Thursday, September 12, 2019

Quora: Did Trump outsmart China by unexpectedly doubling down on tariffs on Chinese goods imported to the USA? Are we seeing the beginning of the end of China’s economic and geopolitical rise?

Ridzwan Abdul Rahman, Self employed (2000-present) answered.

Think about it: many of the products that are being tariffed are products from US manufacturers in China. And the US manufacturers are manufacturing in China because China provides them with the best place for them to manufacture their products.

Companies are interested in profits, so China must be the place to manufacture and give them the most profits. Meaning good, high quality products at a good price.

The US manufacturers will remain in China until the tariffs make China no longer the place that will give them the most profits. When that happens, they will move production for the US market to another place but the costs there will be higher than in China without the latest tariffs.

In other words, the US manufacturers will lose some profit when they move out of China as a result of additional tariffs. They will only move out production for the US market, while production for the rest of the world will remain in China because it is cheaper to manufacture in China, without tariffs.

Will China lose when the US companies move out? Yes. Only a little, because the bulk of the manufacturing will remain in China. It will not kill them.

Meanwhile, the US manufacturers will have to pay tariffs and pass the extra cost to the US consumers. Or, if they move production to another country, the consumers will have to pay a higher cost for the products because of the higher production cost. So,either way, US consumers will lose too.

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