In a recent display of disagreement, technological entrepreneur Elon Musk showcased his opposition to President Trump’s extensive tariffs on overseas goods. In doing so, he presented once again the famous discussion by Milton Friedman, the late economist known for his libertarian beliefs. This renowned discourse, titled the ‘pencil speech,’ was featured in an early morning post by the CEO of Tesla and SpaceX. The post didn’t come with a comment from Musk, instead, the shared video of Friedman imparted an understanding of the complex global supply chain that enables the inexpensive production of a simple pencil.
Friedman introduces his point using the pencil as an illustration: ‘No single person in the entire world can manufacture this pencil,’ Friedman claimed in the video. Far from being hyperbole, he breaks down the process of the pencil’s production. The wood in the pencil could have been sourced from a tree chopped down in Washington. That act of cutting required a saw, the saw’s construction required steel, and the steel, in turn, needed iron ore.
Continuing this line of thought, Friedman proposed that the central graphite of the pencil could have been mined from the South American region. In a similar vein, the rubber eraser might come from Malaya, a place where the rubber tree is not endemic. He added that it was the British government and some businessmen who imported the tree from South America.
Further elaborating on the vast connection among people in simple object’s creation, Friedman shared, ‘The brass ferrule – I have no idea of its origin. Nor the origins of the yellow paint, the paint used for the black lines, or the adhesive applied for binding everything together. Thousands of individuals were involved in producing this pencil.’ He then questioned what made all these diverse parties cooperate in this endeavour.
The late economist expressed that no overseer ordered these steps from a centralized office. Instead, he attributed the harmonious collaboration to the ‘magic of the pricing system.’ His assertion emphasized the necessity of the operation of a free marketplace.
Musk’s act of featuring Friedman’s video followed his criticism against some prominent proponents of tariffs in the Trump administration, Peter Navarro being one of them. Navarro holds the title of the Senior Counselor to the President for Trade and Manufacturing, and Musk has given subtle clues that he doesn’t entirely agree with president’s policy on tariffs.
Elon Musk commented about Navarro, ‘A PhD in Economics from Harvard tends to be detrimental, not beneficial.’ He also argued about a problem of inflated ego present with such individuals. He further went on to remark sarcastically that Navarro ‘hasn’t built anything’ during a conversation.
However, Navarro refrained from retaliating against Musk’s comments. Instead, he criticized Musk, suggesting that the technologist was simply safeguarding his financial interests. Meanwhile, in the past few weeks, Musk’s net worth has decreased by an estimated sum of $46 billion, as per the Bloomberg Billionaires Index.
Musk also took the opportunity to ridicule Commerce Secretary Howard Lutnick over his justification on the imposed tariffs on the Heard and McDonald Islands, known for their penguin population. Lutnick argued that the implementation was necessary to block nations from exploiting shipping loopholes. Musk simply laughed off this justification.
Earlier, Musk had proposed that the successful result of these tariffs would be mutual reduction of trade barriers between the US and Europe. This comes in the wake of Trump’s announcement of a 20% tariff on imports from the European Union under his ‘Liberation Day’ initiative.
Musk conveyed his views to Italy’s right-leaning League party, suggesting ideally both Europe and America should aspire for a zero-tariff scenario, which would mimic a free-trade zone. ‘If individuals desire to work either in Europe or North America, they should have the freedom to do so,’ Musk explained to the League leader, Matteo Salvini.
Without directly criticizing Trump’s tariff ruling, Musk confirmed this had always been his advice to the president. Although the South African native business magnate rarely criticizes Trump, he has been critical about the implementation of duties before.
He cautioned about the potential pitfalls of tariffs in conversation with comedian and podcaster Joe Rogan, ‘Sudden changes in tariffs disrupt everything.’ Musk’s comments were based on his extensive experience dealing with complex global supply chains, particularly for Tesla.
He advocated for predictable tariffs, arguing that companies are willing to enhance manufacturing in the United States, but it can’t happen instantly. ‘Firms are more inclined towards augmenting American production, but such changes take time,’ he further added.
In conclusion, Musk was seen escorting and demanding a much-needed dialogue on tariffs and global supply chains by highlighting the interconnected complexities that exist in manufacturing even the simplest items. While Musk’s unique approach brought the tariffs issue into the limelight, his objective was clear – advocating for a gradual and predictable approach when dealing with matters of global trade.