China Trade Tariffs

China Trade Tariffs

Once again the media frenzy is all about is. When Trump imposed tariffs on select Chinese products, approximately one year ago, the media was ablaze, warning the price of consumer goods were rising. They made us believe that they could not understand why Donald Trump could state, that the tariffs would be great for the American economy. Well it comes down to math.

Prior to imposing the tariffs the Chinese Yuan traded on average at 6.30 Yuan for every U.S. dollar. After the tariffs where introduced the Chinese Yuan migrated to approximately 6.95 Yuan for every American dollar. The reality is that the Chinese devalued their currency to keep export prices to the U.S. the same pre and post tariff.

Example:

Dishwasher priced at:

1,200.00 Yuan converted to U.S. dollars at a rate of 6.30 Yuan per dollar equates to $190.48 U.S. dollars

Dishwasher priced with the added 10% tariff and a devalued Yuan:

1,200 X 1.10 / 6.95 = $189.92 U.S. dollars

In other words, the impact of the tariff simply had the effect of enriching the U.S. Treasury. Why prices to consumers rose is a mystery to me. I refer to it as “corporate rape”. 

This is not a trade war but rather a well orchestrated cat and mouse game for the media and the public. China needs the U.S. as much as the Americans need China. China cannot allow the U.S. economy to fail without partially damaging its own economy. Prior to Trump being elected it was no secret that the U.S. was in an economic tailspin and very likely would have experienced a catastrophic recession. Today the U.S. is experiencing wage growth, increased employment and heightened consumer confidence. 

Trump is a genius, but his genius will not prevail in the long term, as China and Russia will be the dominant nations of the 21st century. China is increasingly becoming self-dependant and its economic clout is Asia is indisputable. Likewise, China's new Silk Road and its growing takeover of African nations will lessen China's dependance on the U.S.

If consumer prices increased with a devalued Yuan we as consumers must ask why. I will leave you with another poem.

Thank you,
Joseph Pede

Dragon and Bear
March 23, 2011

Ominously glaring down from a mountainous gorge
Talons piercing the dirt beneath it
Bellowing fire creates steam atop the dancing Yangtze
Enduring is its power over the mighty waters below

Across the valley a thundering roar
Footsteps mimic the sounds of a quaking earth
Piercing eyes radiate a fearless calm
Power and patience reflecting from each mighty fang

The prodigious Dragon deliberate in its response
Ursus clandestinely camouflaging its mighty strength
The two meet in the land of the Great Khan
There the spirit of Temujin unites the two great powers

Cossack and Mongol transformed to one mighty beast
Careful is their watch over the famished eagle
Flying lost in its attempt to place a deadened quarry to the ground
Peace in the distance awaits the fall of the tragic bird.

Thank you,
Joseph Pede