This week we saw the first major implementation of trade tariffs on China from the USA. On this week's upcoming "GeekRant" podcast, we discuss the impact of this on consumer electronics and the costs.
In doing research for this discussion, I unearthed some statistics that you might be interested in:
- USA has a population of 323 million
- The average adult American spends $1200 per year on technology (not incl. businesses)
- Kids/teenagers also account for $350-$500 of technology purchases per year
- If we assume 90% of these products come from China, and are hit with a 25% trade tariff, this will generate an additional $82 Billion of revenue for Uncle Sam
- This represents an additional annual cost to each US consumer of $336 per year
Interesting numbers. Let's face it... Tariffs are TAXES. This is not about trying to coerce US workers to make the products made in China. This is about extracting more income for the US government from its citizenry. But without risking anyone's political career over it. These tariffs are not a matter of "if" but "when" and the latest news has an additional $267 billion on tariffs being readied to be levied on China in the next few weeks. Ultimately over half a trillion dollars of trade per year will be taxed at 25%, of which your local store will pass that cost directly onto you.
However our discussion continued to look at the entire supply chain that will be affected and that's where it gets scary. If products are not able to be afforded to be imported, then you will be replacing a Chinese factory worker making $5K per year with a US factory worker making $60K per year. Now things get expensive. Big time. Every step in the chain will go up in price, and it won't take long before hyper-inflation takes hold.
How does the US manage this? Simple. Raise interest rates. Our artificial interest rates since the 2008 collapse will start to go through the roof. The base rate will likely exceed 2.5% this year, but it could be raised as much as 5-6% in the following year if the risk of escalating prices start to really kick in. I mean the US Federal Reserve has no other real option to curb hyper-inflation than to use the tool of interest rates.
What does this mean for you?
It's time to pay attention. Start to look for ways to make your technology gadgets last longer. You don't need the latest (fill in the product name here). When they tell you some BS that it is all about security patches or that if you don't upgrade product X, you will be vulnerable to security risks, etc. it is time for us to reject this notion and send a clear message back to the manufacturers that we expect them to honor their obligation to their products and continue to provide security updates or not create some crappy, vulnerable product that can be hacked.
Second, you need to pay down/off your debts. That means credit cards, student loans, and car loans. Mortgages should be locked down for 15 or 30 yr loans at the lowest possible interest rates. If you don't have the money, then stop spending. You got yourself into this mess - now you gotta get yourself out. Get an extra job (yes there are loads of these around) and get every member of your family earning income. Stop speculating on what "might" happen as a crutch to avoid the personal responsibility of debt payment, and MAKE IT HAPPEN. Sell of the crap you don't need and pay off the debts left over. Stop hoarding old things around because they make you feel better about yourself, and start thinking minimalism. The cost of the real estate alone to store all your crap is a liability you cannot afford to carry right now.
If you want to be able to get through the upcoming economic times, you need to be as dynamic and flexible as you can be. That means before you make a decision to take on credit (yes, YOU make that decision - no one makes it for you), make sure you have really thought things through. Do you really need that new (insert product here)? If it is to try and impress your friends, then you have a really low quality of friends. You don't need to look the part before you have got the part. The truth is that recycling or extending the life of things we have will not only protect your economic position, but it helps reduce waste and trash on the planet.
If you are interested, this will all be discussed on this week's "GeekRant" podcast at http://www.elementopie.com It is episode 336.