Yet another blowout jobs report this morning, with the addition of 172,000 jobs beating all expectations and the prior months revised upward as well. The unemployment rate held steady at 4.3%, also a very healthy figure.
But just as we have highlighted that a low unemployment rate and low-to-no net job growth is perfectly sensible and a good sign in a period of aggressive immigration enforcement, it’s worth noting that something must now be amiss.
How can a labor market add more than 500,000 jobs in three months, in a period when net immigrant participation in the workforce is supposed to be flat or declining, and the native-born prime-age population hasn’t been growing, and labor force participation isn’t increasing, and the unemployment rate stays unchanged? We have fairly good data on most of those variables, and fairly poor visibility into immigration flows. So it would not be unreasonable to worry that a dropoff in immigration enforcement is a driver here.
But for some better news on enforcement in the labor market, let’s hand the mic to Daniel:
On June 2, the U.S. Trade Representative published findings that 60 economies—together the source of more than 99% of American imports—have failed to exclude goods made with forced labor from their markets, and proposed new tariffs in response: 10% on trading partners that have committed to a prohibition but not enforced one and 12.5% on those without a commitment, the latter of which includes China, Japan, and India.
Much of the coverage has treated USTR’s determination as a simple pretext, little more than a respectable justification for tariffs it otherwise wants to levy. After the Supreme Court struck down the tariffs President Donald Trump imposed under the International Emergency Economic Powers Act in February, and with the stopgap tariffs that replaced them set to expire in late July, the administration has been searching for a firmer legal footing to reconstitute the tariff wall.
But whatever the motive, the standard the investigation aims to enforce is sound, and it long predates the present scramble for a durable tariff authority. The policy concern it addresses is the one a factory worker understands and an economics degree somehow obscures. Capital moves not to where labor is most productive but to where it is most easily exploited. Cheap labor paid in proportion to its output is just unproductive labor; what the capitalists want is productive workers they can still pay poorly.
Forced labor is the most extreme form of that arrangement, the kind no trading partner will defend in the open. Goods produced under coercion undercut goods produced by workers able to advance their own interests—in the exporting country and in ours. That concern is not the administration’s alone: when USTR opened the investigation in March, it drew prompt support from the AFL-CIO, the United Steelworkers, and the United Auto Workers, as well as domestic manufacturers competing against goods produced under duress.
Nor is the concern a new one. In 1999, President Bill Clinton famously imperiled WTO negotiations with his assertion that there should be, “core labor standards, and then they ought to be a part of every trade agreement, and ultimately I would favor a system in which sanctions would come for violating any provision of a trade agreement.” As the New York Times noted at the time, “other developing nations abhor the idea… And the system, they say, would be abused by the United States and other countries to do away with one big competitive advantage that the developing nations enjoy: the ability to pay workers less.”
For the Trump administration, two laws are doing the work—a modern tool and a much older standard. The authority the administration invoked is Section 301 of the Trade Act of 1974, the same provision the first Trump administration used to impose tariffs on China over its intellectual-property practices; tariffs that remain in full effect. The standard it enforces is older. Section 307 of the Tariff Act of 1930 bars the importation of goods made with convict or forced labor, and its prohibition of convict-labor goods dates back to the Tariff Act of 1890. Its sponsor, House Ways and Means Chairman William McKinley, said the ban was meant to prevent the admission of “convict-made products of the world to free competition with our free labor.” The worker-protection rationale was there at the creation, not added in hindsight. The International Labor Organization (ILO) counts the United States among only a handful of governments to have imposed and enforced a comparable ban. In other words, the Trump administration has reached for a 1974 tool to make the rest of the world honor an American principle that Congress established in 1930.
