Skip to comments.US tariffs on China jump
Posted on 05/09/2019 10:09:09 PM PDT by BeauBo
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Pleases me no end that companies who’ve brushed off almost three years of Trump saying this was coming will pay the most.
3 years isn’t a long time to change suppliers, but it’s not an undue hardship either.
China vows ‘necessary countermeasures’ against Trump tariff hike
I disagree, but thanks for your response.
Hate to sound wishy-wasgy but tonight’s markets are acting like this will all be smoothed out over the weekend.
Like Trump and Xi acting tough but have a deal in hand...
Guess we’ll see Monday.
We all should care about the health of 401k's. And yes, it is about the fight for our Republic. A market crash like any in the past doesn't help the public at large. And a big enough crash like that in 1929 is overwhelming to the country.
I support Trumps actions so far, but we must not go scorched earth....it will bite us too.
It's all even more interconnected and dependent than before.
[US Treasuries serve like their dollar-based checking and savings accounts. They hold them largely because they have to, not to keep a sort of hostage.]
Inertia, and the size of the Chinese market (#2 or #3 in the world for many products) combined with high Chinese tariffs on imports is why they continue to have plants there. Once US tariffs hit 25%, they will probably build plants elsewhere just for the US market. And over time, they will move all of their production not intended for the Chinese market outside of China, because neighboring countries (with the exception of Malaysia, Taiwan, South Korea, Japan and Singapore) and most of Latin America now have lower land and labor costs than China.
Since only 20% of Apple’s sales, but 100% of its production is currently in China, any move by Apple to establish plants outside of China will drop Foxconn’s Apple-related headcount in China by ~80%. That’s a big hit, given that a good chunk of Foxconn’s 1m Chinese employees work on Apple production. Multiply that hundreds of other Fortune 500 US companies, and China is looking at an exodus of millions of export-related jobs. Given that export-related jobs have far better pay packages than purely Chinese domestic industries, the Chinese economy would likely take a serious hit.
A lot of European companies are in the same position. They are 100% in China because of inertia, even though Chinese costs have increased in leaps and bounds over the past 3 decades. In total, dollar-wise, their production volumes in China are probably similar to the US. They, too, will move US-bound production outside of China, and probably production not intended for the Chinese market entirely out of China. So the Chinese are facing a double-whammy.
And I haven’t even included everyone else that also manufactures in China, including Chinese export companies, whose owners have the added incentive of getting their capital out of the clutches of the Party. With 25% tariffs, they now have a genuine excuse to bypass the current Chinese government restrictions on transferring money outside of China that no party honcho can ignore, along the lines of “Let me move my plant to the Philippines, or I will shut my doors, because my net profit is 5%. I can’t eat a 25% tariff. People who make stuff outside of China will eat my lunch on contract bids”.
[I support Trumps actions so far, but we must not go scorched earth....it will bite us too.
It’s all even more interconnected and dependent than before. ]
Again, #### em.
Well, your 401K is far more important than the future of our country...
Look for domestic food prices to drop. It will hurt farmers. But, that means conglomerates like ADM on Wall Street today.
Trump is not fucking around. He was 100% honest when he was saying China would wait him out for Biden. Trump is simply going ratchet the pressure up so much the Chinese cannot afford to wait.
They jump, but already Trump has tweeted that he’ll grant waivers. So to be seen how much of it gets held to.
Great post. The original argument comes from the Glenn Beck school of the scare. Specifically, China will crash our markets with a flood of US dollars. Best rebuttal I have seen online.
China needs the money to sponsor North Korea's activities on the open market.
According to the Wise Honest criminal complaint, it shows that "pls be advised we can only pay in RMB." When Individual-1 objected to payment in RMB, Kwon responded, "We will find someone who can arrange remittance in US dollars."
Page 23 paragraph a
Foxconn is well down the road of moving their Apple production to India - even moving some LCD screen production to Wisconsin.
Back in 2017, their CEO said that moving production was their highest priority. The preparation has been going on in earnest for two years, which is really going to magnify the effectiveness of these sanctions.
“I disagree, but thanks for your response.”
Well at you can take take heart that tariffs on China doubled today, so it was a good day at least.
I really think that the tariffs are just one element of a well planned campaign, to get the US supply chain out of communist China.
We can expect whatever effect the earlier sanctions have had, to be increased.
“Trump is simply going ratchet the pressure up so much the Chinese cannot afford to wait.”
Once the tariffs are in place, time and inertia are on our side.
They can't recall it. All they can do is sell it, and dumping a large amount of Treasuries into the market all at once would certainly do damage.
“They could recall the US debt we have to them. That would do some damage. “
Wasn’t there a movie about this in the early 70’s called, “Rollover”?
The Chinese Government has set up powerful capabilities to manipulate and prop up their markets since 2016.
We can expect that they have a hundred billion dollars ready to flood in as a prop, and can efficiently target it for effect.
So its hard to time the actual dip, because it is not really
a free market. But the the underlying economic reality is that business valuations should be adjusted downward over there, because they will be losing business volume.
If the Government artificially props up valuations now (likely), and more tariffs hit later, they might have an even bigger drop at some point later, to adjust to reality.
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