The China Embarrassment: Trump's Tariff Tactics Show How Little He Knows About the Country

FOCUS online The China Embarrassment: Trump's Tariff Tactics Show How Little He Knows About the Country Alexander Görlach • 16 hours • 3 minutes read Donald Trump's back-and-forth regarding punitive tariffs has the world on edge. What exactly these measures are ultimately intended to achieve remains unclear. Many economists consider the US President's view that there should always be a balanced trade balance between countries to be nonsense. But what about the goal of using higher import fees, i.e. tariffs, to force companies to stop producing in supposedly cheaper countries and instead relocate their production to the USA? Tariffs of up to 145 percent for China At the moment, all eyes are on China for the answer to this question, as Trump has suspended the tariffs he has imposed on the rest of the world (except Russia and the Vatican) for 90 days to prevent the global financial and stock markets from collapsing. He has, however, imposed further tariffs on the People's Republic. The additional burden on Chinese imported goods in the US is now up to 145 percent. Trump believes that China has benefited significantly from the free trade regulations to which the country has been subject since joining the World Trade Organization in 2001 – to the detriment of the United States. He calculates that companies will now flock out of China if their margins, which they earn due to low labor costs in the Middle Kingdom, shrink or even disappear completely. This is based on the perception that the People's Republic is a low-wage country. But that is no longer the case. China has long been capable of more than just producing cheaply Of course, there is still textile production in China, the profitability of which depends on low labor costs. But in reality, many of these companies have been relocating to cheaper countries like Vietnam or Cambodia for years because wage levels within the People's Republic have steadily increased in recent decades. Despite this, China may remain "the workshop of the world," as the country has repeatedly been called – but now for goods whose production requires skill and know-how. Soldering smartphones together or producing electric cars requires different skills than sewing jeans or T-shirts. Trump's Dream Fails Due to a Lack of Skilled Workers The People's Republic has a well-educated population, which releases a huge number of qualified skilled workers into the labor market every year. Apple CEO Tim Cook once said in an interview that specialists who understand the tools needed to assemble the iPhone could fit into a room in the US, but fill an entire football stadium in the People's Republic. For Trump's vision of an America that produces everything domestically, this would mean providing Apple and other companies with the skilled workers they need, for example, to attract technology companies to settle there. Companies aren't fleeing China, they're investing. But there aren't any. The Taiwanese chip manufacturer TSMC, which bowed to the circumstances of the new US geopolitics and built a new factory in Phoenix, Arizona, had to bring workers from Taiwan for complex production (TSMC manufactures the world's newest and highest-quality chips), as the New York Times reported. And it is also the New York Times that is now reporting the latest developments from China: Instead of a mass exodus to the US, the paper is observing the opposite trend. Many companies want to manufacture more in the People’s Republic and expand their production.