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Who would pay for Trump’s tariff hike? If the Trump administration follows through with its plan to hike tariffs on $200 billion worth of Chinese imports at midnight Friday, it would likely hurt not only China’s economy but American consumers and businesses, too. Multiple studies show the tariffs the U.S. imposed last year on $250 billion worth of Chinese goods, plus the retaliatory tariffs China has put on $101 billion worth of U.S. goods, have led to price increases, reduced the availability of some products and forced businesses to seek alternative suppliers. President Donald Trump is threatening now to increase existing tariffs on goods ranging from seafood to handbags from 10% to 25% if China does not agree to its demands during trade talks Thursday in Washington. Trump said Thursday his administration is also starting the paperwork to impose tariffs on an additional $325,000 worth of Chinese products. The idea: leverage more pressure on China to agree to a deal that the two countries have been negotiating for months. “We’re the piggy bank that everyone steals from,” Trump said at a news conference on his efforts to reduce prescription drug prices Thursday, claiming that under his presidency, “we’re going to be taking in more money than we’ve ever taken in.” But any increased revenue is not likely to come from China if current trends continue. Instead, it’s more likely to come from U.S. customers and companies, economists say. And any retaliatory tariffs China imposes could have larger ripple effects throughout the U.S. and global economy. How tariffs affect prices and supply chains When the U.S. puts tariffs on Chinese imports, the theory is that Chinese firms will reduce the price of their products to stay competitive. But so far, that has not happened, possibly because international orders are placed months in advance and the tariffs haven’t been in place long enough to renegotiate prices. Plus, businesses might be waiting to see if the trade dispute is resolved before they make any major adjustments to their models, said Oleg Itskhoki, an economics and international affairs professor at Princeton University. That leaves U.S. retailers to decide between three options: absorb the cost of the tax, pass it along to consumers, or search for an alternative supplier from a country other than China. “In the short run, American consumers bear the cost of the tariffs.” The last option could hurt China’s economy as U.S. companies take their business elsewhere, but it also comes with higher costs for American firms because it is not cheap to find new suppliers, plus domestic producers, as well as those from other countries, often raise their prices because they know customers have few other options. Recent studies indicate businesses are not absorbing the cost. “In the short run, American consumers bear the cost of the tariffs,” Itskhoki said. But American businesses are still being hit in another way — by the retaliatory tariffs China has put on U.S. exports. Because of the tariffs, some Chinese importers are not buying U.S. products and are instead doing business with suppliers from other nations, as they have with soybeans. That means U.S. producers are losing out on valuable income, especially if they cannot find other buyers for their goods. U.S. farmers and other manufacturers could reduce prices to try to compete with other nations, but many of them are already operating on thin profit margins. If they reduced prices further, they could go out of business. What do we know about how much existing tariffs have cost? Trump’s tariff increase would generate an estimated $30 billion worth of taxes on Chinese goods a year. It’s one of the reasons Trump has claimed tariffs are boosting the U.S. economy, but the Tax Foundation, a Washington-based think tank, estimates the current tariffs on Chinese goods will reduce U.S. GDP long-term by $30 billion. Additional tariffs as proposed by Trump could drop GDP by at least another $15 billion, according to the group’s analysis. That doesn’t include other tariffs the Trump administration has imposed on other countries as a negotiating tactic, including an across-the-board tariffs on steel and aluminum. This week, the Trump administration announced it would impose a 17.5 percent tariff on imported Mexican tomatoes because it says Mexico is conducting unfair trade practices. Some specific industries, such as aluminum manufacturers, have benefited from the tariffs. But that has come at a cost to U.S. customers who have to pay higher prices. By October and November 2018, tariffs on China and other countries cost U.S. consumers and businesses $4.4 billion a month, according to a recent study by researchers from the Federal Reserve Bank of New York, Princeton University and Columbia University. Of that, the federal government recouped about $3 billion in import taxes. But about $1.4 billion was lost entirely because tariffs make the economy less efficient–consumers might be buying fewer goods, for example, but they are paying more overall because of the price hike. The $1.4 billion loss amounts to an annual cost of about $133 per household, according to the researchers. Looking at the Consumer Price Index, which measures the cost of consumer goods such as food and clothing, the researchers found