Commentary by Stephen Macaulay

It is breathtaking how little an understanding of economics exists at the highest levels of our government.

No, I am not talking about the president (though then-Sen. Marco Rubio put out a press release in 2016 about the four times — Trump Taj Mahal (1991), Trump Plaza Hotel (1992), Trump Hotels and Casinos Resorts (2004), Trump Entertainment Resorts (2009) — Trump filed for bankruptcy; nor am I referring to Trump Shuttle, Trump University, Trump Vodka, Trump Mortgage, and Trump Steaks, all of which fairly quickly ceased to exist, which presumably indicates there wasn’t anything in the way of ROI for those ventures.

Rather, I’m talking about US Commerce Secretary Howard Lutnick.

While the Commerce Department probably doesn’t get a whole lot of thought, it is important. Traditionally it does things like promote US businesses and help them increase their competitiveness. So, for example, it would make General Motors more competitive so its products are better than anything from Volkswagen or Audi. Which goes to another thing the Commerce Department does, which is deal with international trade. So those better GM vehicles could be brought to Europe and people there would buy them because they are as competitive as anything they could get from VW or Audi.

But rather than making things better for the likes of GM, Team Trump, quarterbacked by Lutnick, is making things more difficult. How many people are being employed trying to figure out the tariff fees at the automaker when they should be employing people figuring out how to make even better vehicles? But real businesses only have so much money to spend, so decisions are made that keeps in compliance with the government taxing scheme while automakers in places like China are getting government support. 

In a recent interview with NewsNation*, Lutnick said that the Trump Administration is pressuring Taiwan — which makes 60%+ of all of the world’s semiconductors and more than 90% of the advanced chips (e.g., <5 nanometers) — to move half of its production capacity to the US.

(Going back to the whole issue of numbers: Lutnick said “95% of our chips used in smartphones and cars, as well as in critical military defense technology” is produced in Taiwan. Which is not true. There are plenty of >5 nanometer chips being used in a variety of applications and are important.)

(Going back to the whole issue of numbers: Lutnick said “95% of our chips used in smartphones and cars, as well as in critical military defense technology” are produced in Taiwan. Which is not true. There are plenty of >5 nanometer chips being used in a variety of applications -- including cars -- and are important. What's more, according to a paper "US Exposure to the Taiwanese Semiconductor Industry" by the US International Trade Commission, published in November 2023: "We estimate that in 2021, about 44.2% of US imports of logic chips were manufactured in Taiwan, compared to 24.4% of US imports of memory chips and 1.0% of US imports of analog chips from Taiwan." It is hard to conceive that there has been a rise of the magnitude Lutnick cites in a comparatively short period. This is not to say that Taiwan doesn't have significant semiconductor manufacturing capability, nor that it doesn't have a leadership position when it comes to the latest semiconductor manufacturing technology. But the 95% statement is an exaggeration, something that seems to be the Administration's M.O.)

While Lutnick acknowledged that the Taiwanese government isn’t going to be delighted with moving about half of its supply chain to the US, he played the “protection” card: “Donald Trump would say it’s not healthy for you or healthy for us because we protect you, and for us to protect you [then] you need to help us achieve. . .reasonable self-sufficiency.”

So there it is. The country that has long been the defender of the Free World now doesn’t care a bit about doing that unless it is going to get some payment for that. 

Forget ideals.

The largest semiconductor manufacturer in the world is TSMC. That’s “Taiwan Semiconductor Manufacturing Company.”

Clearly, TSMC did the hard work to get where it is.

But now Team Trump wants that.

Maybe “free trade” doesn’t work. 

But we should know better and do better than promulgate “extortion trade.”

*Hat tip to Ars Technica