We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.
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But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.
Here are the articles for the week ending 13 April 2025:
1. My Thoughts on Tariffs, Economic History, and the Market Decline (Transcript here) – Morgan Housel
The United States has lost a lot of manufacturing employment over the last 50 years. Of course, it absolutely has. Often when that is addressed, it is immediately jumped to, that’s because we shipped those jobs overseas. The factories that used to be in Indiana and Tennessee and Mississippi, we shipped them to Mexico and Canada and China. There is some truth to that, of course. Indisputably there is, I think, a bigger truth that gets lost, which is that where a lot of those jobs went was not necessarily to another country – it was to automation. It was two robots. My favorite example of this – I wrote this 10 years ago, I had to go fish this up from an old article that I wrote – is about a US steel factory in Gary, Indiana. In 1950, this individual factory produced 6 million tons of steel with 30,000 workers. In 2010 – I guess it was 15 years ago that I wrote it – it produced 7.5 million tons of steel with 5,000 workers. So during this period, they increased the amount of steel that they were making, and they did it with 25,000 fewer workers. They went from 30,000 workers to 5,000. That story, I think, can be repeated across virtually everything that is made in the United States and around the world over the last 50 years.
Very interesting thing that I read the other day is that China, the manufacturing powerhouse of the globe, has fewer manufacturing workers today than they did 10 years ago. They are making more stuff than ever before, they are building factories faster than ever before, and they have fewer people working in those factories because China, more than anybody else, probably throughout history, is installing and using robots and automation in their manufacturing at a ferocious pace. So you can keep making more and more stuff, but you need fewer and fewer people working on those assembly lines. That is often lost in the debate.
Because if we were to bring back the manufacturing capacity to the United States – and that’s a separate debate, that’s a much longer debate – but let’s say that we do, it would not in any circumstances bring back the manufacturing jobs and the employment levels that we had in the 1950’s…
…One other example of this in the auto industry. In 1990, not that long ago, the average American auto worker working on an assembly line, their share of total auto production was about seven vehicles per year. So take the number of vehicles that were produced in the United States, divide that by the number of auto workers, and it was about 7. The average worker was responsible for 7 vehicles per year. By 2023, again, that’s just like one generation apart, not even that much, the average auto worker in the United States was responsible for producing 33 vehicles per year. It went from seven to 33. We are still producing a lot of cars in the United States. We still make a lot of vehicles here in the United States. It just does not require the amount. Of labor that it used to…
…There was this period when, because of the state of global geopolitics, America had a manufacturing dominance to itself for a good 20 years from probably 1945 through the end of the 1960s. That was also a period when, for many different factors – we don’t need to go into all of them – but white collar workers were not making that much money. If you worked on Wall street in the 1970s, that was not a place to make a lot of money. That was an admin accounting job that was not very looked highly upon because you didn’t make that much money. Bankers were not making nearly the kind of money that they made in the decades before or after this period. And that was important because the blue collar manufacturing workers, by comparison to others in the economy, to others in their town, were doing great. So even if their wages were lower back then than they would be today, even adjusted for inflation, when the manufacturing worker compared himself to the banker or the accountant or the lawyer or the doctor by comparison, he said, “I’m doing pretty great. I’m doing pretty well.”…
…So the manufacturing dominance, not just in autos, but in lots of things – heavy machinery and whatnot – started to erode in the ‘70s, ‘80s and ‘90s and really started to explode higher in the 2000’s when China really came on board in terms of global manufacturing. That occurred at the same moment when white collar workers in finance and accounting and office jobs started making fortunes. Huge sums of money. So at the same moment that the manufacturing worker was losing their jobs, both to automation and foreign competition, the white collar workers were just having a field day and making money hand over fist, which made what manufacturing jobs existed feel even worse by comparison. Because let’s say you’re an auto worker making $25 an hour. In one era, that might feel great. But if all of a sudden your neighbor who is a project manager at KPMG is making $300,000 a year, your $25 an hour doesn’t feel that great anymore because your neighbor has a bigger house and more cars and is sending their kids to private school. So by comparison, you feel worse off, even if your wages, adjusted for inflation, may have been going up…
…It is so understandable that you have millions of workers who say, “This economy worked for me 50 years ago and it doesn’t today. My dad, my grandpa, had great jobs in the GM factory and I can’t have that today.” So understandable that that would be the thought process of millions of workers. I think it is naive and insulting for people who are on my side of the tariff debate – who say tariffs are a bad idea – who cannot understand the views of those kind of people. Because if I was in that situation, and if lots of people who disagree with tariffs were in that situation, they’d be arguing for the same thing.
