5 ms·

Can someone explain in plain English what the actual consequence of this will be?

village-idiot 8y ago
Goods that are purchased from China will rise in price. If China decides to retaliate, and they will, anyone who sells to China will see sales drop and losses pile up. Since the Chinese are likely to target based on American politics (think rural red states), the US government will probably step in and offer emergency loans or cash if it gets bad enough, pushing US deficits higher. There will also be some strange third order effects for Europe and other trading partners, but it’s beyond my skill with economics.
- cdash 8y ago
  China will quickly run out of American exports that they can selectively (politically) tariff. In fact, they will eventually run out of ANY goods that they can tariff that are not already already tariffed much before the US does due the huge trade imbalance.
  - NTDF9 8y ago
    But the US has a trade surplus over China in Services exports into China. Presumably those will get tariffed. Also, US made products that relied on chinese intermediate products will go up in price, passed on to consumers. Those same US products will not be export competitive in other countries (because input costs increased with tariffs) and thus China can now export to places that US used to export to. Trade is not that simple and usually needs negotiations to be win-win.
    - WillPostForFood 8y ago
      In 2017 the US had a $40 billion trade surplus in services, and a $375 billion trade deficit in goods.
    - cinquemb 8y ago
      "Goods exports totaled $129.9 billion; goods imports totaled $505.5 billion. The U.S. goods trade deficit with China was $375.6 billion in 2017." "Trade in services with China (exports and imports) totaled an estimated $75.0 billion in 2017. Services exports were $57.6 billion; services imports were $17.4 billion. The U.S. services trade surplus with China was $40.2 billion in 2017."[0] Seems to be an order of magnitude of difference, setting aside possible tariff rates. [0] https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china https://ustr.gov/countries-regions/china-mongolia-taiwan/peo...
      - NTDF9 8y ago
        And after the tariffs what do you expect will happen to goods and services going from the US to China?
        cinquemb 8y ago
        I expect prices to go up (across the board on such goods) in China, and US companies who are more price sensitive will get hit harder on their upcoming 10k's than others, predictably.
  - village-idiot 8y ago
    It’s unclear to me how solid the Chinese economic position actually is. It’s possible that their high debt load will mean that they have to fold very quickly. On the other hand, as an authoritarian regime they can handle much more political pain. You have to hurt China badly enough for them to fear revolution before politics alone will break them. In the other direction, all China has to do is make republicans deeply unpopular before the next election. This would reinforce democratic chances, and increase the likelihood of Congress putting a stop to this whole trade war.
  - cannabisceo 8y ago
    China has threatened to start export controls on raw materials used by US manufacturers. Three trade war is complex.
  - Slartie 8y ago
    And the US will quickly run out of goods that they can selectively tariff that will not immediately and harshly hurt the broad public in a clearly visible way. You already see that in this recent round - Apple gadgets being exempted from the tax is not a random coincidence. The problem is: the entire US consumer population is addicted to electronics, and the only place where modern consumer electronics can be manufactured at scale today is China. Not because of cheap labor (there are actually way cheaper places today), but because the complex production chains necessary to even get all the parts to a single place for final assembly are all door-by-door in places like Shenzhen. Even if there was a serious intent to move these production chains to the US to escape tariffs, it will take multiple decades to do so and will require extremely high up-front investments. And nobody will start such an endeavor during a phase of special tariffs put in place by a president basically for personal reasons, without serious support even from his own party - a president that will eventually stumble over its own foolishness and thus probably not even reach the end of his theoretical 8-year "lifespan" (which, again, would not suffice when we're talking about a process that spans decades). So, effectively, the US presidents' capability to impose tariffs end when he arrives at consumer electronics goods. Because his reality distortion field is not capable of making his followers just accept prices of iPhones, Apple Watches, TVs and countless other "Made in China" gadgets to rise by 25%. The good thing about a bunch of mindless zealots on Twitter and Facebook is, after all, that they hugely depend on smartphones, computers and cheap plastic routers, and the good thing about Fox News addicts is that they can't watch Fox News without a TV set.
