I’m sorry, but I don’t understand this comment.
Tariffs are paid by the person or entity bringing the product into the country, right? I mean, the US government can’t impose the charge on the Chinese manufacturer?
So in the case of Walmart, it’s Walmart that pays for the product in China, and brings it into the US, or orders it from the Chinese vendor. So either way, Walmart pays the tariff, right?
The only way the tariff can be paid by the Chinese vendor is if the vendor reduce its price by the amount of the tariff, so that Walmart ends up paying less for the goods they import to sell, right? If the Chinese manufacturer refuses to do that, isn’t Walmart’s only option to stop buying from the Chinese manufacturer?
And isn’t the result in that case empty shelves at Walmart?
How have I got this wrong?
Sort of...
What China does in times like this is manipulate their currency but the larger action are increased their to their factories. They will offset costs by direct returns to exporting factories of 5% on average to 10%-15% during times like now. Factories cant take the drop in POs, so the government heavily subsidizes them on the VAT refunds. They will also lower their profit margins across the board between raw material suppliers, final assembly, etc..
I don't think they will change currency much as its tighter right now, but will increase factory subsidies.
Furthermore, to feed a beast like Walmart (I import and have imported around 50M-1000M yearly for Walmart business) there are no shortage of 'agent' companies that are opened by former Walmart personnel. They know the ins and outs and certainly make the jobs easier for buyers, analysts, etc. This is an added layer of margin that's not needed. I imagine these will be trimmed away.
Finally, and probably the larger point, there's no denying these actins against China are to weaken their economy. The US absolutely needs to get away from the easy button of China, for a few reasons:
-Their workforce is dying off. There simply won't be the labor there in the next decade to keep production going at low rates and the new generation does not want the unskilled labor jobs. Hence why so many (including myself) are resourcing out at China and have been for 10+ years, albeit faster now.
-Less production in China means a weaker China. Less spoken on this thread about this, but a weaker China is on par with a weaker Russia....better for the US
-There are better low cost options for items that need low cost manufacturing. Even Chinese companies know this and are investing in many more SE and Asian countries for factory development. China still supplies much of the raw materials, so they are partly appeased, but labor is exported.
-Arguably as important, we have found out over the last 7-8 years that the US can compete in manufacturing on certain levels. Section 301 tariffs identified this and US production has increased. This requires a mentality shift as well as a technology investment which I do believe the 5 Trillion dollars pledged is just the start during this administration.
Now, back to the point, it will not offset a tariff of 96.6% on a backpack (yes, a backpack, 17.6% (HTS)+ 25% (section 301) + 10% (first EO)+ 10% (second EO), +34% (Reciprocal announcement)). these are stackable. However, any educated NPD Manager or Sourcing Manager has qualified factories in a variety of countries since 2017.
I don't think there is any denying that Trump is happy to not talk to China until more items, both capital and consumer, are moved out of China.
