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Comment by clay_the_ripper | Hacker News Reader

Can someone explain in plain English what the actual consequence of this will be?

Goods that are purchased from China will rise in price. If China decides to retaliate, and they will, anyone who sells to China will see sales drop and losses pile up. Since the Chinese are likely to target based on American politics (think rural red states), the US government will probably step in and offer emergency loans or cash if it gets bad enough, pushing US deficits higher.

There will also be some strange third order effects for Europe and other trading partners, but it’s beyond my skill with economics.

China will quickly run out of American exports that they can selectively (politically) tariff. In fact, they will eventually run out of ANY goods that they can tariff that are not already already tariffed much before the US does due the huge trade imbalance.

But the US has a trade surplus over China in Services exports into China. Presumably those will get tariffed.

Also, US made products that relied on chinese intermediate products will go up in price, passed on to consumers.

Those same US products will not be export competitive in other countries (because input costs increased with tariffs) and thus China can now export to places that US used to export to.

Trade is not that simple and usually needs negotiations to be win-win.

In 2017 the US had a $40 billion trade surplus in services, and a $375 billion trade deficit in goods.

"Goods exports totaled $129.9 billion; goods imports totaled $505.5 billion. The U.S. goods trade deficit with China was $375.6 billion in 2017."

"Trade in services with China (exports and imports) totaled an estimated $75.0 billion in 2017. Services exports were $57.6 billion; services imports were $17.4 billion. The U.S. services trade surplus with China was $40.2 billion in 2017."[0]

Seems to be an order of magnitude of difference, setting aside possible tariff rates.

[0] https://ustr.gov/countries-regions/china-mongolia-taiwan/peo...

And after the tariffs what do you expect will happen to goods and services going from the US to China?

I expect prices to go up (across the board on such goods) in China, and US companies who are more price sensitive will get hit harder on their upcoming 10k's than others, predictably.

It’s unclear to me how solid the Chinese economic position actually is. It’s possible that their high debt load will mean that they have to fold very quickly.

On the other hand, as an authoritarian regime they can handle much more political pain. You have to hurt China badly enough for them to fear revolution before politics alone will break them.

In the other direction, all China has to do is make republicans deeply unpopular before the next election. This would reinforce democratic chances, and increase the likelihood of Congress putting a stop to this whole trade war.

China has threatened to start export controls on raw materials used by US manufacturers. Three trade war is complex.

And the US will quickly run out of goods that they can selectively tariff that will not immediately and harshly hurt the broad public in a clearly visible way. You already see that in this recent round - Apple gadgets being exempted from the tax is not a random coincidence.

The problem is: the entire US consumer population is addicted to electronics, and the only place where modern consumer electronics can be manufactured at scale today is China. Not because of cheap labor (there are actually way cheaper places today), but because the complex production chains necessary to even get all the parts to a single place for final assembly are all door-by-door in places like Shenzhen. Even if there was a serious intent to move these production chains to the US to escape tariffs, it will take multiple decades to do so and will require extremely high up-front investments. And nobody will start such an endeavor during a phase of special tariffs put in place by a president basically for personal reasons, without serious support even from his own party - a president that will eventually stumble over its own foolishness and thus probably not even reach the end of his theoretical 8-year "lifespan" (which, again, would not suffice when we're talking about a process that spans decades).

So, effectively, the US presidents' capability to impose tariffs end when he arrives at consumer electronics goods. Because his reality distortion field is not capable of making his followers just accept prices of iPhones, Apple Watches, TVs and countless other "Made in China" gadgets to rise by 25%. The good thing about a bunch of mindless zealots on Twitter and Facebook is, after all, that they hugely depend on smartphones, computers and cheap plastic routers, and the good thing about Fox News addicts is that they can't watch Fox News without a TV set.

Idk, I see it hard for there to be riots in the street because electronics go up a bit, unless one subscribes to the Jamie Dimon's train of thought:

“‘It’s not right to say we’re worse off,’ Dimon said [last September 17] at an event in Detroit in response to a question about declining median income. ‘If you go back 20 years ago, cars were worse, health was worse, you didn’t live as long, the air was worse. People didn’t have iPhones.’”[0]

Though I do see it being a bloodbath on the stock market (that significant portion of adults have 0 exposure to compared to the wealthy) if iPhones become non exempt, possibly a ringing bell for market top (ignoring that unit sales have already been declining since 2015) of this 10 year bull market and experiment with ZLB interest rates.

[0] https://www.counterpunch.org/2016/01/29/let-them-eat-iphones...

There doesn’t have to be riots for China to succeed at this, they just need a large democratic victory. They know that the democrats will try and put an end to the trade war if they control congress.

Even if there is a large democratic victory and top of that, if the political establishment manages to turn everything around the under the watch of the current present (or the next), if they still cant address the issues that have been building for decades in the US, they'll have a field day when next aristocrat takes office on nationalistic pandering.

The trade war™ is a symptom of a larger problem that neither major political party has been bothering to address for the past couple of decades because major backers have been profiting very well of it personally.

