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Saturday, March 31, 2007

Chinese Slapped with US Tariff

Washington fought back against China today who has failed to

rein in its currency trading for several years.  They've opted to fight one type of paper with another and so they slept a 21% tariff on paper products coming from the People's Republic of China.

Since many products destined for shells on Wal-Mart and many other stores are packaged in China the tariff is significant.  A $30-$50 product might have packaging costs of $.60 to a dollar and that cost is just gone up to $.70 to a dollar 20.  That may not seem like a large amount however in an environment of retail where suppliers have little ability to increase their prices to retailers in the United States such as Wal-Mart the cost of these products cannot be passed on to the consumer.

Most retailer contracts are set up on a yearly basis and all of the power is set aside for the retailer and not the supplier or distributor.  Most companies couldn't raise prices to Wal-Mart if they wanted to, and most of them do want to.  Among other things this may show Washington's willingness to get tough on China in his opening gambit that will probably increase over the next couple of years and could potentially fuel the fire of financial Stock trading that has recently caused great fluctuations in markets around the world which have been triggered by problems in China.

China wants to look good during the next Olympics, however they could find themselves very much on the defensive and possibly in a very dire economic strait if the situation gets out of control.  China is not the only low-cost manufacturer in the world and the world has learned that it doesn't take long to establish a new one.  Personally I like food from India are better than I do from China and so maybe it's time we went next door and visited our other friends in Asia.