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Notes -
Are
actually a substantial portion of China's trade to the US? I thought we mostly were sourcing the important parts of those from its neighbors. Is this because most of those supply chains have a penultimate step in China for assembly?
Anyway, I dunno – a lot of small businesses might actually benefit from this, depending on where their line of work is. Where I live there are antennae manufacturing factories (I...think that's what they do?) and I assume competing with China is not fun for them.
As an aside, but I can't help but think gradually escalating tariffs would allow Team Trump to get the same end result, but with a lot more stability. Having, say, a year of gradually escalating fees ending at 1,000,000% percent or whatever we've slapped on China now seems much better from a market's perspective than "1,000,000% in 90 days."
[There might be reasons for the abruptness, of course.]
Don't forget the 10% tariffs on everybody except Canada and Mexico still exist - these sounds manageable, but they are still a big drag on the US economy.
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If you’re actually going to do it it’s better to do it all on Day 1 because anything else is extremely inflationary as the tariffs slowly tick up (I assume this is the actual advice Trump was given). Of course, it’s a bad idea to do it at all.
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China makes lots of phones, Iphones for instance. Their biggest export to the US is electronic equipment.
https://tradingeconomics.com/china/exports/united-states
The bulk of the Iphone is produced with Taiwanese, Japanese, Korean parts but a good chunk of the value is produced in China. China does 15-30% of the Iphone. Much more for Chinese brands like Xiaomi.
Yes, however, they get paid a small fraction of the total value.
Most of the bill of materials by value doesn’t come from inside China, it’s shipped there, and then an American firm pays them 10 bucks to assemble it all together, for a $1000 phone.
This is just one more part of why the method of computing trade balances by looking at bilateral difference completely bonkers.
I think we underestimate assembly to our peril. You can't just slap them together like lego, you need quality control and various kinds of precision engineering capabilities. The Iphone is very small and thin, you need tight tolerances and clever tricks.
15-30% of the value of an Iphone is not trivial and not easily replaced!
Indeed, but it is curious that they would only be paid a tiny amount for that if it was such a high fraction of value.
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Gotcha, so it's the assembly part that counts. Sorta what I figured.
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