Skip to comments.China trade surplus with US widens unexpectedly (again)
Posted on 07/13/2018 12:34:43 AM PDT by cba123
China's surplus with the United States has hit a fresh record, adding to the current trade conflict between the world's two largest economies. Beijing blamed the imbalance on structural problems in the US.
Beijing announced Friday that China's surplus with the US hit an all-time high of $28.97 billion (24.85 billion) in June, with exports reaching a record $42.62 billion in June.
The news came as the two economic superpowers stand on the brink of an all-out trade war that would have a huge negative impact globally.
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Yes these stats can change by the hour, but hopefully US economy will victorious in long term.
They are all changing, every single month, higher.
Higher this month.
Higher last month. Higher every single month, this year.
Higher last year than the year before. We are setting YET ANOTHER ALL TIME HIGH trade deficit with China.
Amazon is booming, and Amazon is essentially a Chinese market.
Also, at least 1/3 of the sales on Amazon are from third-party sellers, and as many as half of those sellers are Chinese nationals.
If you are thinking of importing goods into China, depending on the nature of the product, you can expect an import duty ranging from 0% to 35%, a VAT of 17%, and/or a consumption tax of from 5% to 10%.
We’re living in a crazy world. Did you know Mott’s Apple Juice is a product of China?
For those of us non-economically inclined people, what does this mean in practical terms and is it good or bad?
When you buy a foreign made import you are actually hiring foreign nationals to build, assemble, ship that product. You are picking foreign workers over Americans. That is in reality what is happening with trade and imports. Those foreign workers are not paying income taxes to uncle Sam and those imports come in mostly duty free! OTH our workers are burdened with regulations and taxes.
The answer is simple: tariffs. As tariffs slowly take effect and trade deficits decline, the US dollar will only strengthen. This strengthening of the USD will alleviate the effect that the import tariff has on prices of imported goods. In addition to that, as more domestic suppliers of consumer goods come on line, the pressure on prices will be downward.
Labor is about 10% of the cost of a good or service, on average. So roughly speaking, a $800B trade deficit represents about $80B in lost wages for Americans, year over year. Which in turn has a negative multiplier effect on GDP.
Part of this increase in the deficit are short term effects, as Chinese shipments were rushed in before the first tariffs went into effect on 6 July, and as the ChiComs harassed some US shipments with administrative delays, as a negotiating pressure tactic.
I am guessing that tariffs will be rolled out in waves over the next couple of years to allow time for adjustment, and will significantly improve the trade deficit with China before the 2020 election.
It is six months from announcement until enactment of tariffs, and months or years for purchasers to shift to new suppliers (a few months for most things). It is a multi-year effort, that began in earnest at the beginning of this year (2018), after the US economy had been prepared with tax cuts and deregulation, to be able to pick up the production opportunities from displacing communist Chinese manufacturers.
As the trade deficit shrinks the dollar will only strengthen and lower the cost of imports. It’s win - win - win all over the place.
“As the trade deficit shrinks the dollar will only strengthen and lower the cost of imports.”
It does look good for a stronger dollar. Investment is moving into the USA.
Technology will likely lower production costs to some extent as well.
Those factors will probably reduce some of the price inflation that we will see, but we will still probably see somewhat higher prices from the trade adjustments over the next few years. A 10% or 20% tariff on Chinese imports generally won’t translate into a direct 10% or 20% increase in prices for US consumers though. It is hard to guess what the average price change will be - it will vary from one type of good to another, and change over time, as new suppliers ramp up capability. Some price increases will be only temporary, until competition catches up.
Some prices have been artificially low on Chinese imports, due to their strategic subsidies to take market share and industrial base from the USA. Even though China is no longer among the lowest labor cost countries, their wages are still much lower than here (although shipping is a higher cost). Also, the supply chain in China has developed economies of scale, and has subsidies at many points.
We are coming off a period of extraordinarily low inflation (deflation in some areas) and interest rates. I expect more of a return to historical norms, rather than a severe increase in price growth or interest rates.
It is well worth doing (critical, in my view), to pay the short term price premiums for the longer term economic, standard of living, and Government solvency improvements.
In before the tariffs
Because they are dumping
I try to buy made in America as often as I can.
I’ll even pay a little more for it cause I expect the quality to be better.
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