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China export will decline significantly after companies finish their move out of China due to the tariffs. no one is going to stay when tariff rates starts at

• crdoconnor 8y ago
  Clothing/shoes are right at the bottom of the value chain. China was losing them already to Bangladesh and Vietnam and doesn't care. All you need for that is dirt cheap labor and a container port. It's not a strategic industry. The higher value stuff is not going to move though. If America severs the tech supply chain we're not going to see manufacturing suddenly move to the US, we're going to see skyrocketing inflation in hi tech goods. That is, until such time the US can build up a manufacturing ecosystem equivalent to the pearl river delta, which will take years.
  • gotdangloch 8y ago
    > The higher value stuff is not going to move though you mean like foxconn $10b display panel factory in wisconsin? groundbreaking this month? https://www.jsonline.com/story/money/real-estate/commercial/2018/05/11/foxconn-schedules-june-28-groundbreaking-ceremony-mount-pleasant/601626002/ https://www.jsonline.com/story/money/real-estate/commercial/... or apple's manufacturing investment in US https://www.apple.com/newsroom/2018/01/apple-accelerates-us-investment-and-job-creation/ https://www.apple.com/newsroom/2018/01/apple-accelerates-us-... or boeing/bmw automation in US? https://www.postandcourier.com/business/south-carolina-manufacturers-among-nation-s-leaders-in-using-robot/article_3023b708-8286-11e7-838a-bbd8288760e4.html https://www.postandcourier.com/business/south-carolina-manuf...
    • Bluestrike2 8y ago
      None of those are mutually exclusive. The US has a great deal of heavily-automated manufacturing facilities. That's not expected to change. But nor does anybody expect the US to try and recreate the electronics supply chain domestically. The parent comment's phrase "higher value stuff" is referring to higher-value Chinese exports. Focusing on electronics, for example, the majority of hard drives are produced in China and Thailand. And while Foxconn is building a $10bn display panel factory in Wisconsin, that's basically a drop in the bucket compared to electronics components manufactured in China and other Asian nations. More importantly, that display facility relies on a supply chain that's heavily dependent on Chinese (and Asian in general) components and raw materials. As are many of the components in the robots and hardware used by automated American factories. It'd take a truly mind-boggling level of investment to recreate the industry supporting that supply chain in the United States with very little hope of being competitive if that's what someone is hoping for. And while protectionist policy could be used to help shift that analysis, it'd need to be draconian enough that the Smoot-Hawley Tariff Act of 1930 would look positively minor. Because building new factories (and the factories to support those factories) can take years, you wind up with a multi-year transition period at best (more realistically, decades). That's a multi-year period where electronic component costs skyrocket and affect every single aspect of the American economy. All so that, in the end, we can pay significantly higher prices for those components. In terms of economic policy, it'd be less damaging to take the equivalent investment, printing it out as cash, and using it for the world's largest bonfire. As for the clothing industry, that's a transition that economists fully expected. The thing about developing countries is that--at first--you've got lots of cheap, unskilled labor. Clothing and textiles are two of the industries that are all but tailor-made for a comparative advantage in that scenario. You use that cheap labor and foreign investment to industrialize, build up infrastructure, and pour every dollar you can into education programs. Eventually, that means you're going to lose your comparative advantage in certain industries. This is a bit of a simplistic overview, but the point is that losing certain clothing exports isn't necessarily a bad thing in itself for China.
    • crdoconnor 8y ago
      IIRC Foxconn built the Wisconsin factory was symbolic and kind of built almost as a favor. They even changed the ground-breaking date to accommodate Trump being there. Point being that no, I don't think one $10 billion plant is indicative of any real kind of economic shift, any more than $5 billion spent by Apple on factories is turning the tide of manufacturing offshoring. The Pearl River Delta has an enormous ecosystem of factories, companies and deeply interconnected supply chains valued in the trillions and both this factory and anything Apple build will be heavily reliant upon it for components, whereas vice versa is not the case.
• throwaway5752 8y ago
  You're a new account and you've only ever commented on this post, so I don't think you're really communicating with goodwill. But people reading you should understand that companies don't locate production in China for low cost reasons, they do it as to gain access to the consumer market. If a company has to choose between the next 25 years of the US consumer market or the Chinese consumer market, then you will be disappointed to see their decisions if you are assuming tariffs will have the desired effect.
  • gotdangloch 8y ago
    >But people reading you should understand that companies don't locate production in China for low cost reasons, they do it as to gain access to the consumer market. "the share of Nike shoes made in China fell off a cliff, going from 32 percent in 2012 to 19 percent in 2017."
    • throwaway5752 8y ago
      Did you read your own link? It undercuts all the points you're making. They make a bunch of shoes there still (it's not clear if they've even reduced Chinese production or moved new capacity to Vietnam) and they are moving further up the value chain to luxury shoe production. And the reason for the move (increasing wages) means more consumption and more capacity for consumer deleveraging.