10-24-2019
The Trade War
Since July of 2018, the trade war has been affecting our lives in big and small ways. One such way is the tax on imported goods (SCMP). The tax was raised 25% on over 60 billion dollars worth of Chinese imports (NYT). Another effect of this trade war has been in the automobile industry. China and the United States have implemented tariffs on Automobile imports which has caused different automobile companies to move production to the opposite country in order to avoid these tariffs. With regard to everyday goods, the tariffs have affected them as well. The tariffs have added to the price of anything shipped to the US from China. With the trade war, the Chinese and American governments have implemented significant tariffs, or trade taxes, on automobile shipments, technology, and everyday goods.
With this, it has cut off some of the American automobile manufactures’ income. One such example is given by Tesla, who just recently had to build its own production plant inside of China in order to avoid tariffs and compete with the Chinese markets. Tesla is not the only company that is struggling. German car companies are beginning to get hit hard with no production in China. One of the leading German car manufacturers, BMW is said to have lost 333 million dollars from the trade war in 2018 alone (AutoM). With the tax on automobiles, it has added significant price jumps to cars not manufactured in the US. In fact, President Trump has been pushing for the US’ number one car manufacturer, General Motors, to move their production out of China and to the US so as to avoid the tariffs as well as take jobs away from the Chinese economy.
Tech companies have also been the victim of taxes as well. One such company is Apple who produces its iPhones in China and then has them shipped to the US. They are not at as big of a risk because they are able to mass-produce their product. Apple also has enough Chinese customers that they would be hurt either way by a production move. Other tech companies such as GoPro have begun to move their manufacturing to Mexico so as to avoid the US importation tariffs for Chinese products (GPRO YHF). This move was big for the company and gave them a spotlight in the tech industry boosting their stock significantly for the first time in months back in the summer of 2019. Many tech companies have been able to move production but those not so lucky have been at a struggle and have lost significant profits.
Many everyday goods have been taxed as well. Clothing has been effected significantly as well as Chinese products in America. The clothing industry at large is mass-produced in China and once that happens it is then shipped overseas to the US. Throughout this process, we will begin to see clothing prices rise if they have not already. Trump, at one point, banned the sale of a popular Chinese brand (Will name brand once I go back and find it) which in turn would pose as a threat to the economy of China.
In conclusion, we can see that the trade war has been a big factor in the price of goods, automobiles, and technology. Until the trade war ends, we can expect to see continued increases in prices of things shipped to the US from China and vice versa.
Sources
Amiti, Mary, Stephen J. Redding, and David Weinstein. The impact of the 2018 trade war on US prices and welfare. No. w25672. National Bureau of Economic Research, 2019.
Bown, Chad P. "US-China Trade War: The Guns of August." Peterson Institute 26 (2019).