What will the impact of prospective -- and possibly impending -- U.S. tariffs be on audio gear?

[pablolie]

I don't disagree with anything you say here - all reasonable.

I do think, however, that there's a missing piece in many of the narratives here and across the public sphere: the loss of US manufacturing jobs was mainly created by two connected factors: (1) rising competition from European and Japanese industry during the post-WWII decades as their rebuilt economies got going and US firms were unable or unwilling to make large new capital investments to modernize and increase efficiency; and (2) intentional relocation, and then outsourcing, of manufacturing by US corporations seeking cheaper labor costs.

The reference to Germany is in my view instructive here in this regard: Germany is a democratic, capitalist country just like the US, and for a long time across governments run by different political parties Germany has had an industrial strategy and policy that has stabilized and cultivated key industries to soften the blow of the globalization of labor and production. The US has not, instead letting jobs and production go wherever individual companies felt like they should go, and providing more tax incentives to smooth that movement than to shore up domestic production and employment. In my view we should not lose sight of the role of the conscious decisions in all this, even as we acknowledge the important role of large, structural changes in the global economy.

Well, interpretations of history lines are always open to debate.

The history of the reconstruction of Germany (and Europe) and Japan is very different from the investment the West did in China.

The lesson from WW1 was that that it doesn't pay to destroy a country and keep it down. The Versailles treaty was how the Nazis swept power less than 20 years later and hence a huge war started yet again. After WW2, the Marshall plan was a smart way to contain resentment and rebuild Germany and Japan in a totally different way that aligned them with the US global system (and was good for those countries).

The China emergence from incompetent communist rule was an entirely different story and miscalculation by the entire West. All the West saw was a benighted country that would bow down to the power of our market economy and give us a billion consumers that didn't have anything of the stuff we had. We'd go in and turn them into Coca Cola drinking, McDonalds-wolfing consumers. Our leaders -countries and industry- just saw possible profits. They salivated at the chance to reduce manufacturing costs if they invested some into passing some know how over. They never ever imagined how scheming China was. China went "thanks for the know how, but we are not opening our markets". Cisco became Huawei and had to pull out. Amazon became Alibaba and pulled out. Etc etc. Complete and total loss. We gifted immense know how for zero in return. And they remain just as scheming and ruthless. Make no mistake, we are at war... Just not openly.

It's a very different story compared to the Marshall plan era. It was about greed overruling caution. About complete miscalculation. It handed out a lot for nothing in return for the first time. China completely outsmarted every Western strategist.

 

[a4eaudio]

It's not that much of a plan really. For the highest value items, and the easiest to move, any "brokers" will be undercut by a further alternative called "smugglers" and that will not help the people who dreamt up this plan. Also, the tariffs on this scale will overwhelm any attempt to "broker" vast numbers of different products, leading to it looking just like the tariff rate on everything.

Yeah, the broker argument is pretty weak. Consider most imports come through large Multinational Enterprises (MNEs) - for example GM. GM-US is importing from its subsidiary GM-China or one of its joint ventures. Same thing with all of the big companies - Apple, Proctor and Gamble, etc. They are never going to let an unrelated party take title to their product or raw materials.

One supporting fact for those who don't think the sky is going to fall...US imports from China are about 2.2% of US GDP using the highest imports on record in 2022. US imports from China $576B and US GDP of $25.74 trillion.

$576,000,000,000 / $25,740,000,000,000 = 2.23% (trying to do this on my phone calculator app was tough - that is a lot of zeros to keep up with)

To put that in perspective, here is the global revenue of the largest 18 US companies:

Company	Revenue	Employees
Walmart	$648,125	2,100,000
Amazon	$574,785	1,525,000
Apple	$383,482	161,000
UnitedHealth Group	$371,622	440,000
Berkshire Hathaway	$364,482	396,500
CVS Health	$357,776	259,500
ExxonMobil	$344,582	61,500
McKesson	$308,951	48,000
Alphabet	$307,394	182,502
Cencora	$262,173	44,000
Microsoft	$245,122	228,000
Costco	$242,290	316,000
JPMorgan Chase	$239,425	309,926
Cardinal Health	$205,012	47,520
Chevron	$200,949	45,600
Cigna	$195,265	71,413
Cargill	$177,000	160,000
Ford Motor Company	$176,191	177,000

 

[A Surfer]

Some of those people need to be on the receiving end of one of Dave Ramsey's rants.

No argument from me. While I understand the alienation and anger, that would still never be enough for me to turn my back on my country. Putin is smiling broadly.

 

[a4eaudio]

...The China emergence from incompetent communist rule was an entirely different story and miscalculation by the entire West. All the West saw was a benighted country that would bow down to the power of our market economy and give us a billion consumers that didn't have anything of the stuff we had. We'd go in and turn them into Coca Cola drinking, McDonalds-wolfing consumers. Our leaders -countries and industry- just saw possible profits. They salivated at the chance to reduce manufacturing costs if they invested some into passing some know how over. They never ever imagined how scheming China was. China went "thanks for the know how, but we are not opening our markets". Cisco became Huawei and had to pull out. Amazon became Alibaba and pulled out. Etc etc. Complete and total loss.