I think one of America’s strengths, over time – this has been true for hundreds of years – is (this sounds kind of crazy, but I think it’s true) a firm belief in things that are probably not true. That has always been a strength of the United States. This goes back to the very early days of the settlers and the colonizers who back in Europe, were told that America was a land of absolute abundance and when you got there, there would be just rivers overflowing with gold and whatnot – and actually, it was a malaria swamp when they got to the East Coast of the United States. But we believed, it was always believed, that this was the promised land. That was what brought the people over. Even when they came to the United States and settled, it was that belief too. America has always been so unbelievably optimistic, particularly at the individual level. And that’s why I think we’re so good at entrepreneurship…
…But let me say a couple of things about investing, because that has been – the initial reaction to the tariffs has been entirely in the stock market, which as I speak here, is down about 20% or so from its highs that. were reached just a couple weeks ago. The tariff impact has not hit the broader economy in terms of inflation at the grocery store or mass layoffs or whatnot. But so far it’s been in the stock market…
… I think it is possible to be an engaged and informed citizen, even a social media junkie reading the news, and a calm investor at the same time. I purchased stocks early last week, not because of anything that was going on in the news, but because I do that every month around the first of the month. I do it every single month. I’ve done that for about 20 years now. I’ll do it next month, I’ll do it the month after that. That won’t change. I think it never changes. So I think you can simultaneously dollar-cost-average, remain long-term optimistic, not panic about anything that’s going on in the world, you can enjoy life, spend time outdoors, hang out with your kids, eat good food, listen to good music, have a good time, and at the same time, if you are of the same belief as me, realize how destructive and unnecessary what we’re going through is…
…We have in the past been through much more uncertain times than we’re going through right now. But it never feels that way, or it rarely feels that way. Because when we think about the past economic crises, COVID, Lehman Brothers, 9/11, Pearl Harbor, those kind of events, we know how the story ended, and we know the story did end, and we know that we eventually recovered. But whenever it is a current crisis, a current period of uncertainty, you don’t know that. You don’t know when it’s going to end. You don’t know how it’s going to end. Some people don’t know if it will ever end…
…One other thing that’s very different from this period – this tariff period – that we’re going through, if you compare it to other periods of economic upheaval like COVID and Lehman Brothers and 9/11 and Pearl Harbor, is that this could end in the next hour. These tariffs could be immediately removed in the next hour. Or even if it’s not that, there could be certain laws, whether it’s from the courts or from Congress, that could end these very quickly. Obviously, we didn’t have that with COVID. There was no button on anyone’s desk that said “Remove the virus. Just click this button.” We do have that now. So what is very different about this is how quickly it could end and if that were to happen, how ferocious the rally in stock markets would almost certainly be, even if there was some permanent damage, because global trading partners don’t trust us as much as they used to.
2. America Underestimates the Difficulty of Bringing Manufacturing Back – Molson Hart
Think of a supply chain as a company’s ability to get the components it needs to build a finished product. Suppose you wanted to build and sell wooden furniture. You’re going to need wood, nails, glue, etc. Otherwise you can’t do it. If you want to build an iPhone you need to procure a glass screen, shaped metal, and numerous internal electronic components.
Now you might be thinking, “what do you mean America has a weak supply chain?” I’ve built furniture, I’ve assembled a computer. I can get everything I want at Home Depot and at Amazon.
