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Real trade war impact?


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The more I look at this, the more I think it simply means that the trend to manufacture in China for export is relocating to cheaper countries faster than otherwise.

 

Doesn't mean it will be smooth sailing and I think that China will have to change its model to a consuming country vs mostly exporting or another accelerating trend.

 

I also think it may mean regime change. I can't see the young Chinese people accepting this vision mentioned this week or: "That it will be a long journey, we have been there for 5,000 years, blah blah blah". This really sounds like a communist regime wanting to keep people toiling, retain its power vs changing for the better.

 

Countries like Vietnam and India must be salivating at the opportunity and this has been going on for some time as costs in China have been trending up for over 10 years now.

 

Reminds me of an old investment or Gildan Activewear. Bought this back in early 2000's after one of their shipments had been found containing marijuana. Stock came down as a result.

 

What was interesting is that these guys used a loophole to create their entire business or lower tarrifs for imported clothes into the U.S. from Caribbeans and Central America than Asia or mostly China. Then they developed brand new, state of the art plants in these countries. They basically ended up eating everyone's lunch in printed t-shirts including Fruit of the Loom. Then they expanded in socks and more.

 

Anyway what do you guys think?

 

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You hit it right on the nail. Companies are not even remotely thinking about bringing back production to US.

 

If you want firsthand experience, i m currently travelling to Asia, back from Vietnam guess what i was doing there... My company is goin full gas on getting out of china, like hundreds of SKU moving, halt on all new projects in China, etc...

 

It was going to happen, just made it a top priority. Now how ho we profit from it is the question.

 

Beerbaron

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The more I look at this, the more I think it simply means that the trend to manufacture in China for export is relocating to cheaper countries faster than otherwise.

 

Doesn't mean it will be smooth sailing and I think that China will have to change its model to a consuming country vs mostly exporting or another accelerating trend.

 

I also think it may mean regime change. I can't see the young Chinese people accepting this vision mentioned this week or: "That it will be a long journey, we have been there for 5,000 years, blah blah blah". This really sounds like a communist regime wanting to keep people toiling, retain its power vs changing for the better.

 

Countries like Vietnam and India must be salivating at the opportunity and this has been going on for some time as costs in China have been trending up for over 10 years now.

 

Reminds me of an old investment or Gildan Activewear. Bought this back in early 2000's after one of their shipments had been found containing marijuana. Stock came down as a result.

 

What was interesting is that these guys used a loophole to create their entire business or lower tarrifs for imported clothes into the U.S. from Caribbeans and Central America than Asia or mostly China. Then they developed brand new, state of the art plants in these countries. They basically ended up eating everyone's lunch in printed t-shirts including Fruit of the Loom. Then they expanded in socks and more.

 

Anyway what do you guys think?

 

Cardboard

 

I have been building a woodshop dust collection system with HVAC metal ducting the past 6 weeks. I went to homedepot tonight and the wyes I've been paying $14.50 each are now $18 .68.

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If anyone really understands what is going on with the trade war and how it will play out please enlighten us all :-)

 

A couple of my key take aways:

- nobody has much of a handle as to what is going on today, this week, this month, the next 6 months, the next year or the next 3, 5 or 10 years (regarding trade and Trump)

- the bond market is quite pessimistic with yields on 10 year treasuries under 2.35%

- the stock market seems to be completelty asleep at the wheel; the averages are down only a little over the past 2 weeks. Do they expect a deal?

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I find in several cc transcripts of many industrial companies saying they will offset tariffs with price increases..I'm also reminded of Buffetts essay on how inflation swindles the equity investor and am not sure how your run of the mill industrial companies can so freely raise prices without volume decreases. Perhaps these are great companies but not all of them should be able to pass through 25 percent tariffs to customers. Either management is being disingenuous or I'm missing something.

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2 questions:

By moving sources of imports to different countries (trade diversion effect),

a)How will that improve the trade deficit?

b)What about the common sense suggestion that the eventually imported product will be more expensive to the consumer?

 

It's hard or impossible to predict what will happen but, from a historical perspective, the last 30 years has witnessed a very unusual rise in global trade and the consensus is for more of the same with some tweaks along the way.