The choice of Section 301 also matters for whether the tariffs survive. The emergency-powers tariffs were struck down in February, when the Supreme Court held that the statute behind them—which lets the president “regulate” imports—does not authorize tariffs. Section 301 works differently: it carries a built-in procedure. Before imposing a tariff, USTR must open an investigation, consult the governments involved, take comments and testimony, and issue an on-the-record determination that the targeted practice is unreasonable and burdens American commerce. Those steps are why the first Trump term’s Section 301 tariffs on China survived years of litigation and a change of administrations, and they are what a court will look for now. The forced-labor action is moving through the same machinery (investigation in March, hearings in spring, determination on June 2, comment in July). The durability has to be earned step by step.
The clearest sign that this is more than a convenient rationale is that the administration has been writing the same standard into its trade agreements. Each of the nine Agreements on Reciprocal Trade that USTR has finalized over the past year includes a labor article built from a common template. Every signatory must bar imports made with forced labor and must protect the labor rights recognized by the ILO—enforcing its own labor laws, applying real penalties, refusing to weaken those protections, and expressly applying the protections in the export-processing zones where the race to the bottom is usually run.
Most of the agreements reach further and tie the partner to U.S. enforcement. For example, Guatemala must recognize American forced-labor determinations under Section 307 and, presumptively, turn away the flagged goods, making the signatory an upstream check on the supply chains—polysilicon, cotton—through which Chinese forced-labor inputs are laundered into goods bound for the United States. The forced-labor tariffs, in turn, give Washington fresh leverage to hold those partners to what they have signed.
This builds on the Trump administration’s first-term trade policy. The United States-Mexico-Canada Agreement—the deal that replaced NAFTA—included a labor chapter that requires Mexico to guarantee workers’ rights to organize and bargain, and paired that promise with a Rapid Response Mechanism that allows the United States to act against a violation at a single factory. Both the Biden and the second Trump administrations have enforced it in earnest, bringing dozens of cases since 2021 that have won reinstatements, back pay, and independent-union elections at plants exporting to the United States. USTR credits the mechanism, with the reforms it forced, for helping nearly double Mexican manufacturing wages since 2020, from $2.30 to $4.20 an hour. That’s good for Mexican workers and the American workers who compete with and might sell to them. U.S. Trade Representative Jamieson Greer has told Congress that the administration will press Mexico and Canada to further strengthen enforcement of both countries’ forced-labor import bans during this year’s USMCA review.
The new forced-labor tariffs are the leading edge of a larger ambition: a trade policy that makes capital compete on how productively it employs workers, not on how easily it can exploit them, and that restores a level playing field for Americans. Forced labor sits below the floor of where anyone believes the competition should occur, so its exclusion is the natural place to set a standard the rest of the world can be made to honor. These tariffs make good on a promise the 1930 Congress wrote into the tariff code and never fully kept: that an American worker should not have to compete against someone who was never free to say no. — Daniel
TEACH YOUR CHILDREN WELL
The Court of Appeals for the Fifth Circuit has smacked down a district court’s temporary injunction against Texas’s App Store Accountability Act, which requires age verification and parental consent before a minor downloads or makes purchases within an app. The district judge had accepted Big Tech’s argument that the law violates the First Amendment, writing: “The Act is akin to a law that would require every bookstore to verify the age of every customer at the door and, for minors, require parental consent before the child or teen could enter and again when they try to purchase a book.”
The appeals court rightly rejected that absurd construction, explaining: “App listings propose commercial transactions, regardless of whether any monetary payment is made. In fact, the ‘payment’ for apps that are purportedly ‘free’ is access to user data and private information.”
The analysis closely mirrors the argument that American Compass’s Brad Littlejohn made in a policy brief last month, Age-Gating for Contract, Not Content:
In the digital economy, data is the most valuable currency, which is why so many apps choose to offer their services for “free”; in reality, these terms of service still represent an exchange of great value to app developers. Given the common law principle that a contract exists where the parties have exchanged something of value, there is every reason to treat app terms of service as contracts—contracts that minors are not competent to consent to.
Read Brad’s brief for further background on the importance and promise of this approach to protecting kids online.
