Home › Forums › Random Thoughts › US is challenging cheap shipping from China
- This topic has 21 replies, 8 voices, and was last updated 2 years, 10 months ago by
Inglewood.
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10/17/2018 at 11:33 am #50308
https://www.nytimes.com/2018/10/17/us/politics/trump-china-shipping.html
President Trump plans to withdraw from a 144-year-old postal treaty that has allowed Chinese companies to ship small packages to the United States at a steeply discounted rate, undercutting American competitors and flooding the market with cheap consumer goods.The withdrawal is part of a concerted push by Mr. Trump to counter China’s dominance and punish it for what the administration says is a pattern of unfair trade practices. The move is expected to be announced on Wednesday, according to senior administration officials.
The Universal Postal Union treaty, first drafted in 1874, sets fees that national postal services charge to deliver mail and small parcels to countries around the world. Since 1969, poor and developing countries — including China — have been assessed lower rates than wealthier countries in Europe and North America.
While the lower rates were intended to foster development in Asia and Africa, Chinese companies now make up about 60 percent of packages shipped into the country, taking advantage of the lower rates to ship clothing, household gadgets and consumer electronics. Many websites now offer free shipping from China, in part because of the cheap postal rates, administration officials say.
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This topic was modified 2 years, 10 months ago by
Jay.
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This topic was modified 2 years, 10 months ago by
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10/17/2018 at 11:40 am #50311
To be fair, China is no longer a poor and developing country, so perhaps it really is time they go over the treaty and adjust for country status!
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10/17/2018 at 11:47 am #50314
This should have happened before the tariff battle. I guess it really doesn’t matter though – as China has already ran out of leverage on the tariff front.
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10/17/2018 at 11:48 am #50315
60% of all packages that enter US are Chinese goods. That is insane.
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10/17/2018 at 12:37 pm #50323
The other insane thought is the rate. It was over a year ago this topic popped up here at SL and I think someone back then attached a link that took a reader to the Chinese data that showed what the “Chinese First Class Packet” cost was. It was something like for a padded bubble, manailla mailer weighing less than 6 ozs. the Chinese shipper paid $.25. We have to pay about $2.66 for the same size and weight.
My neighbor gets stuff all the time from China through Alibaba and he says they pay pennies to our dollars for shipping stuff in and as Jay has always said.. “Cheap junk from China flooding our market”. To add insult to injury China still has a ton of extremely low income, almost slave houses where by workers are paid pennies per hour and US citizens buying this stuff is contributing to that.
I agree the plug should have been pulled long ago. I look forward to the day, that two identical items sit side by side on a shelf, the prices are the same or close and the only choice I have to make is buy the item from China or the one made in the USA. Wouldn’t that be nice. Probably never happen but at least making the postal rates universal would help to level the playing field somewhat I am thinking.
mike at MDCGFA
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10/17/2018 at 12:54 pm #50326
This story also came out today:
https://www.cnbc.com/2018/10/16/china-hidden-local-government-debt-could-be-6-trillion-sp.htmlSo if Trump ends cheap Chinese shipping, then a lot of these Chinese junk manufacturers could go belly up. 6 trillion in debt could be called in a hurry on the Chinese. Ouch…
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10/17/2018 at 12:56 pm #50328
Through all the talks of tariffs and things like that, I’ve had the thought in the back of my mind that this may be good for all of us who resell. This will make us even more competitive with the “new items” market.
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10/17/2018 at 1:24 pm #50336
I agree that the US should not be subsidizing shipping Chinese goods to the US.
But the larger fight over tariffs etc is much more complicated. Trump may be upset at the Chinese, but its US companies that voluntarily moved their production and supply chains overseas.
Tariffs will likely mean we pay more for foreign-made items, instead of US companies bringing production home. We already have the lowest unemployment in decades. Who would make all those cheap goods?
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10/17/2018 at 12:58 pm #50329
@retrotreasureswv but don’t the Chinese own a huge portion of the US national debt? What stops them from calling in that debt in order to save their own economy?
None of this is simple and straightforward and I imagine there will be lots of repercussions that will be teased apart by future generations.-
10/17/2018 at 1:21 pm #50335
If China stopped buying US debt, it’s referred to as the “nuclear option”: https://www.nytimes.com/2018/10/09/business/dealbook/china-trade-war-nuclear-option.html
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10/17/2018 at 1:35 pm #50337
I can’t imagine that US companies will bring manufacturing back to the states. It would be far too expensive for them to have to build a manufacturing economy from the ground up. It’s much easier for them to pass the tarrifs along to the customer or move the manufacturing to another country without tarrifs – India comes to mind.
Plus, they may hold out for a few years in hopes of a change in US government that would be more in line with what was done in the past supporting large corporations.-
10/17/2018 at 3:11 pm #50360
Companies are already moving manufacturing back to the US. I work for a global pump manufacturer. I work at their main US parts manufacturing plant. This company (Not a US company) is shutting down foreign plants and sending the work to us. The US pump market is way up (water, Oil/gas, industrial)compared to 2016.
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10/17/2018 at 4:20 pm #50362
I hope that’s true for advanced materials. I know our little rural county would do anything to have a manufacturing plant locate here.
