Tech jocks tell Trump: Tariff tiff with China will not achieve what you think it will achieve US tech giants Dell, HP, Intel and Microsoft have submitted a plea to have laptops and tablets excluded from the tariffs imposed by the US government on Chinese imports. The letter (PDF) comes as the administration of American president Donald Trump continues to ratchet up the stakes in the squabble over alleged trading …
The feeling is mutual. However, Silly Valley has missed a key point that Orange Man has been making - lower middle class and working class people have been taking it in the shorts economically for a long time. For a healthy country (and economy) these people need to be better integrated into the economy. Shipping jobs to low wage countries to save a few pennies on manufacturing costs devastates the ex-workers and eventually runs out of low wage countries to move to. Silly Valley is not making many friends by insisting on keeping manufacturing in China with the pathetic arguments they are using now. They need to understand the longer term is for a stronger, more vibrant economy not their quarterly profits.
@a_yank_lurker
I'm not American, so have no skin in this game, but I think you downplay the economic factors of outsourcing manufacturing. It isn't just to "save a few pennies" as you put it, the difference in the wages payed is such that to try and make the same products in any developed country and pay developed country's wages would mean a 30 - 40% increase in unit costs.
However, added to that, there is the cost of the regulatory burden in the US particularly, where the processes of manufacture used by the low-wage countries may not even be allowed in the US, or only by putting in place very expensive monitoring or containment processes.
Yes, of course there is an element of protecting their profits, but I'm not sure consumers would be prepared to pay for the actual cost of goods manufactured in the US, as opposed to abroad.
Too a point wage differences initially are very attractive. But I ride an article about 20 years ago in the WSJ about chasing low wages. A Korean business man noted that as the current low wage country gains manufacturing expertise the wages start to rise to approximate parity with the US/Europe/Japan. The rise takes a few years but eventually the cost structure is such you cannot sell on price. You now have to sell value (a combination of price, quality, and features). Also, it becomes reasonable to move manufacturing to nearer or the market. At the time, Korea was the low wage manufacturing goto country and the Korean wages did rise. The Koreans did make the transition to value manufacturers. Chinese wages will rise and the process will continue.
Having worked with German companies importing products into the US, one of our major pain points was ocean/air freight from Europe. Duties are an additional pain point (we did have to pay duty). A US or Canadian manufacturer did not the extra freight and US manufacturers did not have the duty. Costs 'ex works' were about the same. If the exchange rate was favorable we might have an effectively lower 'ex works' price but it often was not be enough to offset the freight and duty.
In the US, most vehicles are partially manufactured/sourced in the US with a huge number being assembled in the US. Toyota, Nissan, VW, Hyundai, KIA, Mercedes, BMW all have assembly and/or manufacturing operations in the US, mostly in the South. In fact many of these companies often have a higher percentage of US made parts than your traditional US manufacturers in there vehicles.
"In the US, most vehicles are partially manufactured/sourced in the US"
But that's at least partially to avoid tarrifs and taxes on non-US manufactured vehicles, such as the infamous "Chicken Tax". Which lead to such shenanigans as Ford importing Transits that had been built in Spain with rear seats (so they counted as 'passenger vehicles'), and then removing the rear seats and trim to turn them into vans, which would have otherwise incurred a higher tarriff rate.
"...have been taking it in the shorts economically for a long time."
Agreed.
However, the Orange One is not addressing that problem by imposing tariffs. He's just screwing Americans from a different angle.
Here's something: I'm on a fixed income (comfortable, but watching my purchases a bit). Back in May, I bought a low-end drafting table. Made in China, $127 on Amazon. Now, post-tariff, it sells for $150.
How is making American consumers pay a large (percentage-wise) additional tax on goods from China helping low- and middle-class Americans?
How does the trade war -- the retaliatory tariffs imposed by China -- help American companies? Don't they shrink the American market share by making Chinese consumers prefer non-American products?
Yep, the lower and middle wage earners in America have been taking it in the shorts. For a long time. You can blame low wages in China or Malaysia or Mexico. But an American enterprise makes $XXX K per year. Out of that, the workers get wages. Out of that, the stockholders get profits. Out of that, the company officers -- CEO etc -- get salaries and bonuses.
