Let’s start here, tariffs are taxes. Raising taxes isn’t a good thing. Ideally, we would have true fair and free trade. However, this isn’t an ideal world. If this stand of results in better terms for the United States going forward, it will have been worth implementing them. If it doesn’t, they would have been negative. While we wait to see what the answer will be, here’s the real version of what this means to our economy and most specifically you.
First of all, the total size of US trade of imports and exports with China in 2018 was $659.3 billion. The total size of the US Economy in 2019 is of $21.1 trillion. All in China’s 3.1% of the US economy. To quickly put this in perspective, the US economy has grown at 3.3% over the past twelve months. If China trade were non-existent the US economy would still have marginally grown over the past year. Don’t get me wrong, a 3% hit on the economy is a big deal but then again if trade with them didn’t even exist and we still weren’t in a recession, that's a far cry from the noise of the day on China trade.
Second, let's cover the more direct impact to you. There’s nothing like a story that makes President Trump look bad for news media to rally. In this case, it’s rallying around the plight of you buying Chinese products from mass retailers. But it’s a funny thing that’s happened during the Trump economy. Manufacturing output in the United States has never been higher. After shrinking by 10% from 2000-2010. We’ve grown US Manufacturing by 25%. Since then, we've had record jobs to go alongside the record output. The top categories for Chinese imports are electronics, electrical equipment, machinery, clothing, and metal. In other words, there are American alternatives in almost all instances.
There’s nothing there that can’t be replaced by American manufacturing. The greatest challenge is dealing with some of the parts that go into various devices that are assembled in China. Additionally, the narrative that you’ll necessarily pay more even for these items is assumptive, not certain. As American manufacturing has gained scale over the past couple of years, the cost of fair producing goods has been mitigated by eliminating international shipping costs and ports fees.
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