the prices on products subject to the tariffs increased between 10 percent and 30 percent after the tariffs were implemented. If tariffs rise further, as Trump has proposed, consumers are likely to see prices increase again. Much of that price increase comes from tariffs the U.S. puts on goods from China, which make up the heftiest tariffs, as opposed to the retaliatory tariffs China has imposed on U.S. goods. Who suffers the most? Areas with high concentrations of agriculture and metal production are most at risk of feeling the negative effects of tariffs. Those industries have been singled out in the tariffs Trump imposed on steel and aluminum, as well as by China, which imports a large amount of U.S. agricultural products. By sheer number, regional metropolitan centers such as Chicago and Dallas export the most products that are affected by tariffs, but in rural areas a larger share of the economy is affected, according to a study published in October 2018 by the Brookings Institution, a Washington-based think tank. Counties that voted for Trump in 2016 are twice as likely to be affected by the trade battle with China than those that voted for Hillary Clinton, the research also finds. That’s because Trump won a number of rural counties whose economies depend heavily on certain goods, such as agricultural products, that are included in China’s retaliatory tariffs That observation is backed up by a study conducted by four academic researchers and released earlier this year. They found workers in “heavily Republican counties were the most negatively affected by the trade war.” Trump’s base seems to be sticking by him when it comes to his stance toward China, but the views held by all Americans are more complex. In September, only 42 percent of Americans said they thought the trade war with China was good for jobs, according to an Axios poll. But the percent of Americans’ who have a favorable view of China has also dropped significantly since the tariffs went into place. Fear of the unknown In addition to the more immediate effects, a trade battle injects unpredictability into the economy that can cause many businesses to rethink their long-term investments. “If these tariffs go into effect, that makes you uncertain,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. “And if you’re a firm considering enlarging your relations with China, you could put that on ice for the time being.” If enough companies pull back on their expansion, that can make a dent in the growth of both U.S. businesses and China’s economy. That’s exactly what investors fear, said Hufbauer, a former deputy assistant secretary for international trade and investment policy at the U.S. Treasury Department. The day after Trump announced his new tariffs threat, stocks plummeted. If Trump makes good on that threat, it’s likely Wall Street will see yet another sell-off. On the other hand, other countries are benefiting from the U.S.-China trade dispute. Brazil has boosted its soybean production to make up for the soybeans China is not buying from the U.S. Other nations, such as Thailand and Malaysia, could also benefit if U.S. companies decide to purchase from them instead of China. But so far, those larger effects are still hard to measure. No one is sure exactly how long the tariffs will be in place and are cautious about making any rash decisions that would be difficult to reverse.  Honesty is the best policy. |
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1ClassyLady. How about not moving the goalposts! You said Chinese will not buy those American and high end products. You are wrong. That was my point. You are woefully misinformed about almost everything you have said about China. There is plenty to criticize. I'm just asking that you don't criticize stuff you know nothing about. China did not block Google for revealing too much. Google was blocked because China wants to protect it's own businesses first. Baidu is the Chinese equivalent as is QQ the social media equivalent of Facebook. These and others are blocked because of protectionism which I don't agree with but that is what is here. It will change eventually. All things do. If not for protectionism, Google would be available here (most people who do much with computers use it anyway--it is a simple matter to avoid the firewalls) and they would still be able to block specific content. They don't really need Google's cooperation in censorship. That is a different matter than blocking the application entirely. Anyway, again, plenty to criticize. China isn't better than the U.S. nor vice versa. They are just two very different places with very different social standards. Whether one or the other meets your needs is up to individual choice to decide. I don't use their Baidu, Line, or QQ. I use text messages with my married daughter (OBGYN MD), and my son, my friends, if email is not good enough. I have a FaceBook account but using fake name because I want to stay low profile and protect my privacy. I don't post any picture on Instagram, nor I have Twitter account. But I do have Twitter stock. Asia Friendfinder is the only website that I reveal so much about my personal life. Tomorrow is Mother's Day, my daughter and her husband will come home and they will pay for a lunch and celebrate with me. I will keep my good spirit on. Honesty is the best policy.