Obviously, most CEO and company officer salaries have risen astronomically over the last decades. Corporate profits (as a share of national income) have just about doubled since 1992, and stand near a record high.
Workers' wages have not risen astronomically. Workers' wages have not tracked profits.
Workers are taking it in the shorts largely because the top tier take more and more of the money. Trickle-down economics in America means the workers get pissed on.
The solution is to legislate closer management of capitalism. Minimum-wage reform, returning to a 50% tax on the highest brackets, nationalized health insurance, etc.
It won't happen. The political system in the US is run by the wealthy. (It was designed that way from the beginning, incidentally; the period from the 1940s through the 1960s was an aberration.)
I saw a bumper sticker a few days ago that put it succinctly. It read, "Eat the rich."
>How does the trade war -- the retaliatory tariffs imposed by China -- help American companies? Don't they shrink the American market share by making Chinese consumers prefer non-American products?
The way I heard it said by someone smarter than me is that it's a stealth tax. Trump talks big about punishing China, but the tariffs aren't paid by China they're paid by US consumers, and it basically becomes a tax that disproportionately affects the working class - 25% tax on the essentials, and run of the mill appliances and items will never be felt by anyone who earns a good wage. But working class folks have a real risk of bleeding over it.
It's raising billions extra off the middle class, and his base eats it up because it's labelled as punishing the foreigners
Seems only the Chinese understand the Trumpster. He knows nothing about tariffs, trade, economics or (honest) business. He's a punk with a switch blade walking into a Chinese sword fight. He also has to please angrier, poorer Americans, who want only cheap stuff regardless of origin. The Chinese will drop US stuff and buy Chinese because they're real nationalists, not just weekend flag wavers.
If Apple/Dell/HP was somehow forced to make iPhones/laptops in the US it would be done in a huge factory filled with robots. He seems to think you can turn back the clock to the 1950s, but unions were much stronger back then (and it is his republican party that is primarily responsible for weakening them) so factory work in outside of the remaining unionized industries like automobiles are low wage.
Probably most US citizens wouldn't want a $10/hr job standing on an assembly line 8 hours a day fiddling tiny bits into phones or laptops. There are plenty of people who would take a job like that though south of the border. The same people who take the jobs Americans don't want in California's orchards, or the meatpacking plants in the Plains states, and so forth.
The problem is even at $10/hr it would be cheaper to do with robots, which is why the process is slowly becoming more automated. If Steve Jobs was still alive I'd be willing to bet iPhones would be made in robotic factories today - he was always enamored with that idea and had a super high tech factory at NeXT that used a lot of robots. Unfortunately it was decades too soon for that and one of the reasons NeXT couldn't turn a profit.
I attempted to buy a few components from China last year (a lcd screen controller) and had to pay like 26% tax ?
If you're importing into the UK from outside the EU, that'll be VAT (20%) plus import duty. Import duty is exempted for some items, set at a specific level for certain other categories of items (i.e. motor vehicles), and I believe is set at 3.5% for everything else.
That was a bright idea from long ago in the UK. In order to build an electronics components industry slap a tax on components.
Just components.
Assembled boards etc. were fine so there was less duty paid on the imported components when they were part of an imported item than being imported to be assembled in the UK. At that time any board contained components from all over the world, there was no way any manufacturer could source all its components from any one country let alone the UK. The result was that there was an incentive to offshore assembly. With off-shored assembly there was less home market for component manufacturers.
Question: why did this bright idea not result in a vibrant, cutting edge UK electronic component manufacturing industry?
A builder friend of mine here in VietNam just bought 5,000 instant on water heaters for an apartment building he's constructing. He though the pro-forma invoice was wrong. A 22% discount for quantity PLUS another 15% for 'promotion' (i.e. an Trump Tariff offset).
We ordered custom chips and were given an additional 12% 'promotion' discount. These 'promotional' discounts are rippling through several trades - all to keep the big machine busy.
All things considered, if we're not going to get along, tariffs are a much more polite way of disagreeing.
China's self-decreed possession of the South China Sea and the creation of their artificial island military bases, has left everyone wondering if empowering China as an unfettered partner is a bad addiction.
Better to take your lumps now, before it hurts you even more later.
"Reliance upon older devices," wail the four tech giants, is "potentially putting their security at risk".
