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Trump’s Tariffs Undermining America’s Economic Future

June 25, 2018 • GLOBAL ECONOMY, Dan Steinbock, On Donald Trump Administration

By Dan Steinbock

As President Trump is again suspending the opportunity for trade compromise, new US tariffs are not only alienating US allies and partners but undermining America’s own future prospects.

 

On Monday, US President Donald Trump threatened to impose a new 10 percent tariff on $200 billion of Chinese goods. That will not only re-escalate the trade war with China but contribute to new risks of collateral damage to the US economy.

And make no mistake: While China is the first target; the next ones will include some of the largest trading economies in Europe, East Asia and Americas.

 

US tech giants will not be immune

US semiconductor chipmakers, including as Intel and Qualcomm, generate $15 billion each in annual revenue in China. The two are amid a great unease as US government is considering tariffs on chips imported from China, which has a critical place in their supply chains.

Due to increasing global interdependency, US unilateral moves are undermining the profitability and future prospects of not just US and Chinese companies, but other companies that are held up by the trade war. While Qualcomm needs China’s approval for its $44 billion buy of NXP Semiconductors, the latter is linked with US relief for Chinese telecom giant ZTE, which Trump supports but US Congress may oppose. That means uncertainty to the Dutch NXP’s workers, suppliers and buyers.

Due to increasing global interdependency, US unilateral moves are undermining the profitability and future prospects of not just US and Chinese companies, but other companies that are held up by the trade war.

The leading global technology companies have an estimated $100-150 billion at stake in the US-China trade war.

For Apple and Intel, China accounts almost a fourth of revenues (read: $45 billion and $15 billion, respectively). In Broadcom and Microsoft each, a tenth of revenues ($9-$10 billion in each) come from China. After Google shut down its Chinese search engine in 2010, it has dreamed about a return. In turn, Facebook’s CEO Mark Zuckerberg hopes to launch his site in the mainland. Trump’s message to both is: Dream on.

The greater is the Chinese segment in US multinationals’ revenues, the greater headwinds they now expect. Boeing’s shares are down, as the US giant seeks for a cut in the $1.1 trillion that China will spend in the next 20 years to buy new airplanes. After all, Beijing could also purchase its planes from France.

 
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About the Author

Dan Steinbock is the Founder of Difference Group and has served as Research Director of International Business at the India China and America Institute (US) and a Visiting Fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). For more, see http://www.differencegroup.net

 

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