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1ClassyLady. How about not moving the goalposts! You said Chinese will not buy those American and high end products. You are wrong. That was my point. You are woefully misinformed about almost everything you have said about China. There is plenty to criticize. I'm just asking that you don't criticize stuff you know nothing about. China did not block Google for revealing too much. Google was blocked because China wants to protect it's own businesses first. Baidu is the Chinese equivalent as is QQ the social media equivalent of Facebook. These and others are blocked because of protectionism which I don't agree with but that is what is here. It will change eventually. All things do. If not for protectionism, Google would be available here (most people who do much with computers use it anyway--it is a simple matter to avoid the firewalls) and they would still be able to block specific content. They don't really need Google's cooperation in censorship. That is a different matter than blocking the application entirely. Anyway, again, plenty to criticize. China isn't better than the U.S. nor vice versa. They are just two very different places with very different social standards. Whether one or the other meets your needs is up to individual choice to decide.
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I forgot to mention that Google also own "Android" system for smartphones except Apple iPhone. Honesty is the best policy.
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Hi Luxus42: You are a new blogger on AFF. You don't know me much. I have mentioned many times about many things. I don't want to repeat. China kicked out Google over a decade ago. Google owns "Google search engine", Google Maps, Google Translate, Gmail, YouTube video, Waymo (the first and best autonomous car), .... Because Google is so honest to reveal everything that China can't censor their people to know some of things Chinese government wanted to hide. Communist governments want to block "TRUTH" from their people. China is better than North Korea. There is no internet in North Korea. People in North Korea are so very poor that they can't know the outside world. In communist countries, the governments control people. They don't know in "Democracy" countries can speak freely and have bipartisan system to "checks and balances" the president or the leaders (such as Prime Minister in UK, or Chancellor in Germany). In China, they don't have presidential election, so they have NO VOICE. Yes, China also kicked out FaceBook, Twitter, ... social medias. FaceBook own "Instagram", so no Instagram in China. They only have Baidu to do search and Baidu is under Chinese government control. Many sensitive news will be blocked. Those comments I put here respond to XiWangdeXin comments that how rich Chinese people are that they drive luxury cars. ---------------------------------------------------------------------------------------------------------------------- To XiWangdeXin: I shouldn't reveal so many things about myself and my investments. I am not here to brag my wealth, but when I heard you said Chinese people are rich to own BMW, Mercedes, Porche (Germany made), Lamborghini (Italy made), Rolls Royce (UK made), .... none of those luxury cars made in USA. So, you think Chinese people own those luxury cars are rich than Americans. To compare the people's wealth is not on "luxury cars" but on "annual income". Do you know that??? If I sold a house of my properties, I can buy many luxury cars, but I don't want to. Do you know that?? You are ridiculous to compare rich Chinese people and American people on luxury cars. Those Chinese became rich because they know how to manipulate and bribery their government officials. That is called "corruption". Due to "Cultural Revolution" for a decade, China retreated 30 years in economy. After Mao died, they tried to catch-up with the rest of world. That's why their GDP Growth rate % became strong. They overly built buildings but their people can't afford it. People in China buy properties but can't own the land, they lease the land with their government for 99 years. If sold, the next owner keep carry-on for the rest of the years. In USA or other countries, you buy properties, you own the land too. Their GDP growth rate were 7%, 8%, ... but now slow down because most people can't afford to buy high-priced properties. So, those buildings became vacant. The "supply" is way over "demand". The out balanced real estate market will be crashed. It is an alarming dangerous but they don't know. Some days they will learn the lesson that over built buildings and let them vacant. Their system is wrong. I invest in U.S. real estate and stock market. I have patriot spirit. I don't drive luxury cars but I have better investment brain than Chinese people. I am smarter than them. Honesty is the best policy.