Microsoft has always cared about small companies, and those who partnered with it before going into the discard. Still, whilst new tech is probably more efficient as a rule, why would old hardware be less secure ? Not like hackers target by the age of servers..
...wait until the companies move production back to the USA inbig enough numbers, then slap an export ban on Rare Earth materials for "environmental reasons" (this is already being contemplated).
The rest of the world simply cannot respond to that kind of drop in production.
Rare Earths aren't that rare. China produces them cheaply enough no-one else bothers to dig them up and refine them, at the moment. The Chinese producers are well aware that increasing prices or cutting back production will simply encourage competitors to open mines elsewhere in the world, including in the US.
There are toxicity and pollution problems with mining some of the more useful lanthanides and other such elements but if needs must then the mines will be dug and the ores processed elsewhere.
I live in the US and personally I love what Trump has done. The company I work for got a huge tax break. they turned around an gave everyone a nice big raise. On top of that I was given a second and even larger raise do to the increasing demand for people with my skill set and the proposed restrictions on H1b visas means we are not easily replaced with foreign worker. Additionally I got the first decent tax break I have had in 30 years. sure the tariffs may sting a little but I am willing to endure them for a better economy. Fact is that my quality of life has improved dramatically under the Trump administration.
The part often gets left out is all the IP theft that happed from China. The company I work for makes heavy machinery parts. The Chinese have been copying our designs and making cheap knock offs parts that fail prematurely. They look identical to ours but they are made from inferior materials and not heat treaded properly. When a customer buys one of these thinking he is getting a OEM part at a cheap price, it fails and they end up suffering damaged equipment because of it. The companies reputation also suffers because of these knock-offs because the consumer does know that it was a knock off. It is not just the company I work for that suffers from this, lots of industries are suffering for Chinese IP theft or force IP sharing agreements. I wont even get start on the currency manipulation they do.
Personally I would like to see the Trump Admin cut them off entirely until they get their carp together and start acting like a responsible trading partner and that's not just to the US but to the entire world.
That said, I don't care for Trump as a person, I think he is an ass. But I also think the it has been blown way our of proportion by the left wing media who had gotten used to kissing Obamas seat warming appendage and did everything they could to put Hillary in the white house so they could keep doing the same, only to get the shock of their lives when she lost. They have never gotten over it. I voted for Trump simply because a lot of the republican policies made sense at the time.
I have lived threw one term of Carter, two terms of Reagan, one bush term, two terms of Clinton, and another two terms of both Bush and Obama. the two best periods of growth that I have seen in my life time were under Regan and Trump. the two worsted periods of growth that happed in my life time were Carter and Obama. granted shit hit the fan in the last year of Bush 43. But the almighty Obama had 2 years to fix it with a super majority in both houses of congress and could not find his ass with both hands. Additionally he had an additional 6 years to work with both parties, and still could not get it right. the day after Trump got elected and the republicans took control of both houses of congress, the economy went crazy because everyone knew that Obama was a lame duck and would be gone in 60 days. Obama was an incredible failure as a president on both foreign and domestic policy, However he is a fairly likeable guy unlike the current occupant of the white house. I don't detest him the way I detest Trump as a person. If things keep going like they are (and I sure hope they do) I will be voting for him again in 2020.
Anonymous because I expect to get flamed for voting for Trump by everyone suffering form Trump Derangement Syndrome. I am not trying to troll or trigger anyone, just stating things form my perspective as someone who lives on this side of the pond. Most of my co workers feel the same and I live in one of the so called deep blue states. If things keep going the way they are, I think Trump will win again and this time by an even bigger margin in 2020.
You wouldn't have said "Trump derangement syndrome" or said you'd continue to vote for trump despite him fucking things up for the majority of us if you weren't a right wing troll shill.
It's sad to see people ignore all trumps lies and bullshit because they may see a few more pennies short term.
Me? I really want America to be great again. Bernie 2020
Let's start by getting a little thing off my chest - "the two worsted periods of growth " Your company makes knitting needles? Knitting machines? Suchlike?
Now I've got that off my chest ... nothing you've said alters the fact that US citizens will be paying higher prices for US-branded consumer electronics under Trump's Tariffs. So much for Small Government - higher taxes means bigger government, but I'm betting the infrastructure still won't get fixed, and importers will get sick of roads and the like being not fit for purpose to get products to their US markets. It'll happen in your lifetime.
