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> Blaming this USA plant's closing on Trump's tariffs is a lie., Element Electronics company is obviously lying.
Supposn
post Aug 9 2018, 12:56 PM
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Element Electronics company is obviously lying.

If the USA levies tariffs upon components, I would suppose and expect we would do so upon similar imported components and finished products from all foreign nations. USA producers are at disadvantages to cheaper foreign labor, but they're at lesser rather than greater disadvantages due to such USA levied tariffs.

I don't doubt that the tariffs will to some extent reduce USA sales of the finished products. We all benefit from cheaper imports, but they don't fully compensate for USA's chronic annual trade deficits consequential reduction of our GDP and net numbers of jobs.

I'm among the proponents of the improved unilateral trade policy concept as described in Wikipedia's “Import Certificates” article. It is superior to pure free trade, tariffs, or any other trade policy we're aware of.

Google Wikipedia, Import Certificates .
Refer to: https://www.newsday.com/business/ele...ffs-1.20345862
and
https://www.usatoday.com/story/news/politic...iffs/927203002/

Respectfully, Supposn
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Julian
post Aug 13 2018, 05:32 PM
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QUOTE(Supposn @ Aug 9 2018, 01:56 PM) *
Element Electronics company is obviously lying.


About what? They do final assembly on components that are entirely sourced from the Far East, mostly China. Tbey ere making tin margins when the tariff on these components was 4.5%, and now it's gone up to 25%, what did you think was going to happen.

It may be a pretty tenuous business, and the investors and senior management may have been skating on thin ice to set up Element Electronics in the first place. They already had to back down from saying "made in the USA" to the more accurate "assembled in the USA".

But, based on this article (which actually disccusses the business and how the sanctions will affect them), they aren't lying - their business is going to be killed off by Trump's trade war. How serious that is for the whole USA is another matter.

QUOTE
If the USA levies tariffs upon components, I would suppose and expect we would do so upon similar imported components and finished products from all foreign nations. USA producers are at disadvantages to cheaper foreign labor, but they're at lesser rather than greater disadvantages due to such USA levied tariffs.


All true, but if you want to buy a television. or a whole host of other consumer electronics products as a US consumer, you don't have the option to buy from one of the advantaged-by-tariffs US manufacturers, because there aren't any, because (in turn) electronics manufacturing (an industry I've worked in for 13 years now) is a highly layered and interdependent industry. Some of the design and branding may be owned by First World companies (in the US, Europe, Japan and Korea) but precious little of the component manufacturing happens outside China, Taiwan and India these days. And for mass-market products - TVs, cellphone handsets, games consoles, etc. - pretty much all the final assembly happens either in the China/Taiwan/India nexus, or in domestic plants that extensively use components and sub-assemblies from there.

It'll take more than a 25% component tariff to make it worthwhile to disinvest the hundreds of billions of dollars worth of plant, equipment, raw materials processing and human capital, and it'll take more than one or two presidential terms to reverse 50 years of outsourcing. And if it does, be prepared (as loyal American consumers) to pay 50% more for your consumer electronics than the rest of the world needs to, because while you are still (just) the largest single consumer market on the planet, the rest of the planet put together makes it more worthwhile to keep the manufacturing investment somewhere that doesn't think that the basic rules of supply and demand should be bent in its favour.

QUOTE
I don't doubt that the tariffs will to some extent reduce USA sales of the finished products.
Probably. Probably not by enough to make the benefit in balance of trade outweigh the lost jobs in electronics retailing as the retailers try to offset the new tariffs by absorbing some of it themselves through headcount reductions, rather than passing the full cost increase to the consumer. Though, from my experience, it's more likely that they'll pass the full tariff on and sneak through some price increases of their own, knowing that everyone will blame it on the tariffs and on government (both that of the USA and of China)

QUOTE
We all benefit from cheaper imports, but they don't fully compensate for USA's chronic annual trade deficits consequential reduction of our GDP and net numbers of jobs.


The best way to do that (ie compensate for trade deficits) is not through tariffs and trad wars, though, is it? Import certificates might but that's not what the Trump administration is trying - they're just reviving policies that have already been used, and have already failed and were superseded by free trade agreements in the 1960s and 1970s.

QUOTE
I'm among the proponents of the improved unilateral trade policy concept as described in Wikipedia's “Import Certificates” article. It is superior to pure free trade, tariffs, or any other trade policy we're aware of.


In your opinion, maybe. And that's all anyone has on that subject, since nobody has ever tried them out - they are purely theoretical. That's not to say they might not work - they might, but we won't know for sure until someone implements them. And we won't know what the unforeseen consequences are until someone tries them either.

Whatever else might or might not be true about them, it is simple fact that Element Electronics (whose business model is uniquely exposed to this type of issue; their strategic analysis didn't pay enough attention to the Political 'P' of their PEST/SLEPT assessment, or gave unduly low risk scores) is going to shut down directly and immediately because of Trump's trade spat with China.

