China Tariffs already kicking in

Sep 2012
3,303
3,135
California
#21
I also think its harder nowadays with globalization. That has complicated life for the working people, if you notice this problem is worldwide. Populist candidates are everywhere now.
Here is the real problem as I see it. Global trade is a reality, there is no way to go back without serious short term and long term pain for certain sectors. High tech is very dependent upon Chinese sources. Companies like Finosar make all the optics in the world. All of our vendors, big and small, have manufacturing in China. If Trump decides to place tariffs on these imports it will delay infrastructure improvements until they are taken away. As it is today, the cost of these critical pieces of the network is already high. Cisco charges 20% per year of the total cost of the entire network for services alone. That means you buy your network again in five years. If you look at your own connection to your house you will see components from the carrier or cable company that are made in China or Mexico. How will the market absorb these shocks? Whatever the impacts will be, they are not positive in any way at all.
 
Mar 2012
51,000
33,650
New Hampshire
#22
Here is the real problem as I see it. Global trade is a reality, there is no way to go back without serious short term and long term pain for certain sectors. High tech is very dependent upon Chinese sources. Companies like Finosar make all the optics in the world. All of our vendors, big and small, have manufacturing in China. If Trump decides to place tariffs on these imports it will delay infrastructure improvements until they are taken away. As it is today, the cost of these critical pieces of the network is already high. Cisco charges 20% per year of the total cost of the entire network for services alone. That means you buy your network again in five years. If you look at your own connection to your house you will see components from the carrier or cable company that are made in China or Mexico. How will the market absorb these shocks? Whatever the impacts will be, they are not positive in any way at all.
I cant speak for Trump (who knows what he wants) but historically those that favored tariffs or were against free trade felt that in your scenario an American company would pop up and provide the needed component or product. Therefore creating jobs and increasing wages since that product wouldnt be made by people who were paid $5 a day. It was a bit similar to the anger we saw in the 80s by the UAW workers who saw Americans driving cheap foreign cars as decreasing their wages and jobs.
 
Jun 2014
43,160
42,012
United States
#24
I cant speak for Trump (who knows what he wants) but historically those that favored tariffs or were against free trade felt that in your scenario an American company would pop up and provide the needed component or product. Therefore creating jobs and increasing wages since that product wouldnt be made by people who were paid $5 a day. It was a bit similar to the anger we saw in the 80s by the UAW workers who saw Americans driving cheap foreign cars as decreasing their wages and jobs.

In the '70s and '80s, Americans didn't buy foreign cars because they were cheaper, but because foreign manufacturers offered superior products. That was never the laborers' fault. US car manufacturers were simply designing and engineering inferior products in order to maximize their profit margins.
 
Jan 2016
41,540
37,313
Colorado
#25
The idea of tariffs may sound attractive, the reality is a bit less fun.
Indeed. Economists often refer to 'the siren song of protectionism'.

It sounds so beguiling, this idea that we should want to PROTECT our domestic jobs from foreign competition. It seems so NATURAL. Yet invariably, protectionist policies end up DESTROYING jobs, not protecting them. Tariffs always involve special interest politics. The beneficiaries of tariffs are always some small, well-organized group, like steel company executives and steel company workers (organized into unions). The COSTS of such policies are spread out over the entire population. So the opponents of such policies always have their work cut out for them in the public arena. They are fighting very well-organized and powerful enemies.
 
Mar 2012
51,000
33,650
New Hampshire
#26
Indeed. Economists often refer to 'the siren song of protectionism'.

It sounds so beguiling, this idea that we should want to PROTECT our domestic jobs from foreign competition. It seems so NATURAL. Yet invariably, protectionist policies end up DESTROYING jobs, not protecting them. Tariffs always involve special interest politics. The beneficiaries of tariffs are always some small, well-organized group, like steel company executives and steel company workers (organized into unions). The COSTS of such policies are spread out over the entire population. So the opponents of such policies always have their work cut out for them in the public arena. They are fighting very well-organized and powerful enemies.
I work with two unions and I know they are exerting enornous pressure here locally in our midterms over tariffs and trade. Of course so are the farmers up here. Its interesting to see the various candidates not quite sure what to do. Do they side with the unions and support tariffs? Or risk losing their support? Its tricky and like you have said its not a party thing anymore. So both parties are unsure of which path to take. I am sure this divide will blow wide open in 2020 among all the various candidates running.
 