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10/17/2018 at 4:32 pm #50363
The problem is that many areas provide incentives and tax breaks to companies to attract them – in the end it is a race to the bottom that costs the community and the only winner is the corporation. When I read things about businesses like Amazon and the “HQ 2.0” they talk about building, and what various areas are offering to attract it, it scares me.
An extreme example is the Oakland Raiders moving to Las Vegas – they are taking money from schools, health programs, and the community to build a football stadium that will be used by a team maybe 10-11 times a year.
It makes me sick when highly profitable companies like Amazon, Apple, NFL teams, etc. rip off regular tax paying citizens to build facilities. I have no issue with an established local company that has paid taxes, and their employees have paid taxes asking for a break or grant for a reasonable local expansion, but the bidding wars some communities get into to lure jobs is sad. I’ve just sat at too many tables in board rooms where profitable private companies try to figure out how to weasel money out of government to increase a bottom line.
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10/17/2018 at 1:42 pm #50339
What’s to stop China from the nuclear option? Rhetorical question, obviously.
Currently, diplomacy isn’t working with the US. As I see it, the tarrifs are a short sighted power play by a bully. Why wouldn’t China escalate if they think it will save their economy and hurt the bully? I can see machismo taking over and the equivalent of “if he wants to fight, I’ll show him.”-
10/17/2018 at 1:50 pm #50342
Good question. Read the article. China owns 1-trillion of US debt. If they helped destroy the US economy, that debt becomes worthless. That’s why its called the “nuclear option” because there would be no winners.
But anything is possible.
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10/17/2018 at 1:57 pm #50343
They wouldn’t have to call in all of the debt. Just enough to make a point.
Presumably the US economy won’t completely collapse, but crippled enough to make it obvious that China is the new world superpower could be beneficial in the long run. As the US economy rebuilds, their debt is worth more again.
I had a specialized history teacher in college who pointed out that the turn of every century brought change and usually war. Looks like things are right on schedule.
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10/17/2018 at 2:40 pm #50352
China cant call the debt since they bought debt to be paid back in a certain time frame. But the US depends on China to buy new Chinese debt. If China decides to stop buying our new US debt, then interest rates will go up and it’ll be much more expensive for the US to borrow money. That would not be good since the US government runs a debt every year.
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10/17/2018 at 1:47 pm #50340
I remember researching this a few years ago when I was trying to figure out why USPS rates from China are so much cheaper than America’s. There was an e-packet program created by the USPS and China in 2011 to allow for cheaper shipping rates with tracking. PDF of this agreement can be found here:
http://about.usps.com/news/national-releases/2011/pr11_037.pdf
I never understood why a similar agreement couldn’t be made for large sellers in our own country. At least make it an even playing field in terms of international shipping of US sellers to China. So baffling.
As for China holding a large portion of US debt, I would not be surprised if the markets went down for several days before hearing about it, only to go up the day they would announce a huge sell-off, or go up heavily within a week of it happening. Robot trading is also confusing.
Russia dropped a significant amount of treasury bonds this summer, but most people ignored the news. The stock market was fine.
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10/17/2018 at 2:10 pm #50347
This is not a U.S. only problem – shipping form China to Canada is impossibly cheap as well, but I’m guilty of buying goods from China.
I’m curious to see what the U.S. does – Canada has some industries that are starting to become dependent on the Chinese market, and is probably too scared to push back.
Also, Jay has a point – if we want to add costs to Chinese goods, still nobody here will make them, and it will just end up costing us all more to buy items. In the end, it’s not going to bring back jobs, it’s just going to be revenue stream for the government, and potential affect goods going to China.
The Chinese people are starting to demand more pay, benefits, etc. – there are numerous documentaries I’ve seen on the topic (Outsourcing China is one) where the Chinese are starting to move jobs from China to poorer Asian and African countries. I think that China is going to be a past worry as they advance (similar to Japan’s rise from nothing) – it’s the other underdeveloped countries we need to worry about in the future.
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10/17/2018 at 3:07 pm #50357
The Chinese governments have plenty of problems that should be addressed, but its corporations that are the real agents of change. As Chinese manufacturing becomes more expensive, corporations are already moving to cheaper places like Vietnam. Lowest common denominator.
Ultimately its the US buyers who are at fault because we keep demanding stuff for so cheap and then wonder why things aren’t “Made in America”.
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10/17/2018 at 3:17 pm #50361
Our entanglement with China on the economic front is another advancement of MAD.
In the 70s and 80s, we had nuclear proliferation against the USSR to achieve MAD – Mutually Assured Destruction. No one would fire first, as they knew that the other would destroy them. Killing your enemy kills yourself.
With China, we are now in MAED – Mutually Assured Economic Destruction. We are so entangled by buying their goods and they buy our debt (a small percentage at least), that there are many levers and switches that we can pull to hurt each other, but no one wants to go all the way as destruction of one would also be destruction of the other.
I see this as a longer game, and one that we need to improve our position on (reducing their cheap rate of shipping to the US, lessening our national debt, and eliminating their stealing of Intellectual Property), but I doubt it will ever go nuclear.
That said, if other factors continue to increase (their issues at home with how they are propping up their economy, ours with our addiction to cheap goods and a growing debt), then it could get nasty in a few years…
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