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International News Title: Here Is How China Is Really 'Paying' For Tariffs President Trump says China tariffs have given the U.S. government billions of dollars in new revenue. He's half right. Of course, higher tariffs on Chinese imports are a new revenue stream for the government. But China is not paying for it, U.S. companies are. Everyone knows that. American consumers might be next to pay the price, as Walmart executive said recently. But in a roundabout way, China is "paying" for tariffs. They are not paying the port duties, but they are paying the price in this trade war in more ways than one. Barclays Capital expects a one percentage point drop in China's GDP if Trump makes good on his promise to tax everything China sells to the U.S. at a rate of 25%. That takes China's GDP below 6%, its lowest GDP since opening up its economy 40 years ago. By comparison, the U.S. gets around 30 basis points cut from GDP; three times less than a more export-dependent China. Some China manufacturers are lowering prices to help their American clients pay for their orders now that the cost of doing business with them has gone up. Others are moving lower-skilled, labor-intensive manufacturing to Vietnam, Bangladesh, Malaysia, and India. That's a cost of blue-collar labor for China, a country that wants to move up the value chain and make microchips and develop code for video games. Odds that the stitch-and-sew factory worker can do that are slim. The other way China is paying for the trade war is (possibly) losing its role as the go-to nation in the global supply chain. Talk to an American company sourcing parts in China and you will hear the same thing: it's hard to get that kind of economy of scale and pricing elsewhere so quickly...but I'm looking for it! They are incredibly frustrated and looking for options. Moving out of China is one of them. Some of the impacts of tariffs will be offset by a weaker Chinese yuan. If China's currency was to become 25% cheaper to zero out tariffs, the yuan would need to depreciate to 8. A yuan at 8 is unlikely. Some Chinese manufacturers will pay more for the trade war than others. If Chinese toys are expensive, then U.S. importers will look into alternate sources of supply. In anticipation of substitution effects by their American partners, more Chinese manufacturers are seen eating into their margins and lower their prices. In the overall scheme of things, it looks like Chinese exporters can absorb all of an estimated $75 billion to $100 billion in higher costs due to tariffs. China's GDP expanded by $1.3 trillion last year. "It is the second order impact that can make trade wars significantly worse. Deteriorating business confidence and tighter financial conditions can lead to both corporates and households pulling back," says Barclays economists led by Ajay Rajadhyaksha in New York and Jian Chang in Hong Kong. Over time, these indirect effects can dwarf the impact of higher port duties, BarCap economists wrote in a note to clients this week. China is not expected to tighten monetary policy. Meanwhile, China-sourced U.S. corporate revenue is estimated at $300 billion per annum or roughly 2% of total U.S. business revenue. Besides paying the price for trade wars at the port, U.S. companies may also pay for it on the NYSE. Especially the big ones that rely on China for manufacturing and sales, like Apple. "A tariff war could have an outsized effect on equity valuations relative to the macroeconomic effect, given that the bulk of the China exposure is with large multinationals," says Brian McCarthy, chief strategist for Macrolens, an investment research firm in Stamford, Conn. "Some stocks may have embedded expectations of Chinese consumption growth that will now be discounted. If the macroeconomy does not dislocate, there is no reason U.S. equities should," he says. So far that has been the case with the market rising again on Thursday thanks to solid manufacturing data and corporate earnings. Markets were relatively flat here as of late afternoon Friday. "The short-term impact on China's economy may be amplified if higher tariffs weaken confidence and reduce spending by firms and households," says Paul Gruenwald, chief global economist for S&P Global Ratings. The Hang Seng settled 1.18% lower on Friday in Hong Kong. Manufacturing investment growth in sectors exposed to tariffs, like computer hardware, started the year weaker. Lower investment would mean a big short-term hit to the economy, says Gruenwald. Manufacturing accounts for about 30% of total fixed asset investment in China and an estimated 15%-20% of GDP. If manufacturing investment growth fell to just under 3% over the next 12 months it would shave even more off China's GDP. "It seems fair to say that the longer tariffs continue, the greater the cumulative negative effect on the Chinese economy," says Rajadhyaksha. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
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China Is Paying for Most of Trump's Trade War, Research Says
If America buys even ONE DOLLAR more of chink shit, versus how much the chinks buy American goods, and any person on this forum doesn’t wanna fight to EVEN that up, then that person is a chink loving, America hating traitor shithead. Like every socialist democrat... and the LIBERALtarian Dicktards, that fault Trump for evening the playing field.
The answer is simple. Buy American. I realize that things will be hairy for a time, but when American business starts to proliferate, we will win this war. I don't need Chinese made trinkets. Their quality is pathetic. American products used to last forever. I once had a coffee maker for 15 years! I sold it at a yard sale because I was sick of looking at it. Simple truth. It still worked. I want to buy American made clothing for the same reasons. They were well made and of good quality. They were also affordable. Now, clothing falls apart after 1 wash, and the price is not commensurate. Paying top dollar for cheaply made clothing is frustrating. Very frustrating. I'll make due until US manufacturing starts up again. Sick of paying for an absolute garbage product made in China.
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