 

The following two references seem to be helpful:

https://blogs.imf.org/2019/04/03/economic-forces-not-tariffs-drive-changes-in-trade-balances/

https://www.schwab.com/resource-center/insights/content/street-fightin-man-president-trump-ups-trade-war-ante?cmp=em-RBL

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Ross, off topic but why metal ducting? Most woodshops I’ve seen use flexible hose as drops.

 

6 inch metal ducting for the main lines and flexible hose drops. I used metal instead of PVC because I had some interesting turns to get through the truss webs in the ceiling and 6 inch PVC bends don't come in enough variants to make it work. Not having to worry about static is nice too.

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Ross, off topic but why metal ducting? Most woodshops I’ve seen use flexible hose as drops.

 

6 inch metal ducting for the main lines and flexible hose drops. I used metal instead of PVC because I had some interesting turns to get through the truss webs in the ceiling and 6 inch PVC bends don't come in enough variants to make it work. Not having to worry about static is nice too.

 

To add to the offtopic discussion have a 3HP cyclone myself. What HP is your dust collector? Are you sure that ducting wont collapse? Traditional HVAC ducting is typically too thin and will collapse.

 

 

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Ross, off topic but why metal ducting? Most woodshops I’ve seen use flexible hose as drops.

 

Too much resistance and loss of static pressure. Every 1 foot of flexible hose equal to ~5-10 ft of pvc and metal ducting.

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The more I look at this, the more I think it simply means that the trend to manufacture in China for export is relocating to cheaper countries faster than otherwise.

 

Doesn't mean it will be smooth sailing and I think that China will have to change its model to a consuming country vs mostly exporting or another accelerating trend.

 

I also think it may mean regime change. I can't see the young Chinese people accepting this vision mentioned this week or: "That it will be a long journey, we have been there for 5,000 years, blah blah blah". This really sounds like a communist regime wanting to keep people toiling, retain its power vs changing for the better.

 

Countries like Vietnam and India must be salivating at the opportunity and this has been going on for some time as costs in China have been trending up for over 10 years now.

 

Reminds me of an old investment or Gildan Activewear. Bought this back in early 2000's after one of their shipments had been found containing marijuana. Stock came down as a result.

 

What was interesting is that these guys used a loophole to create their entire business or lower tarrifs for imported clothes into the U.S. from Caribbeans and Central America than Asia or mostly China. Then they developed brand new, state of the art plants in these countries. They basically ended up eating everyone's lunch in printed t-shirts including Fruit of the Loom. Then they expanded in socks and more.

 

Anyway what do you guys think?

 

Cardboard

 

I have been building a woodshop dust collection system with HVAC metal ducting the past 6 weeks. I went to homedepot tonight and the wyes I've been paying $14.50 each are now $18 .68.

 

I went to Home Depot and Lowes to buy some black iron pipe the other day for a project. It was 2-3 times the price of copper piping. A length of pipe that used to be $3-5 a year or two ago was now $10-15. I even had some old pipe with price labels still on them that I compared it to for a sanity check. I talked with a guy in the isle who was also looking at the pipe (happened to be a part-time plumber) and he said he's never seen iron pipe cost more than copper. That $50 project quickly turned into $150 and I could buy what I was going to build for less.

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Ross, off topic but why metal ducting? Most woodshops I’ve seen use flexible hose as drops.

 

6 inch metal ducting for the main lines and flexible hose drops. I used metal instead of PVC because I had some interesting turns to get through the truss webs in the ceiling and 6 inch PVC bends don't come in enough variants to make it work. Not having to worry about static is nice too.

 

To add to the offtopic discussion have a 3HP cyclone myself. What HP is your dust collector? Are you sure that ducting wont collapse? Traditional HVAC ducting is typically too thin and will collapse.

 

3 HP as well with a thein separator ducted to the outside. I wanted a cyclone, but couldn't fit it in.

 

I went back and forth but the heavy stuff from oneida is really expensive. I went for it after I found this:

 

https://www.lumberjocks.com/topics/87690

 

I rotated my seams and used 30 ga straight, 26 ga elbows, and 28 ga wyes. No problems with collapse or even any ovaling of the duct with all the blast gates closed. I didn't try slamming the gates shut like he did though!  I wanted to run 6" all the way to my table saw and used a semi-rigid flex duct for the final 6 feet and it held up fine through my first project. It was $13 instead of $50 but more importantly, was available the day I wanted to test my DC system for the first time. I'll replace it if/when it breaks. 