China and the US have bigger problems looming than this trade war™. I find it really hilarious that x% more expensive electronics that people don't really need year after year is the rallying cry to wreck in into the voting booth.

> Apple gadgets being exempted from the tax is not a random coincidence

Isn't this something that competitors could complain about, even legally on US courts?

One example of this is the Trump administration recently giving $4.7B in welfare to soybean farmers, as China raised tariffs on soybeans, something which the US exports to them - that, and farmers being part of Trump's electorate

https://www.reuters.com/article/us-global-markets/new-u-s-ta...

The goal of the tariffs is to make Chinese produced products less competitive against American produced products. For instance you sell widgets. You can take advantage of abysmal labor conditions in China to have these widgets manufactured and produced for $70 there. Or you can have them produced in America by laborers who work in much more pleasant conditions and are legally obligated to higher wages for $100. For a company that's just interested in maximizing their bottom line, it's not much of a decision. But then imagine tariffs suddenly mean the costs become comparable. Now you have a strong economic incentive to use American labor.

Completely free trade sounds great on paper, but in reality it basically just ends up rewarding the lowest common denominators of the world in labor conditions. $1000 iPhones are produced in factories in China where each worker earns several dollars per day and live in on-site dormitories literally surrounded by so-called 'suicide nets' to try to deter impulsive suicides caused from both living and working in such conditions. In the US we'd never accept such conditions, yet in the process of trying to improve the standard of labor in the US we ended up causing companies to simply fire their American workers, and then shift all their labor overseas -- sending trillions of dollars in incentives to the countries with the worst labor standards on this planet. That this hasn't been as much of a political issue to now emphasizes how much both parties in establishment politics are indentured to corporate interests.

You seem to assume China will not retaliate, but they already have.

Even if China retaliates (more than they already have), their economy is way more dependent on physical exports to the US than the reverse. I see more downside risks being exposed to EM than US markets… though I do see US markets catching up soon, esp companies with large exposure to EM revenue flows.

This has been a good year to be short EM and swing in and out of volatility.

We are currently running a $375 billion dollar trade deficit with China. That means each year they receive a net gain of $375 billion in trade with us. And ironically the Chinese already had disproportionate tariffs against numerous American exports. A handy tool on Google is search by date range (wish DDG had this). Search for 'Chinese tariffs' on google with a date range of 2000-2015. You'll find articles such as this [1] referencing China's minimum 25% import tariff on American vehicles contrasted against 5% from the US.

Or articles such as this [2] which I will leave without further comment, since that's an entirely different topic...

[1] - https://www.forbes.com/sites/baizhuchen/2012/07/12/tear-down...

[2] - https://www.greentechmedia.com/articles/read/commerce-depart...

Something I've been wondering about this. China is retaliating with tariffs against, for example: Sinograin [1]. What exactly is the point of this tariff when the company being taxed is, like many big companies in China, state owned? Aren't they essentially just taxing themselves?

[1] https://www.reuters.com/article/us-usa-trade-china-soybeans/...

I'd expect that was just an amusing incident of the left hand not knowing what the right is doing.

Throwing out tariffs on the US farm industry is probably a smart move from a political point of view. Our farm industry is heavily subsidized and controlled by government programs. For instance we literally pay some farmers not to farm lands and in cases where harvests are unexpectedly high farmers can end up being prohibited from marketing some of their harvest. In extreme cases, this means the product -perfectly edible foods- just ends up getting destroyed. It's all about extreme control of supply to try to stabilize prices for the consumer and ensure farmers are a bit more insulated from the swings of the market, and to keep them farming (or potentially farming) year after year.

Anyhow, the point of this is that by imposing tariffs on American agriculture (thus reducing Chinese demand) you stand to force this system to respond very visible ways, such as for instance by increasing the number of farmers being paid not to farm or increasing the amount of harvest that can't be marketed. Imagine a photo of some US farmer surrounded by produce thrown to rot and a headline suggesting this was the product of the tariffs. Great propaganda that makes good headlines against the purpose of the tariffs. That a Chinese state company ended up paying the tariffs, rather than just achieving the end of reducing demand and thus hitting with some bad PR in the states, is something I'd expect is just a hilarious short-term miscalculation.

> Anyhow, the point of this is that by imposing tariffs on American agriculture (thus reducing Chinese demand) you stand to force this system to respond very visible ways, such as for instance by increasing the number of farmers being paid not to farm or increasing the amount of harvest that can't be marketed.

The only thing the tariff forces is Chinese companies paying it. This might in turn incentivize them to not purchase American produce which would lead to the effects you're describing. But why incentivize a company to do something if you're running the company? Can't you just tell them to do whatever it is you want them to do directly? Or are they not, in that sense, running the company?

We can only speculate but in this case I'd expect the order was part of a preexisting (or perhaps even prepaid) contract with the US supplier. Or perhaps this company had demands leaving them unable to cancel the contract even if it was possible. With a country of 1.4 billion and certainly the most expansive government in the history of our species, I wouldn't view the Chinese government as homogeneous. Even in our relatively tiny government one segment regularly engages in action much to the detriment or disagreement of another. In the longterm though I would expect this 'issue' to be 'fixed'.

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