    - cinquemb 8y ago
      Idk, I see it hard for there to be riots in the street because electronics go up a bit, unless one subscribes to the Jamie Dimon's train of thought: “‘It’s not right to say we’re worse off,’ Dimon said [last September 17] at an event in Detroit in response to a question about declining median income. ‘If you go back 20 years ago, cars were worse, health was worse, you didn’t live as long, the air was worse. People didn’t have iPhones.’”[0] Though I do see it being a bloodbath on the stock market (that significant portion of adults have 0 exposure to compared to the wealthy) if iPhones become non exempt, possibly a ringing bell for market top (ignoring that unit sales have already been declining since 2015) of this 10 year bull market and experiment with ZLB interest rates. [0] https://www.counterpunch.org/2016/01/29/let-them-eat-iphones/ https://www.counterpunch.org/2016/01/29/let-them-eat-iphones...
- pizza 8y ago
  One example of this is the Trump administration recently giving $4.7B in welfare to soybean farmers, as China raised tariffs on soybeans, something which the US exports to them - that, and farmers being part of Trump's electorate https://www.reuters.com/article/us-global-markets/new-u-s-tariff-threat-on-chinese-goods-hits-stocks-dollar-idUSKCN1LX00P https://www.reuters.com/article/us-global-markets/new-u-s-ta...
TangoTrotFox 8y ago
The goal of the tariffs is to make Chinese produced products less competitive against American produced products. For instance you sell widgets. You can take advantage of abysmal labor conditions in China to have these widgets manufactured and produced for $70 there. Or you can have them produced in America by laborers who work in much more pleasant conditions and are legally obligated to higher wages for $100. For a company that's just interested in maximizing their bottom line, it's not much of a decision. But then imagine tariffs suddenly mean the costs become comparable. Now you have a strong economic incentive to use American labor. Completely free trade sounds great on paper, but in reality it basically just ends up rewarding the lowest common denominators of the world in labor conditions. $1000 iPhones are produced in factories in China where each worker earns several dollars per day and live in on-site dormitories literally surrounded by so-called 'suicide nets' to try to deter impulsive suicides caused from both living and working in such conditions. In the US we'd never accept such conditions, yet in the process of trying to improve the standard of labor in the US we ended up causing companies to simply fire their American workers, and then shift all their labor overseas -- sending trillions of dollars in incentives to the countries with the worst labor standards on this planet. That this hasn't been as much of a political issue to now emphasizes how much both parties in establishment politics are indentured to corporate interests.
- golangnews 8y ago
  You seem to assume China will not retaliate, but they already have.
  - cinquemb 8y ago
    Even if China retaliates (more than they already have), their economy is way more dependent on physical exports to the US than the reverse. I see more downside risks being exposed to EM than US markets… though I do see US markets catching up soon, esp companies with large exposure to EM revenue flows. This has been a good year to be short EM and swing in and out of volatility.
  - TangoTrotFox 8y ago
    We are currently running a $375 billion dollar trade deficit with China. That means each year they receive a net gain of $375 billion in trade with us. And ironically the Chinese already had disproportionate tariffs against numerous American exports. A handy tool on Google is search by date range (wish DDG had this). Search for 'Chinese tariffs' on google with a date range of 2000-2015. You'll find articles such as this [1] referencing China's minimum 25% import tariff on American vehicles contrasted against 5% from the US. Or articles such as this [2] which I will leave without further comment, since that's an entirely different topic... [1] - https://www.forbes.com/sites/baizhuchen/2012/07/12/tear-down-this-wall-the-chinese-tariff-wall https://www.forbes.com/sites/baizhuchen/2012/07/12/tear-down... [2] - https://www.greentechmedia.com/articles/read/commerce-department-hits-chinese-panel-makers-with-higher-tariffs https://www.greentechmedia.com/articles/read/commerce-depart...

