Hosts
Derek Thompson
Derek ThompsonAbout the episode
The U.S. is in the opening innings of a full-blown trade war with China. What does that actually mean? What do we sell to China? What does China sell to us? How is each country dependent on the other for the supply of electronics, food, machines, and goods? Jason Miller, a professor at Michigan State and an expert on global supply chains, tells Derek that in the trade war between the U.S. and China, one of these two countries seems better positioned to weather a protracted trade dispute—and it’s not the U.S.
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Summary
In the following excerpt, Derek talks to Jason Miller about the uncertainty swirling around Trump’s tariffs.
Derek Thompson: So who are you, and what do you do?
Jason Miller: So I’m a professor of supply chain management here at Michigan State University, and a lot of what I specialize in is essentially distilling a tremendous amount of government data so the business community can derive insight from that.
Thompson: I have to confess something for this show that I don’t think I have confessed on other shows, because I like to see myself as either an explainer or someone who facilitates explanations. I am extremely, I think, confused by the state of these tariffs. On any given morning that I wake up, I’m not exactly sure what the tariff rate on the world is or on China is. You’re an expert in this field. Is my confusion OK, acceptable, understandable? Are you confused, Jason?
Miller: Oh, absolutely. I was doing an executive ed session the other day, and that was when they announced the 90-day pause on the reciprocal tariffs, so I’d just spent two and a half hours talking about a lot of these issues. Literally, we broke and somebody said, “Well, everything we just learned no longer applies.” So do not feel bad, that’s what we’re all experiencing right now.
Thompson: And before we jump into the story of supply chains and America and China, I do want to just briefly extrapolate from that point. If I’m confused and you’re confused, and you’re a supply chain management expert, and you’re doing all of this research for hour-long seminars for other supply chain practitioners, and all of the work that you’re doing proves kaput by the time you finish speaking, what is the logical implication that we should draw for the entire U.S. economy and the confusion that companies and importers and exporters and customs agents are feeling right now? What are the costs of this level of confusion and uncertainty?
Miller: Yeah. You said it with the last word. It’s uncertainty, and when things are uncertain, you naturally hit the pause button. And so, right now, the biggest challenge is folks don’t know what to do. Do I shift production from China to Vietnam because now there’s this massive 135 percentage point difference in tariffs for a lot of items, or do I stand pat thinking the president may have a trade deal with China because that would be the biggest single trade deal that could be struck? That’s the issue that so many folks are facing, and it’s being carried out by hundreds of thousands of decision-makers around the country at the moment.
Thompson: And just practically speaking, what does it mean if people are hitting the pause button? If they’re simply saying, “I’m going to wait this out”? Does that mean you don’t order new toys if you’re a toy store because you think maybe the tariff rate for toys that you order in three weeks is going to be 130 percent lower? Does it mean you don’t invest in a new factory expansion that you were planning because you have no idea what the relative tariff rates are going to be for various countries? What are the practical, quantitative costs of this kind of uncertainty pausing economic activity?
Miller: Yeah. Well, you captured a lot of them. From the big capital investment standpoint, building factories in the United States, it becomes harder to justify those investments. What I would tell folks, don’t let these announcements by, like, Nvidia, saying they’re going to build AI servers and AI supercomputers in the United States, fool you. Those are decisions that would’ve made sense even without tariffs being in place.
But the challenge that decision-makers are facing is, do I buy that new piece of capital equipment, knowing that it’s now 10 percent more expensive, let’s say, or if it was coming from China, 145 percent more expensive? Do I have to find a different supplier? Do I pause adding employees? Just as an example, there’s about 8,000 different firms that operate a hobby shop or a toy store. Those firms employ 130,000 people, almost. They’re right now trying to make decisions. Do we cut imports? Do we trim certain product categories? Do I not hire as many people because I don’t think my growth is there? And so, right now, we’re seeing that play out across millions of different businesses in the United States that are affected either directly or indirectly by this continual whirlwind of tariff policies.
This excerpt has been edited and condensed.
Host: Derek Thompson
Guest: Jason Miller
Producer: Devon Baroldi
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