You're not accounting for countries in which China has set up manufacturing facilities to avoid US tariffs (Vietnam, Mexico, etc.), so the overall figure is higher, albeit indirectly.
The other problem is that you're not considering the full scope of impact at the nation state level.
It might be "3% of China's GDP", but when you look at dollar figures the US is buying almost $500 billion of Chinese goods, while China is buying around $150 billion. If the US stops importing Chinese goods (as an example), that's $500 billion worth of trade that's good for China that is destroyed, whereas if China cuts off the United States, the US is only losing $150 billion.
If you want to minimize the situation by suggesting it's no big deal for China to stop exporting to the United States because it's only 3% of China's GDP, you'd have to make the same argument that it's even less of a big deal for the United States to lose its $150 billion in exports to China.
Of course the situation isn't that simple, and you know that.
Flip side is US MNCs pulls about ~300B in revenue in PRC that's not counted in trade balance accounting (because western products made in PRC factories sold to PRC consumers isn't cross borders transaction unless profit timely repatrioted, which is rarely) - most of the KFCs and Nikes and Apples can be replaced with domestic.
Whereas there aren't much PRC MNCs in US, and what few there are getting lawfared/stomped out of US, i.e. TikTok divestment and de minimis going to kill Shein/Temu.
Dependin on how / where things escalate, lots of US MNCs may lose their 10-40% revenue from PRC. There's also next rung of stupid, i.e. TikTok US getting nationalized, CFIUS forcing PRC divestments in agri, media, blah blah. Or US seize PRC assets, fucking with SWIFT, in which case trillions of US capex in PRC and not repatriated MNC profits goes up in smoke. Then we're stepping stones away from Tesla / Apple getting nationalized. Then who knows.
> Then we're stepping stones away from Tesla / Apple getting nationalized. Then who knows.
Neither company can be "nationalized" because they're American companies. Apple contracts with Chinese suppliers to build their products. Chinese companies already owns the factories. Tesla has their own factories( or factory?) in China but if China "nationalizes" it, that just amounts to Chinese workers in the Chinese Tesla factory losing their jobs and of course Tesla no longer selling their cars in the Chinese market.
> most of the KFCs and Nikes and Apples can be replaced with domestic.
Why would they replace with domestic companies? Isn't that unfair for trade? Wouldn't European or Latin American companies enter the market with their products now or be better able to freely compete in the Chinese market? Or is there something missing here?
> US has ~300B trade deficit with PRC.
What's this number based on? I see a lot of figures floating out there, but similarly to your comment about the flip-side of US companies operating in China like Kentucky Fried Chicken not being accounted for here, you're not accounting for Chinese suppliers and manufacturers set up in other countries to bypass tariffs. Unfortunately it seems everyone (not throwing shade your way here) has their own number to fit their narrative and it's hard to get the full impact.
> TikTok US getting nationalized
Preferably it should be banned (the fewer social media companies and apps that exist the better), but it would be better if it was forced to be sold to a US company, which is a far more likely scenario then nationalization.
In response to shenanigans like TikTok US branch being nationalized, or CFIUS mass reversing PRC MNC portfolios, i.e. shares/purchases of US assets. They can be functionally "nationalized" in retaliation as in just have whatever is in country siezed, as in their presence in PRC. It means WFOE like Tesla losing their factory, whose workers will make domestic cars. Apple losing some R&D centres, all the capex infra build for foxconn can be messed with. Continue hampering capex/engineer export to India or whereever Apple wants to setup their none PRC operation to make process as painful as possible... or simply just kill Apple hardware 90% dead like US tried with Huawei/ZTE.
> replace with domestic companies
Because it's been ~30 years, foreign MNCs who wanted to be in PRC are in PRC. In the short term domestic companies better positioned to soak up domestic demand, which has been independant trend in past few years.
> this number based on
Some PRC finance portal reposted #s from Hurun Research report on US enterpises in PRC last year. There was IIRC Macquarie report a few years ago that tallied 3T in revenue in past 15-20 years or something that comports. Like US is fully of Chinese goods, and PRC is full of US brands, and in both cases US captures most of the value, or at least PRC captures very relatively little merely being margin producer.
> it's hard to get the full impact
Yeah, I'm just pointing out as you did, the situation isn't simple, not because PRC may have 300B more to lose, but potential of US loss maybe closer, not farther accounting diversion, mnc profits... services, ip/patent/licensing fees. I'm highlighting trade diversion/circumvension is not likely going to be on the scale of 100s of billions of US MNC revenue. Hence relative loss likely not as lopsided.
> likely
Full sale was never likely. Some sort of 51%+ US JV (which afaik US investors already owns majority) maybe. But tarrifs obviously blew everything up. So now it's wierd scenario where Trump seems loath to ban, as in very much want US to own so nationalization of US operations doesn't seem unfathomable.
> Full sale was never likely. Some sort of 51%+ US JV (which afaik US investors already owns majority) maybe. But tarrifs obviously blew everything up. So now it's wierd scenario where Trump seems loath to ban, as in very much want US to own so nationalization of US operations doesn't seem unfathomable.
Trump was very popular on TikTok which is why he's in favor of keeping it or making it a US company so he can sell it to one of his sycophants. But it will be fully sold to a US company or banned. I don't think a JV is on the table.
