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To: Oscar in Batangas; BeauBo
YOU, the exporter, pay the duty upon arrival at port.

It takes seconds of research to show that this isn't true.

The US International Trade Administration says to companies wanting to export:

"The tariff, along with the other assessments, is collected at the time of customs clearance in the foreign port. Tariffs and taxes increase the cost of your product to the foreign buyer and may affect your competitiveness in the market."

Is the author lazy or dishonest?

Steel (25%) and Aluminum (10%) tariffs have been in place since 2017. 25% tariffs on $250 billion in Chinese imported goods has been in place since June 2018 (over a year). Yet the prices on those specific tariff goods has only gone up in the USA by 2% net upon arrival.

By the Administration's own admission the tariffs levied to date have been designed to not directly hit consumer goods. The costs are being borne by manufacturers and passed along to consumers, but the tariffed raw materials usually represent a small percentage of the total cost of the end consumer product.

The next round, however, is going to directly hit consumer goods which is why you see the market reaction that you do.

The difference between 25% tariff being paid by the exporter (china), and only 2% increase in price felt by the importer (U.S.) is the amount being offset by the exporter (China). In this example China is paying a 25% tariff and absorbing 23% to keep prices low.

Simplistic and wrong.

Some of the increase is being offset by a weaker yuan and some by Chinese exporters, but a lot is being absorbed by US manufacturers. Just look at the earning statements from Caterpillar, Deere, etc. Their costs for raw materials have gone up and they haven't been able to pass all of it along to consumers, hence lower earnings.

Trump’s goal is reciprocity; however, the EU and Asia, specifically China, don’t want to give up a decades-long multi-generational advantage.

So why kill TPP which made huge strides towards reciprocity for the participating members?

The analysis also completely ignores the billions in costs and disruption caused to US producers by China's retaliatory tariffs.

5 posted on 08/05/2019 7:53:31 AM PDT by semimojo
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To: semimojo

So far, China and Chinese businesses have absorbed the great bulk of the tariffs.

However we are just two months into the really serious tariffs , so we have yet to see for sure how they will work out in practice.

As you point out, this last big batch of tariffs (June 2019) were on intermediate goods, so there were more links in the chain to eat the added costs, before the final price to the consumer (although the numbers so far do show the Chinese side absorbing the great bulk). The next batch, starting in September, is going to be much more on finished goods for consumers, where costs would be expected to be passed more directly to consumers. Computer tablets and smartphones are expected to be hardest hit.

These new tariffs are expected to be more inflationary - but the other tariffs were widely expected to be more inflationary, than they have turned out to be so far. The Government can see in detail the data from the first two months of the quarter. The facts that Fed then cut rates, and the Administration went ahead with new tariffs, strongly indicates that the reports showed very little negative impact on US prices. Certainly the June reports, which have been publicized already, showed negligible inflation, below targets.

The inflationary effect of these new tariffs on consumer end goods however, should be strongly dampened by the fact that their level (10%), matches the recent devaluation of the Chinese currency. So largely, they should balance.

Another factor, is that these products have had a longer warning time, that tariffs were really coming. There has been a scramble to find alternate suppliers, and for suppliers to ramp up outside of China in preparation. It will have to be tested, to find out just how agile and prepared they are, overall.

I still expect that this new package of tariffs will be increased again around January, so that tariffs on China will be 25% across the board. I also think it likely that China will devalue its currency again to absorb most of it, probably going to eight to the dollar.

The relocation of production out of China should seriously pick up steam through the second half of this year. With that withdrawal will come increasing financial pressure throughout the Chinese economy and Government. The risk of things starting to break will grow. Next year, with 25% across the board tariffs, I expect to see some breaks, unless the communists cry uncle, and agree to a deal (which of course, they will intend to break as soon as possible, in every way possible). Knowing who he is dealing with, I doubt that the President really expects a fair deal, and is prepared to break the communist’s economy.

One serious risk, is that an implosion of the Chinese economy could drag down the global economy next year. That would particularly hurt their Asian neighbors, and would drag our growth rate down somewhat as well (but our Fed has more room to cut or inject liquidity than our major competitors do).

Foxconn’s cancellation this week, of the largest investment (almost $9 billion) in production facilities in the history of Guangdong Province (where the Shenzhen Special Economic Zone is located), indicates that the really major moves are beginning. There is a big supply chain associated with just that facility, which was supposed to open in just a few months.

Like moving production facilities out of China, preparing for a financial crisis in China is something that professionals have been discussing for years, as their imbalances have grown. So it will be far from a total surprise.


6 posted on 08/05/2019 9:28:02 AM PDT by BeauBo
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