TRANSCRIPT
Lew: We’ve been talking about 2025 back to 2020. Let’s talk about some of the things that we’ve talked about that may grow sooner into 2026 and see how that might aid our economy and the people and so on.
Lew: So gentlemen. 2026 is upon us.
Chris: Because it’s an election year that there’s gonna be a lot of of governmental type programs coming out to encourage or stimulate or do something for the economy. We’ve already [00:01:00] seen, for example, the $12 billion being offered to the farm community. Kind of a drop in the bucket, but it’s a gesture. But this is the time of year where you get a lot of that.
Chris: And since he’s been in the bowels of Washington for a while, he can probably speak to that better than I can.
Cliff: I’m gonna start, uh, I’m gonna start my 2026 discussion with on the international front because that’s so important to, uh, to manufacturers. Now there’s a lot of, I mean, the Trump Tower. Have created a lot of volatility around the world, and there’s a lot of of interesting things going on the rise of India, possibilities in Africa.
Cliff: But I, in terms of concerns, I wanna talk about China. I think the biggest concern, at least to me on the, um, the international economic front is what’s happening with China. It is very possible that, uh, what we, we don’t have full data for the second half of 2025, but it’s very possible that their growth may be half of what they planned.
Cliff: It’s a B. Now there you have to sort of [00:02:00] divide this into two parts. Their exports remain com, particularly high tech exports remain fairly competitive, but domestically there is a lot of concern about the, even the short term outlook for the Chinese economy. And there there’s a number of things going on for, we talked about demographics.
Cliff: They have a declining, uh, birth rate and fertility rate and, and, uh, and an aging population. The, uh, the, for many years there’s been a concern that China was gonna grow old before it grow, grew Rich. I published a paper on this in 2007, so it, it, it’s been around for a while. Also, their property bubble has basically burst and it didn’t have the same kind of financial crisis that we had in the west. basically because they have much higher savings rates, but we are seeing the, uh, you know, the economic residual. Well, what, what has essentially has been a property bubble burst, and that has taken down fixed asset investment, which, uh, and I, I’m, I’m [00:03:00] afraid of, I’m actually afraid to look at the, the, the latest numbers on fixed asset investment.
Cliff: So China is remained. Very strong, um, concern and for the global picture. And of course China’s, you know, China has very long legs. It, it, it, you know, it matters a great deal to Europe, which has been a Europe has been a little more resilient than people, uh, think. But, uh, Chi China matters a lot of, uh, to Europe’s growth than Europe.
Cliff: You know, manage, manage it, um, matters a lot to, to, um. Canada and Mexico, and therefore the United States. So I I, I think the, the, um, the global economy, has more risk than, than reward right now. So I, I, and I think we’re gonna see, uh, some, some of these, um, global economic difficulties, we reaching a higher pitch.
Cliff: In, um, in 2026. Some of that will depend, uh, again, I I coming back to that, but if the Supreme Court knocks down the Trump tariffs, and that’s gonna [00:04:00] matter a lot to the, to the picture that that could change the picture. But right now, the global economy is, um, is a concern for 2026.
Chris: And some of the advantages that you point out that China has had are detriments in another way. I mean, one of the ways that that property collapse has not affected them is their savings rate. But that savings rate is what’s been interfering with Xi’s attempt to get the consumers to take over the growth of China.
Chris: When he took power, he wanted to reduce that export dependence by getting the Chinese consumer to spend. Like American consumers do. Nobody spends like American consumers spend. I mean, we love to shop. China has not picked up the ball and that has let their economy shrink. Then you look at the tariff policies and so many of them are not just economic.
Chris: I mean tariffs have lots and lots of functions. They’re generally used as negotiating tools and you’re trying to get a country to do [00:05:00] or not do something using the tariff, and so. Beginning of the year, very generous towards India. We wanted India to replace China. Then we got mad at India because they were buying oil from Russia supporting the Ukraine war.
