Chicago Boyz – Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.

Tariffs and the Industrial Distribution World

April 6, 2025 by Dan from Madison

That last tariff post sparked an interesting comment thread so I thought it would be appropriate to throw in my $.02 on the subject.

For those who may not know, I own an HVAC distributor, which is a subset of industrial distribution.

Almost all residential and light commercial HVAC products sold in the USA are touched by Mexico (if not made there entirely), and all are touched by other countries. No vendor in the space will be immune.

So far I have a bunch of letters from a bunch of vendors saying “hey man, we might have to do something about this” blah blah. I had one vendor that announced a price increase since a lot of their stuff is made in China, but they called me on Friday and said “nah”. One vendor gave me a “tariff surcharge” three weeks ago. I called them up and gave them the riot act and they removed it (since none of the tariffs had even taken effect).

Speaking of surcharges, we won’t accept them. We must have a general price increase to keep our costing and accounting in order.

I imagine most of the rest of the industrial distribution world will be facing these same issues.

We will have a mix of responses from our vendors. Some manufacturers will absorb part of it, some all, some none, etc. I’m expecting some supply chain issues as I imagine some manufacturers will “slow walk” production outside of the US if they sense a solution to the tariffs will be coming.

This is about the last thing my industry needed after covid, the onset of A2L refrigerants, and industry consolidation. But as always with any type of disruption, I look at this as an opportunity. But more hard work ahead.

Tariffs

April 3, 2025 by David Foster

…a few quick notes.

The US reciprocal tariffs announced by Trump yesterday are not based simply on the other’s countries’ tariffs for imports of US goods; rather, they attempt to also factor in the effect of currency and of non-tariff barriers. The way the numbers were actually determined is based on a simple algorithm driven by relative trade flows. Flexport CEO Ryan Petersen explains how it works. Here’s some detail from the US Trade Representative.

Also from the USTR, a very long document containing a country-by-country analysis of non-barriers faced by US imports.

Interesting post from a guy whose company builds machine tools in Japan:

I’m on the machine builder side of the equation, out of Japan. Looks like our product is going up 24% in price (we’ll probably absorb some, but machine tool margins are not astronomical).

We do production machines. Our biggest single customer is Apple, so when you need 100,000+ of something, you call us. If this was just a Japan trade war, we would be boned…

But it isn’t. My books were already full of projects coming back from China. Small companies with big, commodity (500k+ unit) volumes, and we were already showing that you *can* do stuff in the US at a competitive cost with good process design, smart machine selection, and existing automation. This market will be able to absorb a 20% equipment price increase, and still come out way ahed compared to building their product oversees (not just China, but bejesus… overseas *anywhere*).

So short term, this is gonna suck… but the future was going in a direction of unlimited downside, and if this is what it takes to swing that into long-term health? So be it – all of the people saying this is insanity seem to be clinging to a status quo that everyone with eyes could see is headed towards disaster – they have no better answers.

Conclusion: The Secret Voyage of the Kofuku Maru

April 1, 2025April 1, 2025 by Sgt. Mom

(Part 1 here and Part 2 here.)

Once they passed through the Lombok Strait, the Krait (formerly the Kofuku Maru) threaded a cautious way among islands that were irregular polka-dots of green along the Sumatra coast, Engineer McDowell and his assistant nursing his engine as if it were a cranky child prone to tantrums. One of the officers was in the wheelhouse at all times. The mixed crew of soldiers and sailors kept a careful look-out, day and night – but they had come deliberately by a route that avoided the normal shipping lanes in and around Singapore. They made a happy discovery, upon encountering other craft—mostly native fishing boats and small commerce; such craft turned around and went the other way, at top speed, upon seeing the purposefully stained and tattered Japanese flag which they flew now. By the 18th, they were a bare 22 miles from Singapore, lurking with intent among the islands star-scattered to the south of the city, searching for a deserted and unobserved spot within striking distance of Keppel Harbor. Anchoring off Panjang Island at 4 in the morning, they decided that spot would do, for disembarking the six members of the canoe teams, and deadly cargo: Lyon, Davidson, and Page, with the three naval ratings: Walter Falls, Arthur “Joe” Jones and A.W. Huston. In two weeks exactly, the Krait would return to the rendezvous at Panjang to retrieve the six … if all went according to plan.

About That New York Times Article…

April 1, 2025April 1, 2025 by Mike

There is a lot of hubub on the nets concerning the NY Times article outlining the three-year history of the relationship between the US and Ukraine militaries during the Russian invasion. It’s fascinating, and while the larger strategic issues of the war are pushed into the background in favor of tactical and operational considerations, it fills in important details. Given the length (13,000 words) and the research involved, I’m sure there is a book in the works somewhere.

Given that, there’s something strange going on.

There is little in the article that should be shocking to anyone who has been paying attention for the past three years. It doesn’t take a proverbial “leaked Signal chat” to know that we have been providing the Ukrainians not only with supply, training, and planning support but also with ISR plugged right into the kill chain. We were everything but (officially) boots on the ground.

Problems in paradise between American and Ukrainian military planners? A staple of coalition warfare. The details are interesting, but the overall tenor is not surprising

That there were opportunities on the battlefield lost through miscommunication and political meddling? These dangers are present (and realized) in every war, and it’s the mark of a general’s ability to navigate those shoals at the highest levels of policy that gives them their place in history. George Marshall was a grandmaster at it. Mark Milley, not so much.

Retrotech: Sending Photographs Under the Ocean, in 1925

March 30, 2025 by David Foster

In my post Technology in 1925, I mentioned the Bartlane process for transmitting news photographs via undersea cable. The way that this process works is so..so…the words ‘elegant’ and ‘baroque’ both come to mind..that I thought it deserved its own post.

Transatlantic cables had been around since the 1860s, originally handling transmissions in Morse Code or its cable variant. By 1925, teleprinter transmission thru the cables was increasingly common. Bandwidths had increased but were still quite limited–a maximum of 25 to 40 characters per second, usually multiplexed into multiple slower subchannels. These cables were strictly for telegraphy: voice telephony under the Atlantic was still many years away. News stories could be transmitted under the ocean almost instantaneously, but the accompanying photos would take a week or more: obviously there would be commercial value if the photos could be transmitted by cable as well.

So how was telegraphy married with photography?

The Bartlane process (Bartlane comes from the names of co-inventors Maynard McFarlane and Harry Bartholomew) starts with analog-to-digital conversion of the filmed image (although neither ‘analog’ nor ‘digital’ were terms in common use at the time)..varying shades of gray at particular points in the negative (‘pixels’, in our terminology) are captured as combinations of holes punched into a paper tape. The completed tape is sent to the cable office where it is transmitted using standard cable transmission equipment..simultaneously punching a duplicate tape at the other end of the cable. The received tape is then run through a device which recreates the original picture…with quality limited by the density of pixels and the number of shades of gray that the equipment can handle.

In its original 1924 released form, the Bartlane system contained no electronic components at all–it was strictly mechanical, electrical, and optical. How did that work?

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