As the tariff volleys in the People’s Republic of China’s years-old economic war (of which trade is just one component) against us begin to grow, some potential changes in international trade and production for trade are becoming visible. If these apparent changes represent the beginning of a solid trend, the changes and the trend will not be to the PRC’s benefit.
It’s true that consumer prices might start to rise in both our nation and in the PRC, but as a population—and as a people—we’re better able to absorb those increases than is the population of the PRC. Our per capita GDP is $62,500, more than three times the PRC’s $19,520.
It might get worse from there.
- Sweden-based telecom gear-maker Ericsson AB is preparing to shift some manufacturing from the PRC to the US, Estonia, Brazil, and Mexico
- Republic of China-based AsusTek Computer Inc has been moving some production bases domestic facilities and Vietnam from the PRC
- Foxconn, which assembles a huge share of iPhones, has been considering producing the devices in India and Vietnam
- The 25% tariff on PRC-made lithium batteries means PRC producers will have difficulties competing with Korea’s LG Chem and Japan’s Panasonic Inc, both of which already have lithium battery production facilities in the US
If that sort of thing spreads and grows, and if US exporters find other markets (as US farmers are doing for next year’s crops, while others change the crops they grow for export), it won’t be good for the PRC’s economy—or for PRC President Xi Jinping’s political standing in his Party.