Chris: So now India has higher tariffs than China. You know, we put huge tariffs on Brazil, which has driven the price of copper to all time highs, $12,000 a pound. And that’s ridiculous. And. Is it because we’re protecting China or US copper production? No, it’s because we don’t like what the Brazilian government is doing to its previous presidents who is an ally of Trump.
Chris: So we’ve been punishing Lula saying, quit picking on Bolsonaro. Well, that means we put tariffs on coffee and copper and chocolate and ethanol. So did it help Bolsonaro? No, he’s in prison. Has it hurt us copper users? Oh yeah. I mean, these [00:06:00] prices are outrageous and that’s the problem with tariffs. There’s, there’s it, it doesn’t just have one thing, you know, it’s designed to do a lot of things, but it has unforeseen circumstances.
Chris: My favorite law of economics is the law of unintended consequences, so.
Lew: The situation we have in this country right now with regards to copper, being that you brought it up, is that we have a serious shortage
Chris: Very serious.
Lew: And everything that we’re doing in the new digital world and technology is about copper. We need copper in everything that we do, and so by instituting a severe.
Lew: Tariff on copper kind of slams our own country. Unmercifully.
Chris: And that’s one of those things where you look at international politics. That could change really fast because Chile [00:07:00] now has a new president who is not a left wing president. Gado Budig was a former student labor leader. He’s gone and he’s been replaced by the most hard line conservative Chile has seen since Pinoche.
Chris: Which is probably gonna open up the copper market as far as the US is concerned. So to Cliff’s point, we tend not to pay as much attention to international because we’re so preoccupied with our own deals. But what happens in Europe, what happens in Chile, what happens in Indonesia? What happens in Japan matters and, and it matters dramatically to us.
Lew: We have, um, close friends in Europe and there still is a Europe, but we don’t hear a whole lot about it. About what’s going on there and their various economies. Uh, in order to get any news about Europe, you have to listen to the BBC. Uh, [00:08:00] you can’t get any European news on us. network news that
Chris: Well, but my, but my favorite, here’s my plug, my favorite, I listen to B, B, C too, but my favorite is Deutsche, the German version of B, B, C. ’cause it’s so typically German, you know? It’s like these people died. Did you know them? No. Then who cares? Um, so. It’s just typically German.
Lew: Yeah. So, uh, what’s happening in Europe? What do you see? They’re, they’re angry at the Americans. They’re angry at our politics.
Chris: They’re
Chris: angry at
Chris: each other.
Lew: they, well, that’s been going on for millennials. The bottom line is that, um, Europeans are not coming to the United States or tar or tourists, industries being mercifully whacked, including from Canada.
Lew: The state [00:09:00] of Florida, Mr. DeSantis says, oops, I’m sorry, I said something political. The, uh, Florida economy is built on tourism. Well, the Canadians said, you know what? We’re not coming, and they’re not.
Chris: Yeah. What’s interesting about Europe right now is that Germany is still in recession. It’s been in recession for a number of years. The interesting thing is that countries that have been kind of the sick men of Europe are now the stronger ones. Um, Italy, Spain, uh, doing much better than people expected.
Chris: Britain is still struggling. France is still struggling, but Europe is a lot like the us We’re seeing a lot of division depending on where you are. The Eastern European countries are. It kind of almost experimenting with what do we turn into as we try to transition into something. You know, Poland is stronger than it has been.
Chris: Hungary is getting weaker, so
Cliff: [00:10:00] Germany and the uk the the problems. Are very fundamental. They’re not, it’s not just a slump that they’re going in and out of. They, they need really need to rethink their, uh, their economic policies. Germany missed the boat on, uh, on investing in advanced manufacturing. They really got be behind that and they got therefore competitively behind.
Cliff: But we, one of, I, I mean again, while we don’t talk politics, I think to understand Europe. And, and the economic, um, you know, uh, shock waves coming outta Europe, not shock waves. you have to think geopolitics a little bit, and therefore Ukraine matters, uh, economically because what it’s doing is, um, to the extent that it’s causing strains in the NATO alliance.
