4 ms·

America owes China $1tn. That’s a problem for Beijing, and Trump knows it

40 points by dberhane 10y ago

X-Istence 10y ago
The US consumer is the one that will be paying for the tariffs if they ever come. Which country would US consumers even purchase from instead? Mexico? Who even manufacturers stuff cheap enough for most US consumers?
- dragontamer 10y ago
  The idea is for Trump to encourage manufacturing to grow in the US. There are regulatory hurdles to making a manufacturing plant in the US however: minimum wage, safety regulations, etc. etc. So it will be more expensive if made in the USA. Alternatively, things can become like the Car industry. Where certain parts are manufactured outside the US, while the final car is manufactured inside of the US. Toyota has a major presence in the US. I'm not saying I necessarily agree with it, but it helps to understand at least why Trump's supporters support Trump.
  - tedd4u 10y ago
    'Q:What does China's competitive edge look like in practice?' 'A: One example from The Times article: When Jobs decided just a month before the iPhone hit markets to replace a scratch-prone plastic screen with a glass one, a Foxconn factory in China woke up about 8,000 workers when the glass screens arrived at midnight, and the workers were assembling 10,000 iPhones a day within 96 hours. 'Another example: Apple had originally estimated that it would take nine months to hire the 8,700 qualified industrial engineers needed to oversee production of the iPhone; in China, it took 15 days. Anecdotes like that leave you "feeling almost impressed by the no-holds-barred capabilities of these manufacturing plants," says Edward Moyer at CNET News, "impressed and queasy at the same time."' From: https://theweek.com/articles/478705/why-apple-builds-iphones-everything-else-china https://theweek.com/articles/478705/why-apple-builds-iphones...
    - thomastjeffery 10y ago
      Don't forget that changes has a billion more people.
      - thomastjeffery 10y ago
        s/changes/china/ For some reason I can't edit the obvious mistake I made.
        grzm 10y ago
        Likely you unfortunately just missed the end of the two-hour edit window.
        thomastjeffery 10y ago
        Shucks. TIL.
  - X-Istence 10y ago
    The American populace won't ever take the jobs at the pay required for building the products in America to be viable for businesses. The products would be more expensive, which less consumers would be able to afford, meaning even less demand. American companies are also likely to start heavily looking at using robots or other devices to help with building and the tooling required because that is the only way to drive costs down, but that requires an up front investment that is difficult to justify to the shareholder when it's easier to ship it overseas.
- pcurve 10y ago
  Exactly. Cheaper goods have been the only saving grace for American middle class in the past 30 years, where wages have stagnated and vast majority of fruits of labor went to the top 1%. You take away those $19 jeans, $49 blue ray player, $79 ikea bookcase, $299 laptop and there is going to be hell to pay.
  - HillaryBriss 10y ago
    my prediction is a bit different. consumers would be disappointed, but i'm not as confident that people would become super angry about it. they'd buy less disposable low quality merchandise. for other, high quality goods, people would repair more often and replace less often. also, property theft would rise.
  - matt_wulfeck 10y ago
    More specifically, there's going to be inflation to pay. Not necessarily a bad thing if you owe $1T in fixed rate loans.
    - pcurve 10y ago
      "Not necessarily a bad thing if you owe $1T in fixed rate loans." It's fixed rate loans, but it's also fungible assets that can sold before maturity. I don't think China will sit idly and watch their tbill ands forex reserves turn into paper.
      - arcanus 10y ago
        > I don't think China will sit idly and watch their tbill ands forex reserves turn into paper. What will they do? Unloading them will flood the market, collapsing the price.
        pcurve 10y ago
        It has already begun. $1 trillion is already down from $1.25 trillion just couple years ago. That's a sizable dumping. https://www.ft.com/content/714117d0-ddd1-11e6-86ac-f253db7791c6 https://www.ft.com/content/714117d0-ddd1-11e6-86ac-f253db779...