That’s because America has an amazing consumer supply chain, one of the best, if not the best in the world, but this is totally different from having an industrial supply chain…
…The inputs to manufacturing are not just materials, labor, and knowhow. You need infrastructure like electricity and good roads for transportation, too.
Since the year 2000, US electricity generation per person has been flat. In China, over the same time period, it has increased 400%. China generates over twice as much electricity person today as the United States. Why?
Manufacturing.
To run the machines which make the products we use, you need electricity, a lot of it. We already have electricity instability in this country. Without the construction of huge amounts of new energy infrastructure, like nuclear power plants, we cannot meaningfully increase our manufacturing output.
And it would put huge stress on our roads and create lots more dangerous traffic. When we import finished goods from foreign countries, a truck delivers them from the port or the airport to distribution centers, stores, and where we live and work.
When you start manufacturing, every single component, from factory to factory, needs to be moved, increasing the number of trucks on the road many times.
Paving more roads, modernizing our seaports, improving our airports, speeding up our train terminals, and building power plants in the costliest nation in the world to build is a huge undertaking that people are not appreciating when they say “well, we’ll just make it in America”…
…There are over a billion people in China making stuff. As of right now there are 12 million people looking for work in the United States (4% unemployment). Ignoring for a moment the comparative inefficiency of labor and the billions of people making products outside of China, where are the people that are going to do these jobs? Do you simply say “make America great again” 3 times and they will appear with the skills needed to do the work?
And where are the managers to manage these people? One of the reasons why manufacturing has declined in the United States is a brain drain towards sectors that make more money. Are people who make money on the stock market, in real estate, in venture capital, and in startups going to start sewing shirts? It’s completely and totally unrealistic to assume that people will move from superficially high productivity sectors driven by US Dollar strength to products that are low on the value chain…
…Most people think that the reason why American manufacturing is not competitive is labor costs. Most people think this can be solved by automation.
They’re wrong.
First, China, on a yearly basis installs 7x as many industrial robots as we do in the United States. Second, Chinese robots are cheaper. Third, most of today’s manufacturing done by people cannot be automated. If it could, it would have already been done so, by China, which, again, has increasingly high labor costs relative to the rest of the world.
The robots you see on social media doing backflips are, today, mostly for show and unreliable off camera. They are not useful in industrial environments where, if a humanoid robot can do it, an industrial machine which is specialized in the task can do it even better. For example, instead of having a humanoid robot doing a repetitive task such as carrying a boxes from one station to another, you can simply set up a cheaper, faster conveyor belt.
Said another way, the printer in your office, is cheaper and more efficient than both a human and a humanoid robot with a pen, hand drawing each letter…
…Let’s go back to that last example, the China based and the US based companies which were importing goods into the United States. That US based importer could’ve been a manufacturer. Instead of finished iPhones, perhaps they were importing the glass screens because those could not be found in the USA, for final assembly.
Our government applied tariffs to finished goods and components equally.
I’ll say that again. They applied the same tax to the components that you need to make things in America that they did to finished goods that were made outside of America.
Manufacturing works on a lag. To make and sell in America, first you must get the raw materials and components. These tariffs will bankrupt manufacturers before it multiplies them because they need to pay tariffs on the import components that they assemble into finished products.
And it gets worse.
They put tariffs on machines. So if you want to start a factory in the United States, all the machinery you need which is not made here, is now significantly more expensive. You may have heard that there is a chronic shortage of transformers needed for power transmission in the United States. Tariffed that too.
It gets even worse.
There is no duty drawback for exporting. In the past, even in the United States, if you imported something and then exported it, the tariff you paid on the import would be refunded to you. They got rid of that so we’re not even incentivizing exports to the countries that we are trying to achieve trade parity with.
Tariffs are applied to the costs of the goods. The way we’ve structured these tariffs, factories in China which import into the United States will pay lower tariffs than American importers, because the Chinese factory will be able to declare the value of the goods at their cost, while the American importer will pay the cost the factory charges them, which is of course higher than the factory’s cost.
