Fryowa
Administrator
I've opined on this board plenty about the effect of the tariffs on China product. I deal with it every day at my job.
The people backing Trump on doing this are idiots, plain and simple. I'm just going to say it...if you trust Trump to be making the right decision with this you are a mouth-breathing imbecile. I have many, many manufacturing contacts in my personal network dealing with the same thing, and we are part of a few large-ish, active consortiums of businesses who import components/products from China to be used in domestic manufacturing and production. So I would consider myself fairly knowledgeable in this arena as far as the effect on the US economics that this will have.
You know what effect the original 25% and subsequent 10% bump had? Nothing. Zip. Nada. When those first two tariffs went into effect we were notified from our importers what our cost impact would be, and we passed it on to our customers fully. We didn't take any additional margin, we simply passed it on. If the cost of one of our components went up by $10, we directly passed the equivalent cost increase proportionally to our customers buying the things we use that component to make. We have about a 50/50 mix of direct component sales vs manufacturing into bigger assemblies so it's a little more complicated than the above example, but the point remains the same. If we got charged an extra $10, our customers got charged an extra $10. We don't share the cost impact of tariffs because once you start doing that customers expect it, then your margins erode permanently, and you can't do business that way.
Once our vendors get that new $10 increase they pass it on to their distributors in the price of whatever they manufacture with it, then those distributors pass the $10 on to their retail customers, and the retailers pass the $10 on to the end users, who are you and me. Unfortunately at the distribution and retail level those folks usually take their normal margin on the increase because there's so much value-add and overhead involved by then. So by the time the end user pays for it, they actually see a $12 increase.
You want to know how much of that volume of stuff we buy and sell was driven from China to US domestic production like Trump wanted? None. Not a single thing. Want to know why? Because in China they can (and do) pay a 14 year old girl working in an unheated factory in flip flops $4 a day to work 14 hours producing those components. To make that same component in the US, you have to pay someone $35 an hour for 45 hours a week plus benefits in a factory with ridiculously high operating costs (remember, everyone here wants a comfortable living and that costs a lot of money at every step in the flow from raw materials to transportation to production to transportation again to sale). To make it worse, for most things imported from China there aren't even domestic sources if you wanted to use them. You know how many companies make trailer couplers in the US like the ones on your boat trailer, camper, garden trailer? Zero. It's not feasible in the US to have those factories because it's so cheap in China. Want to buy a US-made TV to support Trump's idea? Lemme know what you find. Want to buy a US-made ratchet? Have fun writing that $200 check to Snap-On when you can buy a $14 GearWrench or DeWalt or [insert any other manufacturer here].
And before you tell me that the example of the 14 year old girl in flip flops is embellishment, it isn't. I've been there many times and seen it first hand. There ain't no OSHA or benefits over there, jack. And if that girl breaks her arm there are literally billions of 'em to take her spot.
Today we're going to do the exact same thing this week with the 3rd bump, an additional 10%. None of this is having any impact whatsoever other than inflation to the end user of everything made in China. It's making CEOs richer, China richer (they base the tariffs on China's cost which can be whatever they say it is), and American end users spend more. There is ZERO that this will do to hurt China economically in any way. They have us by the balls in every conceivable fashion, but Trump knows it will get the hillbillies and union members to vote for him and keep him in power. It's all just a game and it's hilarious. I ain't even mad anymore. I just populate these spreadsheets on rinse and repeat and laugh at the hilarity of it all. What else you gonna do? Go home and kick your dog?
The people backing Trump on doing this are idiots, plain and simple. I'm just going to say it...if you trust Trump to be making the right decision with this you are a mouth-breathing imbecile. I have many, many manufacturing contacts in my personal network dealing with the same thing, and we are part of a few large-ish, active consortiums of businesses who import components/products from China to be used in domestic manufacturing and production. So I would consider myself fairly knowledgeable in this arena as far as the effect on the US economics that this will have.
You know what effect the original 25% and subsequent 10% bump had? Nothing. Zip. Nada. When those first two tariffs went into effect we were notified from our importers what our cost impact would be, and we passed it on to our customers fully. We didn't take any additional margin, we simply passed it on. If the cost of one of our components went up by $10, we directly passed the equivalent cost increase proportionally to our customers buying the things we use that component to make. We have about a 50/50 mix of direct component sales vs manufacturing into bigger assemblies so it's a little more complicated than the above example, but the point remains the same. If we got charged an extra $10, our customers got charged an extra $10. We don't share the cost impact of tariffs because once you start doing that customers expect it, then your margins erode permanently, and you can't do business that way.
Once our vendors get that new $10 increase they pass it on to their distributors in the price of whatever they manufacture with it, then those distributors pass the $10 on to their retail customers, and the retailers pass the $10 on to the end users, who are you and me. Unfortunately at the distribution and retail level those folks usually take their normal margin on the increase because there's so much value-add and overhead involved by then. So by the time the end user pays for it, they actually see a $12 increase.
You want to know how much of that volume of stuff we buy and sell was driven from China to US domestic production like Trump wanted? None. Not a single thing. Want to know why? Because in China they can (and do) pay a 14 year old girl working in an unheated factory in flip flops $4 a day to work 14 hours producing those components. To make that same component in the US, you have to pay someone $35 an hour for 45 hours a week plus benefits in a factory with ridiculously high operating costs (remember, everyone here wants a comfortable living and that costs a lot of money at every step in the flow from raw materials to transportation to production to transportation again to sale). To make it worse, for most things imported from China there aren't even domestic sources if you wanted to use them. You know how many companies make trailer couplers in the US like the ones on your boat trailer, camper, garden trailer? Zero. It's not feasible in the US to have those factories because it's so cheap in China. Want to buy a US-made TV to support Trump's idea? Lemme know what you find. Want to buy a US-made ratchet? Have fun writing that $200 check to Snap-On when you can buy a $14 GearWrench or DeWalt or [insert any other manufacturer here].
And before you tell me that the example of the 14 year old girl in flip flops is embellishment, it isn't. I've been there many times and seen it first hand. There ain't no OSHA or benefits over there, jack. And if that girl breaks her arm there are literally billions of 'em to take her spot.
Today we're going to do the exact same thing this week with the 3rd bump, an additional 10%. None of this is having any impact whatsoever other than inflation to the end user of everything made in China. It's making CEOs richer, China richer (they base the tariffs on China's cost which can be whatever they say it is), and American end users spend more. There is ZERO that this will do to hurt China economically in any way. They have us by the balls in every conceivable fashion, but Trump knows it will get the hillbillies and union members to vote for him and keep him in power. It's all just a game and it's hilarious. I ain't even mad anymore. I just populate these spreadsheets on rinse and repeat and laugh at the hilarity of it all. What else you gonna do? Go home and kick your dog?
