Star Spangled Indicator : The Indicator from Planet Money Flags: symbol of a country, patriotic rallying cry, and a telling economic indicator. Today on the show, a factory in China that makes American flags, and what it tells us about the modern economy.

Star Spangled Indicator

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There is a joke they tell in China about President Donald Trump's upset victory in 2016, and we learned about it from our intern Echo Wang. She is from China. Hi, Echo.


VANEK SMITH: And the joke is about a province in China where they make flags. So, Echo, tell us. What is this joke?

WANG: Yes. It's a province called Zhejiang. And people there, they thought that they were the first in the world to know that Trump was going to win because they got way more flag orders from Trump campaign than from Clinton's campaign.

VANEK SMITH: Oh, so they were making flags for political rallies, and they got so many more orders for Trump flags than Hillary flags they knew he was going to win.

WANG: Yeah.

VANEK SMITH: Li Jiang owns a flag-making factory in this province. It was in fact one of the places that was making Hillary Clinton flags and Donald Trump flags back in 2016. And he doesn't just make political flags. He makes flags for countries all over the world, including the U.S. He says he's made flags for all 50 states.


Mr. Li does not speak English, so we asked Echo to translate for us.

VANEK SMITH: How many flags do you make? Do you know?

LI JIANG: (Through interpreter) Every day around a hundred thousand.

VANEK SMITH: That is so many flags.

LI: (Through interpreter) Yes.

VANEK SMITH: Li Jiang's factory is big and open, and the flags are on these giant spools, these big fabric rolls that are just flag after flag after flag. And workers cut them apart and sew the side seam. It's amazing to watch. They're super fast.

GARCIA: And Mr. Li says he makes little flags, about 4 inches by 6 inches, just like the ones that everyone's going to be waving at Fourth of July parades tomorrow. The biggest flag he's ever made was for a mega skyscraper in the United Arab Emirates that was more than 160 feet across. This is THE INDICATOR. I'm Cardiff Garcia.

VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, flags. As it turns out, flags are really fascinating indicator. Not only can they help you predict an election, they can also tell you a lot about global trade and economics.

GARCIA: And after the break, we let our INDICATOR flag fly.

VANEK SMITH: Yes, we do.


VANEK SMITH: We caught up with Mr. Li in his car on his way home from dinner. He had just gone out with his wife and some friends.

Oh, what did you have in town?

LI: (Through interpreter) You know, shrimps and rice. We think Chinese food is really good.

VANEK SMITH: So do I (laughter).

See; we're just building bridges here at THE INDICATOR...

GARCIA: Yeah. Who doesn't...

VANEK SMITH: ...With Chinese food.

GARCIA: ...Think Chinese food is really good?

VANEK SMITH: And we were talking with Mr. Li about his flag factory. And he told us that in fact his factory did not always make flags.

LI: (Through interpreter) We were actually producing these red scarves for primary school students, the Young Pioneers.

VANEK SMITH: The Young Pioneers are like the Communist Party youth. And in fact, Mr. Li's factory is called We Must Win from that time.

GARCIA: But then in 2001, China joined the World Trade Organization, which made it easier for the country to trade with the rest of the world. And Mr. Li and his wife saw this chance to grow their business, to go global themselves. And literally, like, what is more global than flags?

VANEK SMITH: Nothing is more global than flags.

GARCIA: So Mr. Li started making flags for countries all around the world.

LI: (Through interpreter) We're producing a lot of flags, for example, from Germany, France, Brazil, United Kingdom, India, South Africa.

VANEK SMITH: Mr. Li's factory and the inexpensive labor in his country meant his business quickly became competitive on a global scale. He started charging about a dollar per flag, making about a dime of profit on each one. And business has been growing pretty consistently with the world and with the U.S. - at least for now.

GARCIA: Yeah. The U.S.'s trade war with China has not yet directly affected Mr. Li and his business. There are no flag tariffs yet. But President Trump's escalating trade tensions with China do worry Mr. Li. And those tensions are especially notable to him considering one of the orders that he is currently filling.