Worse still.
With a few exceptions like steel and semiconductors, the tariffs were applied to all products, ranging from things that we will never realistically make like our high labor Tigerhart stuffed animals to things that don’t even grow in the continental USA, like coffee…
…Unless this policy is quickly changed, this is the end of America’s participation in globalization. If we had enacted these policies in 2017 or 2018, they stood a much stronger chance of being successful. That was before Covid. China was much weaker economically and militarily then. They’ve been preparing 8 years for this moment and they are ready.
China trades much less with the United States as a percent of its total exports today than it did 8 years ago, and as such is much less susceptible to punishing tariffs from the United States today than it was back then.
Chinese made cars, particularly electric vehicles, are taking the world by storm, without the United States. Go to Mexico to Thailand to Germany and you will see Chinese made electric vehicles on the streets. And they’re good, sometimes even better than US made cars, and not just on a per dollar basis, but simply better quality.
That is what is going to happen to the United States. Globalization will continue without us if these policies continue unchanged.
3. How big of a problem are tariffs for China’s economy? – Amber Zhang
In the short term (e.g. 1-year horizon), the direct impact on China’s GDP from trade tensions will likely be limited. Exports to the U.S. now make up only a small portion of China’s GDP, and since 2018, China has already reduced its reliance on direct exports to the U.S.
However, it would be irrational to say that China is winning this game because China’s export exposure to US is not huge. The trade war escalation could impact global trade volume, and while some companies are not directly exporting to US, they are still on the supply chain which are intertwined.
Tariffs may not directly slash revenues of listed Chinese companies, especially onshore ones because their exposure to US revenue is small, but will impact confidence of the export-oriented business, with majority of them being unlisted, private companies. And right now, confidence is exactly what China lacks. Even without the trade war, the country is still struggling through a deflationary cycle triggered by the burst of its real estate bubble…
…It’s also unrealistic to assume that China can simply “trade with other countries” to offset U.S. tariffs and make the problem completely go away. In our post Could China’s exports continue to drive GDP growth? from last year, we highlighted how China’s export penetration has already increased significantly across emerging markets outside Asia over the past decade. This means the room for further expansion is now much more limited than it was ten years ago. And with tariffs dampening overall global import demands, China’s exports will come under indirect pressure…
…In the world post globalization, the only logical path for China is to boost domestic consumption…
…On that front, an analysis by Morgan Stanley team provides a framework that I find helpful in thinking about this new “China Dream.” According to their study, for domestic consumption to become a “main pillar” of China’s economy, the goal is to increase domestic consumption by 30% by 2030. This translates to about 5.4% annualized growth per year.
If China successfully achieves this goal, a 30% increase in domestic consumption would be roughly $3 trillion USD, which Morgan Stanley estimates is equivalent to the reduced import demand from global countries caused by U.S. protectionism…
…This path isn’t just about boosting demand through short-term measures like vouchers. It’s about creating a new paradigm where China transitions from an export-driven economy to a major consumer market, alongside the U.S. This shift will be a game-changer, not just for China, but for the world.
4. Why Trump Blinked on Tariffs Just Hours After They Went Into Effect – Annie Linskey, Josh Dawsey, and Meridith McGraw
President Trump finally blinked.
It took a week for the plunge in the stock and bond markets—along with a sustained campaign by executives, lawmakers, lobbyists and foreign leaders—to prompt Trump to roll back for 90 days a major element of his sweeping tariff plan…
…Shortly after Trump published his post, as markets rose, Bessent stood outside the entrance to the West Wing and explained that the move to pause some of the tariffs was discussed Sunday when the two men met. “He and I had a long talk,” Bessent said before a crowd of reporters. “This was his strategy all along.”
Bessent was flooded with worried calls from Wall Street over the weekend and felt strongly he had to persuade Trump that a pause was needed. It wouldn’t be a capitulation, Bessent argued, because they were going to have so many deals.