I'm confused. China is in FACT a Coca-Cola drinking, McDonald's wolfing country. Kentucky Fried Chicken may have passed up McDonald's recently. Pizza Hut is huge. When I lived in Shanghai for two year my wife and kids were super excited when a Dunkin Donuts opened up near our apartment - in between the Starbucks and McDonalds. All of the locals I worked with had an iPhone. The most popular cars were Porsche, Ford, GM, Toyota, Mazda, etc.

What does it mean that Amazon became Alibaba? Two different companies. I bought plenty of stuff from Amazon when I lived in China.

China has 11 of the largest companies in the world (by revenue). All but one is a local utility company, construction company or bank. The other one is a Baowu Steel. The US has 23 followed by Germany (4, 3 of which are automobile manufacturers), UK and Switzerland (2) and Japan, France, etc. (1 each).

GDP per capita in China is $22,000 compared to $73,000 in the US and outside of the largest cities in China (Shanghai, Beijing and a few others) most areas are like every other undeveloped/developing economy. To put this in perspective, China at #95 is between the Dominican Republic at #91 and Gabon at #102.

Its almost like they are playing checkers while we are playing 3D chess.

 

[JeffS7444]

No argument from me. While I understand the alienation and anger, that would still never be enough for me to turn my back on my country. Putin is smiling broadly.

Did you actually watch the video? It has nothing to do with any of that, and everything to do with people falling behind due to their own bad choices.

 

[pablolie]

I'm confused. China is in FACT a Coca-Cola drinking, McDonald's wolfing country. Kentucky Fried Chicken may have passed up McDonald's recently. Pizza Hut is huge. When I lived in Shanghai for two year my wife and kids were super excited when a Dunkin Donuts opened up near our apartment - in between the Starbucks and McDonalds. All of the locals I worked with had an iPhone. The most popular cars were Porsche, Ford, GM, Toyota, Mazda, etc.

What does it mean that Amazon became Alibaba? Two different companies. I bought plenty of stuff from Amazon when I lived in China.

China has 11 of the largest companies in the world (by revenue). All but one is a local utility company, construction company or bank. The other one is a Baowu Steel. The US has 23 followed by Germany (4, 3 of which are automobile manufacturers), UK and Switzerland (2) and Japan, France, etc. (1 each).

GDP per capita in China is $22,000 compared to $73,000 in the US and outside of the largest cities in China (Shanghai, Beijing and a few others) most areas are like every other undeveloped/developing economy. To put this in perspective, China at #95 is between the Dominican Republic at #91 and Gabon at #102.

Its almost like they are playing checkers while we are playing 3D chess.

You must be the only person that still believes China is an open economy playing by mutual rules and that its markets are completely open for Western companies.

Amazon does not offer many services in China. Local companies have and will continue to decrease its market presence. Interesting you don't mention Huawei, which is a complete ripoff company that even kept original code comments from software they stole. Come on. And McDonald's in China is a local entity that basically pays minor royalties (basic internet search: ".. McDonald's in China is not government owned, but a consortium led by a state-owned conglomerate controls the majority of the business.."). That is the façade China puts on things, the "consortium" thing until they milk your know-how and basically shut down your business. It's the same with pretty much any halfway recognizable name you find there - Four Seasons hotels etc etc etc. Coca Cola is known for very close relationships with the Chinese government to do business there, there were several bribery inquiries and arrests. Apple continues to lose market share in China after -coincidentally- Huawei/vivo/oppo (government owned) started producing some kick ass local smartphones with oddly similar ARM cores they pay zero royalties for (other internet search "In 2016, Arm sold a 51% stake in the company to a local investor consortium consisting of state-controlled China Investment Corp").

The common lesson: Only way to stay in China business is to sell out to the government.

 

[a4eaudio]

You must be the only person that still believes China is an open economy playing by mutual rules and that its markets are open for Western companies.

I don't necessarily believe either of those things. I just don't see much evidence that "China completely outsmarted every Western strategist" or even "any strategist". China does stuff they think is in their best interest. Most of it is not - a command economy simply cannot compete in the long run with market economies. This was settled between 1988-1992, China just hasn't accepted it yet. If they don't want to be an open economy that hurts them, not us. There markets are no less open than Japan's in the 1980s and 1990s.

The US has been trying to block the sale of US Steel to Nippon Steel (Japan) for "national security" reasons. Of course the real reason is because US Steel was in the most important swing state of the 2024 election. Japan is quite upset that the US is not playing by the mutual rules.

 

[jayapple]

As president of the United States, Donald Trump will no doubt impose tariffs on Chinese products. But it is unlikely to be all goods, and audio exports are negligible for China.
The United States has always been a big market, but it is rare to see Chinese products in the United States except for some cheap daily necessities. On the contrary, you can buy almost any American product in China, which is inherently unequal.

