4 ms·

Looks like taxes can alter behavior after all. The "tariffs don't work" lie is now observably false. That it took Donald Trump to get companies to make their s

by User23 7y ago

Looks like taxes can alter behavior after all. The "tariffs don't work" lie is now observably false. That it took Donald Trump to get companies to make their supply lines less fragile is pretty depressing. Never rely on a single source for anything if you don't have to.

m463 7y ago
I know companies selling into China are at a disadvantage. Tesla is moving to build batteries/cars inside China because of China's huge tariffs.
- DiogenesKynikos 7y ago
  As I understand it, Tesla is building a factory in Shanghai because there's a massive market for Teslas in China, not because of tariffs. In fact, the original plan was to build the factory without a local partner, which would have meant that Tesla would have had to pay tariffs anyways. But after Tesla's decision, the Chinese government lifted joint-venture requirements in the auto industry, so Tesla won't have to pay tariffs after all.
sonnyblarney 7y ago
'Don't work' to do what? Damage trade? Nobody is going to claim that a 25% tariff won't destroy a trading relationship, of course it will. That's a monster tariff. It's big enough and wide enough it will have substantial effects if it's held. The issue is who actually wins, who loses, what are the after-effects etc.. All things considered, China will be the bigger loser here, but America doesn't stand much to gain, other than some overall strategic leverage. iPhone's won't be any cheaper, and Apple likely won't be making more money over this, rather, they'll possibly have a more resilient supply chain, and America will maintain more power in the ensuing balance. If anything 'the rest' of SE Asia is probably the winner in all of this. Which is fine. Edit: I should add, if 25% tariffs are maintained, all of America will soon start to see that hit them personally; there will be a material lift in consumer prices that will be noticeable even at the consumer level. I don't think it will be a 1970's OPEC shock, but we'll see it. It takes a long time to realign supply chains, and even then a lot of it is not very amenable to shifting away from China. It will be interesting to see what happens when this goes from an 'abstraction' to materially popping into people's lives. It's already hitting my business hard as we're scrambling to figure out what to do, and this reality will soon trickle into the lives of regular people. I actually do support some kind of trade re-negotiation with China, and the 25% tactic is in some ways a nice manoeuvre, the problem is, it might have to be a bluff because it's going to hit the economy very hard.
- DiogenesKynikos 7y ago
  Apple will probably actually end up losing a significant amount of money over this. They're likely to lose a lot of their market share in China, not because of any explicit government measures against them, but because Chinese people are getting angry at the American government's trade war against China, and will avoid prominent American brands. China has a massive internal market, similar in scale to the US or Europe, so losing out there is a significant blow to a company like Apple.
- rohit2412 7y ago
  > All things considered, China will be the bigger loser here, but America doesn't stand much to gain, other than some overall strategic leverage. That is what it has been about. Geopolitical dominance and leverage. Your statement is like "by preparing for Olympics America doesn't stand to gain much, except a few medals, global recognition of sporting prowess, and a healthy cultural of staying fit".
  - sonnyblarney 7y ago
    "Geopolitical dominance and leverage." ??? So America will be paying through the nose in hard dollars for a trade war with China ... ... so they can get what exactly what (?) from 'Geopolitical Dominance'? Where does the money come from exactly in some extra 'Geopolitical Dominance'? Cars? Better trade terms? Cheaper goods? Better IP? Your argument is upside down: The whole point of 'strategic dominance' is to be able to create value for citizens. Making citizens pay a 25% tariff for the hope of some future intangible return is basically ridiculous. The best outcome for America in this situation is a good trade deal with China. If neither the US or China blinks on this, it will be very damaging for both countries, net. There's nothing to be gained by either the US or China with a permanent trade war, it defies reason.
Despegar 7y ago
No one had any doubts that taxes or tariffs "work", corporations respond to incentives. If you want to get political about it, Apple's not going to be making their "big, beautiful plants" in the US [1]. [1] https://www.wsj.com/articles/trump-says-apple-ceo-has-promised-to-build-three-manufacturing-plants-in-u-s-1501012372 https://www.wsj.com/articles/trump-says-apple-ceo-has-promis...
- Cyclone_ 7y ago
  If it takes leverage away from China in negotiations, is that not a good thing for the US?
pertymcpert 7y ago
Did you read the article?
zaroth 7y ago
Trump was dealt a very strong hand given the global macroeconomic state, and he had no compunction about playing it to achieve nationalistic goals. It’s wading into ideological territory not best treaded on HN, but IMO tariffs are an important tool in the arsenal, and they are being used to good effect here. The upcoming G-20 summit will be an important data point on whether we are going to see a beneficial resolution soon. I think China is doing the math on whether a Democrat President will be less likely to wield the cudgel of tariffs so strongly, and if they can afford to wait it out, it would be much more effective if the tariffs were a bipartisan effort. Obviously that was never going to happen.
- rswail 7y ago
  I think the US will find that national economic responses from other nations will drive the response. The US may consume large amounts of the world's resources, but there are ample markets outside the US. These markets are growing rapidly and are open to Chinese investment. Tariffs on specific countries is a mercantilist, short sighted, zero sum policy. It is not backed by any reality, other than the effect of the Smoot-Hawley act in the 1930s. Tariffs on specific products to protect local industry, or subsidies to local industry have some economic sense in some circumstances, particularly as an aid to transition that industry. But Trump's manner and mechanism of trade policy has achieved very little other than froth. The USMCA is a rewarmed NAFTA, trade policy with the EU is stagnant, the US has withdrawn from APAC in terms of economic engagement. The world is moving on. The Emperor is naked.

by User23 7y ago

m463 7y ago

I know companies selling into China are at a disadvantage. Tesla is moving to build batteries/cars inside China because of China's huge tariffs.

