An exemplary analysis — you performed a case study analysis such as we did at business school — from which gross and pretax margins can be clearly seen on a typical China manufacture for the US retail market.
Kevin Walmsley pointed on some time ago that this structure could provide enormous returns to European car companies if they were to partner with Chinese ev manufacturers — as the in country dealership and service profits would be substantial.
The fundamental fact is that China has almost priced its export (wholesale) costs at very small gross margins. If you see the aggregate figures for the value in USD of rare earth exports over the last decade, you would be shocked. As shocked as we are today to think no one in the west tried to stockpile.
The competition between Chinese companies has resulted in an almost pathological inability to price its goods properly (to ensure adequate profits to Chinese workers and companies). Louis-Vincent Gave has talked about this. Chinese companies are so willing to commit seppuku that China is actually the country with the problem that Trump lays claim to: victimization.
Great article, thanks. What America is doing is basically like a household refusing to go to their local supermarket, electric store, hardware store after deciding that it's cheaper to grow their own food, make their own clothes, build, design their own smartphone and smart TV, manufacture and design the countless bits and pieces a household needs, all while at the same time working to pay off a massive mortgage, pay for ever increasing fuel, electricity and education. Oh, and don't forget that there isn't one person in the household who has the skills, never mind the materials to make this independence from the store possible.
Do you think that the policy makers in Washington are on drugs?
Maybe these idiots are watching too many survivalist videos on yt while lighting up the crack pipe.
The very core of the problem. Trump has made the China tariff impost "high enough" to warrant a complete supply chain reorganization that is unfolding in real time before our eyes. This a splendid and timely piece of analysis Dr Powell. Razor sharp. Trump may well achieve what the CCP could not. He may just kick off a rising consumption share of GDP in China. Crazy stuff. There will be a Nobel Memorial Prize in Economics for whomever rewrites Optimal Tariff Theory to account for this unexpected, but very real phenomenon. This is supply chain economics, and value-added distribution analysis on steroids. Remarkable times.
Thanks this is an excellent analysis of the consequences from applying a blunt instrument to a complex ecosystem. The other day I came across a Youtube video from Gamers Nexus that has dollar costings and how PC parts suppliers are dealing with the uncertainty. What comes out is the lack of clarity and stress levels that these businesses are experiencing https://youtube.com/clip/UgkxMIq9OuHXXPwhcqoMR5eR_UG0GcQKSCqX?si=PS_H2O9dFHyqIV1F
<< On TikTok, Chinese Manufacturers Open a New Line in the Trade War
Videos on the social media app, filmed at factories in China, urge viewers to buy luxury goods directly, as tariffs drive up prices. Americans are receptive. >>
An exemplary analysis — you performed a case study analysis such as we did at business school — from which gross and pretax margins can be clearly seen on a typical China manufacture for the US retail market.
Kevin Walmsley pointed on some time ago that this structure could provide enormous returns to European car companies if they were to partner with Chinese ev manufacturers — as the in country dealership and service profits would be substantial.
The fundamental fact is that China has almost priced its export (wholesale) costs at very small gross margins. If you see the aggregate figures for the value in USD of rare earth exports over the last decade, you would be shocked. As shocked as we are today to think no one in the west tried to stockpile.
The competition between Chinese companies has resulted in an almost pathological inability to price its goods properly (to ensure adequate profits to Chinese workers and companies). Louis-Vincent Gave has talked about this. Chinese companies are so willing to commit seppuku that China is actually the country with the problem that Trump lays claim to: victimization.
Great article, thanks. What America is doing is basically like a household refusing to go to their local supermarket, electric store, hardware store after deciding that it's cheaper to grow their own food, make their own clothes, build, design their own smartphone and smart TV, manufacture and design the countless bits and pieces a household needs, all while at the same time working to pay off a massive mortgage, pay for ever increasing fuel, electricity and education. Oh, and don't forget that there isn't one person in the household who has the skills, never mind the materials to make this independence from the store possible.
Do you think that the policy makers in Washington are on drugs?
Maybe these idiots are watching too many survivalist videos on yt while lighting up the crack pipe.
Do you have another explanation for this madness?
Trump is and has always been in a bubble of delusion. The sad thing is, so are a majority of muricans.
Great article. Great analysis. Thank you Karl for pointing me to WP.
Another facet of the PMC under direct assault. Stagflation will like mushrooms appear at dawn.
You're welcome.
Some "parasitic middlemen who fed off the peasants sweats for years will wither and die".
The Chinese OEMs have a bigger market outside the entitled crowd who treated them with disdain.
The very core of the problem. Trump has made the China tariff impost "high enough" to warrant a complete supply chain reorganization that is unfolding in real time before our eyes. This a splendid and timely piece of analysis Dr Powell. Razor sharp. Trump may well achieve what the CCP could not. He may just kick off a rising consumption share of GDP in China. Crazy stuff. There will be a Nobel Memorial Prize in Economics for whomever rewrites Optimal Tariff Theory to account for this unexpected, but very real phenomenon. This is supply chain economics, and value-added distribution analysis on steroids. Remarkable times.
I hear Ray Charles singing "Unchain My Shoe".
I've been wondering all along why the Walton family isn't on Trump's case. Or did I miss something.
Thanks this is an excellent analysis of the consequences from applying a blunt instrument to a complex ecosystem. The other day I came across a Youtube video from Gamers Nexus that has dollar costings and how PC parts suppliers are dealing with the uncertainty. What comes out is the lack of clarity and stress levels that these businesses are experiencing https://youtube.com/clip/UgkxMIq9OuHXXPwhcqoMR5eR_UG0GcQKSCqX?si=PS_H2O9dFHyqIV1F
https://www.nytimes.com/2025/04/24/technology/chinese-factories-tiktok-trade-war.html
<< On TikTok, Chinese Manufacturers Open a New Line in the Trade War
Videos on the social media app, filmed at factories in China, urge viewers to buy luxury goods directly, as tariffs drive up prices. Americans are receptive. >>