 

 

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The more I look at this, the more I think it simply means that the trend to manufacture in China for export is relocating to cheaper countries faster than otherwise.

 

Doesn't mean it will be smooth sailing and I think that China will have to change its model to a consuming country vs mostly exporting or another accelerating trend.

 

I also think it may mean regime change. I can't see the young Chinese people accepting this vision mentioned this week or: "That it will be a long journey, we have been there for 5,000 years, blah blah blah". This really sounds like a communist regime wanting to keep people toiling, retain its power vs changing for the better.

 

Countries like Vietnam and India must be salivating at the opportunity and this has been going on for some time as costs in China have been trending up for over 10 years now.

 

Reminds me of an old investment or Gildan Activewear. Bought this back in early 2000's after one of their shipments had been found containing marijuana. Stock came down as a result.

 

What was interesting is that these guys used a loophole to create their entire business or lower tarrifs for imported clothes into the U.S. from Caribbeans and Central America than Asia or mostly China. Then they developed brand new, state of the art plants in these countries. They basically ended up eating everyone's lunch in printed t-shirts including Fruit of the Loom. Then they expanded in socks and more.

 

Anyway what do you guys think?

 

Cardboard

 

I have been building a woodshop dust collection system with HVAC metal ducting the past 6 weeks. I went to homedepot tonight and the wyes I've been paying $14.50 each are now $18 .68.

 

I went to Home Depot and Lowes to buy some black iron pipe the other day for a project. It was 2-3 times the price of copper piping. A length of pipe that used to be $3-5 a year or two ago was now $10-15. I even had some old pipe with price labels still on them that I compared it to for a sanity check. I talked with a guy in the isle who was also looking at the pipe (happened to be a part-time plumber) and he said he's never seen iron pipe cost more than copper. That $50 project quickly turned into $150 and I could buy what I was going to build for less.

 

I remember last summer 2x4 studs hit $5. I think it was a combination of NAFTA renegotiation and supply problems. It seems like building materials are very sensitive to the tarifs and HD and Lowes are really quick to implement price increases.

 

I am in the process of planning a solar array. Luckily, it is all US built and has actually gone down in price since I've been planning.

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Ross, off topic but why metal ducting? Most woodshops I’ve seen use flexible hose as drops.

 

6 inch metal ducting for the main lines and flexible hose drops. I used metal instead of PVC because I had some interesting turns to get through the truss webs in the ceiling and 6 inch PVC bends don't come in enough variants to make it work. Not having to worry about static is nice too.

 

To add to the offtopic discussion have a 3HP cyclone myself. What HP is your dust collector? Are you sure that ducting wont collapse? Traditional HVAC ducting is typically too thin and will collapse.

 

3 HP as well with a thein separator ducted to the outside. I wanted a cyclone, but couldn't fit it in.

 

I went back and forth but the heavy stuff from oneida is really expensive. I went for it after I found this:

 

https://www.lumberjocks.com/topics/87690

 

I rotated my seams and used 30 ga straight, 26 ga elbows, and 28 ga wyes. No problems with collapse or even any ovaling of the duct with all the blast gates closed. I didn't try slamming the gates shut like he did though!  I wanted to run 6" all the way to my table saw and used a semi-rigid flex duct for the final 6 feet and it held up fine through my first project. It was $13 instead of $50 but more importantly, was available the day I wanted to test my DC system for the first time. I'll replace it if/when it breaks. 

 

 

 

Nice Ok.  I went back and forth myself but ended up doing 6" DWV PVC, A little more resistance but works well. And yes oneida is prohibitively expensive. Mind me asking what makes/machines you have? Happy or not with them?

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Important but unknowable, but it seems plenty of other countries have cheap labor and don't force technology transfers and make you give up over half the upside, trap your capital forever, etc... 

 

I don't really think tariffs are "the devil" anymore than a VAT or border tax.  The discussion of increased consumer prices impact on the economy always fails to consider "and then," if the tariff is successful the increased costs would seemingly be paid to U.S. producers with additional impacts on GDP (wages, capital investment, etc...), but yeah I agree seems most likely more moves to other places and just speeding up automation that was coming in any case.

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"Important but unknowable, but it seems plenty of other countries have cheap labor and don't force technology transfers."

