The United States has been hooked. No, I don’t mean on drugs ... but that too is a serious problem. I mean on low-priced consumer goods ... many coming from China. Companies like Walmart, Christmas Tree Shops, Five Below, etc. have been big beneficiaries of this trend ... as obviously have been our consumers.
I have often chided my wife, after a trip to one of these discount stores, that one day our house is going to explode because of all this cheap “stuff” filling all our crooks and crannies. And I’m sure that this story is being repeated all across middle-class America. Do we really need a four-story cat cubby and scratching pole?
So, the U.S. consumer needs to go on binge-buying withdrawal. And, if Trump sticks to his guns on his tariff wars, the eventual higher cost of such goods might inspire such an adjustment. ... maybe even a sea change.
These purchasing adjustments might well be painful to many American retailers, even possibly Amazon. But they would also be devastating to those foreign manufacturers which have relied on cheap labor to produce the cheap goods they export.
I am not smart enough to gauge the extent of these economic dislocations ... but they clearly could be severe ... maybe even traumatic ... somewhat like the detoxification that junkies experience in the first weeks of their rehab treatments.
3 comments:
You admit here that tariffs are not good for American consumers. Also not good for American companies selling. Who is benefiting?
Read what I said again. Trump postponed the tariffs on consumer products which already had prices with their Chinese factories locked in. Normally, US companies would force price reductions on their Chinese suppliers to offset the tariffs. They couldn’t do this with so short a notice ... thus the 3 month delay. This is not rocket science ... pay attention.
Longer term ... 2 to 3 years ... tariffs might have to be passed onto US consumers ... at which point these costs would suppress purchases of Chinese consumer goods by US consumers. This might not be all bad.
So consumers should stop consuming until prices go up.
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