And for a rollicking discussion of this and many related issues, check out this terrific episode of The Center Edge on The Post-Human First Amendment with Brad and Lex Politica’s John Ehrett.
Next, your regular reminder that efforts to hook children on obviously harmful technology were an explicit and oft-stated (in internal documents) goal of Silicon Valley’s largest and most profitable companies. In ‘Teachers Are Going to Hate It’: How Social Media Apps Hooked Teens at School, the New York Times takes the latest dive into the discovery from the lawsuits that 1,000+ school districts have filed against Meta, YouTube, and others:
“Teachers are going to hate it,” an employee wrote in 2022 to an internal group focused on child safety, referring to a new feature prodding users to post within the next three minutes. “Kids already have smartphone addiction in class.” In response, a manager said the team’s job was to support as well as challenge the business. Competitors, she said, were doing the same thing. “If we assume teens are going to do this anyway, we’d rather them be here on TikTok,” she wrote.
Let’s not put all the blame on Big Tech, though. Schools have also proven themselves incapable of resisting the Ed Tech craze. No one is holding young people accountable for their own behavior. And also, You Can and Should Blame Young People When They Act Like Lazy Cheaters, Actually, writes Freddie de Boer in a barnburner on the free pass everyone is giving students who use AI to cheat:
I blame them and you should too, if you want the best for them. Blame them as a form of respect, blame them and then help them, blame them and then build something better, blame them while also burning down the credential mill and the surveillance software and the whole rotten edifice that gives people excuses to cheat. But do not, for the sake of your own self-image, for the cheap pleasure of feeling forever young and forever on the right side, pretend that nothing bad happened and no one did anything wrong.
Maybe the only hope is that we get all the way to the bottom of the slippery slope and, sitting miserably in the mud, decide to pull ourselves up and start climbing again. If so, we could celebrate as good news that we seem just about there: University of California Professors Are Begging Schools to Reinstate the SAT (Wall Street Journal). “We now observe preparation gaps so severe that instructors must reteach middle-school mathematics while simultaneously teaching the material students need for sciences, engineering, economics, and other quantitatively demanding fields. … UC has finite resources and can help only so many students.”
YOUR GOOD READS FOR THE WEEKEND
First of all, if you haven’t already read it, be sure to peruse American Compass’s new statement on Reclaiming American Citizenship. As we explain:
The younger American men and women seduced by the political fringes are rightly outraged by the squandering of their inheritance, made all the more infuriating for its carelessness. Taking for granted and demolishing a social order is easy compared to building and cherishing one. But which are they doing? One side decries America itself and proposes to replace it with a state-dominated collectivism that has never worked. The other adopts a performative nihilism that despairs of progress and embraces transgression and conflict as ends unto themselves. Both are dead ends.
Decline is a choice, and we can choose otherwise…
Writing on AI Slop, Alastair Roberts provides a good example of true citizenship stripped away and what we must do to reclaim it.
In his conversation with Treasury Secretary Scott Bessent at Tuesday’s New World Gala (a good listen for the weekend!), Oren pushed on the question of whether we could rebuild our industrial base by focusing only on a few strategic industries: “Are capabilities just synonymous with those critical outputs or are there capabilities we need to be building here? Not because the thing you make with it is particularly high value today, but because if you needed to shift to a war footing, I don’t know, maybe it’s the whoopie cushion factory that also makes the tourniquets.”
Trade attorney Nick Phillips extends the case in The Case for Flat Tariffs at American Affairs:
The expert consensus is right that tariffs should be strategic. But it is wrong about what strategy requires. A tariff regime designed around planners identifying products for protection will always arrive late, play whack-a-mole with circumvention, ignore key parts of the value chain, and target the current generation of technology instead of the next one.
The more strategic move is simpler, dumber even: tariff everything. Create a durable preference for production in the United States, across the whole industrial base, and let entrepreneurs, engineers, and manufacturers discover where the next breakthroughs will come. The scalpel has its place, but the blunt force object is the tool for this job. For those who really want to “rebuild our manufacturing and our resilience,” it’s time to start hammering.