 

Well, I am certain that their engineers/workers will learn/copy processes on how to improve their operations and designs. I have seen that from the Chinese in the early 2000's on really basic stuff but, yes there is not that coercive factor and they don't have an army of spies and conducting cyberwarfare.

 

True problem is the communist regime.

 

Think about it, if Huawei was based in South Korea or Japan would we have such opposition? They are both competitors but, we are not afraid of their governments and behavior. We have no problem with Nokia which is based in Finland.

 

I am certain that if China was democratic that most of these issues would go away. However, you can't trust a country or regime right now that wants to invade Taiwan (renegade province as they call it but, truly refugees from civil war), talks about a 5,000 year long march while they have killed 15 to 45 millions in the process of their own citizens by being starved to death or assassinated in death camps, supporting North Korea and their nuclearization, invading oceans, etc.

 

I can only hope that young Chinese will wake-up and get rid of these old dictators. It was prevented following Tienanmen Square masacre but, maybe that today could be different.

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Ross, off topic but why metal ducting? Most woodshops I’ve seen use flexible hose as drops.

 

6 inch metal ducting for the main lines and flexible hose drops. I used metal instead of PVC because I had some interesting turns to get through the truss webs in the ceiling and 6 inch PVC bends don't come in enough variants to make it work. Not having to worry about static is nice too.

 

To add to the offtopic discussion have a 3HP cyclone myself. What HP is your dust collector? Are you sure that ducting wont collapse? Traditional HVAC ducting is typically too thin and will collapse.

 

3 HP as well with a thein separator ducted to the outside. I wanted a cyclone, but couldn't fit it in.

 

I went back and forth but the heavy stuff from oneida is really expensive. I went for it after I found this:

 

https://www.lumberjocks.com/topics/87690

 

I rotated my seams and used 30 ga straight, 26 ga elbows, and 28 ga wyes. No problems with collapse or even any ovaling of the duct with all the blast gates closed. I didn't try slamming the gates shut like he did though!  I wanted to run 6" all the way to my table saw and used a semi-rigid flex duct for the final 6 feet and it held up fine through my first project. It was $13 instead of $50 but more importantly, was available the day I wanted to test my DC system for the first time. I'll replace it if/when it breaks. 

 

 

 

Nice Ok.  I went back and forth myself but ended up doing 6" DWV PVC, A little more resistance but works well. And yes oneida is prohibitively expensive. Mind me asking what makes/machines you have? Happy or not with them?

 

-DC is a 3 HP Grizzly. I like it except it trips the GFCI about 1/10 times when I turn it off. I think it has to do with the motor generating electricity when it spins down and poor grounding. My whole garage is fed with a 60A GFCI breaker to protect the entire subpanel. I have to get to the bottom of it.

-Table Saw is a Delta 36-725. It is a good machine but getting the fence aligned perfectly from side to side has been a pain.

-Bosch router and home made table works great.

-Dewalt planer works fine

-Miter saw - Kobalt 10 inch slider - awful machine. Its ok for rough work, but is almost unusable for the picture frames I'm making right now due to the slop. I sold a dewalt 12-inch (great machine) and bought the kobalt used because I needed a slider for the 8 inch trim in my old house. I plan on replacing it with the Hitachi or Bosch slider when I can find one second hand.

-Orbital sander is a Bosch 3725DEVSN and was worth every penny.

 

I've got a bunch of other smaller power tools but those are the big fixed in place ones.

 

-I'm looking at table top jointers right now, I've been using my TS or router to straighten edges.

 

I just finished a two story garage with my workshop on the second floor. I'm still "nesting"  ;)

 

 

 

 

 

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Some thoughts:

 

I’m pretty sure these tariffs will make corporate profits go down and consumer prices go up, so it’s not something I welcome.  At the end of the day, it’s a tax hike: the government takes more money from the private sector and distorts things along the way.  And if things really escalate … it may be time to panic.

 

Cardboard is right though that even if the tariffs were to become permanent the long term damage should be blunted by the fact that businesses, consumers, and other governments around the world will adapt to them over time.

 

As to whether this will change China’s political regime and/or behavior, I’m pretty skeptical.  They seem to really hate being told how to run their country, which I guess is understandable.  But we'll see.

