.

Change in Small, Medium, Large Employment Details

• Small: -197,000
• Medium: +275,000
• Large: +1,012,000

None of this is a surprise. I have been discussing, and predicting this all year.

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