That might be a bad idea if markets break easily in the face of disruption, but in fact their ability to solve for new constraints is one of their most powerful features. It’s always funny to watch the same market fundamentalists who trumpet this power, in almost any context, suddenly lose their minds at the prospect of a tariff or immigration enforcement. The economy will grind to a halt, prices will skyrocket, crops will rot in fields… and then it doesn’t happen, because, in fact, markets are great, and when constrained in ways that better align the private and public interest, their results can serve us all.
In the New York Times, Christopher Smart extends this case to the Middle East: The Strait of Hormuz Is Getting Less Dire by the Day. “Just as the Covid-19 pandemic and President Trump’s tariffs forced a significant rewiring of global supply chains, the Strait’s closure has prompted a similar adjustment. … Desperate buyers always manage to find new sellers when the old ones can’t deliver. The longer the world lives without the Gulf’s supplies, the easier it gets.”
RESHAPING THE INDUSTRIAL COMMONS
Good observations from James Thorne at RealClearPolitics about Bessent and the Hamilton Standard: “He sees the economy not as a series of quarterly data points, but as a system shaped over time by production, energy, capital formation, and national power. That synthesis, of theory, history, and practice, places him firmly in the Hamiltonian tradition, and makes him a natural architect for translating President Trump’s economic doctrine into operational policy.”
How’s that going? “The stealth manufacturing boom continues,” notes the Wall Street Journal’s chief economics commentator, Greg Ip. Why stealth? Probably because no one wants to admit it might be happening.
No, instead we get pieces like this one from the Financial Times: Donald Trump’s Pledge to Unleash a ‘Golden Age’ of US Manufacturing Sputters. Their evidence is lower levels of investment and employment, but both had already been trending downward before President Trump took office. So while it’s true that efforts to turn around 40 years of deindustrialization did not yield an instant “mushroom cloud of explosive growth,” to cite one complaint, the better question is whether the ship is turning.
Putting aside the computer industry, where both the CHIPS Act and the data center build-out are causing large swings, investment in manufacturing structures has started to show significant growth. The decline in manufacturing jobs has reversed—indeed, we’re now on a five-month run of stable or increasing employment.
Not helpful, on the other hand: sending shipbuilding offshore. The Pentagon’s FY2027 budget request included $1.85 billion (with a b) for a feasibility study on sending advanced warship building to Korea and Japan. Rep. Jared Golden (D-ME) has led the fight against this approach and last night the House Armed Services Committee adopted his amendment blocking the proposal from the National Defense Authorization Act. The issue is a good one for an enterprising senator to take up as well.
RESHAPING THE LABOR MARKET
Berkshire Hathaway and Japanese Builders See the Same Opportunity in U.S. Housing (Wall Street Journal). “What does Berkshire Hathaway see in America’s home builders that investors in public markets have missed? Maybe the same thing as Japanese firms eyeing the industry: a chance to boost innovation in one of the least productive parts of the U.S. economy.”
That’s good news. But while the story highlights the shocking fall in labor productivity over the past 50 years, there’s no mention of actual workers, or wages, or the purported labor shortages that afflict an industry that struggles to offer good jobs. Actual innovation that boosts productivity in the sector would be good news for workers, for homebuyers, and for the businesses building them. That’s how capitalism is supposed to work. And it underscores the importance of ignoring proposals to instead address the challenge by importing more cheap labor.
We see the same thing on farms, in The Cheap Foreign Labor Regime Blocking Agricultural Intelligence (American Intelligence). “American firms built much of the underlying technology. American universities produced the foundational research. American workers could be trained to operate it. But the United States will not lead unless it dismantles the cheap labor regime that has allowed agriculture to skip the last revolution while pretending it is ready for the next.”
