In a 2016 landmark success over the attrition of unfair competition, Weldbend Corp., a U.S. PVF manufacturing company, accomplished anti-dumping success where previous attempts had failed.
While the current U.S. Department of Commerce-mandated levels of punitively large import tariff increases from Italy, India and Spain have been focused on finished carbon steel flanges, these were subsidized by the major foreign producers’ home countries. Although these will likely discourage such illegality in the future, it’s only a first step in protecting such outstanding independent American manufacturers from the rampant competition to which they have been exposed for years.
But this puts only a dent in the activities of major U.S. conglomerates who continue to shift both production facilities and finished goods to foreign countries that provide them with higher margins of profit to fatten their bottom lines and the value of their stock market shares.
The continued freedom to import such conglomerates from offshore facilities must be greatly controlled if America’s currently abbreviated facilities are to be kept from even greater reduction. The current 68% of the U.S. gross domestic product (GDP) must be eventually lowered to less than half this percentage for the U.S. to return to the first rank of manufacturing capacity and capability enjoyed by this former world-leading industrial producer.
Although this combination of near 20-year neglect may seem like an impossible burden, there is no alternative to America’s return to its mid-1980s greatness and advanced progress thereafter. Delayed neglect in this arena, and a major upgrade delay in U.S. overall infrastructure development, will only worsen America’s return to manufacturing leadership.
Striving for energy independence
President Richard Nixon’s call for U.S. energy independence in 1974 seemed like an idle “pipe dream” at the time. With domestic U.S. demand increasingly dependent on foreign sources, especially from then-belligerent world-leading oil producer Saudi Arabia, America’s conventional oil production staggered to a minimum production of 3 million oil barrels a day — little more than one-third of the domestic amount needed during that period.
Although the U.S. downward attrition was eventually offset by increased exports major OPEC producers, this did not prevent the price per oil barrel from temporarily shooting up to $145 just before the 2008 Great Recession.
By the end of 2016, the price per barrel for oil wallowed in the mid $40s. This resulted in President Obama lifting the 42-year-old U.S. export embargo in order to gain approval of the fiscal 2016-17 budget just before he left office in January.
But a simultaneous collusion of circumstances is the U.S. oil industry’s ability to make hydraulic fracturing (fracking) more cost-effective to offset global price recovery sought by OPEC’s member nations, even after setting back their annual production quotas.
While the new life given to U.S. oil production and natural gas availability by the fracking revolution had put the U.S. near the top of production of fossil fuels like oil, gas, and coal, as a whole, it had imprisoned the global WTI oil price structure to the mid-to-high-$40s range. But, surprisingly, it has also created a new world market for U.S. light oil, especially in Southeast Asia, as opposed to the much heavier crude found in most of the rest of the world.
This is leading the U.S. into the realm of top world exporters while also reaching the lofty objective in shipments of liquid natural gas. This anticipates a U.S.-based energy-development bonanza.
Such unexpected positive developments could easily position the U.S. at the global top, as Asia’s falling oil reserves open the door to America’s WTI light oil. China and India represent the world’s fastest growing demand providers, but they possess only the most rudimentary oil refineries — a bonanza for the U.S.
Unemployment of college graduates declines
With unpaid college educational debt topping one trillion dollars, and unemployed college graduates near an all-time high, a Course Hero Survey conducted by the organization of that name in mid-June of this year indicated that architecture promised the best chances of employment in today’s markets. Of the 16 categories analyzed, physical sciences, communications, and business/financial were found near the top, while math, law, and English brought up the rear.
The good news is that unemployment among college graduates has lately been on the decline; but of the variance between the top and bottom of the 16 job preparation segments defined, the chance of employment among these specific educational degrees is based on the external training received.
This focus on hiring potential flies in the face of most major colleges, which put an emphasis on liberal arts rather than employment capability when students graduate.
