The Impact of American Tariffs on China

This is a broad overview, our American philosophy, a rough draft if you will allow me. We will get far more into the technical side of specific goods and industries as our trade negotiations develop. Currently, we have a “temporary” tariff of 25% on about 250 billion of Chinese imports. These are not “Permanent tariffs” as part of a long and ongoing US policy. It’s a tool to make China behave. If China agrees to behave, with an all important enforcement mechanism, then the tariff would go away. The choice is up to China.

Yes, the President is correct, the Chinese have devalued their currency, which creates the effect of the “tariff penalty” being paid on the Chinese side. Let’s take a look at the new temporary tariffs scheduled to be enacted on September 1, 2019.

You guys know me. I’m a numbers gal.
The USA has a 20 trillion dollar economy.
The new tariffs will be a 10% tariff on 300 billion in imported goods. This tranche of tariffs is mostly consumable products. The Trump administration was careful and saved those for last, hoping the Chinese would negotiate honorably…. but they have not.

In fact, per Maria Bartiromo this morning, the Chinese have backed out of all items where they previously agreed. Maria was wide-eyed when she explained —– The Chinese even backed out of their agreement to punish fentanyl makers who send drugs to the USA, which was important to President Trump. Got that? They want to continue killing Americans………. change your perspective a little bit? 

Back to the numbers: 

300 billion/20 trillion = .015
That’s 1.5% of our economy which COULD cost 10% more because of these tariffs.
Actual cost is even less. The increase would be .15%
A 10% tariff on the 300 Billion is .0015 or about 1/10th of 1% of our economy. Gotta move that decimal to the right, one more time, to get the actual cost of the increase.

Of course, that’s assuming the USA consumer still buys the same Chinese goods, the same supply chain, and nothing else changes. Think about your entire household income. Your budget may include mortgage/rent, a car, auto insurance, home insurance, health insurance, utilities, gas for the car, food, savings, maybe a summer vacation with the kids. Very little of what you spend your money on will be an item imported from China. AND, now that you’re more aware of what China has done to our economy, send fentanyl to our shores, their theft of intellectual property………
……. would you buy those dish towels/kids toy/light bulb from China…… or India….. or Turkey…. or Brazil…… or maybe even a dish towel/kid toy made in the USA?

Bottom line, the impact on the USA side is minimal – yet the devastation on the Chinese side is massive. Chinese exports to the USA are already down 11% with millions of jobs lost on the Chinese side. The President’s tactics are superior and he’s playing hardball. “Diplomacy” was never effective, other leaders have tried. We do have the upper hand. Don’t let the media worry you. And understand, these are not permanent tariffs. Here, tariffs are being used as a penalty, a tool, by President Trump to finally bring China to the table on trade…. to get them to stop stealing our intellectual property, and to trade fairly according to rules of the WTO…… remember those WTO rules….. the rules agreed to by every nation?

Sure, the problem of China acting badly should have been addressed by previous Presidents, before we lost our manufacturing base in the USA. Yet, the problem of where we are now was egged on by “leaders” in the USA. We were told that opening our markets to the Chinese would bring them into the 21st century, spread democracy,…. make the Chinese….. more like us. How arrogant they were. No, the story of rainbows, unicorns, and world peace, only masking the real motive…… love of money.

In the USA, historically low interest rates after the crash of ’08 helped companies grow and expand……. but multinational companies took loans from USA banks (and European banks as well) and expanded overseas…… which furthered the devastation of our manufacturing base. Low percentage to Zero tariffs, bringing the goods back into the USA, helped boost profits of multi-nationals and created cheaper goods in the USA……… but it was a sugar high. The hidden cost was far greater.

Shuttered factories all over the country are the result. Unemployed skilled workers are the result. Torn apart families and an increase in opioids are a result. Loss of ethics, honor, and a new attitude of “what can the government do for me – cuz I want a check”, is a result. But hey……. we can still by cheap towels from China with our welfare benefits.

With our last measure of dignity, we elected President Trump, in part, to fix the problem. It won’t be easy and we know it. We’re overdue for a solution. Leaders have to make tough choices. It’s time to make a stand…….. before there is nothing left of the American economy to stand upon.

Think about it this way. If we are mostly a consumer driven economy…. then right now, we are like a couch potato, cozy and comfy, eating doughnuts and pizza, as much as we want…. but we’re using our nation’s credit card to buy the doughnuts and our kids will pay the bill. If we don’t make anything anymore, if we don’t export, then the couch potato ends up eating seaweed and begging for a fish head. The problem is exacerbated by the fact that we are now older, fatter, lazier, more comfortable on the couch…….. and many have lost the fight…. no longer proud of their country…… nor inherently indignant about being told what to do and how to think.

As someone who trades internationally, I live in this industry. The “Problem of China” was the primary reason I voted for President Trump. I know other countries addressed the problem of Chinese trade — long go. Their leaders put in permanent tariffs. Turkey has imposed a permanent 18% tariff on Chinese goods. Brazil has a 35% tariff. You will laugh……. even IRAN has a 40% tariff on the importation of Chinese goods. We all know China cheats.

As someone who works in the building industry, I’m also aware of Chinese intellectual property theft. A software program called AutoCad is used by almost all architects. The cost of a license, to me, is about $15K. My head man in China downloaded it for $1.00. While the software expense of $15K might be frustrating for me…….. it’s nothing compared to losing the design for a nuclear submarine……. or a new jet fighter. My little condo plans don’t endanger national security.

We also know…. when the money is worked out, when “America is wealthy again”, we can afford to be generous. For instance, if I have $1.00, I can buy a soda. If I have $5, I can buy a soda and a burger. If I have $20, I can invite friends. The Dems, our political opposition, loves to spend money on lavish domestic programs. Even Republicans agree, we want to help those in need, but Republicans like to track the funds for effectiveness. With the money worked out, with trade worked out, we can afford to be more generous to those Americans who are truly in need.

Right now, for our economy, for our future stability, it’s a question of priorities.

And our priority is America, first!

End.