> In response to shenanigans like TikTok US branch being nationalized, or CFIUS mass reversing PRC MNC portfolios, i.e. shares/purchases of US assets. They can be functionally "nationalized" in retaliation as in just have whatever is in country siezed, as in their presence in PRC. It means WFOE like Tesla losing their factory, whose workers will make domestic cars. Apple losing some R&D centres, all the capex infra build for foxconn can be messed with. Continue hampering capex/engineer export to India or whereever Apple wants to setup their none PRC operation to make process as painful as possible... or simply just kill Apple hardware 90% dead like US tried with Huawei/ZTE.
Right but those activities harm China too. If China isn't building iPhones in China because China nationalized those specific assets then Chinese workers sort of lose too. Similarly with the Tesla factory - if they keep it running they have to spend money to retool it to make BYD cars, then they have to sell those cars to someone - perhaps domestic consumers, but there's a lot of analysis that would be needed to be done to understand the exact effects.
I mostly took issue with your statement that Apple and Tesla would be nationalized, but I think you just meant to say their assets would be nationalized in China which is certainly an option that China has on the table.
But like all things there are actions the US can take that China would be very unhappy about, like, perhaps the US decides to build a military base in Taiwan. Now what? I'm not suggesting that's a good idea or on the table, but just saying both countries can get creative.
> Because it's been ~30 years, foreign MNCs who wanted to be in PRC are in PRC. In the short term domestic companies better positioned to soak up domestic demand, which has been independant trend in past few years.
Sure but now with US ventures like KFC probably being forced to shut down there should be room for European companies or companies from other countries to move in to China, which China will be just fine with right? I'm imagining since tariffs will be higher for Mercedes in the US they'll have to ship those cars to other countries and who better than China?
I think JV was on the table, pre tariff. Already talking about "licensing" tiktok algo, i.e. concession to PRC export controlling algo which made full sale non starter. So it's either ban, or majority US JV, or some other politics to get TikTok US under US control... because as you mentioned Trump seems very intent on keeping TikTok.
> both countries can get creative.
I did preface "next rung of stupid", as in stupid / creative rungs of trade war escalation ladder. We're already at 100%+ tariffs, I think it's fair to conclude we're entering unseen/stupid/creative territory, hence highlighting increasingly wild options, because at some point the just adding to tariff %s become farcical and need to move onto other intruments. I think we're in the... almost anything short of kinectic war can happen realm.
> China will be just fine with right
Yes, I think China would actually be fine with substituting imports from EU for US if only to more balance trade with EU and further peel them from US. Under more predictable (slow) transition this would/could happen. But TBH I don't think PRC/EU relations good enough even with Trump/EU breakup. I think we're in very accelerationist trade war scenario and most likely patriotic buying (which is already growing trend in last few years) is going to do a lot of the capturing. Chinese domestic brand influence are growing, Chinese increasingly fine with consuming higher value Chinese brands.
Yeah some PRC producers heavily dependant on US is going to get burned. But shave off maximalist 3% and most Chinese will just have to face the bleek reality of... living QoL of summer 2024, which TBH weren't great time for economy due to RE unwinding, but prices were under control and borderline deflationary. Whereas Americans are going to face some of the steepest CoL increases in their lifetimes. E: PRC grew enough and diversified trade enough that even relatively total trade disruption US simply can't fuck PRC hard enough for most people to live worse than they were 5 years ago, vibes will definitely feel bad because... well the world is exploding, but very few in PRC is going to long for lifestyle 20 years ago where per capita income was 1/6th and everything including the air was shitty.
It's interesting to me how it's no big deal for China to stop selling all these products, implying that they don't send much to the US or they aren't exposed that much to trade pressure, but simultaneously Americans are supposed to somehow experience a devastating cost increase.
But if the amount of products China sells to the US aren't a big deal/don't amount to much, or whatever, Americans won't see much in the way of large price increases either.
The more likely scenario is Americans are going to see higher prices, but China is going to be very much feeling the effects of these tariffs.
We've already seen this manifest in the creation and subsidization of companies like Temu which are making the cheapest products possible without regard to environmental factors or product quality (i.e. your t-shirt disintegrates after you wash it once) to keep the manufacturing lights on and keep Chinese people employed.
It's not big deal for MOST Chinese, who are used to consuming cheap Chinese goods and will continue to. It's a big deal for MOST Americans, who are used to consuming cheap Chinese goods but will not continue to. It's also a big deal for some Chinese producers that depend on US which is minority, because US though largest, is not significant share of PRC exports, and US producers who depend on PRC. The former I've acknowledged.
I don't think Americans will see large price increases, as in nothing most households can't absorb / pile on their credit... but US is debt society, so many will drown. The pain is not the same as PRC dipping more into savings if they deal with price increase.
So no, IMO the most likely scenario is many americans are going to feel the tariffs, some will drown, some PRC producers that depend on US and american producers (that depends on PRC inputs) are going to drown. But your average Chinese will tighten belt like then did in 2024, because vibe sucks, not because they're losing purchasing power or going bankrupt, since PRC has high savings society.
> seen this manifest
Again, wipe 3% off PRC GDP (i.e. near total cessation of US trade) and they're back to 9 months ago. They'll broadly feel what they feel then. Some will feel it worse, because they're specifically exposed to US trade. But most will not. The average American will feel the trade war more than the average Chinese, because the average Chinese will continue to get cheap Chinese goods. The psychology is going to hit different on society level and influence accordingly.
https://www.ig.com/en/news-and-trade-ideas/US-China-trade-wa...