Who really suffers

so much winning…

From Sailing Anarchy

Who really suffers in this trade war with China? The Chinese companies? Perhaps but nowhere as near as the poor American consumer.

Let’s look at one simple product – a ball point pen. Pre tariffs (just a tax really) lets say and American ball point pen cost $2 and a Chinese pen cost US1. The Chinese company still sells the pen for the same amount, the US distributor still pays the same amount – to the Chinese company PLUS (after Jan 1 2018) 25% to the US Government. Will people start making American made ball point pens ( does the US still make any cheap ball point pens?)

If they pass the whole tax onto the low end consumer that ball point pen now costs $1.25.

It is a well known and proven fact that much of the low end products sold in the likes of Walmart and so on come from China and are bought, in many cases, by lower income consumers.

So expanding the equation from 1 ball point pen to US100Bn of low end Chinese products likely to be bought by lower income Americans does this not mean that instead of having US25Bn to spend on supporting their lifestyle that will just go to the US Treasury to replace some of the tax given away earlier this year to the MUCH higher earners.

Would this impact on their ball point pens? Not at all, they will still be able to go out and buy their Parkers, Cross or Mont Blanc equivalents.

The boating industry depends a lot on OEM products from China that go into American boats. I know stainless steel manufacturers in China that supply some major US builders with all their cleats, their bow rollers, their tube steel guard rails and many other products – all subject from 1/1/19 to a tariff, tax or surcharge of 25% – none of which they will see coz make no mistake it all goes straight into the US Government’s coffers. It all adds to the cost of US Boat production.

And what about the trade in the other direction? Come the turn of the year American built boats sold to China will cost 25% more and make no mistake China is a growing market for the likes of Brunswick and their like. European and Australian boats wont which automatically makes the Europeans more competitive in the China market.

Not just boats either. BMS’s largest factory in the world is in the USA. They produce 350,000 a year and employ 10,000 people in the factory (never mind the other employment around the community.) 100,000 of those cars are for China. BMW have already said that, if necessary they will move the China market production to China. So lets see, if BMW need 10,000 employees in the US factory to produce 350,000 cars, how many less will they require to make just 250,000 cars?

And I’m sure we have all heard what Harley Davidson is gonna do. They have little other option except charge the European consumer an estimated USD2,000 extra per motorcycle.

And of course the US soya bean industry is so secure that the administration has promised US12Bn support for them and I understand that is just for this year.

The US administration claims they will cripple the Chinese economy! Well they missed the boat on that one. The Chinese export economy is now approx. 19% of GDP. The US element of those exports is around 19% of that so 3.8% of the Chinese GDP so if Mr Trump thinks that forcing American Consumers to pay an extra 25% on 3.6% of the Chinese economy I think he may be just a little off base somehow.

In the meantime the US boating industry will be saddled with a tariff/tax/duty/surcharge – call it what you wish – on certain parts needed to produce their boats  AND then be hit with a 25% increase on the finished product when they try and sell it in China.

The likes of Beneteau, Jeanneau, Bavaria, Azimut and other European builders should perhaps write a thank you letter to the US Administration for so wonderfully enhancing their price competitiveness in China.

But then again they always say there are bound to be casualties on both sides in any war.

Just sayin’

SS