How China Can Withstand the Impact of U.S. Trade Tariffs

May.13 -- Chen Zhao, chief global strategist at Alpine Macro, discusses the impact of trade tariffs on the U.S. and Chinese economies. He speaks on "Bloomberg Daybreak: Americas."

[gardnerjoseph]

OK, let me ask these questions...
Who decide to move manufacture out of US in the past 50 years?
Is it Chinese, Japanese or Vietnam? It was us.
Why move manufacture out of US?
Because Chinese manufacture cost is cheaper. So US company earn more profit.

Why US government knows moving manufacture out will cause manufacture job lost and do nothing to stop it?
To help China, Vietnam? Because America is the leader in science and technology. So 30 years ago US believe US should focus on higher level job of in high tech area so US can keep its' leading position in global industry. Let's not waste high skill American people's time on those cheap low skill manufacturing jobs. American can earn more money by owning technologies. Then American company can create more jobs - higher level and higher paid jobs - better than manufacture jobs.

Did it work?
Yes, it did work. At Clinton time, most of low end manufacturer jobs already moved out of US. But US economy significantly increased and unemployment rate significantly drop.

For a 20 dollar product, how much does Chinese earn?
Typically, US company will buy it from China with the cost of $3-$6. Chinese may earn $1-$3 profit. US brand owner will earn $5 - $8, US retailer (Walmart etc.) will earn $8 - $11. So in total China gets 10 % of the profit while US companies gets 90% of profit. Is it not a good deal for American?

Where did the 90% of profit go?
Use to pay US engineers, designers, lawyers, salesman, and Walmart employees. And of course, the entrepreneurs always get the biggest part of the cake. With these high profit, US company can pay high salary to American employee so family can afford a house and two cars.

Why we don't want to continue this good deal?
Is high tech strategy not working? No, high technology industry still drives American's economy. Check out those IT guys salary in California. But the problem is high technology industry is actually not having a lot breakthrough development in the past 10 years. Don't tell me Facebook, Instergram are breakthrough technology. Real breakthrough technology are those that can significantly increase efficiency of industry. So today's high tech only makes a little group of American in IT industry, financial industry rich. The 90% profit earned by US entrepreneurs was not used on developing breakthrough technology that can bring new jobs to fellow American people. These profit entered into internet industry which are more profitable but not actually creating real science and technology development! Focus on technology development should keep US's leading position in global economy and keep creating new jobs in new industrial area. This was the plan. But technology did not developed a lot. Dodge is still selling V8 engine. So let's bring manufacture job back!

Is bringing low end manufacture job back a really good idea?
Well it may bring some factory back. But this is a backward movement! China is developing its' own science and high technology area to try to not just be a world factory. Does American want to be world factory? Its like you were hiring someone to do the yard work and fix the house so you can spend your more valuable time to do better jobs and enjoy time with your family, but now let's do it by yourself, you will earn more!

So this is not about democracy. Blaming China doesn't solve the problem.

[bungkusi]

China is laughing....
Seeing how high can Trump raise the tariff before Americans
Imagine if the next iPhone will be US$ 2000 phone, perhaps that will be the time iMoron scream for help.

[Owleyes]

Despite what Trump says about China paying for the tariffs, all tariffs will be paid by the American consumers. China’s lose will be sales, China does not paid any tariff to the US government

[Jason-sfvx]

US export represents about 4% of China's GDP, China just can forego US market and focus on other markets, Besides China should revamp its model to more consumption and domestic oriented . It will be difficult for US to reoriented its economy because of its inherent fat regulatory and high labor cost.

[kevinlaw]

Loss of face? Big money involved, no face needed, Expert!

[laopang]

Trump sold his base that Mexico is paying the wall.

[anthonyzhj]

Never doubt Chinese wisdom on economy and politics, on the other hand Trump is too young too naive

[bungkusi]

China has 1.4 billion domestic market.

China factory can't be closed if only 300 million customer gone. They still have 1.4 billion customers.

On the other hands, USA only have 300 millions customer. US factory/farmer can go bankrupt if 1.4 billion customer gone, and only have 300 millions customer

[jasminew]

For those who cried for getting back the jobs China has « stolen » from US, just forget it! China could not give you these jobs back because these jobs are already taken by Vietnam, Cambodge, Morocco and so on! These jobs won’t come back any more! Just forget it!

[alloomis]

a large %age of chinese exports to usa are through american companies in china for cheap labor, and access to china market. labor they can get elsewhere, but if they leave, end of china market. it's not just tariffs, they can make apple, buick and walmart pay rent.

[nelsonfeng]

What amis lost in stock on Monday is times more than the total import from China...
That's why we can withstand the tariff

[chrischen]

A high percentage of Chinese actually experienced tough life in certain period of their lives and thus we are not afraid of living a tough life again. Almost all America born Americans have never experienced that before. If the US economy goes down, the whole country will collapse.

[davidouellette]

Need to get my keyboard cleaned thanks for letting me know

[captiveexile]

XI simply cannot possibly bow to the demands of arrogant Trump, the one who rudely pushes and shoves, brags about being a "winner" after turning things "upside down" (Isaiah 5:18-21).
THEY DO NOT MAKE PEACE (Psalm 35:7-0, 20*) BUT BRING FALSE ACCUSATIONS AGAINST THOSE WHO ARE PEACEFUL. Also note "Do not fret because of EVIL MEN" (Psalm 37) for the
day is coming when their own cheeks will turn red, matching the color of their caps. They think they have a "cleverly devised plot" -- but they are unable to perform it (Psalm 64:2-9).

[tuoli]

The big question for me to President Trump is
Will this man keep his words?
or MOU, agreement, contract, whatever he calls them.

[wendelrichard]

Coming to the negotiating table isn't weak if it's for mutual benefit. In a chili eating contest one opponent reaches for the glass of water first. In a negotiation, each side could come to the table at the same time

[Mythx]

china hasn't been tough yet, so many Americans make a huge amount of money by doing business in China

[ragnatouya]

America say there people is rich so tariffs is nothing to America hehe! Go both economies power

[shanedesilva]

In 2020, the Industrial and Commercial Bank of China reported total assets worth approximately 33.3 trillion

[CCMphilip]

Utterly rubbish to say that China response in kind is about "face"..! It's reciprocity!! And guest speaker claimed China is in a state of shock which is uttering rubbish too... as ALL businesses usually bragged about taxes!!