Goods that are purchased from China will rise in price. If China decides to retaliate, and they will, anyone who sells to China will see sales drop and losses pile up. Since the Chinese are likely to target based on American politics (think rural red states), the US government will probably step in and offer emergency loans or cash if it gets bad enough, pushing US deficits higher. There will also be some strange third order effects for Europe and other trading partners, but it’s beyond my skill with economics.

cdash 8y ago
China will quickly run out of American exports that they can selectively (politically) tariff. In fact, they will eventually run out of ANY goods that they can tariff that are not already already tariffed much before the US does due the huge trade imbalance.
- NTDF9 8y ago
  But the US has a trade surplus over China in Services exports into China. Presumably those will get tariffed. Also, US made products that relied on chinese intermediate products will go up in price, passed on to consumers. Those same US products will not be export competitive in other countries (because input costs increased with tariffs) and thus China can now export to places that US used to export to. Trade is not that simple and usually needs negotiations to be win-win.
  - WillPostForFood 8y ago
    In 2017 the US had a $40 billion trade surplus in services, and a $375 billion trade deficit in goods.
  - cinquemb 8y ago
    "Goods exports totaled $129.9 billion; goods imports totaled $505.5 billion. The U.S. goods trade deficit with China was $375.6 billion in 2017." "Trade in services with China (exports and imports) totaled an estimated $75.0 billion in 2017. Services exports were $57.6 billion; services imports were $17.4 billion. The U.S. services trade surplus with China was $40.2 billion in 2017."[0] Seems to be an order of magnitude of difference, setting aside possible tariff rates. [0] https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china https://ustr.gov/countries-regions/china-mongolia-taiwan/peo...
    - NTDF9 8y ago
      And after the tariffs what do you expect will happen to goods and services going from the US to China?
      - cinquemb 8y ago
        I expect prices to go up (across the board on such goods) in China, and US companies who are more price sensitive will get hit harder on their upcoming 10k's than others, predictably.
- village-idiot 8y ago
  It’s unclear to me how solid the Chinese economic position actually is. It’s possible that their high debt load will mean that they have to fold very quickly. On the other hand, as an authoritarian regime they can handle much more political pain. You have to hurt China badly enough for them to fear revolution before politics alone will break them. In the other direction, all China has to do is make republicans deeply unpopular before the next election. This would reinforce democratic chances, and increase the likelihood of Congress putting a stop to this whole trade war.
- cannabisceo 8y ago
  China has threatened to start export controls on raw materials used by US manufacturers. Three trade war is complex.
- Slartie 8y ago
  And the US will quickly run out of goods that they can selectively tariff that will not immediately and harshly hurt the broad public in a clearly visible way. You already see that in this recent round - Apple gadgets being exempted from the tax is not a random coincidence. The problem is: the entire US consumer population is addicted to electronics, and the only place where modern consumer electronics can be manufactured at scale today is China. Not because of cheap labor (there are actually way cheaper places today), but because the complex production chains necessary to even get all the parts to a single place for final assembly are all door-by-door in places like Shenzhen. Even if there was a serious intent to move these production chains to the US to escape tariffs, it will take multiple decades to do so and will require extremely high up-front investments. And nobody will start such an endeavor during a phase of special tariffs put in place by a president basically for personal reasons, without serious support even from his own party - a president that will eventually stumble over its own foolishness and thus probably not even reach the end of his theoretical 8-year "lifespan" (which, again, would not suffice when we're talking about a process that spans decades). So, effectively, the US presidents' capability to impose tariffs end when he arrives at consumer electronics goods. Because his reality distortion field is not capable of making his followers just accept prices of iPhones, Apple Watches, TVs and countless other "Made in China" gadgets to rise by 25%. The good thing about a bunch of mindless zealots on Twitter and Facebook is, after all, that they hugely depend on smartphones, computers and cheap plastic routers, and the good thing about Fox News addicts is that they can't watch Fox News without a TV set.
  - cinquemb 8y ago
    Idk, I see it hard for there to be riots in the street because electronics go up a bit, unless one subscribes to the Jamie Dimon's train of thought: “‘It’s not right to say we’re worse off,’ Dimon said [last September 17] at an event in Detroit in response to a question about declining median income. ‘If you go back 20 years ago, cars were worse, health was worse, you didn’t live as long, the air was worse. People didn’t have iPhones.’”[0] Though I do see it being a bloodbath on the stock market (that significant portion of adults have 0 exposure to compared to the wealthy) if iPhones become non exempt, possibly a ringing bell for market top (ignoring that unit sales have already been declining since 2015) of this 10 year bull market and experiment with ZLB interest rates. [0] https://www.counterpunch.org/2016/01/29/let-them-eat-iphones/ https://www.counterpunch.org/2016/01/29/let-them-eat-iphones...
pizza 8y ago
One example of this is the Trump administration recently giving $4.7B in welfare to soybean farmers, as China raised tariffs on soybeans, something which the US exports to them - that, and farmers being part of Trump's electorate https://www.reuters.com/article/us-global-markets/new-u-s-tariff-threat-on-chinese-goods-hits-stocks-dollar-idUSKCN1LX00P https://www.reuters.com/article/us-global-markets/new-u-s-ta...

