Asian firms shuffle production around the region as China tariffs hit
With tariffs being placed by the U.S. on imports from China, companies are shifting production out of China so that their products don't get taxed.
But to me, it is just a musical chair, a matter of time.
While plants usually have existing capabilities for slight increases in production, to sustain this in the long run, they will need to make capital investments for expansion. Which needs money. Which will eventually be reflected in the cost of products. Of course, companies can choose to keep the same price, which means returns on investments will take a longer time.
But as imports from other countries start to increase, their trade balance with the U.S. will change. If it changes enough, the U.S. may go into a trade deficit again, and we all know what the guy in the White House thinks, and may do in such a case. Tariffs.
The fundamental problem is that the U.S. is an importing nation. It imports raw materials and semi-finished products to add value to them, then resell them to consumers both within and outside the U.S. Some of those imports are used by various sectors to provide services, which compared to the imported products, are way bigger earners. Tariffs actually make it less profitable to provide those services, since they increase costs for such companies.
Anyway, until the U.S. fundamentally reshapes its economy toward manufacturing, moving away from services, the trade balance in terms of goods will not really change much.
With tariffs being placed by the U.S. on imports from China, companies are shifting production out of China so that their products don't get taxed.
But to me, it is just a musical chair, a matter of time.
While plants usually have existing capabilities for slight increases in production, to sustain this in the long run, they will need to make capital investments for expansion. Which needs money. Which will eventually be reflected in the cost of products. Of course, companies can choose to keep the same price, which means returns on investments will take a longer time.
But as imports from other countries start to increase, their trade balance with the U.S. will change. If it changes enough, the U.S. may go into a trade deficit again, and we all know what the guy in the White House thinks, and may do in such a case. Tariffs.
The fundamental problem is that the U.S. is an importing nation. It imports raw materials and semi-finished products to add value to them, then resell them to consumers both within and outside the U.S. Some of those imports are used by various sectors to provide services, which compared to the imported products, are way bigger earners. Tariffs actually make it less profitable to provide those services, since they increase costs for such companies.
Anyway, until the U.S. fundamentally reshapes its economy toward manufacturing, moving away from services, the trade balance in terms of goods will not really change much.
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