- ThrowawayR2 10y ago
  Mexico wouldn't be a bad place for the US government to encourage manufacturing to move to, IMO. A lot of problems there that bleed over into the US could be solved by boosting the economy there.
- dexen 10y ago
  > The US consumer is the one that will be paying for the tariffs if they ever come. One of the dangers of over-reliance on single source of import, and a serious failure of long-term planning of several recent administrations. Imagine if imports were diversified; split roughly equally among several source countries. Slapping import tariffs on one of them wouldn't move the prices much thanks to competition, but surely would put serious pressure on the one select source country. Even the mere ability to do just that that would give USA some leverage in any trade negotiations. As things stand, introduction of small tariffs on imports from China would help manufacturing grow and flourish in competing countries, including inside USA. Also would put some brake to Chinese current policy of financing growth by huge credit. Let's not forget American manufacturing and services are already carrying nontrivial burden of indirect taxation by the regulation of environmental protection, workplace health&safety, and the likes. This indirect taxation is much lower in China, allowing it to manufacture at very low cost, to the detrimen of local environment, populace health etc. Basically a lot of externalities are unpaid for in China. An import tariff based off of at least a degree of (the missing) environmental protection could be palatable to Dems (including "progressives"), while being long term help to American economy (help move some manufacturing back to the States), temporary increase in prices of goods notwithstanding. tl;dr: currently China is the sole source of many consumer goods, and tariffs on chinese imports would tax consumers. If America had several alternative sources, tariffs on chinese imports would tax the chinese; with prices remaining low thanks to competing countries.
  - pwinnski 10y ago
    How does the US make other countries compete with China? That is, how do we end up with several source countries split roughly equally, rather than the situation we have now? To consider the opposite, how have ended up so reliant on China, given that there are many other countries that would love to split the business?
    - HillaryBriss 10y ago
      right. that's just it. the center of mass of electronics manufacturing, and, yes, design too, is within China. even Japanese and Taiwanese electronics companies are having products created and manufactured in China. so, now, how does any other country really have the ability to do that work?
HillaryBriss 10y ago
if there was ever a president experienced at playing chicken with a large creditor and coming out alive, it's Trump. of course, giving the US a reputation for something resembling default probably won't be a good thing in the long run. and i'm sure there are ways any large creditor could "encourage" the election of US politicians which favor the return on capital above other priorities.
koolba 10y ago
I just had a shudder seeing a headline like this on HN. This is the crap you see on /r/politics. The article itself isn't that bad either but I guess even the Guardian has to compete with eye catching headlines now too.
- mac01021 10y ago
  What headline would you prefer? This one seems to me to accurately describe the thesis of the article.
  - koolba 10y ago
    The contents vs. the headline aren't that off in this case but the general trend of phrasing all headlines in a gossip style is off-putting. If you replace the names and amounts in the headline with celebrities it reads like a Hollywood divorce article from the National Enquirer.
patrickg_zill 10y ago
If you owe the bank 10,000, you have a problem. If you owe the bank 1,000,000,000, they have a problem.
- tree_of_item 10y ago
  Yes, we read the article.
  - devmunchies 10y ago
    no i didn't.
cylinder 10y ago
Default is not an option for the US. Most economic growth the last decade has been from deficit spending. State and local pensions are headed to catastrophic ends soon, and will need bailouts with federal dollars. Losing deficit spending would bring the US to its knees. This is all rubbish.