If Trump starts a trade war, then China will also stop importing all American products and increase tariff barriers, which will undoubtedly cause a big blow to the US economy. Europe is a good example, China is a big market, we open the market and welcome imported products, but others shut you out.

At that time, Japan and South Korea were also low-cost high-quality products to conquer the world, but not China? This is ridiculous!
Because China is not a running dog of the US? A country without independent sovereignty is pathetic and can be manipulated at any time.

 

[pablolie]

... China will also stop importing all American products and increase tariff barriers, which will undoubtedly cause a big blow to the US economy. Europe is a good example, China is a big market, we open the market and welcome imported products, but others shut you out.

That is bizarre sorry. US exports to China decreased 25% in the last year (150B) whereas China exports to the US are still 500B.

Europe has already imposed major tariffs on Chinese EVs.

 

[Galliardist]

Yeah, the broker argument is pretty weak. Consider most imports come through large Multinational Enterprises (MNEs) - for example GM. GM-US is importing from its subsidiary GM-China or one of its joint ventures. Same thing with all of the big companies - Apple, Proctor and Gamble, etc. They are never going to let an unrelated party take title to their product or raw materials.

One supporting fact for those who don't think the sky is going to fall...US imports from China are about 2.2% of US GDP using the highest imports on record in 2022. US imports from China $576B and US GDP of $25.74 trillion.

$576,000,000,000 / $25,740,000,000,000 = 2.23% (trying to do this on my phone calculator app was tough - that is a lot of zeros to keep up with)

To put that in perspective, here is the global revenue of the largest 18 US companies:

Company	Revenue	Employees
Walmart	$648,125	2,100,000
Amazon	$574,785	1,525,000
Apple	$383,482	161,000
UnitedHealth Group	$371,622	440,000
Berkshire Hathaway	$364,482	396,500
CVS Health	$357,776	259,500
ExxonMobil	$344,582	61,500
McKesson	$308,951	48,000
Alphabet	$307,394	182,502
Cencora	$262,173	44,000
Microsoft	$245,122	228,000
Costco	$242,290	316,000
JPMorgan Chase	$239,425	309,926
Cardinal Health	$205,012	47,520
Chevron	$200,949	45,600
Cigna	$195,265	71,413
Cargill	$177,000	160,000
Ford Motor Company	$176,191	177,000

Imports from China are around 17.5% of total imports to the US. So, it is significant. Remember that a lot of extra value is added to those imports, and a significant part of GDP comes from distribution and sale of those goods after importation. We shouldn't overestimate this, but neither should we underestimate it.

More important than where things come from, is what things they are. Tariffs from every country? In the US, every TV set is imported . 99%+ of cellphones are imported. 100% of tablet devices are imported. Most over-ear headphones are imported. Most projectors are made in China. Pretty much every audio product in the US has imported components.

Obviously, what tariffs get imposed upon will affect the result, along with the ability of US industry to react to those changes. However, if the major consumer goods of our time are affected heavily, and US industry has no capacity to compete, the result will look like a regressive sales tax on those items. Now, do you think that will improve the living standards of middle and working class citizens? Even if the US suddenly starts making millions of TVs and smartphones, that's going to be automated and few workers will be employed in what will be new plants, with technology still behind that of Chinese and South Asian rivals. I don't see how the argument for high tariffs holds up.

There's one more thing to consider. The US dollar is currently the reserve currency, mainly used in trading. A retreat from international trade could weaken that. It's worth remembering that the US dollar became the reserve currency over time after the UK made some radical moves in the 1920s that weakened sterling, and then the principal reserve currency as part of the trade system after WW2. Weaken that currency position, and then the US economy will weaken accordingly.

Which currency will replace or challenge it? China is careful about currency - it has a two currency system, and only certain countries can trade in the internal renmimbi (Australia was given that privilege in its FTA with China). So it's hard to see the external Yuan becoming a reserve currency in practice because of those special deals. I could see a situation where the fact of a reserve currency is taken out of international markets, and that could itself be problematic as well.

So, I expect the overall tariff to be set very low, just to not weaken that US position, and to allow imports without too much effect on US consumer markets.

 

[Mnyb]

Audio products of the kind we want are such niche .

They will just get more expensive , they are still >10x cheaper than most insane local products US has two exceptions shiit and geshelli , they price reasonably .
So a chinese DAC's still outcompetes almost everything at twice the price , and i think they can adjust downwards a bit anyway if they want

I think the internal Chinese market is huge and the products shipped to some US or EU nerds are a rounding error so they may not care .

EU seems to have some advantage in class-D modules , but wonder where they are manufactured ?

 

[Jimbob54]

I think we have hashed out the facts and possible impacts of said proposals now and this thread has turned into more of an us V them thing . Locking it down .