He revealed little publicly about why the president and his team waited until Wednesday afternoon to enact it, with Trump saying that he decided on the move Wednesday morning…
…Another factor that made Trump more willing to relent on the tariffs, a person who talked to him said, was that so many countries are in negotiations with the administration.
Trump was also swayed by the stock market and the parade of business leaders expressing concerns about the tariffs. Over the past few days, executives and lobbyists had flooded White House chief of staff Susie Wiles’ phone, according to a person close to her. A White House aide noted that it was standard for the president’s chief of staff to field calls on his behalf.
The message delivered to Trump and his top advisers by chief executives was they needed to find an off ramp…
…Trump was also in listening mode. Over the past few days, he has been asking friends and advisers about the markets, and he indicated he was closely watching them. At the White House on Wednesday, he had lunch with financier and investor Charles Schwab and met with Michigan Democratic Gov. Gretchen Whitmer, who had warned that Michigan was already feeling the impact of the tariffs throughout its automotive industry—events that came after his decision but signaled he was widely gathering input.
On Tuesday evening, Trump said that he absorbed the bad news about a plummeting bond market. “I saw last night where people were getting a little queasy,” Trump said Wednesday about the bond market.
Trump, an avid consumer of cable news, said that he watched Dimon’s interview Wednesday morning with Maria Bartiromo on Fox Business. During the interview, Dimon said a recession was a “likely outcome” of the new tariff program, but also defended the idea of some tariffs as a way to improve trade. He urged the president to give Bessent time to make deals. “I’m taking a calm view, but it could get worse,” Dimon said.
Dimon hasn’t had a substantive conversation with Trump for years, people familiar with the matter said. While his appearance on the Fox Business show had been in place for some time, Dimon knew that Trump and his inner circle often watched Fox and that his message would likely get through to them, one of the people said.
5. Economic Growth Now Depends on Electricity, Not Oil – Greg Ip
Americans have long equated energy security with oil. The country wanted as much as possible because of the havoc an interruption to supply—from wars, disasters and political convulsions—can cause.
In coming years, though, energy security will mean electricity.
Power demand, stagnant for decades, is now growing rapidly, for data centers to run artificial intelligence and other digital services and, in time, transportation and buildings.
An economy dependent on electricity will be different from one dependent on oil. It will require mammoth investment in generation, distribution and transmission. It will challenge regulators and political leaders, as the supply and price of electricity become as politically potent as that of gasoline…
…With oil, an interruption to supply in any part of the world could ripple ashore in the U.S., even once it became a net exporter, which has long influenced U.S. foreign and security policy.
Electricity comes from almost entirely domestic sources—coal, gas, nuclear, hydro, wind, solar and geothermal—insulating it from foreign influences or interruptions to any single fuel source. At night, the electricity that no longer flows from the solar panels in Gloucester comes from Dominion’s nuclear and gas plants and, in the future, batteries. “There’s no single power source that’s going to reliably serve all of our customers,” said spokesman Aaron Ruby. “We need nuclear, we need natural gas, we need renewables.”
The threats to electricity security are different: extreme weather and other disasters; sharp fluctuations in demand, such as from cryptocurrency mining; or weather that reduces solar and wind power.
Most of the cost of oil and gas is the fuel itself, whereas for electricity it is the generation, transmission, storage and distribution infrastructure. Oil-and-gas extraction and refining contribute twice as much to gross domestic product as utilities, but electric utilities alone invest 50% more in plant, equipment and technology.
So the electric economy needs a lot of real estate and equipment, both of which have been in short supply. “We’re buying 10 times as much electrical equipment as a few years ago. We’re very short on transformers and the other basic equipment that goes into substations,” said Rob Gramlich, president of Grid Strategies. “The companies that were manufacturing those things five to nine years ago were looking at very low demand, laying people off and turning to other things.”
Those shortages drive up costs, which can get passed on to ratepayers. If expected demand doesn’t materialize—some have warned of a data-center bubble—the cost of unneeded capacity will also be shifted to customers.
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