I'm guessing a ton of new companies will pop up overnight in India, Taiwan, Vietnam, S Korea that simply purchase components from China and resell them to the US. Not exactly helping anyone.
> guessing a ton of new companies will pop up overnight in India, Taiwan, Vietnam, S Korea that simply purchase components from China and resell them to the US
The reality in high-tariff economies is simpler: more people just forge customs paperwork.
This will happen in Cambodia. They are building a massive amount of factories near Sihanoukville where the Chinese goods will be stamped with « made in Cambodia » and shipped right away to the USA.
This is a known issue with tariffs, so "governments" are on the lookout for it. It's risky, and there are consequences if you get caught.
There were however reports of Chinese companies actually setting up production in e.g. Thailand. The products are more expensive then, so it doesn't actually change anything - at least it was like this before the introduction of the one billion gagillion tariffs.
> This is a known issue with tariffs, so "governments" are on the lookout for it.
not just an issue with tariffs, but with sanctions.
Guess how many companies suddenly popped up in places like kazakhstan importing electronic components and other us-sanctioned products, and then selling it to russia.
Apple is shifting its production to India, but in reality, the phones are just assembled in India. All the components are made in China, shipped to India, where they are put together. China still captures 90% of the value
I don't know the latest, but as of like 6-8 mo ago. India hasn't been able to produce much (anything?), despite having millions of dollars of Chinese equipment ready to be put into use.
India has been producing mobiles for local consumption for few years now. Sure, almost everything was imported initially. But, recently govt is targeting PLI for specific mobile components like PCB, screen, camera modules, enclosures etc. CPU/SOC still has to be imported though. 10% of apple iphones are already manufactured in India.
The interesting thing is that India already has high tariffs for goods coming from China, however this might be different for finished vs non-finished goods and for consumption vs re-export goods. The tariffs aren't cheap though. Iphones not manufactured in India and sold there are significantly more expensive due to all the tariffs.
Yeah and it has no effect because its done by companies not countries. This is gonna continue for a long time. Its an incredible time to be a middle man
I thought a majority of Chinese businesses are state owned. Their neighbors understand the stakes though and have demonstrated eagerness to have low US tariff rates. I assume their customs agencies will be on the lookout for this relabeling strategy.
It's going to occur, as it already does occur, for all kinds of reasons, but it's not going to be as simple as you make it out to be. There is a limited capacity to perform this work meaning the costs may not even be competitive with the US tariff in the long run.
> I thought a majority of Chinese businesses are state owned.
Where'd you get that? The state has a significant (though usually less than controlling) ownership stake in about 1.5% of Chinese businesses, and at least _some_ ownership in about 2%.
"The state owns some of this" is, of course, not equivalent to "the state meaningfully controls this".
But in any case for this sort of activity you'd probably just establish new companies, which the state wouldn't have any share in anyway. And, also, this is kinda academic, because you wouldn't be doing it in China, you'd be doing it in some third country and transhipping goods originating in China.
I have never been to China, but you sound informed on the topic - maybe you can weight in on that.
I've heard from various YouTube channels covering news about China, it's social issues and shenanigans that all companies above a certain size are required to have someone on staff that's essentially part of the government. These channels are however mostly run by people speaking very good English, so clearly made for the western market.
But Googling that information seems to confirm it, too. I.e.
> Since 2018, domestically-listed companies are required to establish a party entity.
I cannot speak with confidence on the topic, but from an uninformed spectators perspective, it does sound like timewizards argument was correct?
> I thought a majority of Chinese businesses are state owned.
That’s not how things work, they care about control not micromanaging everything. There are rules favoring majority Chinese owned companies, but that doesn’t need to be government ownership.
The CCP only really cares about large companies or specific industries like media. There’s minimal interference in a food truck and thus most companies that are small, but things get more involved as you scale. Critical industries like shipping and electricity have government owned businesses running things.
Long term it will work. If foreign govt allow getting around tariffs, according to trump import deficit formula, tariff on the govt will go up. Usgov could also increase tariff on countries with more companies doing tariff shenanigans. The problem is with american 2 year election/midterm cycle no one believes that this will last more then 3-6 months now.
With the exception of command economies (basically just North Korea, these days), this sort of thing would generally be done by companies, not countries.
Straightforward circumvention like that isn’t allowed (I’m not saying it won’t work). The new companies you mention would only be entitled to thelower tariffs on the value they add to the product they buy from China.
But how much visibility can the US government have into what happens between India and China? Especially if they work at hiding this stuff. I'm not saying it will work, I'm just curious. How can you tell how much of a product is made in India vs China if India and China work together to lie to you about it?
Regarding India, Indian govt already has huge tariffs and non tariff barriers on China. They imposed many of those during Galwan valley standoff and later extended them when they are promoting manufacturing or PLI for specific sectors. Indian govt and local Indian manufacturers won't allow middlemen to come and relabel items and eat in to their share of the pie. Sure, with the corrupted Indian bureaucracy some relabling will still go through, but it wont be much. Not sure how US plans to deal with relabling in Cambodia, Mexico etc. though.
This already happened under Trump I administration. Now they are setting high tariffs on India, Vietnam, as well. Not sure whether it is to close this loophole or not.