LI: (Through interpreter) We also make flags for Trump for 2020. It seems like he has another campaign going on in 2020. Isn't that right?

VANEK SMITH: That's right. Do the flags say made in China on them?

LI: (Through interpreter) Yes, all of them.

VANEK SMITH: So, Cardiff, as you know, a lot has been made of Trump's Make America Great Again hats being made in China. But the fact is, even though Trump has kicked off what is shaping up to be a full-on trade war with China, the guy needs flags and Make America Great Again hats for his campaign - thousands of them. And if you need thousands of flags and hats in a short span of time at a reasonable price, you go to China.

Does it feel strange to be making flags for for him?

LI: (Through interpreter) It is completely normal. And that is trade. We buy stuff from America, and America is buying buying stuff from China. For example, my car is from America.

VANEK SMITH: Oh, what kind of car do you have?

LI: (Through interpreter) It's a BMW X5.

VANEK SMITH: Oh, wow, nice car.

WANG: And the wife said that it is from Germany.

VANEK SMITH: (Laughter).

WANG: But he said, "no, I know that it is from a branch of BMW based in America."

GARCIA: And in fact, they do make BMWs in Spartanburg County, S.C. BMW moved part of its production there in the 1990s, and the factory employs about 9,000 workers. And they had been planning a big expansion. But recently, they have threatened to close the plant if President Trump puts a tariff on European cars, which he said he just might do.

VANEK SMITH: You like the car?

LI: (Through interpreter) Very much. Look; this is the best car from Germany, and they're producing from America. Of course I like it.

GARCIA: This is incredible, by the way. I just want to note that, right? He makes flags, the symbol of a country's pride, which he sends to America, which makes the car that he drives but which was designed in Germany. And not to mention he's also talking to us on an iPhone 7 designed in the U.S., made in China.

VANEK SMITH: And he's on his way back to a factory where he's busily filling an order for thousands of blue and white Trump 2020 flags supporting the campaign of a man who has been speaking out against businesses like his.

GARCIA: You can imagine a situation where - in the future when President Trump is campaigning again for himself or maybe for some other people that he'll be looking out over a sea of supporters, and they'll be waving flags and wearing hats that were just shipped in from China and which are affordable to give out en masse in part because of the very system that President Trump is now condemning.

VANEK SMITH: And Mr. Li's flags might eventually end up on a U.S. tariff list.

Are you worried about a trade war?

LI: (Through interpreter) We are not so worried because first of all, we have a big price advantage over our competitors. And our clients are very smart. They would always go to the cheapest place. If China is cheap, they go to China. If America is cheap, they go to America.

GARCIA: Now, there actually are a lot of American flags made in the U.S. But if you see them at political rallies, you should know that they are the expensive American flags. And we did some searching around. We looked at wholesale prices. And in some cases, American flags made in the U.S. were three or four or five times more expensive than the flags that were made in China.

VANEK SMITH: Right. And this is the thing about free trade because a U.S.-made American flag is just going to be way more expensive than a flag made in China. And in fact, you see this across the whole textile industry. There used to be a big textile industry in the U.S. up until the '90s, but a lot of that production has moved overseas to Asia. And that has allowed the U.S. economy to grow. It's made way for a booming tech sector and a growing health care industry. But it has also left some people behind.

GARCIA: Mr. Li says even if his U.S. business disappears entirely, he'll be fine. Most of his business is with other countries - lots of orders lately in particular from Israel, Pakistan, Saudi Arabia. And mostly, Mr. Li says, it would just mean that he wouldn't be making any more U.S. flags. And for U.S. consumers, it would mean either fewer flags or more expensive flags at political rallies and at Fourth of July parades.

VANEK SMITH: I mean, you have to look at flags all the time. How do you think it compares to other flags looks-wise?

LI: (Through interpreter) It's very pretty with stars and stripes. Fifty stars, isn't it?

VANEK SMITH: Yeah. That's right.

WANG: Fifty-one or 50?


WANG: (Foreign language spoken).


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