The western media only look at the world from their own perspective, praising every act of the Americans and western govts against China and the rest of the world, and exaggerating how China and the world are suffering from American and western aggressive behaviours. In the case of the tariff war, China is suffering, Chinese companies are suffering and closing, workers are being layoff. How serious is the tariff really hitting China and Chinese companies?
For one, importing from America, buying American goods are going to cost a lot more. In reality, China just stop buying American. Case closed, nothing to worry about. China only needs some high end American chips and this would hurt some Chinese companies and products, would stop China from making more advances in high tech innovations. But this also is no longer true. China is now self sufficient in chips and imposed a total ban on importing American chips. This part of the tariff equation is no longer relevant. There will be still some products or components that China needs from America. But by keeping tariff low, at 10%, Chinese companies can still manufacture goods without having to become uncompetitive.
Exporting to America at 35% will hit Chinese exporters. But they are all diversifying to the rest of the world. Losing the American market will be compensated by new markets elsewhere. There are still many products that can be sold to America even at 35% tariff but with lower profit margin. It is the poor Americans that have to pay for the price hike. Not China's problem.
What the western media did not want to see or report about are the consequences hitting American companies. Many American companies need components, raw material and semi process parts and accessories from China in their production chain. Importing them at 35% tariff will mean having to price their products higher, thus no longer competitive to be made in America. And the same products, if exported to China or any country around the world would also be hit with reciprocal tariffs from the respective countries. This means American products would be hit with a double whammy, higher production cost and higher exporting cost. This combination would kill all products made in America.
This is the main reason why so many American companies are relocating out of America, just like what the Chinese companies are doing. Mexico, Brazil, Latin American companies and companies in Asean are going to be beneficiaries from this tariff wars when they can trade with China with no or little tariffs. American companies have no choice but to move out to these countries so that they can import and export from/to China.
What did Trump want to achieve? Bringing manufacturing back to America? The numbers say NO. Manufacturing in America just because of the two way tariffs would be a dead proposition. And we are not even talking about the high cost of labour, inefficient labour, small pool of labour, crippling labour relations. America cannot be a replacement for manufacturing goods and products.
Thank you very much, Donald. Manufacturing in America with the new tariff rates both ways is a big NO GO.
3 comments:
The products that China can sell in USA are still the same in profitability, the same in cost of production, the same wages paid to workers (or even no wages needed with factories totally automated), the same raw materials that China has already cornered and in control. USA importers or consumers are factually paying for the tariffs, but their leaders are still imagining they are not eating those tariffs, even though Chinese manufacturers are not paying them. Can somebody ask the USA pretenders who pays those tariffs?
Meanwhile, the peasants in China still carry on with enjoying their life of sufficiency, cheap in paying for everything, plenty of savings left that will not be used to help in the buying of Treasuries for sure. Why lend money to rich pretenders to buy Chinese goods and yet getting demonized?
But the show must go on. Some social media sites still talking about the collapse of China coming soon, as if twenty years of harping is not enough. Some social media sites still talking about Evergrande with its massive debts that will collapse the Chinese economy, like the property crash in the USA's housing market in 2008. A few hundred million is just a drop in the bucket in relation to the Chinese GDP, and China is not going to collapse. Moreover, China has already taken steps to prevent a meltdown in the real estate sector long ago, which is why so much state investment fund is now available in subsidizing other growth sectors like semiconductors and renewable energy. China is not throwing good money after bad to rescue the real estate sector, a step many foreign investors are hoping but which did not happen. Lots of foreign investors lost their pants in the real estate sector betting on a bailout by the Chinese Government. Never bet against China, nor mess with China's economy. Scott Bessant found that out as fund manager for George Soros trying to bring down the Hong Kong financial system years ago and suffered heavy losses.
What they are not saying is that companies are leaving China, but those are mostly Chinese manufacturers relocating to cheaper destinations to make products that will even be cheaper selling worldwide. So many lower end Chinese manufacturers have relocated some production to Bangladesh long ago. In more recent years some more sophisticated Chinese entities have relocated part of their production to Vietnam, Brazil and Mexico. These Chinese manufacturing are expanding overseas, not deserting China.
Trump is really desperate, threatening China with 200% tariffs if his rare earth magnet demand is not met. I think this is just academic, whether Trump threatens 1000%, which China is just going to ignore.
The war in Ukraine and the demand of supporting Israel is really getting to Trump now without the rare earth magnets for making more weapons. He is now touting about the Middle East war coming to a close in three weeks. Where did he pluck all these dates from? In his sleep? Something is seriously wrong in the head with this man.
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