Cliff: That’s gonna have economic reverberations with us, with our, with our freighting, with our, our, uh, efforts at, uh, you know, at at, at, uh, you know, GG seven or G 20, strand. And also it doesn’t help that we, we, you know, we. [00:11:00] And again, I know we wanna avoid politics, but it matters to economics that we keep, souring our relationships that are important.
Cliff: And, and I’ll give you two extremes. Ca, Canada matters a lot to our economy. They are our largest trading partner. They, uh, there are millions of jobs that, uh, depend on exports to Canada and to the extent that that is. It, it at least compromise anywhere between compromised and threatened. That’s gonna matter to our, our jobs picture, those jobs numbers that we hopefully will keep getting, uh, on, on a monthly basis.
Cliff: It also doesn’t help that, I mean, in spite of, of obvious concerns about South Africa, we need to keep South Africa in our, you know, area of France because Africa as, as, as you know, as Chris pointed out. That’s where labor force trajectory is positive, that that’s where manufacturers can see, uh, you know, uh, positive investments from a [00:12:00] positive labor force trajectory.
Cliff: So, you know, we, we need, we need to a little smarter about our relationship because if, if we keep souring on Canada, keep souring on Southern Africa, it’s gonna come back to our, to haunt our manufacturing growth and eventually to our job growth.
Chris: Yeah. When you talk about China and how it’s gonna react to its, its threats, they have very aggressively been developing relationships in Africa, in Latin America, in South Asia. Fortunately for us, if we can take advantage of it, the Chinese can be pretty hand handed about getting involved with other countries.
Chris: My African contacts. Say that China is constantly referred to as the new colonialists. You know that they come in and exploit the heck out of the country and then leave. But the point is they’re putting a lot of money, uh, into Africa, a lot of of development in specific countries. I mean, we tend to look at Africa like it’s one country, it’s 47.[00:13:00]
Chris: And you know, some of them are very, very different. You know what’s going on in places like Botswana and Namibia and. Guyana and Guinea. I mean, there’s very, very different performances. And then we start looking at our dependence on, you know, we just tried to broker a piece in the Democratic Republic of Congo for the 85th million time because they have what we want.
Chris: They have cobalt, they have copper, they have uranium, they have oil in the Kaga Province. And that place has been fought over since time immemorial. Um, so, and it will continue to be.
Lew: The, uh, Canadian, uh, issue being that they are our number one trading partner. We might have to rethink. Our policies that we’ve imposed upon them and recognize that, and Canadians don’t like hearing this, but they are sort of our 51st [00:14:00] state and I know we wanna buy them, but I don’t think that’s going to happen.
Lew: Uh, but the point is that they are our 51st state. And 20% of our trade goes to, goes either to or from Canada. So I think our DC folks need to get a grit on who’s who, and who’s what, and who, who’s who, who needs to do what for their best interest.
Chris: We kind of forget what we were trying to do 10, 20 years ago. I mean, when NAFTA was being developed, the whole idea around it was we needed to counter the European Union that Europe was uniting. Europe was, and now. They haven’t done as good a job of it as they would like to, but that was the idea is to create a common economy, you know, France and Germany and Italy and Britain all pulling in the same direction.
Chris: Our response [00:15:00] was to create a North American economy. And that was working for us very well. And now we’ve sort of allowing it to fray. ’cause it’s not only our relationship with Canada that’s strained, our relationship with Mexico is strained. And when you start looking at things like the workforce, unless we’re gonna suddenly change the retirement age to 96, we’re gonna have to recruit younger people and they’re likely to be coming from south of the border.
Chris: And I am have worked with a lot of companies. Polaris has an operation in Minnesota, and they have one in Monterey. And they are constantly trying to get people in Monterey to move up to Minnesota to work at their plant, except that they’re from Mexico. And they said, Senor, we get the weather channel down here.
Chris: Um, why, why, why, why, why don’t you move here? Uh, rather than us go to Minnesota?
Cliff: Big implications of all this for our auto industry, for Canada, and. [00:16:00] Mexico, uh, the, the North America Canada story for our auto industry, there is no such thing as an American made car anymore. It just doesn’t exist. I mean, cars cross the border between the US and Mexico and the US and Canada multiple times before it becomes a finished product.
