This post was edited by sfphoto at 2018-5-11 13:10|
Boston101 Post time: 2018-5-11 05:19
China exports $1.6 trillion worth of goods to the US. Think again about who will lose a trade war.
From the US Census, US imported $505B from and exported $130B worth of goods to China, as follows:
NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified.Details may not equal totals due to rounding. Table reflects only those months for which there was trade.
|December 2017 |
But the above figures are from the USA side. The figures from China’s side is lower due to the practice of transfer pricing where the legal title to US-branded goods made in China are “transferred” to an offshore tax haven for the purpose of evading US taxes. In other words, US MNCs import their US-branded products from their offshore subsidiaries at an inflated price which is much higher than the actual cost paid to their manufacturing partners in China. The difference between the price of those US-branded goods sold to the US MNCs by their offshore subsidiaries and the cost of those US-branded goods paid to contract manufactures in China by their offshore subsidiaries is the TAX-FREE PROFIT of the US MNCs.
US MNCs have the most to lose because they reap the TAX-FREE PROFITS that is 5x to 10x higher than their manufacturing partners in China. The impact to the US economy is also higher because the price of those imported goods sold in the USA is much higher than the cost of those goods manufactured in China. For example, Apple sells iPhones at the retail price of US$ 600 but pays only $200 to their manufacturing partners in Taiwan, South Korea and China. Out of that $200, China gets less than $100 but Apple makes $400 out of every iPhone, TAX-FREE, and generates $150 Billion in revenues from selling more than 216 million iPhones in 2017.
If Apple were to manufacture its iPhones in the USA, this would reduce the trade deficit in goods between the USA and China (as well as the rest of the world) because Apple would no longer import those iPhones from China but will instead export those iPhones from the USA. But it would lose its TAX-FREE profits of US$ 400 per iPhone because Apple would be forced to pay US costs of labor and taxes for manufacturing its iPhones in the USA which would reduce its profit margins from 60% to 10% for every iPhone sold by Apple.
US MNCs such as Apple — not their manufacturing partners such as Foxconn — have the most to lose because they make the most from outsourcing the manufacturing of its products such as the iPhone in China.
Lastly, Apple won’t survive as a company if they didn’t outsource the manufacturing of their iPhones to China. And that’s because Apple needs to compete against Chinese brands such as Huawei, OPPO, VIVO, Xiaomi, etc. as well as South Korean brands such as Samsung and LG.