President Trump announces that Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer have successfully concluded three-days of topline trade negotiations with their Chinese counterparts.
President Trump and Chairman Xi will now evaluate the successfully negotiated details and institute the topline strategy as part of the overall future trade agreement. According to the Truth Social post, there will be a 55% tariff on Chinese imports and a 10% tariff on U.S. goods to China.
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At a 55% tariff rate against Chinese finished-goods imports, there will be ZERO inflationary pressure to the U.S. consumer.
None. Zero. Zippo. Zilch.
I will explain why below.
Tariffs are paid by the importer based on the wholesale price of the product as delivered by the exporting country depending on the exporters’ tariff rate.
Tariffs are NOT LEVIED/PAID based on the retail price of the product as sold to the consumer.
Example: A pair of Denim Jeans made in China for Guess Brand. The Chinese manufacturer sells the jeans to Guess Brand for $10 a pair manufactured. Guess sells the jeans at retail in the USA for $100 (a $90 gross profit).
A 50% tariff on China means the jeans cost Guess Brand $15 instead of $10 (an $85 gross profit). A 50% tariff on Guess brand jeans, that retail for $100, changes the cost to the retail brand by $5.
Multinational corporations who have off shored their production and manufacturing to China are the ones screaming about tariffs. Ultimately in the final analysis, President Trump is exposing corporatism, multinational corporate vultures; he is not necessarily just exposing China.
In the example above the company makes $85 gross profit as opposed to $90 gross profit on the pair of jeans if they do not raise the retail price.
They don’t raise the price because their profit margins are already ridiculous, and that’s why consumer prices do not go up. A 50% direct tariff on Chinese goods only marginally hits the multinational corporation.
American consumers need to understand this dynamic better.
Unrelated yet enmeshed in the geopolitics of U.S-China trade, if these earnest details hold up it means the likelihood of China taking any aggressive or hostile action toward Tiawan is gone. If these earnest agreements are not adhered to, the opposite is true.
Lastly, on the issue of the Chinese students – Marco Rubio has control of the visa filtering and vetting process. It should not be a problem to target specific issues that may arise and yet adhere to the U.S. commitment.