Cliff: So we, you are essentially, um, by, by. I don’t wanna say decimating, but by seriously compromising our relationship, our economic relationship with Canada and with Mexico, we are seriously compromising the, uh, the vitality and the competitiveness of, of, of the North American auto industry major. The downstream impacts on, on many manufacturing industries, even just besides oil oils.
Chris: Yeah, I agree. And it’s, and it’s
Chris: rectifiable.
Chris: one of the things about Mexico, however, is. They’ve got inherently a crime problem. The US department of uh, state has, uh, now [00:17:00] put certain areas in Mexico only within the last two weeks. Uh, put them on the do not travel list. and that’s a problem. And they’re, they’re not dealing, uh.
Chris: They’re not dealing well with the crime, which of course is all based on the cartels and, you know, we’re doing our best to shoot the boats out of the, the water from Venezuela. But, uh, maybe we need to do something more proactive in helping the, the, the government down there with regards to their crime problem Even when you look at, at the crime problem, I mean, I’ve done many conferences in Querétaro which is a manufacturing town, and you ask them about the drug problem and they just laugh and say, we don’t have one here. He said, no self-respecting drug, Lord wants to be in charge of the Pittsburgh of Mexico. He said, we’re, this is, this is not Acapulco.
Chris: It’s not full of tourists, it’s not full of. He says, who do you think is buying all these drugs? [00:18:00] You are.
Chris: And you know, so if, if you stay away from the tourist areas, so part of the lesson is you go to Rero and it’s a whole different Mexico. I mean it was so funny, everyone about nine o’clock at night, kinda, where are we gonna go from here?
Chris: And they all looked at, it’s like home. We have to be at work tomorrow at eight. You know, this is a manufacturing town. We’re not gonna party until one o’clock in the morning. Are you nuts? And it’s like you people are boring. I know. We’re manufacturers. What do you want?
Lew: gentlemen, this is, uh, very enlightening. Um, I think that, um, we need to look at this, um, uh, show that we’re doing today as possibly a regular, uh, broadcast that we do once every three months and give the quarterly update. Into Q1, Q2, three and four in 2026. And I think, uh, that would be [00:19:00] really a great barometer for our audience as to what’s, what’s going on.
Chris: And then people can laugh at how, how off we were, you know?
Lew: Well, that’s true, but that, that’s your issue because PhD means piled high in di
Lew: uh.
Chris: it’s like exactly.
Lew: I was gonna say piled high in diapers, but
Chris: yeah,
Chris: yeah. yeah. You know, just make cracks about our age. Go ahead.
Lew: Yeah. Um, any final comments? Cliff?
Cliff: I, I think you know everybody. Now there’s a lot of questions about, uh, 2026 and I, I think there’s a, you know, this 2025, there’s been a year of tremendous uncertainty. I think you’re gonna have a lot of uncertainty in 2026. I’d like to say that it’s gonna calm down. It’s gonna be said in year. I don’t think so.
Cliff: There’s too many unanswered
Cliff: question. too many points of, of abrasiveness and sharpness will, you know, we are not sure [00:20:00] which way it’s gonna go. So, uh, I, I think manufacturers business people will have to, you know, be aware of the, the, both, the volatility and the uncertainty that I, I think is gonna spill over from 2025 into 2026, which I can say otherwise, that’s my general prediction.
Chris: Yeah, that would agree. And I think you compound it because it is an election year and so you did, you do tend to get a lot of, of policy experiments during an election year. And we also have to mirror in mind back to the international thing, that there’s been transition in other places too. Japan has a new prime minister, um, the British government is not particularly stable.
Chris: Uh, you’ve got. Challenges taking place throughout Eastern Europe. You have the rise of, of kind of the populist movement in Europe as well as here. All of that’s gonna play a role and as we go into 26. It’s gonna be, I mean, I always laugh when people say, [00:21:00] you know, what do you think next year is gonna be like?
Chris: Like economics pays no attention to calendars. It doesn’t matter that it went from December to January. Um, it’s the same issues that we’ve been dealing with. And with any luck, we start taking some of these a little bit more seriously. But it’s a slow process.