While the job creation in America’s slowly recovering employment sector is somewhat encouraging, little emphasis has yet to be put on employment of U.S. college graduates, and liberal arts instruction is a major factor. The growing tendency to promote liberal arts studies has lessened emphasis on job readiness. This is a negative trend that has also diminished the existence of trade schools and mechanical education as lower on the totem pole of social status and caused 20% of today’s college graduates to exclaim that alternate training would be their choices if they had to do it all over again.
Mergers and acquisitions take a hit
While a new wave of U.S. corporate optimism seems becoming more pervasive, the number of inter-company mergers and acquisitions hit the lowest ongoing level by mid-year.
When attempting to look for a rationale behind this scarcity, those CEOs who have expressed optimism on this conundrum cite the avalanche of changes to tax, trade and tariff rules that are sure to emerge in the ongoing tug-of-war between the White House and Congress. These have yet to hit their peak.
This major U.S. internal bickering has had its global impact on mergers and acquisitions between companies whose worldwide conglomerates are primarily multi-nationals heavily dependent on the yet-unknown economic direction of the U.S. government. Further complicating the current “deal dearth” is Brexit and the impact of recent French and German elections. Even the very existence of the European community worries potential dealmakers awaiting universal clarifications that may not even be known by the end of 2017.
Meanwhile, companies are paying higher multiples for acquisitions and investments, indicating that multi-billion-dollar deals with strong stock market following are still attractive enough for both the buyers and sellers of these prospective businesses.
The highly touted telecom competition made headlines back in April, when Verizon Communications topped AT&T’s $1.6 billion bid for Straight Path Communications with a $1.81 billion offer.
Straight Path owns a swath of wireless spectrum, believed to be at the forefront of the next generation of networks. Although Straight Path lost money in a recent quarter, its future growth was the basis of competition between the two telecommunications giants.
An alternative reason for the acquisition slowdown may also be internal growth of some of the most highly publicized global industries. High technology stands out in this respect as Apple, Microsoft, Facebook, Google and Amazon are setting revenue, profit and cash-flow records.
The internal dynamic of these multi-billion-dollar companies indicates rarity in external purchases, as the investing public seems more than satisfied by their ongoing internal growth.
With America’s focus on rebuilding its domestic manufacturing sector, 2018 may be the breakout year leading up to the midterm House and Senate elections in November 2018.
All eyes on November 2018
While the end of President Donald Trump’s first year in office is rapidly approaching, it’s becoming readily apparent that the major economic issues requiring urgent attention are becoming bogged down in Congressional infighting that is preventing a unified approach to fulfillment.
What appears unique in this impasse is that much of it stems from the lack of unity within the Republican Senate rather than effective resistance emerging from the minority Democrats. It seems inconceivable at this point that a meaningful replacement for some aspects of President Obama’s Affordable Care Act has become the main stumbling block.
In retrospect, this decision to make health-care replacement the primary issue upon the advent of President Trump’s accession of power while the nation’s more urgent economic priorities have been held back was a major error.
While the national debt has reached new heights, breaking the $20 trillion record in the 2017 fiscal year, which ended Sept. 30, no deceleration of this ongoing record spending appears to be in the works.
It is ironic that much of the lack of agenda follow-through is due to strife within the Republican Senate, whose two-vote majority is compromised by up to a half-dozen members who have taken independent stances on some of President Trump’s priorities. This is further militated by a 100% solidarity of the Democrat minority senators against all of President Trump’s initiatives.
If this impasse persists well into 2018 to the midterm November Congressional elections, a further lack of progressive initiatives being positively addressed will restrain any growth above the 2% annual average. This has persisted for the last 16 years.
Unless there is a major thrust to the economic upside prior to the November midterm balloting, the Senate and House advantage, barely benefitting the GOP, could be overturned. This not only could doom the last two years of the Trump Administration, but could also undermine the chance of a Trump second term.
Such potential lack of Republican Party unity will almost surely be attributed to President Trump’s inability to provide his unifying leadership capability, inherent in the successful appeal potentially provided by a substantial majority of American voters.
But this will only happen if updated infrastructure, tax reform and an approved health care replacement bill make some progress prior to the midterm elections in November 2018.