Trump wants to levy extra tariff on all Chinese goods, but here’s the catch: there are actually a few different types of “Chinese” goods. And if we’re not careful, we will be shooting ourselves and our allies in the foot.

American Goods Made in China: Nike, Coach, GM and countless number of other American companies manufacture their goods in China and ship them to the US. So while Trump may be happy he’s taxing “China,” he will really be taxing an American company.

Goods with Global Parts Assembled in China: You can tax an iPhone because it comes from China, but all the valuable stuff in an iPhone really come from South Korea (Samsung), Japan, Taiwan, Germany and the US. China gets only 5% of the value of an iPhone. So if you tax the hell out of an iPhone, you’re really taxing the hell out of our allies! This is the complexity of the global supply chain.

Chinese Goods with Foreign Parts: Take a Lenovo laptop or a Huawei smartphone. Those are Chinese brands, made by Chinese. However, even those will have semiconductor chips from Qualcomm (American), Intel (American) etc. So taxing them and reducing their sales also affects companies in the US and our allies.

Chinese Goods to be Resold by American Corps: Consider Walmart. They buy about $60 billion worth of Chinese goods every year. A 10% tariff means Walmart has to pay $6 billion of extra taxes! That would slash Walmart’s net income by almost half, and Wall Street will dump the stock like a rotten apple! Plenty of other retail giants will face a similar fallout.

Made in USA … with Chinese Parts: There are lots of “American” finished goods which have plenty of Chinese parts inside them. From cars to household appliances to industrial goods … many of them depend on parts shipped from China. Thus tariffs on Chinese goods will also raise the cost of such “American” goods.

Truly Chinese Goods: Someone needs to do a detailed analysis, but perhaps only 20% of the stuff we import from China are truly Chinese — made by a Chinese corporation using Chinese parts and Chinese labor.

Doesn’t look like Peter Navarro, Trump’s anti-China adviser, has thought about all this…

Author: Chris Kanthan