Lew: There is one point that we did not bring up and I think it was just by omission, uh, and I’d like to just hear a couple of comments on the Ukraine, which of course affects all of Europe and in many ways the United States.
Chris: Yeah, I think the, you know, that goes back to my, I started out as a Soviet specialist back in the eighties, Ukraine, similar to many other Eastern European countries. It never made a great deal of sense as a country. So the process that we’re seeing in Ukraine, similar to what happened in Yugoslavia, I mean, we had a 10 year war trying to decide how those states were gonna divide.
Chris: [00:22:00] Czechoslovakia, they at least had the good sense to split amicably and basically say, look, we don’t like Slovak. If we’re Czech, we don’t like Czech. If we’re Slovak, let’s just split. Ukraine has always been split between a Russian Eastern side and a Ukrainian Western side, and it unfortunately is having to be worked out violently.
Chris: Um, there will be, I think, some kind of a settlement, which isn’t really gonna make anybody very happy. Because Ukraine will lose part of its Eastern section and almost has to, and so Europe is trying to figure out how to bail it out, but they don’t have the wherewithal or the money to do that.
Cliff: Lemme make two points, Lew, on, on this. Let, let, let me look at the Russia side of, of that story and uh, the Russia side of that story is a testament to how difficult. Forecasting is even over the long run. Remember when, uh, the new [00:23:00] world was coming out? We had Gorbachev, we had yel. We thought Russia was moving forward to become a modern, not Western, but a at least a modern state.
Cliff: Now we have Putin. We didn’t, we didn’t think about Putin when we were looking at, uh, Gorbachev and Yeltsin now. So that, that’s, that’s one thing. So it’s a testament to how difficult. Human forecasting, um, is second of all, however Ukraine gets settled. If it gets settled. We cannot appear to be rewarding Putin for this kind of behavior because if we do, he won’t stop with Ukraine and we will have a threatening pale cloud over over Europe that is gonna have, uh, significant economic consequences.
Chris: No, I agree. We have to remember that there’s several of the East European governments right now that are pro Putin, and if he gets away with Ukraine, it won’t be [00:24:00] a big stretch for countries like Slovakia or Hungary, uh, to. Going back into that orbit and that suddenly compromises West European security and they worry about the Baltics.
Chris: And I mean, yeah, it’s, it’s a very difficult mess. Europe is trying to step up, but you know, even with the commitments they’ve made to future military buildup, it’s gonna take years before they get to a point where they can defend themselves.
Lew: Well, I think that 2026 will tell its tale in about a year from now. hopefully some of the. Ideas and predictions that, uh, we put forth, uh, either do happen or don’t happen. Uh, but I think that, uh, you’re right about some of the, uh, Russian comments made here. Uh, that being said, uh, terrific show, great topics.
Lew: I really appreciate the two of you being, uh, here today. I [00:25:00] also, uh, wanna remind you of my comment that you heard for the first time about us doing a, uh, quarterly recap of what’s going on in 2026, Q 1, 2, 3, and four, that we’ll discuss that off air. Gentlemen, thank you very much. Have a good holiday for the two of you.
Lew: Um. Washington DC Go see the, go. See the Christmas tree at the White House. Um, I, I, I don’t know. Is it white this year or blue?
Chris: I am just working on a tree in my own house,
Lew: right.
Cliff: haven’t seen it up close in person. I think it’s flu this year.
Lew: I think it’s blue because, ’cause I got chastised last year. The all white one. Gentlemen, thank you very much
Lew: and to our friends and audience listening today, tune into manufacturing Talk radio on a regular [00:26:00] basis. If you like the show, hit the like button. If you have comments about the show.
Lew: Please spare me your political views. Um, and lastly, I, I think that, uh, anyone who has a story to tell regarding manufacturing, let us know. Manufacturing talk radio.com. There’s, uh, there you can reach out to us and contact us through our, our emails, and I wish to thank everybody who’s been here today.
Lew: Thank you very much all, and I bid you a due.
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