DiogenesKynikos 7y ago
As I understand it, Tesla is building a factory in Shanghai because there's a massive market for Teslas in China, not because of tariffs. In fact, the original plan was to build the factory without a local partner, which would have meant that Tesla would have had to pay tariffs anyways. But after Tesla's decision, the Chinese government lifted joint-venture requirements in the auto industry, so Tesla won't have to pay tariffs after all.

sonnyblarney 7y ago

'Don't work' to do what? Damage trade? Nobody is going to claim that a 25% tariff won't destroy a trading relationship, of course it will. That's a monster tariff. It's big enough and wide enough it will have substantial effects if it's held. The issue is who actually wins, who loses, what are the after-effects etc.. All things considered, China will be the bigger loser here, but America doesn't stand much to gain, other than some overall strategic leverage. iPhone's won't be any cheaper, and Apple likely won't be making more money over this, rather, they'll possibly have a more resilient supply chain, and America will maintain more power in the ensuing balance. If anything 'the rest' of SE Asia is probably the winner in all of this. Which is fine. Edit: I should add, if 25% tariffs are maintained, all of America will soon start to see that hit them personally; there will be a material lift in consumer prices that will be noticeable even at the consumer level. I don't think it will be a 1970's OPEC shock, but we'll see it. It takes a long time to realign supply chains, and even then a lot of it is not very amenable to shifting away from China. It will be interesting to see what happens when this goes from an 'abstraction' to materially popping into people's lives. It's already hitting my business hard as we're scrambling to figure out what to do, and this reality will soon trickle into the lives of regular people. I actually do support some kind of trade re-negotiation with China, and the 25% tactic is in some ways a nice manoeuvre, the problem is, it might have to be a bluff because it's going to hit the economy very hard.

DiogenesKynikos 7y ago
Apple will probably actually end up losing a significant amount of money over this. They're likely to lose a lot of their market share in China, not because of any explicit government measures against them, but because Chinese people are getting angry at the American government's trade war against China, and will avoid prominent American brands. China has a massive internal market, similar in scale to the US or Europe, so losing out there is a significant blow to a company like Apple.
rohit2412 7y ago
> All things considered, China will be the bigger loser here, but America doesn't stand much to gain, other than some overall strategic leverage. That is what it has been about. Geopolitical dominance and leverage. Your statement is like "by preparing for Olympics America doesn't stand to gain much, except a few medals, global recognition of sporting prowess, and a healthy cultural of staying fit".
- sonnyblarney 7y ago
  "Geopolitical dominance and leverage." ??? So America will be paying through the nose in hard dollars for a trade war with China ... ... so they can get what exactly what (?) from 'Geopolitical Dominance'? Where does the money come from exactly in some extra 'Geopolitical Dominance'? Cars? Better trade terms? Cheaper goods? Better IP? Your argument is upside down: The whole point of 'strategic dominance' is to be able to create value for citizens. Making citizens pay a 25% tariff for the hope of some future intangible return is basically ridiculous. The best outcome for America in this situation is a good trade deal with China. If neither the US or China blinks on this, it will be very damaging for both countries, net. There's nothing to be gained by either the US or China with a permanent trade war, it defies reason.

Despegar 7y ago

No one had any doubts that taxes or tariffs "work", corporations respond to incentives. If you want to get political about it, Apple's not going to be making their "big, beautiful plants" in the US [1]. [1] https://www.wsj.com/articles/trump-says-apple-ceo-has-promised-to-build-three-manufacturing-plants-in-u-s-1501012372 https://www.wsj.com/articles/trump-says-apple-ceo-has-promis...

Cyclone_ 7y ago
If it takes leverage away from China in negotiations, is that not a good thing for the US?

pertymcpert 7y ago

Did you read the article?

zaroth 7y ago

Trump was dealt a very strong hand given the global macroeconomic state, and he had no compunction about playing it to achieve nationalistic goals. It’s wading into ideological territory not best treaded on HN, but IMO tariffs are an important tool in the arsenal, and they are being used to good effect here. The upcoming G-20 summit will be an important data point on whether we are going to see a beneficial resolution soon. I think China is doing the math on whether a Democrat President will be less likely to wield the cudgel of tariffs so strongly, and if they can afford to wait it out, it would be much more effective if the tariffs were a bipartisan effort. Obviously that was never going to happen.

rswail 7y ago
I think the US will find that national economic responses from other nations will drive the response. The US may consume large amounts of the world's resources, but there are ample markets outside the US. These markets are growing rapidly and are open to Chinese investment. Tariffs on specific countries is a mercantilist, short sighted, zero sum policy. It is not backed by any reality, other than the effect of the Smoot-Hawley act in the 1930s. Tariffs on specific products to protect local industry, or subsidies to local industry have some economic sense in some circumstances, particularly as an aid to transition that industry. But Trump's manner and mechanism of trade policy has achieved very little other than froth. The USMCA is a rewarmed NAFTA, trade policy with the EU is stagnant, the US has withdrawn from APAC in terms of economic engagement. The world is moving on. The Emperor is naked.