I was trying to imagine what will be the result if China is hit with a 50% tariff. Now China is not Vietnam. China’s labor is no longer strictly speaking third world. It’s probably “second world.” Will a two dollar “hammer” still sell if it costs three dollars? It’s a fair question. How about a fifty-dollar tool that now costs seventy-five dollars. Well, maybe you say, “Sure because the American tool costs one hundred dollars.” But what if I remind you that it’s a really awful tool that doesn’t work very well and only lasts a third of the life; like those things you buy at Harbor Freight. Well, now you have something to think about.
Maybe that’s what Trump is doing. The only thing I can’t figure out is if the correct number is 50% or 100% or 300%. I really don’t have a good feel for what the equivalence point is. And it can’t be the same for every different item out there. How exactly does he make this work.
The funny thing is I’m excited about the prospect of closing the “China valve.” I’d love to see nothing exported from China to America. I witnessed first-hand American companies building the industrial capacity in China needed to replace American jobs by the million. They gladly partnered with the Chinese government and they got their thirty pieces of silver in the process only it was probably ten pieces of silver. The Chinese were always cheap.
I listened to Pete Navarro talk about how tariffs are just a small part of the trade picture. Europe and other places have a value added tax (VAT) that they use to keep out imports. And places like Vietnam (and China) infamously steal intellectual property without any concern for consequences. They bootleg everything from clothing to toys to handbags to you name it. And nothing is done. From what I can tell we’re not trying to fix these things. We’re trying to quarantine the merchandise coming from this whole side of the world. Wow.
So, I’m all for this.
But can it be done?
I’m assuming there will be an enormous disruption to commerce. After all, these products are shipped across the Pacific on boats that take weeks to reach here. Now all of this product costs a lot more. What if the people who bought it to sell it to Americans can’t get people to buy it at the higher prices? What happens at Christmas when I can’t buy all that crappy branded merchandise associated with the latest crappy Hollywood kid movie? Mass hysteria!
And what about all those American companies that buy parts for their products from China and the rest of Asia? Will this change their pricing? Yes. But now they’ll also be competing against foreign manufacturers whose products will really get expensive. German and Japanese cars are excellent. But will they be worth a significantly higher price tag? That will have to be decided on the merits. And will that mean that Toyota and Mercedes will start making more of their cars here? I hope so. That is where we get a win/win.
Well, the stock market seemed to steady today. I’m following all of this and it’s wild stuff. That crazy Trump. He’s the greatest show on Earth.