The Trump Trade War , its Effect on our Business

The Trump trade war with China is in full battle mode.  Today’s news where the US has asked Canada to detain a female executive from Huawei , has now escalated this to a new and more dangerous level. The Chinese will see this as an inflammatory escalation that is personally punitive to one of their citizens, its akin to China arresting the head of China Ford, we would be outraged and up in arms. Why is the question? I’ll answer at the end of this post.

Let me fill you in a bit on my part of this, albeit small as it is.

I have been importing from China for twenty years, my wife is Chinese, we have invested several million dollars  in China over the last 15 years supporting our own factories. We are mosaic tile manufacturers, importers and distributors, we are a vertically integrated company with three branches and separate companies.  We own multiple real estate properties in China, I’ve lived there at times up to a few months, I have traveled extensively throughout the country, I have numerous friends, acquaintances and associates there, for the most part I like China and the Chinese people.  My business relationship with China is good, the same for thousands of other US based companies who import from China. The Chinese are a stable source of production with good infrastructure.

We import our designs form China every month or so. At end of the year, we bring in a lot of shipments so to be prepared for the stopgap of China New Year. We have to be fully stocked til April at least.

Since the additional  tariffs kicked in, in September, our normal duty has risen form 4.8% to 14.8%, this means we will pay an extra $40,000 (for duty only)  or so in November and December alone. For us, this is a lot of money, money out of our pocket.  Money that could be used for other things, or as profit to us. It is also a cost that we may have to pass onto our customers, as of now we will absorb this cost, but if the tariffs increase to 25%, making our total duty 29.8%, I will definitely have to increase the price of our goods to compensate. Thousands of other companies will also face this decision, and most will do the same. INCREASE PRICES ACROSS THE BOARD.  20% of all goods sold in America come from China, $440 Billion dollars worth,70% of all tile products are imported and many of them common everyday items most Americans will purchase.

We cannot manufacture in the US do to the lack of glass tile resources here , lack of certain stone materials, and the labor differential.  It would take an item I wholesale from $8-12 and push it up to $20-50 or more, and then making the retail price more than $40-80.00/ sheet of tile, unaffordable to most at best, making people stop buying at worst. Its not feasible at all!

Now I get that the Trump administration feels somehow that China is guilty of not stopping intellectual property theft, dumping, and blocking access for certain exports. I too believe that China must open up and stop theft, but these two world economies are too intertwined to fight a trade war, both sides lose, but the US consumer loses more.

Further, Trump is an empty vessel , and his head is being filled up with a New Cold War thinking from some of these anti communist ideologues  he has in his administration.  To them China is now like Russia in the 1950-1960’s era. “They are The Enemy!” I don’t think they are like the Russians, who are our enemy but this is why this trade war escalation has taken on more impetus. They want to STOP China in their tracks, and maybe they are hoping for regime change, which will not happen. What will happen is that it will hurt both countries and may become something worse, like a real war; detaining this woman executive is a worrisome and a bad move that will harden the Chinese further.

Its hurting me now, and will hurt way more industries and people in the near future if this doesn’t become a negotiated settlement.