And when talking about China and Intellectual Property Rights, please do so remembering that China once held the monopoly on silk, until some enterprising Westerner stole some silk caterpillars way back when. Likewise China once was the sole source of the fine earthenware known variously as porcelain or fine china, until that IP also got lifted following the Opium Wars. Everybody does it; it's just that having lived also through the various doofuses in the Hot Seat in the White House, I'm by now mighty sick of US sacrosanctimiousness.
And having had to listen to Republican birther conspirationalists, I am now wondering if Hawaii is in fact a state of the US of A, or if that is just another of these Fake News thingees a certain someone keeps rabbitting on about. So much for Republican values.
Tax Cuts - Yes that's very nice for you, but you do realise the money has to come from somewhere don't you? For example the budget deficit has increased with the Trump administration with no plan how to bring it under control. Its like living on credit cards, at some point you will have to pay for your excesses. Of course Trump in the past managed situation like that by declaring chapter 11, I wonder what the equivalent is in a country? In the meantime the US infrastructure is slowing reverting to 3rd world standards
H1B - Again good for you, on the other hand have you ever wondered how much of the US technological dominance was through the ability to attract the brightest and best? With increased restrictions, increased fear of immigrants and greater restrictions on non-citizens I wonder how many of those would prefer to take there skills elsewhere?
IP Theft - this is a two way street and product counterfeits occur in the US as well as China. I don't think Trumps policies will make any difference to this, because in the end only the Chinese government can actually stop it, and they are not going to want to show loss of face by what could be seen as kowtowing to trumps demands. The global supply economy is so integrated, you could not isolate China, without huge knock on effects to your economy. Big IT companies know this which is why they are lobbying for the tariffs to end
Trump is an ass - Well we agree there, although I am not willing to look over for his xenophobic, narcissistic personality for a one off wage rise bribe, because I have seen where eventually that leads to.
Economy - well if you look at the figures the economy started rising during the Obama administration, this after the biggest financial crises in the 21st century, so i think you give Obama too little credit. It could be said that Trump is just riding on the coat tails of the economic improvement bought in by the Obama administration. The best you can say is that he has not managed to bugger it up yet. On the other hand, economies are like super tankers , they take a long time to change course, so it is likely we have not seen the effects of this administrations policies yet
Reagan - In many ways the crash of 2000's was a result of the Reagan boom and boost policies. It is easy to boost an economy short term, long term steady growth is far harder and most Republican policies fall down here, unless you are the very rich. Clinton managed growth and a balanced budget, something that eluded most other residents of the white house.
Sure vote for Trump, but be aware that history has shown with people like Trump in charge, when things start going bad, they go very bad
“Alleged” trading practices by the Chinese??? The Register needs to do some simple research to know that there is nothing “alleged” about China’s overwhelming trade imbalance and protective practices when it comes to balance of trade. It IS real. As for Chip shortages, they have been happening for years before this Administration came into office. This is nothing more than big business whining about some short term issue that will benefit Americans in the long run. But as it usual, I am sure The Reg in its CLEAR Euro view, will bash Trumps approach. But his approach has been GREAT I’m terms of having balance of trade to mirror just that: BALANCED TRADE and access to markets for America.
Unfortunately in an integrated and globalised economy, where people / countries depend on each other, even when it comes to technology, it's not easy to be isolationist anymore. Further, the trade imbalance between China & the US is partly as a result of policies which have kept wages / cost of living low in some parts of the world, whereas in a different part, wages (and the cost of living) have increased significantly (or uncontrollably?) over the decades.
You may argue that the US-China trade"war" was probably necessary to reset things, but no one wins from this, not even China.
Finally, there is this falacy of infinite growth.There can't possibly be infinite growth in any economy (or across the world as a whole), because the earth's resources are ... finite. Even if you go to the moon to extract minerals, or some other planet, you'll still need things from earth, to make your existence possible.
So, I doubt its possible to achieve infinite growth because there would be costs associated with bringing those resources to earth, and until we find other habitable planets (and practical ways of immigrating to those planets), actually another way of looking at it is that China is the country which has been fiscally responsible by keeping wages & the cost of living relatively low for its people (however controversial that process is deemed to have been). Western countries are the ones who should learn something from China. On that basis, the jocks are right.
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