Trump's tariff increase. Many people only know that this is negative news, but they do not understand what the tariff increase really means. Today, I will explain it clearly in simple terms.
First, let's understand what tariffs are. Let me give you a very simple example.
Suppose we in China produce a mobile phone and prepare to export it to the United States for sale, with a price of 7000 yuan. If we convert it at an exchange rate of 7:1, the price of this mobile phone entering the U.S. market would be 1000 dollars.
Now, if Trump imposes a 30% tariff on Chinese goods, what will happen? The mobile phone that was originally priced at 1000 dollars will directly increase to 1300 dollars in the U.S. market. That extra 300 dollars is essentially the U.S. government taking a cut from the sale of this mobile phone.
After Trump's tariff increase, the rising price of the mobile phone will likely lead to a significant drop in sales. Once mobile phone sales decline, the performance of the manufacturers producing the phones will also be at risk, which could lead to a collapse in the stock prices of these manufacturers.
So, do mobile phone manufacturers have a way to cope? Yes. If they want to maintain their market share in the U.S., they may choose to lower their prices. For example, if a mobile phone manufacturer exports the phone to the U.S. at a price of 800 dollars, even after the 30% tariff is added, the selling price would only be slightly over 1000 dollars, which might help retain some sales.
But a new problem arises. After the price cut, the profit per mobile phone sold decreases, which will also lead to a decline in the company’s performance, ultimately making it hard to avoid a significant drop in stock prices.
So, regardless of how the mobile phone manufacturers respond, under Trump's tariff increase, it is highly likely that the stock prices of mobile phone exporters will plummet.
It's not just Chinese companies; many countries in Asia, especially Japan, have many products that need to be exported to the U.S. Under the impact of Trump's tariff increase policy and various trade tactics, the profits of these countries' companies will face unprecedented significant shocks.
