China Trade – What tariffs on all Chinese goods would mean to the economy & you
Bottom Line: My head hurts from the amount of poor analysis, seemingly designed to scare you, pouring in about the Chinese tariffs. Let’s start here. Tariffs are taxes. Raising taxes isn’t a good thing. Ideally, we’d have true fair & free trade. This isn’t an ideal world. If this stand of results in better terms for the United States going forward, it will have been worth implementing them. If it doesn’t, they’ll have been a negative. While we wait to see what the answer will be here’s the real version of what this means to our economy and most specifically you.
Total size of US trade – Imports and Exports with China
- $659.3 billion in 2018
Total size of the US Economy
- $21.1 trillion in 2019
All in China’s 3.1% of the US economy. To quickly put this in perspective – the US economy has grown at 3.3% over the past twelve months. If China trade were non-existent the US economy would still have marginally grown over the past year. Don’t get me wrong, a 3% hit on the economy is a big deal but then again if trade with them didn’t even exist and we still weren’t in recession – that's a far cry from the noise of the day on China trade. That’s the first point. The second is this... The more direct impact to you.
There’s nothing like a story that makes President Trump look bad for news media to rally. In this case it’s rallying around the plight of you buying Chinese products from mass retailers. But it’s a funny thing that’s happened during the Trump economy. Manufacturing output in the United States has never been higher. After shrinking by 10% from 2000-2010. We’ve grown US Manufacturing by 25% since then with record jobs to go alongside the record output. In other words, we don’t need as much cheap Chinese stuff. There are American alternatives in almost all instances.
Here are the top categories for Chinese imports:
- Electronics
- Electrical equipment
- Machinery
- Clothing
- Metal
There’s nothing there that can’t be replaced by American manufacturing. The greatest challenge is dealing with some of the parts that go into various devices that are assembled in China. Additionally, the narrative that you’ll necessarily pay more even for these items is assumptive – not certain. As American manufacturing has gained scale over the past couple of years, the cost of fair producing goods has been mitigated by eliminating international shipping costs and ports fees. There are two side to stories and one side to facts. These are them on this issue.