Trump’s decision to tariff the world (tax Americans), has happened so quickly, and further escalated so quickly, that Americans have yet to feel any of its outcomes.
Unfortunately, in the next month or so, supply chains will have depleted and the real costs associated with Trump’s lunacy will translate into increased costs.
The 57% of products that America buys from China are most of what it consumes on an almost daily basis, whereas for China, the products America exports to China are primarily items that the Chinese need not consume on a daily basis.
And as importantly for the Chinese, most of the products that are consumed, and need not be replaced with any frequency, such as computers, monitors, apple phones, etc., are also produced by China. The alternative for Chinese consumers is simply to switch away from the American made products.
But the impact on Americans who want to buy products from China, manufactured in China will be profound, and for the poor, devastating.
Already, a 50% increase for any of the tens of thousands of products on Amazon or at Walmart and Target, principally coming from China will rise by as much as 50%. Retailers and Online businesses like Amazon and Target will only absorb 6 to 7% of the cost, without losing money on consumables. The remaining 43 or 44% of the increase will be passed on to the consumer.
When coupled with the 25% increase in fresh produce, dairy, breads, etc., etc., caused by the derivative products coming from Canada and Mexico, it’s fair to say that the monthly food costs for Americans will rise, appreciably.
But worse, for those farmers in America that sell grains and other derivative foodstuffs, not only will they lose sales, they will lose permanent market-share. Stupidly, — trump has attacked the entire world’s trading system, and done so without any concern for the domestic producer, who, when this is over, will find that he has no export markets.
Previously, there was always a ready market for American food exports. That will no longer necessarily be the case, as nations are realigning their trading blocks and buying replacement commodities and agricultural products from around the world.
The void left by America for soy or chickpeas or grains (for example), will be filled by Canada, Australia, Brazil and even Ukraine. And once the supply has been assured, from a reliable and truly ‘fair trading’ partner, they won’t be coming back to America that has proven that it cannot be trusted.
America hasn’t just shot itself in the foot. It may have shot itself in the head.
In fact, rather than increasing production in the U.S. in the future, it may simply mean a shrinking of manufacturing as the export markets dry up, and purchasers refrain from buying more expensive and less dependable supply from America.
EV vehicles from the U.S. are inferior, as the market sees it. Chinese EV’s, (and soon, trucks) will easily replace those made in America (for example).
But the worst may be the home run by China in its resultant strategy that blows right by America and its workers.
A ban on American goods, cars, electronic devices, etc., — even those that have manufacturing within China.
If American companies cannot sell what they produce in China, bankruptcy may be in the cards for many American well-known brands.
Coercion only works when the group doing the coercing hold ‘all the cards’.
With respect to China, Japan and Korea, that is hardly the case.
The Japanese may decide to do what Jaguar Range Rover have already done. Stop shipping their vehicles to the U.S.
Volkswagen, Porsche and Audi are in the process of doing the same thing.
Somehow I can foresee this being disastrous for American consumers and owners of those brands, particularly if their dealers close.
Trump, like a child in a sandbox, has decided to take all his toys and go home.
The other kids, are building a new sandbox and bringing their own toys.
Importantly, the child who left, won’t have anyone to play with, and soon, no reason to go to the sandbox.
C’est la guerre America.
Bon Voyage.
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