TangoTrotFox 8y ago

The goal of the tariffs is to make Chinese produced products less competitive against American produced products. For instance you sell widgets. You can take advantage of abysmal labor conditions in China to have these widgets manufactured and produced for $70 there. Or you can have them produced in America by laborers who work in much more pleasant conditions and are legally obligated to higher wages for $100. For a company that's just interested in maximizing their bottom line, it's not much of a decision. But then imagine tariffs suddenly mean the costs become comparable. Now you have a strong economic incentive to use American labor. Completely free trade sounds great on paper, but in reality it basically just ends up rewarding the lowest common denominators of the world in labor conditions. $1000 iPhones are produced in factories in China where each worker earns several dollars per day and live in on-site dormitories literally surrounded by so-called 'suicide nets' to try to deter impulsive suicides caused from both living and working in such conditions. In the US we'd never accept such conditions, yet in the process of trying to improve the standard of labor in the US we ended up causing companies to simply fire their American workers, and then shift all their labor overseas -- sending trillions of dollars in incentives to the countries with the worst labor standards on this planet. That this hasn't been as much of a political issue to now emphasizes how much both parties in establishment politics are indentured to corporate interests.

golangnews 8y ago
You seem to assume China will not retaliate, but they already have.
- cinquemb 8y ago
  Even if China retaliates (more than they already have), their economy is way more dependent on physical exports to the US than the reverse. I see more downside risks being exposed to EM than US markets… though I do see US markets catching up soon, esp companies with large exposure to EM revenue flows. This has been a good year to be short EM and swing in and out of volatility.
- TangoTrotFox 8y ago
  We are currently running a $375 billion dollar trade deficit with China. That means each year they receive a net gain of $375 billion in trade with us. And ironically the Chinese already had disproportionate tariffs against numerous American exports. A handy tool on Google is search by date range (wish DDG had this). Search for 'Chinese tariffs' on google with a date range of 2000-2015. You'll find articles such as this [1] referencing China's minimum 25% import tariff on American vehicles contrasted against 5% from the US. Or articles such as this [2] which I will leave without further comment, since that's an entirely different topic... [1] - https://www.forbes.com/sites/baizhuchen/2012/07/12/tear-down-this-wall-the-chinese-tariff-wall https://www.forbes.com/sites/baizhuchen/2012/07/12/tear-down... [2] - https://www.greentechmedia.com/articles/read/commerce-department-hits-chinese-panel-makers-with-higher-tariffs https://www.greentechmedia.com/articles/read/commerce-depart...