Far from doing that, today America’s Farms Depend More Than Ever on a Troubled Visa Program (New York Times). “The Trump administration is allowing in more agricultural guest workers under the H-2A program, but preventing abuses is proving difficult.” Who would’ve guessed?
Daniel would. If you haven’t already, you must read his recent Commonplace essay, From Human Bondage to Open Borders, on “the Mudsill Theory of a two-tiered labor system.”
Maybe even the EU is starting to get it: EU greenlights controversial return hubs in ‘strictest-ever’ new migration law (EuroNews).
BUT WHO GETS IT ON CHINA?
Also in his remarks at the New World Gala, Secretary Bessent emphasized the FCC’s important work banning Chinese drones and routers from the American market:
I think that we’ve repositioned the direction of travel for a lot of these industries. I think they’ll go and do it. FCC, a couple months ago, said no more Chinese routers and no more Chinese drones. That’s a perfect example. We cut off China, we gave a market signal, and now can’t believe how many new router and drone companies there are.
More of this, please.
Meanwhile, though…
Canada continues to demonstrate its comparative advantage in spite. Biden’s national security advisor Jake Sullivan is warning on Canadian television: “I do believe that Canada should be cautious about becoming dangerously dependent on China in certain industrial areas at the cost of Canada’s long term industrial and innovation muscle.”
250 years later, the EU may be learning our lesson about the weaknesses of the Articles of Confederation. “Spain is withdrawing its support from a French-led initiative to boost the EU’s trade defenses against China, its economy and trade minister said this week” (Politico).
And remember everyone making fun of the Liberation Day tariffs on obscure countries? Well, they’re not laughing now, per the Financial Times. “Alarm is growing in Brussels that the billions of dollars Chinese companies plan to invest in Morocco could turn the north African nation into a launch pad for heavily subsidised goods that threaten to swamp European industry.”
This, in particular, is an all-time line: “EU officials said it could be difficult to distinguish genuine Chinese industrial collaboration with Morocco from attempts to circumvent EU import tariffs.”
And yes, here in the U.S., many still don’t get it either. Sources: Stephen Curry signs $400M deal with China’s Li-Ning (ESPN). “Li-Ning and several other Chinese companies have been identified by the U.S. government and human rights groups as using forced labor to produce their goods. Li-Ning merchandise was banned in the United States in 2022.”
Does Steph Curry really just not have enough money? Or does he just not care? Someone should ask his coach, Steve Kerr, who enthusiastically speaks out on all manner of social justice issues, so long as they don’t harm the NBA’s opportunities in China.
This is a classic example of a “cultural problem” for which there is indeed a policy solution, outlined in American Compass’s A Hard Break from China:
Policy: Cultural Export Controls. For a unique set of cultural exports, “the people are the product.” U.S. law should designate a class of products and services where the creation of intellectual property, performances, or products is connected to the participation of specific individuals such as actors, singers, athletes, or other entertainers. U.S. law should prohibit revenue-generating exports of such products and services and licensing of associated brands and content to China—including films, musical recordings, broadcasts of sporting events, personalized footwear and apparel lines, and live performances. In many cases, free, unauthorized, or pirated versions of these products will still circulate in China, but this is a feature of the law. While American producers will lose the incentive to kowtow to CCP censors, some American cultural influence and soft power will still reach the Chinese market and create demand within China for greater openness to the free world.
In the meantime, rooting for Steph Curry is a choice. And fortunately, so is imposing Section 301 tariffs on countries around the world for their failure to keep forced labor out of their supply chains.
Enjoy the weekend!
We can all agree that forced labor is unacceptable. But so are a lot of other things like the current federal minimum wage. What does Oren propose for a federal minimum wage? Should it be high enough that we do not have employees of major corporations on food stamps and Medicare?
I would hope that contracts with Japanese and Korean shipyards is seen as a short term expedient. Our navy is desperately in need of hulls in the water and what is left of the industry can't deliver in the short term. So let's turn to allies while we get shipyards built. Then reshoring becomes feasible.