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I invest on U.S. properties and get rental income every month (make money even while I am sleeping). I invest in U.S. stock market, not successful but I have confidence in USA. I love to travel, so I can spend over $10,000 USD to travel abroad every one or two years. I have different concept about money than you or those Chinese driving BMW, Porche, Lamborghini, Mercedes, ... I can afford to buy those cars too, but I don't want. I think car is just a transportation from one point to another. No investment value. Besides, those cars are not made in USA, not about Trump increase tariffs. You envious of those rich Chinese people, so you as an American went to China to live there??? Do you know their "Cultural Revolution" for a decade? Do you know their economy retreated 30 years from the rest of the world?? Chinese leader, Mao Jer-Dong is the top #1 of killer in the world in history?? Can you Google in China? In order to censor the news, China kicked Google out. People can't get REAL news, so they don't have freedom to get knowledge and easy to control. Do you know they call you "foreigner" as 2ndary person? They have serious racial discrimination. They have misconception about foreigners. Can you criticize Chinese politics as we can in USA? Do you know Fulun Gong people been killed and took their organs? How many things you want me to pinpoint to you? Buying luxurious cars don't mean a thing to me. I can proudly to say I have better investment concept than them. Honesty is the best policy.
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I recommend that you set aside assumptions like these and do a little more research. Hint: In the Chinese cities you will see more Nike, Under Armor, Apple, Adidas, Columbia, North Face, New Balance, etc. Than you will in any U.S. city..... In almost everything you've said about China, your assumptions are wrong at worst or greatly outdated at best. I live in the 37th largest city in China. Daily, I see on the road, Rolls Royce, Ferrari, Maserati, Bentley, Mercedes, Porche, BMW..... -------------------------------------------------------------------------------------------------------------------------You have underestimated me. I have tenants who are from Shanghai. NOT all 1.5 billion people buy those luxurious cars but they paid 3.5 times than we paid in USA or in Europe because tariffs. China is very very "polarized" now, rich are very rich, poor are very poor. Those rich Chinese like to "show-off" by purchasing luxurious cars. You think I don't know Chinese people about "value"? They don't buy America brand name clothing, toy, shoes, bicycle, ... because they have different "value" and "taste" differences than Americans. Those general goods are the 1.5 billion Chinese people buying. I live in Rowland Heights and saw so many 2nd generation rich Chinese bought BMW, Lamborghini (they like to buy Lamborghini the most), Porche (2nd highest), .... they are driving in Rowland Hts and said those cars are much cheaper in USA than in China. I don't think all 1.5 billion of Chinese people are buying those BMW, Porche, Lamborghini, .... in China. Most of 1.5 billion of Chinese need clothing, shoes, toy, bicycle, .... but they bought in China not from USA. You missed my points what I was saying is 1.5 billion Chinese consumers are NOT buying clothing, shoes, ... daily use merchandise. The USA companies go to China and have Chinese to make clothing, shoes, ... using Chinese cheap labor then ship back to USA and sell to Americans. Now Trump increase tariffs to 25% that those merchandises will cost American consumers more money to buy. This morning on CNBC said the same as I posted this blog, Nike already switched from China to Vietnam to make clothing and shoes. Nike found out those Vietnamese factory are actually owned by Chinese. Nike was mad about it. Nike might switch to other country. Because Trump only target on China but not other cheaper labor countries. You seem not understand my blog. Trump increase tariffs will hurt American consumers who buy clothing, shoes, bicycles, ... that made in China because those are "imported" from China. NOT ALL 1.5 BILLION CHINESE CONSUMERS ARE BUYING BMW, PORCHE, LAMBORGHINI, ... those cars are made in Europe, not USA. BMW and Porche are made in Germany. Lamborghini is made in Italy. Buying expensive cars don't mean they have good investment concept. If rich Chinese love their country, China, they should buy house, apartment for rent, .... Invest on real estate in China. Look rich Americans, i.e. Bill Gates, Tim Cook, Warren Buffett, Trump, .... they are billionaires but they don't buy luxurious cars, but they put their money in USA real estate. That is the real patriot spirit. I used to have 2/3 of investment on U.S. real estate and 1/3 on stock market, but sold some properties with profits and now 50/50. Do you know when you buy a car the next day the car value immediately less? No matter how good is the car, the value will depreciate tomorrow. The real estate is a much bigger investment than luxurious cars. Of course, Chinese have top 1-2% rich people but their luxurious cars don't mean a thing to me. I invest my money in U.S. real estate, I trust USA. Chinese rich people buy real estate abroad, USA, Canada, Australia, UK, .... and let their country became "ghost town", "ghost cities". How good is their investment concept?? I am a millionaire and have a banker CEO friend and a PhD physicist friend, all 3 of us invest in U.S. real estate but we don't buy luxurious cars. It is the different value concept than Chinese. I drive Honda Odyssey, if you want to know. It is Not an expensive car but it is a mini-van (7 seats) and reliable quality. I can afford to buy BMW, Mercedes, Porche, ..... but I don't want to buy those cars. I have my eye on "autonomous car" in a couple years later. Honesty is the best policy.
