Dan Collins: Tariffs and the Future of US Manufacturing — Manifold #85
Dan Collins is Founder of Tyrell Chemical. He studied at Tsinghua University and spent 20 years working for companies like General Motors in China, helping to localize automotive manufacturing. Dan and Steve discuss tariffs, deindustrialization in America, the Go-Go days of rapid economic growth in PRC, and the future of the US-China relationship.
Follow Dan on X: https://x.com/DanCollins2011
(00:00) - Introduction
(01:25) - Dan's Early Life and Education in Michigan
(02:30) - Experiences in China, Tsinghua University
(05:42) - China's Educational and Economic Transformation
(14:39) - US-China Trade Relations and Joint Ventures
(41:48) - China's Auto Market
(42:38) - Weaponization of Customs and Nationalism
(43:20) - Impact of Tariffs on US Manufacturing
(44:28) - Chaos in Global Trade and Supply Chains
(49:34) - The Golden Screw Theory and Manufacturing Dependence
(51:50) - Strategies for Reindustrializing the US
Audio-only version and transcript:
https://www.manifold1.com/episodes/dan-collins-tariffs-and-the-future-of-us-manufacturing-85
Good interview. Talks about many subjects that the US audience would do well to hear, pundits and pols especially.
Can't emphasize enough the downstream impact of manufacturing inputs and spare parts. US manufacturing very often has a "layercake" structure with independent specialty businesses stacked up. Pricing locked by multi year contracts, and exposure to key components becomes concentrated for individual suppliers at component or subassembly level. So scenario where there's a "golden screw" type of input, the end manufacturer might happily pay 10x for something that's 0.05% of *their* BOM cost, but they're not the ones buying it. And the situation is different for the tier 4 supplier who imports the unique item, and the tier 3 supplier who purchases it for a subassembly (or a manufacturing tool needed to commision new production lines!). Esp in cases where the unique item is 20%+ cost in the tier 3's BOM, ie enough to put the tier 3's business case in question too. So they can have a complex negotiation involving both upstream and downstream biz partners. Re-opening the price question during what's widely expected to be an inflationary period! Or they can declare an informal force majeure, pause shipments, and wait for the whole crisis to get called off by the White House via skillful diplomacy - or alternatively wait for third-country tariff evasion trade to get set up. Net result: delays, extended lead times, and at the end a price shock.
So all this takes time to manifest, and that goes to the question of China's willingness to compromise in the short term (months) timeframe. Beijing I think should logically expect their negotiating position to improve in a quarter or two, when the effects on the US side manifest themselves in full. IMHO a fast deal requires a near total walk-back by the Trump team, which might be more than their conception of the US position can bear. IOW we're likely going for the ride.
The intense competition and profit margins being driven to zero rings true. I’ve heard stories of small firms taking deals they know will lose them money so that they can get a foot in the door and hopefully make money on future business. The first deal is like an audition.