As news about the never-ending trade war between the United States and China began to emerge last week, there’s only one thing that’s sure: it’s not going to be good news. As the tension escalates between the two countries, the latest on the trade talks would most likely affect you.
Apparently, the United States has decided to raise tariffs on over $200 billion worth of Chinese goods. That’s a significant leap from the previous 10% to 25%. In obvious retaliation, China has also decided to impose tariffs on over $60 billion on U.S. goods starting June 1. Moreover, another $300 billion could be subjected to higher tariffs from China as early as July. According to the list released by the Office of the United States Trade Representative, it will include a large majority of imports from China. Bluntly, covering nearly all products that the U.S. buy.
Ideally, what President Trump is trying to achieve with the on-going trade war is to pressure China into accepting a deal that would be more beneficial or, at least, less exploitative to American businesses whose manufacturers and resources come from China.
In a series of tweets that Trump has sent out to Twitter this week, he seems to consistently point out that Tariffs are actually a good thing and that the U.S. will gain more in the long run, that is if China will still refuse to accept the deal has previously been offered.
In a tweet, he claims that this year’s “good” first quarter was significantly aided by tariffs from China. That may be true, coming from an economic perspective. However, he seems to have sugarcoated the issue quite too much. The effects of U.S.-China trade wars and tariffs are consequential and definitely not a harmless battle.
In this next string of tweets, Trump seems to have completely been alluded by the idea that China will, in fact, give in to the terms set by the U.S. and that if they won’t, China is still on the losing end because U.S. companies could easily move out of China and source other resources in neighboring countries in Asia such as Vietnam. Better yet, U.S. companies can move their businesses back to provide more jobs for the American people.
But what Trump claims are easier said than done. As of the moment, most U.S. companies rely on China for manufacturing and resources. Particularly, companies like Apple would need to pay much less with Chinese employees compared to the U.S.
Moreover, tech companies source materials such as steel from China, which is vital in phone or tablet making, to name a few. In other words, having a manufacturing house in China would be more cost-effective for U.S. companies because they wouldn’t need to pay for tariffs of moving resources from one country to the other.
Specifically, companies like Apple are the ones at the front to absorb the impact of the latest set of tariffs since tech companies manufacture most of their consumer goods in China. In this case, Apple products like iPhones, iPads, and MacsBooks. So in a couple of months, if you’re looking to buy a Mac charger, expect to pay a few dollars more.
In numbers, Apple had its biggest drop of the year in the stock market since President Trump started to tweet about China tariffs last May 5. It fell 5.8% at $185 and lost almost 12% of its market value. This means a significant $120 billion loss for its shareholders.
In relation to President Trump’s tweet above, tech companies aren’t the only ones who will suffer the latest tariff adjustments. Most of the U.S. farm and produce exports mainly go to China to meet their large demand. However, by increasing tariffs on these products, the Chinese would most likely be forced to buy less or, worse, to source goods outside the U.S.
The trade game that two of the most powerful economies in the world may be a power play between who will give in to whom but the fact still exists that its effects directly affects its citizens. It’s true that the United States may earn from the upsurge of tariff implementations on China but the ones who are really paying are American households and businesses.