40 points by dberhane 10y ago

The US consumer is the one that will be paying for the tariffs if they ever come. Which country would US consumers even purchase from instead? Mexico? Who even manufacturers stuff cheap enough for most US consumers?

dragontamer 10y ago
The idea is for Trump to encourage manufacturing to grow in the US. There are regulatory hurdles to making a manufacturing plant in the US however: minimum wage, safety regulations, etc. etc. So it will be more expensive if made in the USA. Alternatively, things can become like the Car industry. Where certain parts are manufactured outside the US, while the final car is manufactured inside of the US. Toyota has a major presence in the US. I'm not saying I necessarily agree with it, but it helps to understand at least why Trump's supporters support Trump.
- tedd4u 10y ago
  'Q:What does China's competitive edge look like in practice?' 'A: One example from The Times article: When Jobs decided just a month before the iPhone hit markets to replace a scratch-prone plastic screen with a glass one, a Foxconn factory in China woke up about 8,000 workers when the glass screens arrived at midnight, and the workers were assembling 10,000 iPhones a day within 96 hours. 'Another example: Apple had originally estimated that it would take nine months to hire the 8,700 qualified industrial engineers needed to oversee production of the iPhone; in China, it took 15 days. Anecdotes like that leave you "feeling almost impressed by the no-holds-barred capabilities of these manufacturing plants," says Edward Moyer at CNET News, "impressed and queasy at the same time."' From: https://theweek.com/articles/478705/why-apple-builds-iphones-everything-else-china https://theweek.com/articles/478705/why-apple-builds-iphones...
  - thomastjeffery 10y ago
    Don't forget that changes has a billion more people.
    - thomastjeffery 10y ago
      s/changes/china/ For some reason I can't edit the obvious mistake I made.
      - grzm 10y ago
        Likely you unfortunately just missed the end of the two-hour edit window.
        thomastjeffery 10y ago
        Shucks. TIL.
- X-Istence 10y ago
  The American populace won't ever take the jobs at the pay required for building the products in America to be viable for businesses. The products would be more expensive, which less consumers would be able to afford, meaning even less demand. American companies are also likely to start heavily looking at using robots or other devices to help with building and the tooling required because that is the only way to drive costs down, but that requires an up front investment that is difficult to justify to the shareholder when it's easier to ship it overseas.
pcurve 10y ago
Exactly. Cheaper goods have been the only saving grace for American middle class in the past 30 years, where wages have stagnated and vast majority of fruits of labor went to the top 1%. You take away those $19 jeans, $49 blue ray player, $79 ikea bookcase, $299 laptop and there is going to be hell to pay.
- HillaryBriss 10y ago
  my prediction is a bit different. consumers would be disappointed, but i'm not as confident that people would become super angry about it. they'd buy less disposable low quality merchandise. for other, high quality goods, people would repair more often and replace less often. also, property theft would rise.
- matt_wulfeck 10y ago
  More specifically, there's going to be inflation to pay. Not necessarily a bad thing if you owe $1T in fixed rate loans.
  - pcurve 10y ago
    "Not necessarily a bad thing if you owe $1T in fixed rate loans." It's fixed rate loans, but it's also fungible assets that can sold before maturity. I don't think China will sit idly and watch their tbill ands forex reserves turn into paper.
    - arcanus 10y ago
      > I don't think China will sit idly and watch their tbill ands forex reserves turn into paper. What will they do? Unloading them will flood the market, collapsing the price.
      - pcurve 10y ago
        It has already begun. $1 trillion is already down from $1.25 trillion just couple years ago. That's a sizable dumping. https://www.ft.com/content/714117d0-ddd1-11e6-86ac-f253db7791c6 https://www.ft.com/content/714117d0-ddd1-11e6-86ac-f253db779...
ThrowawayR2 10y ago
Mexico wouldn't be a bad place for the US government to encourage manufacturing to move to, IMO. A lot of problems there that bleed over into the US could be solved by boosting the economy there.
dexen 10y ago
> The US consumer is the one that will be paying for the tariffs if they ever come. One of the dangers of over-reliance on single source of import, and a serious failure of long-term planning of several recent administrations. Imagine if imports were diversified; split roughly equally among several source countries. Slapping import tariffs on one of them wouldn't move the prices much thanks to competition, but surely would put serious pressure on the one select source country. Even the mere ability to do just that that would give USA some leverage in any trade negotiations. As things stand, introduction of small tariffs on imports from China would help manufacturing grow and flourish in competing countries, including inside USA. Also would put some brake to Chinese current policy of financing growth by huge credit. Let's not forget American manufacturing and services are already carrying nontrivial burden of indirect taxation by the regulation of environmental protection, workplace health&safety, and the likes. This indirect taxation is much lower in China, allowing it to manufacture at very low cost, to the detrimen of local environment, populace health etc. Basically a lot of externalities are unpaid for in China. An import tariff based off of at least a degree of (the missing) environmental protection could be palatable to Dems (including "progressives"), while being long term help to American economy (help move some manufacturing back to the States), temporary increase in prices of goods notwithstanding. tl;dr: currently China is the sole source of many consumer goods, and tariffs on chinese imports would tax consumers. If America had several alternative sources, tariffs on chinese imports would tax the chinese; with prices remaining low thanks to competing countries.
- pwinnski 10y ago
  How does the US make other countries compete with China? That is, how do we end up with several source countries split roughly equally, rather than the situation we have now? To consider the opposite, how have ended up so reliant on China, given that there are many other countries that would love to split the business?
  - HillaryBriss 10y ago
    right. that's just it. the center of mass of electronics manufacturing, and, yes, design too, is within China. even Japanese and Taiwanese electronics companies are having products created and manufactured in China. so, now, how does any other country really have the ability to do that work?

HillaryBriss 10y ago

if there was ever a president experienced at playing chicken with a large creditor and coming out alive, it's Trump. of course, giving the US a reputation for something resembling default probably won't be a good thing in the long run. and i'm sure there are ways any large creditor could "encourage" the election of US politicians which favor the return on capital above other priorities.

koolba 10y ago

I just had a shudder seeing a headline like this on HN. This is the crap you see on /r/politics. The article itself isn't that bad either but I guess even the Guardian has to compete with eye catching headlines now too.

mac01021 10y ago
What headline would you prefer? This one seems to me to accurately describe the thesis of the article.
- koolba 10y ago
  The contents vs. the headline aren't that off in this case but the general trend of phrasing all headlines in a gossip style is off-putting. If you replace the names and amounts in the headline with celebrities it reads like a Hollywood divorce article from the National Enquirer.

patrickg_zill 10y ago

If you owe the bank 10,000, you have a problem. If you owe the bank 1,000,000,000, they have a problem.

tree_of_item 10y ago
Yes, we read the article.
- devmunchies 10y ago
  no i didn't.

cylinder 10y ago

Default is not an option for the US. Most economic growth the last decade has been from deficit spending. State and local pensions are headed to catastrophic ends soon, and will need bailouts with federal dollars. Losing deficit spending would bring the US to its knees. This is all rubbish.