Executive Briefings

Tariffs On Chinese Imports Could Backfire In California

With each provocative tweet aimed at China from the president-elect, David Vered worries about a trade war that would hurt profits at his Los Angeles jeans company.

All the denim Vered buys for his brand, YMI Jeans, comes from Chinese factories, which have come to dominate the industry because of China's abundance of affordable labor, capital and lax environmental laws. Those same conditions help make China the world's top producer of all manner of manufactured goods such as cellphones, furniture, rubber boots and even Christmas lights. It's difficult for foreign companies to source supplies from anywhere else and stay competitive.

“It would be disastrous,” Vered, who remains a Donald Trump supporter, said of a trade war. “China is the whole production line. It would be very, very difficult for us.”

Across California, companies reliant on Chinese factories and suppliers are mulling over what it means if the incoming Trump administration makes good on threats to slap new tariffs on Chinese goods. The president-elect and his surrogates have floated the idea of import taxes as high as 45 percent and as low as 5 percent to punish China for undervaluing its currency — a charge many economists say is outdated.

Should the trade relationship with China sour, no state would feel the disruption more than California. About $143.6bn in goods from China were shipped to the Golden State in 2015, according to the latest full-year census data. That’s three-and-half times more than second-place Texas.

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All the denim Vered buys for his brand, YMI Jeans, comes from Chinese factories, which have come to dominate the industry because of China's abundance of affordable labor, capital and lax environmental laws. Those same conditions help make China the world's top producer of all manner of manufactured goods such as cellphones, furniture, rubber boots and even Christmas lights. It's difficult for foreign companies to source supplies from anywhere else and stay competitive.

“It would be disastrous,” Vered, who remains a Donald Trump supporter, said of a trade war. “China is the whole production line. It would be very, very difficult for us.”

Across California, companies reliant on Chinese factories and suppliers are mulling over what it means if the incoming Trump administration makes good on threats to slap new tariffs on Chinese goods. The president-elect and his surrogates have floated the idea of import taxes as high as 45 percent and as low as 5 percent to punish China for undervaluing its currency — a charge many economists say is outdated.

Should the trade relationship with China sour, no state would feel the disruption more than California. About $143.6bn in goods from China were shipped to the Golden State in 2015, according to the latest full-year census data. That’s three-and-half times more than second-place Texas.

Read Full Article