A friend in Houston, Ron Farmer, owns US LED – a lighting-supply company. After reading my recent letter warning against rash decoupling from China’s economy, he sent to me the following e-mail. I share Ron’s e-mail here with his kind permission.
All of our contract manufacturers are Chinese. Until recently all of our lighting manufacturing has been done in China. In an effort to compete with each other, many of the Chinese lighting manufacturers have opened additional factories in Thailand, Vietnam, Mexico and elsewhere in reaction to the 25% tariff that was added during the Trump years. I need not tell you that the cost of the tariffs has been borne by American buyers.
However, the Chinese are paying a very high price for the movement of their manufacturing to other lands. The layoffs of the low end workers is massive and will only get worse. This will have a negative effect on China but it is unclear how this will help Americans.
I don’t like the Chinese government’s policies just as I do not like ours. But I am dismayed when I see the advancement in the quality of life for the common person in China being reversed.
What will Xi do to employ the unemployed? Sell off our bonds to finance their unemployment? Have them manufacture something else for domestic use? Munitions? Or just let them go hungry?
A weakening and destabilized China is not good for anyone.