Nov 2015
3,439
1,041
UK
#28
I sell networking equipment to carriers, ISPs and utilities. This week as I met with clients the issue of tariffs on Chinese goods came up for the very first time. One client has been buying a connector used to terminate fiber drops from China. These products are about one dollar each and they go through a lot of them. Last week one of their shipments came from China. DHL called our customer up to say they owed duties of 900 dollars on the shipment due to the increased 25% tariff Trump imposed. This single event triggered our customer to ask us and our suppliers which products will be subjected to tariffs and price increases. So far our suppliers do not have any idea how these tariffs will affect them. Price increases are likely as the 25% tariff kicks in on components, assemblies, raw materials and electronics. For instance, Juniper Networks makes their products in China as do most of the major networking vendors. These products already cost a lot, one router alone fully populated can cost 500 grand. If you slap a 25% tariff on that import we are talking about serious change. The payment to DHL did not go to DHL, it went to customs or the government. That extra cost was paid for by a US company employing 300 people supplying broadband to under served communities. The margins on this service are slim. If you increase the cost of building a network by 25%, it will have to be passed on to the consumer which means your old bill of 50 dollars will end up being 60 or 70 dollars without any increase in service or performance.

We have been asked whether or not outstanding quotes will be valid. We will end up having to charge more and pushing our customers to sources not affected by tariffs. In the networking space, equipment is assembled and tested abroad either in China, Mexico or similar low cost manufacturing countries. Trump is forcing suppliers to move their facilities around the world as he hurls tariffs in a willy nilly fashion or absorb the costs and hope the market will bear such an increase.

What exactly is the benefit of this policy? Does Trump think that any manufacturer will suddenly move their operations to Kansas when we all know these tariffs are not part of any treaty and can be changed with the stroke of a pen once Trump is out of office? This is what happens when you have knee jerk reactions to complex subjects and act unilaterally without consulting experts. This is only going to get worse as these tariffs start hitting everything that comes out of China. Just wait until this happens to goods from Mexico and Canada.
Trump is using the tariffs to negotiate the trade terms between China and America, a trade deficit that has been allowed to happen under previous presidents without any intervention.

Those companies that rely on the cheap crap from China just have to put prices up, absorb the cost or a bit of both.
 
Jan 2016
41,540
37,313
Colorado
#29
Trump is using the tariffs to negotiate the trade terms between China and America, a trade deficit that has been allowed to happen under previous presidents without any intervention.

Those companies that rely on the cheap crap from China just have to put prices up, absorb the cost or a bit of both.
If America really WANTS a smaller trade deficit, there is truly only ONE way to bring that about: as a nation, we would HAVE to start SAVING more. That's it. The REASON we have such a large trade deficit....AND such a large budget deficit.....is that we Americans just generally STINK when it comes to saving. We USED to be much better at it, up until about the mid-1970s. That's when our saving rate started plunging. And lo and behold, that's when we started running large trade deficits, and Reagan's large budget deficits came just a few years later. In the 1980's, we started calling them 'the twin deficits'. They ARE linked.
 
Likes: BigBob
Jan 2016
41,540
37,313
Colorado
#30
If America really WANTS a smaller trade deficit, there is truly only ONE way to bring that about: as a nation, we would HAVE to start SAVING more. That's it. The REASON we have such a large trade deficit....AND such a large budget deficit.....is that we Americans just generally STINK when it comes to saving. We USED to be much better at it, up until about the mid-1970s. That's when our saving rate started plunging. And lo and behold, that's when we started running large trade deficits, and Reagan's large budget deficits came just a few years later. In the 1980's, we started calling them 'the twin deficits'. They ARE linked.
And, of course, one of our very serious problems right now, is that President Trump understands NONE of this. He thinks that our trade deficit is ENTIRELY the fault of our trading partners, that it is entirely due to the unfair trading practices of the countries that we trade with, and has accused them ALL of 'taking advantage of us'. Ironically, his policies, by causing the budget deficit to soar, are also causing the trade deficit to WORSEN, not get better, as he promised. In fact, 'fixing the trade deficit' was one of his key campaign promises, along with building the wall and making Mexico pay for it.
 
Likes: NightSwimmer

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