Inflation During a Pandemic, Other times, and the Results
Can you blame Biden for this? Not likely. Companies can price to what the market will bear and more. Creating Tariffs on overseas product will exasperate the issue and cause higher prices resulting in inflation. If you wish to cut out overseas companies? Bring the product back to the US for manufacture. That is another story altogether,
Just read the part in parenthesis and then I will talk a bit about what I have experienced in supply chain planning and management globally. The inherent part of this is costly and which the nation experienced to a major degree during the pandemic
Get Ready for Trump-flation
– by Robert Kuttner
The American Prospect
“There’s a version of the next four years where Donald Trump is convinced by advisers at Mar-a-Lago to do nothing, inherit a great economy, declare victory, and reap the benefits. But Trump is almost certainly too convinced of his own ideas to do that, and the various hangers-on in Trumpworld too ready for their own corrupt paydays to allow that to happen. So instead, the likely outcome is an inflation rebound.
How will Trump’s policies spike inflation? Let us count the ways.
As the Prospect has extensively reported, much of the increased cost to consumers since COVID has been the result of supply chain dysfunction and corporate price-rigging.
To the extent that supply concerns have eased and corporate pricing tricks and traps have been restrained, it is the result of Biden regulatory policies that will be ended by Trump. To the extent that Trump kills or suspends Biden’s several investment programs that were aimed at securing and managing supply chain spot shortages, that will also spike inflation.”
Off shoring manufacturing time does not decrease if the same technology is being used. What will decrease is Labor cost and the Overhead related to Labor. Things like vacation time, healthcare insurance, Social Security, OSHSA, Child Labor laws, etc. All of those things are prevalent.
Lead times grow. You can expect at least three weeks on the ocean. One week on each end of the ocean to sit, pass through customs, and board ship. Reverse it at the other end at the arrival port. Typically the company which orders the product owns it once it leaves the manufacturer. Time to get to port may be minimal. Time from the West Coast to Detroit with components will be a minimum of 1 week and probably longer.
The ordering company pays the cost for the 6-7 weeks of inventory after purchase. The balance is equal or mostly equal. If a pandemic slows down off-loading the ships and trucks pile up waiting for their loads, the costs increase. Biden pushing on the West Coast to OT to off load ships was a good move. To get your product sooner is close to a miracle, I was successful twice. My head speun around twice and I was spitting flames.
Increasing tariffs will add to the cost of the product and it will be passed on to customers in a higher price which impacts inflation. Much of the cause of inflation during the pandemic was the result of suppliers raising prices because they could do so because of shortage due to less production while demand remained the same or increased. The cost to manufacture and probably transportation was the same locally. Coming from overseas, 48-and 52-foot containers went from $2,000 to $10,000. Maybe the cost of fuel was up a bit, etc. 🙂 Otherwise, prices went up because they could raise them.
Free market pricing manipulation was very apparent. I told you the story of one chip-manufacturer demanding a 20% increase in price for their semiconductors. We were Tier 1 automotive manufacturers, many times we do not set the price and the supplier is selected by Ford, GM, Chrysler, etc. We pay the price and eat it. Qualification of a new suppler would be weeks or months.
Sure, Biden could jaw-bone the supply chain. Kind of hard during a pandemic. We did see much of this in the food industry with smaller packaging and just plain price increase blaming it on the pandemic. Maybe some could be blamed on the pandemic. There appeared to be excess increases.