LAST SEPTEMBER, I WROTE ABOUT THE TRUMP ADMINISTRA-
tion’s latest round of tariffs on Chinese imports. Fast forward a year and
to quote Ronald Reagan, “There you go again.”
At press time, the U.S. was about to impose another 10-percent tariff on
some $300 billion worth of Chinese-made goods (although tariffs on elec-
tronics and other consumer goods have been delayed until December to
shore up holiday sales). That’s on top of other tariffs already on the books.
So, have all of these tariffs really had the effect of leveling the playing field,
bringing manufacturing back to the United States, and curtailing the theft
of intellectual property? The simple answer is—well, not really. You see,
it’s rather complicated.
In the short term, the tariffs are quite painful—
although not necessarily for the intended target. While
the tariffs are meant to punish the Chinese government, China does not pay any actual tariffs. Those are
levied on importers of Chinese goods, with the costs
typically passed along to American consumers.
The hope is that China will be affected indirectly, as
companies pull manufacturing out of China and bring
it back to the U.S. So, how’s that been going?
According to a study released by the U.S. Chamber
of Commerce in May, 41 percent of member companies were “considering relocating or have relocated
manufacturing facilities outside of China.” But less
than 6 percent of those members are reshoring any of
their production to the United States. Instead, they’re going to Vietnam,
Indonesia, Thailand, India, Cambodia, and Mexico.
To make up for the loss of American manufacturing, China has been
marketing its factories to companies from Europe and other Asian countries, and in many cases, undercutting costs to keep its machines humming. This makes it harder for American businesses that manufacture
elsewhere to compete.
Anticipating the tariffs, many companies scheduled holiday orders to
arrive before the September tariffs hit. Ports have done a brisk business. In
fact, in July, the Port of New York & New Jersey leapt past Long Beach to
become the nation’s second-busiest port, with some of that business coming across the Atlantic from countries like India and Pakistan. It remains
to be seen whether the pattern will continue once peak season ends and
the latest round of tariffs takes full effect.
So, while the tariffs are driving some business away from China, the
shift is coming at a high cost. I believe the Trump administration would
do better to learn to negotiate rather than bullying its opponents to get
what it wants.
bigpicture
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