Trump and China Tariffs

I’ve been looking at the lists of tariffs and trying to plan out my spending. Here are a few ideas I have, and some bits of lists of tariffed items.

What is a Tariff?

A tariff is a tax that’s applied to imports when they enter a country. To a tariffs raised by the US is charged to imports as they enter the US.

For example, if we have a 30% tariff, it gets applied to the price the buyer paid. If the wholesaler bought a speedometer for $30, then the tariff is $10; the total cost of the item is $40.

Tariffs just make importing uncompetitive, and give an edge to local manufacturers.  However, one thing I find confusing about the Trump tariffs is that I’m not certain that there are US manufacturers for all these things.  So, in that case, the tariff would advantage any other countries that aren’t taxed.

Tariffs also apply to US-branded products. So if a US company like Honeywell makes a fan in a factory in China, and there’s a tariff on fans, then, the fan will be taxed.  Arguably, this will bring jobs back to the US, but I suspect it’ll just cause the company to seek out a manufacturer in Mexico, Vietnam, or other low wage country that may not have a tariff.  It’s really up in the air, and I think some jobs will come here, but I don’t know if it’ll be that many.

What are Retaliatory Tariffs?

In response to high US tariffs (these are the highest tariffs ever), China also raised high tariffs on products that US companies export to China.

That means when these products land in China, a tax must be paid.  This causes the price of US products to rise, and become less competitive in the foreign market.

What this means for us is, at least for the rest of the year, there will be a huge surplus of some items. These things have already been produced, and were going to China, but now, they aren’t going to China.  This surplus will cause prices to drop, and they’ll probably be sold domestically and exported to other markets.

Then, if there’s not enough demand, people will be laid off and production scaled back to reflect the new market realities.  The outcome is variable, of course.

So, What?

Well, it means it’s time to pay attention to some prices, and see if the future prices for some commodities and goods are going to rise or drop.

I’ve been looking at lists of tariffs and came up with a few plans:

  • Look forward to a drop in tofu and soybeans [SOYBEANS].  China raised a tariff on soybeans, and they are our main customer.
    • Specifically, I may start to hoard a little bit of black soybeans. Some specific types of black soybeans retail for $10 a pound or more, and aren’t available in most areas.
  • The USA raised tariffs on many lubricants, so it might be a good time to just hoard this stuff.  It lasts forever.
    • However, it’s also possible that US oil production can recover some lubricant manufacturing capacity and make lubes again.  Either way, the price should rise.
  • The USA raised tariffs on parts for printers and copy machines.  Yikes. This could mean the used parts market will grow.

Note that I’m talking about local prices, not importing anything. The opportunity to import has closed and has been closed for a while. As the effects of the tariffs hit us, we’ll see the early hoarders selling their stock.

I’m planning to write more of these articles if people start subscribing to this blog.

See Also

Tariffs are a difficult topic; there are so many moving parts.  To raise so many at once, unilaterally, and then see countries around the world, including many allies, bristle and then raise their own tariffs, is pretty shocking.

Reddit has thousands of posts on the topic, and they’re instructive.

The Customs and Border Patrol website has advice about importing and exporting.

As a member of the WTO, the US uses the WTO method of valuation to calculate what amount should be taxed.  Most valuation is simple: find the imported item cost, then add the tax.  It’s more complex for companies like Apple that manufacture abroad, with global supplies going to China, and then bring a finished product into the United States.

Author: John

I can be reached at johnk@riceball.com.

Leave a Reply

Your email address will not be published. Required fields are marked *