The Gloves Come Off In Trump S Tariff War

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I don’t think there’s a single person, from Trump on down, who still pretends that tariffs aren’t taxes, or that they aren’t inflationary. They’re both.
Tariffs will cause pain for everybody, Americans as well as the rest of the world, with no winners yet in sight.
When the dust settles, perhaps months or likely years from now, there’ll be some winners for sure – those smart, brave and agile enough to pivot and take on the new reality with strength, fortitude and most importantly, with friendship and in partnership with many other similar-minded people.
Who will be those winners? I certainly hope good old Malaysia will be one of them.
I hope we can be brave and smart in facing the economic shocks of our exports getting taxed by the US, making them more expensive than…than what? Than any other imports?
Not likely, as imports from elsewhere will be all taxed too. Against locally manufactured goods? Hardly, because in many instances, the US doesn’t make them, or can’t make them cheap enough, because of their higher costs and because the raw materials needed are also hit by the tariffs.
Glove boom and bust
Here’s something I’m quite familiar with. In the late 1980s, the demand for medical gloves, especially throwaway examination gloves, exploded because of the HIV/AIDS epidemic.
Everybody, from medical personnel to ordinary people, were gloving, or even double-gloving, and ordering, and even double-ordering, gloves like there was no tomorrow.
Malaysia was then, and still is, a big producer of gloves made from latex for reasons that are obvious. The US were also a big producer of said gloves, mostly made in the cheaper labour areas such as their southern states.
The glove business was booming for one and all.
The thing was, a US manufacturer making those gloves would have to import the latex, mostly from Malaysia. Now latex – and I can’t assume all Malaysians understand this any more – is basically a suspension of natural rubber particles in a lot of water.
During manufacturing, the rubber part of latex is turned into gloves while the rest of it (mostly water) is lost through evaporation. Thousands of tons of latex were shipped from Malaysia, then sent by truck thousands of miles to factories in places such as Arkansas and Mississippi.
In effect, you could say that we were exporting a bit of rubber and a lot of water to the US. Water is heavy, bulky and gets thrown away during manufacturing. That certainly didn’t make much business sense.
Malaysian attraction
So, a number of American glove-makers then decided to close their US plants and open up new ones in Malaysia. They got to enjoy cheaper raw materials and labour, many financial and fiscal incentives and also expertise on rubber, which Malaysians had developed over a century of being a major producer.
Americans got cheaper gloves, either made by their own companies or by foreign manufacturers. Quality improved through competition and higher US requirements.
Technology produced alternatives, such as nitrile gloves for those allergic to natural rubber.
Since then, neighbouring countries, especially Thailand as well as China, also became major exporters of gloves. The recent Covid pandemic was a huge boost for the industry, making some of the owners of the glove factories extremely rich overnight.
Nowadays, basically no western countries make the ubiquitous examination gloves any more, and hardly any of the more specialised gloves either. It just doesn’t make economic sense.
The gloves supply chain has become so established and about as efficient as it can get, and can’t be duplicated without great costs and disruptions over long periods.
A costly business
Trump’s tariffs will result in Malaysian-made gloves becoming more expensive in the US, and so too every other glove made by every other country, many of which face higher tariffs than Malaysia.
The US would have to rely on locally-made gloves to keep prices low, except that I don’t think there are any more locally-made gloves in the US. And if there are any, their producers would take advantage of the tariffs to jack up prices and increase profits. The end result: higher prices for gloves for all Americans.
Ironically, this will also lower prices for the rest of the world as glove manufacturers seek new markets. As for the US, the days they can still make competitively-priced gloves are well and truly over.
An American company that I was with set up three operations in Malaysia, each of which the largest of its type in the world, to make latex-based gloves and other medical devices. They then closed a number of US plants that manufactured those products.
After about 10 years, they used up all their tax and fiscal incentives, and as labour and raw materials became more expensive and scarce, shut down their operations and went to Thailand instead.
This is how these things work.
Maids in Malaysia
The argument that the US can replace imports with local manufacturing just doesn’t hold water.
It’s a little bit like saying that foreign housemaids in Malaysia are unfairly stealing jobs from Malaysians by accepting cheaper pay and we need to impose tariffs to make local alternatives more viable.
Except that local alternatives disappeared a long time ago. No locals want to work as maids because of the low pay, hard work compared to other jobs, as well as the stigma. No amount of money can persuade enough locals to replace the foreign ones.
Certainly, you’d want to prepare for the days when housemaids, whether local or foreign, are no longer an option, and work on alternatives.
The American way
But there is careful, strategic planning and there’s the American way – shoot yourself in the foot just to score political points with your base.
That, dear readers, is a short primer on how these tariffs will impact all of us.
The ones recently imposed by the US are blunt instruments that’ll smash rather than fix things. Tariffs have their place certainly, but only if used surgically and sparingly, assuming you desire some positive economic outcomes from them.
But if, as in this case, the desire is to stir up grievances and fear and loathing of foreigners and roil the country with non-stop political drama, then tariffs will instead hurt everybody, especially the Americans. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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