Another Trump Tariff Success Story: Vietnam

-edited

Today, we have another Trump "success story" to report. To the detriment of China (and the US), Vietnam benefits.

Tariff costs prompt executives to shift production to other countries; ‘Once you move, you don’t go back’ is the often head claim.

As a result of Trump's tariffs, Manufacturers Move Supply Chains Out of China but who is the beneficiary?

Companies that make Crocs shoes, Yeti beer coolers, Roomba vacuums and GoPro cameras are producing goods in other countries to avoid U.S. tariffs of up to 25% on some $250 billion worth of imports from China. Apple Inc. also is considering shifting final assembly of some of its devices out of China to avoid U.S. tariffs.

Furniture-maker Lovesac Co. is making about 60% of its furniture in China, down from 75% at the start of the year. “We have been shifting production to Vietnam very aggressively,” said Shawn Nelson, chief executive of the Stamford, Conn., company. Mr. Nelson said he plans to have no production in China by the end of next year. “Once you move, you don’t go back,” Mr. Nelson said.

Yeti Holdings Inc. said it plans to move most production of soft-sided coolers out of China by the end of this year. iRobot Corp. said it would start producing Roombas in Malaysia this year, too. Crocs Inc. CROX 2.54% said it expects less than 10% of U.S.-bound products to be made in China by next year, down from 30% in June. And diesel-engine maker Cummins Inc. said it has avoided $50 million in tariff expenses by moving some production to the U.K. and other countries.

Imports from China fell 12% in the year through May compared with a year earlier, according to the U.S. Census Bureau, the biggest decline since the financial crisis a decade ago.

The biggest beneficiaries of that decline have been other countries in Asia where production costs are low, such as Vietnam, India, Taiwan and Malaysia. Many of those countries have seen sharp increases in exports, although there have been allegations that some of that added traffic was due to goods made in China that were routed through those countries without significantly altering them to avoid tariffs.

Detriment of China?

Read that last paragraph carefully.

To be sure, China has taken a hit, but likely not to the extent reported.

Who else suffered? You get one guess.

US Poor Suffer Most From Trump Tariffs

Bloomberg reports Trump’s China Tariffs Hit America’s Poor and Working Class the Hardest

The burden of import taxes is five times as heavy for the bottom tenth of households as for the top tenth.

The New York Times reports Trump’s Tariffs Could Nullify Tax Cut, Clouding Economic Picture

President Trump’s tax cuts provided a temporary jolt to the United States economy by putting more money into taxpayers’ pockets. The tariffs that Mr. Trump has grown so fond of may have the opposite effect.

Two new analyses show that the tariffs Mr. Trump is using to punish China, Mexico, Europe and other governments would more than wipe out any gains from his $1.5 trillion tax cut for low- and middle-income earners, leaving them with less money to spend into a consumer-driven economy. Higher earners would fare only slightly better, with their tax gains significantly eroded but not entirely washed away.

What Do We Call This?

Inquiring minds might be wondering what we call this.

The Cato institute says Trump on Tariffs: Consistent, and Consistently Wrong.

Tut Tut

Everyone by now should know we call this "winning".

Without a doubt, Vietnam is very impressed with this Trump "win".

Mike "Mish" Shedlock

Comments (23)
No. 1-12
Anthony1961
Anthony1961

I like you mish. I heard you on a late night talk radio show one or two weeks ago or maybe it was a few days ago. I can't remember. Hehehe. I taped it. I can't remember when. I like what you have to say. I'm sure we do disagree on several things. I have a lot to say about this subject. I will probably say it in several comments.

thimk
thimk

there is a myriad of workarounds to avoid tariffs . orange man can't plug all the loop holes. As an analog ;New York city is the cigarette smuggling capital of USA. (google it) . wait till china gets belt and road fully on-line . i guess USA is stuck with the inflationary FIRE sector for GDP growth.

Mish
Mish

Editor

Hi Anthony I was on Coast to Coast for two hours on July 9

2banana
2banana

"Neither the tariffs placed on steel and aluminum imposed a year ago nor the more recent ten percent tariff on Chinese goods pushed prices of goods sold to consumers up. And now we have price data from May that once again indicate no tariff pricing pressure on consumers."

Sechel
Sechel

companies have been shifting production to take advantage of low wages to vietnam from before Trump's tariff talk. Trump may be responsible for accelerating a trend but not for creating it.

with regards to China, who knows what their true GDP rate is. China counts GDP when a good is produced, not sold. Thought you would have brought up shadow stats, like backing out GDP from electric usage.

Sechel
Sechel

Did Trump and his economic team believe production would move from China back to the U.S?

Mish
Mish

Editor

"Did Trump and his economic team believe production would move from China back to the U.S?"

Who the hell knows what they really think?

We do know that was the stated plan. Whether they believe it is hard to say, but I suspect they do

Blurtman
Blurtman

Croc, Yeti, Roomba, GoPro, etc. - these are all the brands US consumers should boycott.

RonJ
RonJ

"US Poor Suffer Most From Trump Tariffs"

How many were made poor by U.S. factories closing and moving to China? Americans lost good paying jobs and the local businesses and their workers that depended on those well payed factory workers, suffered as well, as a result of the follow on effects of a closed factory.

TheGreatMiginty
TheGreatMiginty

It's time to let the lower cost producers get a share of success China had with open door to imports. They should have realized, appreciated reciprocated to who was responsible for the great leap they took in 30 years. Workers from Philippines, Vietnam, Cambodia, Laos, Myanmar and even Mexico and Canada deserve a piece now.

Carl_R
Carl_R

Two comments:

  1. Smuggling will occur any time there is a tariff. Don't think Vietnam is the only country good are/will be smuggled through. During the 2002 Steel tariff, I purchased some products that came in boxes marked "Made in China", and over that, stickers had been placed that said "Product of Canada" with a nice maple leaf.
  2. A tax is a tax is a tax. If you give a tax cut here, and add an equal tax there, they net each other out. That said, however, there are differences in the incentives taxes produce. Thus, if you reduce taxes on income, you will encourage productivity, while if you increase taxes on items which are consumed, you will discourage consumption. Encouraging productivity, and discouraging consumption is a net positive, in my book.
MrGrumpy
MrGrumpy

"US Poor Suffer Most From Trump Tariffs" This smells of political spin.
Do the US Poor buy milk and bread from China? Or eggs, beef, fruits and vegetables? I doubt it. Do they pay rents to Chinese landlords? Or send their children to Chinese schools? Again, I doubt it. How about coffee, cheese, ketchup? Are new homes made with Chinese lumber? Don't get me started on Chinese dry wall. I admit the price of clothing will be affected. That includes shoes.

I just can't agree with the premise that tariffs will disproportionately hit the US Poor.