China, Trump, and the Future

Estimated reading time: 23 minutes

Matties: That's the other part. Even in America, the types of jobs that we're going to see in the future are jobs that require higher education. You're going to have to have computer skills because you're going to be running equipment via computers. You're not going to be loading boards. It seems like China may have a stronger labor pool in that regard as well.

El-Abd: I think that we need to understand that China graduates a million engineers a year. We don't. Maybe they're not the greatest of engineers, but I would say 25% of them are pretty damn good engineers. Think about that. We need more engineering. We need more software skills, all of those things are very important and they're cranking them out.

Matties: We mentioned Trump and it looks like he's moving forward. There's a lot of talk from him about how he's going to deal with China. What's the take from China on that?

El-Abd: They basically think he's nuts. The reality is he says he's going to put 35–40% tariffs on Chinese made goods. Let's be logical. If he did that, he'd shut down American industry very quickly. How's Wal-Mart going to survive?

Let's say all iPhones are made here. Are you going to move iPhone production to the United States? Is America ready to pay three times the price of an iPhone? The other thing that the Chinese have, which we do not have in America, and if you're a logical businessman you have to understand this, is a supply chain. The supply chain is gone in America. If you were to build the iPhone in America, the supply chain with all the materials that you need are not made in America. You're going to have to import everything.

The other thing is young American engineers, I'm sorry, they don't want to work in a factory—no way. These guys are now raised on Google and Facebook and things like that, with that kind of environment. They don't want to work in a factory floor. Let's be logical. How are you going to do it? It's not possible. In my opinion, because of the oncoming of automation and robotics, the future will hold satellite factories in America, satellite factories in China, China factories producing for the China market and American factories producing for the American market. That's what's coming, but it's going to take us some time to get the supply chain right. We have to get the supply chain in the loop. The investments we should be making should be in all these logistics’ companies, because they have to move stuff around quickly. That's coming.

A lot of that is going to have to change. How do you make the casing? Where do you buy the casing? Where do you buy the glass? Where do you buy the components? Right now, the components are not made in the United States and you’ve got to import the components. Are you going to have a component factory making that stuff in America? No, I don't think so.

Matties: It sounds like no matter what the path is, prices are going up, with a Trump administration, whether it's a tariff or new supply chain costs or whatever it is.

El-Abd: If he does become president, I see costs going up and I see a little bit of a shock. On the other hand, Trump is Trump. He talks. Whatever he says today, it may not mean anything tomorrow. He changes his mind every day. If he gets into office, he’ll say, "No, no, no, we're not going to put a 45% tariff. We're not crazy." He's a businessman. He will say and do whatever it takes to get elected and then after he gets elected he'll say something else.

Matties: That will be interesting to see. He's had amazing success in the campaign so far.

El-Abd: It's been a big surprise to me that so many Americans are not really questioning, "How are you really going to do it?" They're blindly following. It could be the shock therapy that America needs to straighten out America. He could be a one-term president who shocks America into realizing that they have to make all these right changes, but I don't think he's presidential.

Matties: I agree with that. It's a shock. It's wake-up call, and not just to the American people but to the leadership. The population is tired of, what do we have, .04% growth?

El-Abd: And stagnation in government.

Matties: Not just stagnation, just gridlock. I mean absolute gridlock. We struggle to pass a bipartisan piece of legislation.

El-Abd: There’s one thing that I advocate and I have advocated for 25 years. Living out here, you have a flat tax. I believe that the American people, if you explain the flat tax to them, it makes sense. First of all, the IRS would be a quarter of the size that it is today. What you do is you draw a line. Everybody below the line is classified as the poverty line. Then everybody above it, it doesn't matter who you are, you pay one flat tax, no deductions. No deductions for grandma, kids, whatever—you just pay one flat tax period. Forbes has been pushing this for more than 20 years.

If you kept the flat tax at say 18%, what they don't tell you is that if every American pays 18% we'd have more money than the government has ever had before. Right now, more than 50% of the population doesn't pay anything. Or, if you get a guy like Bill Gates, and I'm not knocking Bill Gates, but he's got all these accountants moving and shoving money around so that he's exposed to the least amount of taxes possible. He would pay 18% period. No deductions, no hiding anything, you would pay 18% and you're happy.

Matties: It's level.

El-Abd: It's level and everybody is paying the same. That is the right way to go about it. Everybody pays the same in Hong Kong. We pay 16% in Hong Kong. In Singapore, I believe it's 20%.

The thing the American people need to understand, at the end of the day, is the government would have more money and you would pay less taxes. You and your neighbor have paid the same amount of money. None of this crazy stuff. Some people will tell you the rich people have to pay more. The rich people aren't paying any. They've got all these accountants.

Matties: Yeah, they know how to move it around. There could be a national sales tax on what you purchase even. If you earn money and want to let it sit in the bank account, let it sit there, but it’s when you spend it you pay your share of tax.

El-Abd: I also don't like the double taxation, meaning that you earn a hundred thousand, you pay your taxes, and next year you pay another tax on the hundred thousand that you paid taxes on. You should pay on what you earn that year, business taxes, corporate tax. How many American companies have left the United States because of American corporate tax? Are we going to keep shoving them away? That's wrong. They should pay a fair tax for being in the United States and they should pay a worldwide tax, end of story, or only on what you have in the United States. If you have it in Europe, you pay European taxes. If you’re in China, you pay Chinese taxes. You don't pay here and here and here. They should just get you for one huge tax once.

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