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Conservative politics make for good music. The Nixon administration inspired anti-Vietnam war songs like “Fortunate Son” and “What’s Going On.” Ronald Reagan’s first term yielded “Born in the USA,” in which Bruce Springsteen smuggled social commentary on Vietnam and US industrial decline inside a hook so strong and anthemic that it has been serially misunderstood by reactionary politicians ever since. The first Trump administration elicited Childish Gambino’s “This is America.” And decades before all of this, Woodie Guthrie was wielding a six-string that killed fascists.
Whatever creative songsmiths have on tap for the second Trump administration, the means of production will be more expensive if the president-elect follows through on his threats and campaign promises to raise tariffs. The musical instrument market is highly globalized, and threatened tariffs on China in particular will hit the entry-level market – students, teenagers looking to turn mowed lawns into rock star dreams, and cash-strapped school music programs – the hardest.
President-elect Trump promised during the campaign to impose tariffs of 10 to 20 percent on all imports, with an even higher 60 percent tariff on all imports from China. More recently, Trump threatened a 25 percent tariff on Canadian and Mexican imports, which has disabused US trading partners of the notion that active free trade agreements will spare them from real or threatened tariffs.
If caught up in Trump’s promised tariffs, the musical instrument trade would be one illustration of how the Trump’s trade measures will affect Americans’ lives by raising prices and reducing supply. The irony is that the globalization of the musical instrument industry has turned out pretty well for all involved, the United States included. It’s a clear example of the virtues of specialization, gains from trade, and market segmentation. These benefits are obvious when looking at specific firms.
Take the Fender Musical Instruments Corporation, the United States’ largest manufacturer of guitars. Fender produces versions of its iconic Stratocaster[1] in five locations: California, Mexico, Japan, Indonesia, and China. American-made Stratocasters are considered top of the line, made by skilled American luthiers and assembly technicians, and retail for $1,200 and up (way, way up for boutique models). Mexican-made Stratocasters use similar components but take advantage of wage differentials between the United States and Mexico to offer high-quality instruments at a lower price point ($800 to $1,350). Production quantities in Japan are small, tailored to Japanese tastes, and similar in price to US-built models. Chinese-made and Indonesian-made “Squier” versions of the Stratocaster leverage those countries’ cost competitiveness in both inputs and labor to bring beginner-level instruments to market for $200 to $600.[2] Because of its global supply chains, Fender is able to serve the high-end, collector-grade, mid-grade, and beginner markets, both in the United States and abroad. This is an almost textbook example of how globalization makes a wide range of products at different price points available to a global consumer base.
There would be a lot fewer guitar players in the United States if the only available instruments were American-made guitars. Those teens mowing lawns for guitar money would be middle-aged by the time they saved enough to purchase an American-made Strat. And American-made guitars would have a much smaller market if they could not be sold the world over.
This kind of distributed, segmented production is not just the purview of guitar makers. The same pattern is generally true of brass, woodwind, and stringed instruments. Yamaha produces professional grade trumpets in Japan but manufactures their entry-level, student models in China. Ditto for their woodwind and stringed instruments. And it’s not just true of US or Japanese firms. The same story is true of Germany’s Sonor Drums – the R&D, product design, and high-end drums are German-made, but their entry-level drum sets are produced in China. And they do so for the same reason Fender does: to offer a quality but not premium instrument at an affordable price. And this doesn’t even get into the various components (like the little metal bits, including drum lugs and guitar bridges), many of which are made in China.
Trade in musical instruments is dominated by a small set of exporters and importers with large market shares: The top ten exporters (see figure below) account for 84 percent of global exports. China and Indonesia are the largest exporters and run large trade surpluses. The countries with the largest trade deficits in musical instruments are the United States, the United Kingdom, and Australia, even though the United States is a large exporter itself. These patterns make sense if one considers musical instruments luxury goods: The market for the high-end products produced in advanced economies is inherently smaller – and for the US, more dominated by US-based consumers rather than exports – than the market for lower-end products produced by China and Indonesia, which serves not just the entry-level market in advanced economies but professional and gigging players in developing and middle-income countries.
The implications of Trump’s tariffs for the US musical instrument market are straightforward: It will have limited impact on high-end instruments but will increase prices significantly for beginner and student models. These models are overwhelmingly made in China and are precisely the models the musical instrument industry relies on to create its consumer base of the future.
Production may shift to other countries, with Indonesia being a likely candidate to pick up market share. But those products would still be 10 to 20 percent more expensive than they would have been otherwise, and the costs of reorienting these supply chains and moving production out of China to avoid US tariffs will be absorbed by consumers – not just in the United States, but the world over. And like other regressive aspects of Trump’s proposed tariffs, the hardest hit segment of the market will be the lower income households and school music programs that need a reliable supply of relatively inexpensive instruments.
Musical instruments account for just 0.04 percent of global exports, but their cultural import is vast. Many instruments are as iconic as the musicians who play them: Jimi Hendrix’s upside-down Stratocaster, Taylor Swift’s bedazzled Taylor acoustics, John Bonham’s see-through Ludwig Vistalite drums. Half of US households have at least one member who plays an instrument. China now has the largest musical instrument market in the world and is among the fastest growing market for Fender guitars. Music is a truly universal language with many practical benefits, especially for children and young people, such as building coordination, memory, and study habits.
US consumers and manufacturers have been well-served by the globalization of the musical instrument industry, and there is no plausible argument to be made that tariffs are necessary to protect US industry or US manufacturers. Their American-made musical instruments are world renowned and industry-leading. US instrument manufacturers don’t want to produce entry-level instruments, because it would be a huge misallocation of their globally scarce highly skilled labor.
As a share of the potential economic costs of rising protectionism and geoeconomic fragmentation, the effects for the musical instrument market would be a rounding error. But the costs to our humanity, and our ability to speak a common, harmonious language, could be enormous.
Notes
1. Picture in your mind an electric guitar. Dollars to doughnuts you’re picturing a Fender Stratocaster (or perhaps a Gibson Les Paul, especially if you, too, grew up in Kalamazoo, Michigan). Stratocasters have been the guitar of choice for Eric Clapton, Pink Floyd’s David Gilmour, Nile Rodgers, and John Mayer, as well as bluesmen like Buddy Guy, Steve Ray Vaughn and metal guitarists like Slipknot’s Jim Root.
2 . Some professional touring musicians, like Joe Trohman of Fall Out Boy and J. Mascis of Dinosaur Jr., have Squier signature models they use for live performances.
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