10% can QUICKLY become 25% which can QUICKLY become 50% which can QUICKLY become 75%. LET IT BE SO. American companies and importers, remember the old maxim — YOU SNOOZE, YOU LOSE!
“0% can QUICKLY become 25% which can QUICKLY become 50%...”
I anticipate that come January first, the new 10% tariffs are planned to go to 25% (then it will be 25% across the board on all Chinese imports).
China will likely devalue their currency to 8 to 1, or less.
Both sides have likely war gamed this out extensively, like a chess game.
The Chinese probably want to inflict enough pain to make President Trump fail to be re-elected (maybe that’s why Chuck Schumer has been so supportive of the fight), or to concede on trade, to protect his re-election.
The Trump Administration probably wants to inflict enough pain on the Chinese economy to force concessions, or maybe they really don’t want/expect a deal - they might really be aiming for a permanent economic divorce, but not being overt about that.
What happens after we have 25% across the board, and China devalues?
The flight of manufacturing from China should become a stampede, and our monthly/quarterly trade balance will probably be challenged by the currency differences.
China will likely resort to harsher new measures, like forbidding companies from taking their capital out of the country, perhaps dictating their business decisions under penalty of forfeiting assets in China. Maybe they will boycott supplies of rare earth minerals. Maybe they will make military provocations in the South China Sea or North Korea.
On the US side, China might be designated a currency manipulator, moves might be made to sanction them, or expel them from the WTO, and as you point out, 25% could become 50%. We might see interest rate cuts to soften the currency imbalance, and minimize an economic slowdown.
In any event, the gloves are coming off, and the Chinese communists are likely to drop their smiling “Panda Mask”.
Yep. I don’t see how China wins this game. If their plan of last resort is to continue to devalue their currency in proportion to Trump increasing tariffs on them, then it seems that their currency would become worthless at precisely the same time that they reach 100% tariffs on their exports. Good luck to them trying to buy food and other necessities with a worthless currency.
Of course, long before that point was reached they would have also lost most of their foreign manufacturing base to more trade friendly countries, like perhaps Vietnam.