Ooops! I forgot the link HERE
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Supposn
post Aug 14 2018, 02:51 AM
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QUOTE(Julian @ Aug 13 2018, 01:32 PM) *
QUOTE(Supposn @ Aug 9 2018, 01:56 PM) *
Element Electronics company is obviously lying.

About what? ...

It is a lie to imply or state that Element Electronics position has or will be less profitable due to Trump's tariffs. Due to the tariffs, their competitive position has in fact been improved.
Respectfully, Supposn
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Julian
post Aug 14 2018, 05:58 PM
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QUOTE(Supposn @ Aug 14 2018, 03:51 AM) *
QUOTE(Julian @ Aug 13 2018, 01:32 PM) *
QUOTE(Supposn @ Aug 9 2018, 01:56 PM) *
Element Electronics company is obviously lying.

About what? ...

It is a lie to imply or state that Element Electronics position has or will be less profitable due to Trump's tariffs. Due to the tariffs, their competitive position has in fact been improved.
Respectfully, Supposn


Straightforwardly, no, you're absolutely wrong. It is "a lie"* to insist that Element Electronics will be better off - they'll go out of business within a month of the tariff increase because their business model is entirely predicated on buying cheap Chinese parts and only doing final assembly in the USA.

*One born, I'm sure, not of deliberate falsehood but simple lack of knowledge, so I'll proceed on that assumption.

The new tariffs will kill this particular business because:
  • All of Element Electronics' components have historically been sourced in the Far East because nobody inside the USA makes them.
  • Nobody inside the USA is going to be able to make them for some time, because even if someone wanted to start making (say) capacitors or LCD screens of the kinds that E.E. will use, it will take a significant time to set up the factory, hire the staff, tool up, etc. Probably 2-5 years. If E.E. are meant to wait that long until their components are available from domestic suppliers, what are they supposed to use to build their TVs in the meantime?
  • Those components have historically been taxed at 4.5% in line with US Customs commodity codes on imports, and are now going to be taxed at 25% instead.
  • Element Electronics is a low margin, final assembly business and they don't make enough profit at a 4.5% to be able to absorb an increase in the tariff rate to 25% on their entire purchased parts catalogue.

It doesn't matter that their TVs will be competitively priced within the US market - they will only be able to sell their existing stock and maybe what they can make from the Chinese components they already have on their premises. They won't be able to buy more bits to make more of the TVs that you think will be so much more easy to sell because their competitive position will improve. Modern manufacturers tend to run on a Just-In-Time basis, meaning they don't carry huge amounts of component parts in stock, instead ordering them as they need to use them. Bespoke Chinese parts (such as they're likely using for their screens and the plastic and/or metal cases and stands for the finished TVs) typically take 3 months to reach the UK via surface transport. The USA is geographically closer, so that transit time will more likely be 6-8 weeks. Allowing another couple of weeks for their Chinese suppliers to actually build the sub-assemblies, and you're looking at maybe 10 weeks from the time of placing a purchase order to the time of receipt.

Those parts are also likely to be the most expensive components, so E. E. isn't going to have many of them on their own shelves, otherwise they'll cement their feet by tying up all their cashflow in their stock holding. An efficient purchasing team will maybe hold 12-20 weeks' worth of these components to last them the time it takes to order more from China, plus a 'safety stock' to insulate them against delays in their supply (caused by, say, a storm in the Pacific that holds up the supply ship) and against an increase in their demand (caused by a sudden increase of their competitive advantage brought on by a commercially illiterate President picking a trade fight with the countries hosting their main competitors, as well as all their current suppliers).

Let's be charitable and say that their competitive advantage you say they'll get means their sales go up by 100% - "Great news! Sales have doubled! Trouble is, our stock of screens is now going to run out in 10 weeks' time, and we can't get any more for 12 weeks and we can't afford to pay the extra 21.5% on top of what it cost us last time, so we'll be shutting up shop even though sales are good. It's 14 August today, so my cashflow will disappear and I won't be able pay you anything after 23 October. Here are 100 pumpkins seeds- plant them now, and you might stand a chance of selling enough of them in time to be able to eat and keep a roof over your heads between then and Halloween, 'cos I sure as heck can't help you do that."

Is that clear enough?

You can certainly argue that Element Electronics have bet the farm on the wrong business model, so it's their own fault their going to be put out of business by the tariff change. But you're arguing instead that they're lying about that - not just mistaken, but wilfully lying. Which makes me think if you have the first clue about how manufacturing businesses work - this post is my small attempt to help you understand a little more about that.

If you still insist that Element Electronics are lying about how the new tariffs will affect their business, it'll be you that is wilfully misrepresenting the facts and not them.
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