 

Maybe one positive thing I can say about all this is that it raises some (much needed) tax revenue in a way that many voters don’t seem to mind.  I think there’s some political brilliance there. 

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Ross, off topic but why metal ducting? Most woodshops I’ve seen use flexible hose as drops.

 

6 inch metal ducting for the main lines and flexible hose drops. I used metal instead of PVC because I had some interesting turns to get through the truss webs in the ceiling and 6 inch PVC bends don't come in enough variants to make it work. Not having to worry about static is nice too.

 

To add to the offtopic discussion have a 3HP cyclone myself. What HP is your dust collector? Are you sure that ducting wont collapse? Traditional HVAC ducting is typically too thin and will collapse.

 

3 HP as well with a thein separator ducted to the outside. I wanted a cyclone, but couldn't fit it in.

 

I went back and forth but the heavy stuff from oneida is really expensive. I went for it after I found this:

 

https://www.lumberjocks.com/topics/87690

 

I rotated my seams and used 30 ga straight, 26 ga elbows, and 28 ga wyes. No problems with collapse or even any ovaling of the duct with all the blast gates closed. I didn't try slamming the gates shut like he did though!  I wanted to run 6" all the way to my table saw and used a semi-rigid flex duct for the final 6 feet and it held up fine through my first project. It was $13 instead of $50 but more importantly, was available the day I wanted to test my DC system for the first time. I'll replace it if/when it breaks. 

 

 

 

Nice Ok.  I went back and forth myself but ended up doing 6" DWV PVC, A little more resistance but works well. And yes oneida is prohibitively expensive. Mind me asking what makes/machines you have? Happy or not with them?

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I think you will see Electronics manufacturers moving out out of China, at least partly.

Many of these are Taiwanese companies doing their assembly work in China.  They are moving some of their capacity back to Taiwan and moving some of the capacity to Vietnam and Indonesia.

Below is a list of top 20 exporters of China to US for 2016.

The number 1-7, 9, 12,14-16 and 18-20 are from Taiwan.  They will see very different tax rate depending on whether they do manufacturing in China or not.

836eee4b6b9de0e6e16d23c4f1d8f49d.thumb.jpg.2973af1e28385ab4bc73f6e5ad082f2a.jpg

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Ed Yardeni, recently pointed out that Chinese imports actually declined 0.9% in price in the past year after the 10% tariffs were implemented. This was mainly due to the fact that China devalued its currency to offset the tariffs and maintain market share.

 

http://blog.yardeni.com/2018/10/chinas-syndromes.html

 

https://www.nytimes.com/2019/05/21/opinion/china-trump-trade.html

 

Also - US home buyers are getting better rates

 

https://www.cnbc.com/2019/05/23/china-trade-war-leads-to-lower-mortgage-rates-for-americans.html

 

Huawei approach

 

https://www.wsj.com/articles/huaweis-yearslong-rise-is-littered-with-accusations-of-theft-and-dubious-ethics-11558756858?mod=hp_lead_pos5

 

 

Important but unknowable, but it seems plenty of other countries have cheap labor and don't force technology transfers and make you give up over half the upside, trap your capital forever, etc... 

 

I don't really think tariffs are "the devil" anymore than a VAT or border tax.  The discussion of increased consumer prices impact on the economy always fails to consider "and then," if the tariff is successful the increased costs would seemingly be paid to U.S. producers with additional impacts on GDP (wages, capital investment, etc...), but yeah I agree seems most likely more moves to other places and just speeding up automation that was coming in any case.

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I think people hoping for regime change have a unrealistic view of the Chinese populace.  Many Han Chinese made a lot of money during the hyper growth years and basically few spend lots of time worried about  living in a dictatorship.  The main point is if everyone is making money, its not a huge deal that we dont get political expression.  They do have a point.  I mean think about it as a US citizen how much time is the average person spending in the political sphere.  The question is if corruption and propaganda causes economic pain to the middle class.  Tarrifs could play a role in that, but I'm skeptical how much damage it does to both US and China. 

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hey all:

 

One thing that I think is obvious now is that USA based manufacturers are going to be more valuable going forward.

 

How much more valuable?  Very hard to say, but it is going to be SOMETHING.  There might be some small cap auto parts manufacturers that should be able to capture a bit more business in the near future.  Those might be the companies that benefit the most?

 

 

 

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