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1ClassyLady "As far as clothing and handbags that U.S. companies can ship to India, Indonesia, Thailand, Vietnam, ... those countries provide lower labor cost than China, then ship back to USA for U.S. consumers. I hope U.S. companies such as Nike, Under Armour, Apple iPhone products can switch out of China to other cheap labor Asian to make clothing. I know very well, Chinese NEVER buy America's clothing, handbags because the prices are too high (too expensive to afford). Chinese women like to wear silk, and Chinese-style fashion, so they NEVER buy U.S. fashionable clothing or handbags." I recommend that you set aside assumptions like these and do a little more research. Hint: In the Chinese cities you will see more Nike, Under Armor, Apple, Adidas, Columbia, North Face, New Balance, etc. Than you will in any U.S. city..... In almost everything you've said about China, your assumptions are wrong at worst or greatly outdated at best. I live in the 37th largest city in China. Daily, I see on the road, Rolls Royce, Ferrari, Maserati, Bentley, Mercedes, Porche, BMW.....
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Now you can clearly understand that "U.S. farmers (corn, soybean, orange,...) and U.S. fishermen (lobster, fish, ... seafood) will get hit the first. Then U.S. "steel" and "aluminum" manufacturers. As far as clothing and handbags that U.S. companies can ship to India, Indonesia, Thailand, Vietnam, ... those countries provide lower labor cost than China, then ship back to USA for U.S. consumers. I hope U.S. companies such as Nike, Under Armour, Apple iPhone products can switch out of China to other cheap labor Asian to make clothing. I know very well, Chinese NEVER buy America's clothing, handbags because the prices are too high (too expensive to afford). Chinese women like to wear silk, and Chinese-style fashion, so they NEVER buy U.S. fashionable clothing or handbags. Ever since "Cinco de Mayo" 5/5/2019 Sunday, Trump tweeted to announce that he would increase tariffs on China. China will boycott America's agriculture products (soybean, seafood, ...) that is within my prediction. But I hope other big products such as Boeing airplane (unfortunate that Boeing had bad news recently, so Xi Jing-Pin already switch to buy France AirBus), Caterpillar big machine equipment such as dozers, motor graders, trucks (fear of China retaliation, this stock plunged for a week), Lockheed Marine, Raytheon (Defense weapon, missile, ...). Fortunately, the top #1 rich person in Taiwan, Mr. Terry Gou 郭台銘, (Foxconn CEO/ Chairman) came to meet Trump recently to start manufacture factory to make Apple iPhone, iPad, iComputer, iTV in USA. Mr. Gou chose the right time to meet Trump to save Taiwan current political conflict with China. Trump wants Americans to buy American products, Made in USA. The U.S. labor cost is high that eventually the price will be high. So, Mr. Gou came to USA to build Foxconn factory and will close China's Apple factory. Mr. Gou is very smart person doing smart thing. You perhaps don't know Mr. Gou when I mentioned his name, but when I said his company, Foxconn, you know that company is the factory in China helped U.S. Apple Inc. to make products using Chinese cheap labor. Trump wants to move Foxconn to USA, so Mr. Gou does what Trump wanted. Honesty is the best policy.
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