Quote:
Originally Posted by Law
See, that's the thing though.
It shouldn't even take a PhD in Economics to be able to grasp this concept.
Businesses will follow the money, it's basic Economics 101, not rocket-science.
Create a hostile environment for businesses and they will either fold or take their money elsewhere.
Okay so you see today's article as small potato stuff.
So a few more X5's are gonna be built abroad instead of the US, right?
But really, it's not that simple.
Today's article is about only one company, BMW.
When you zoom-out and look at the big picture, the tariff war is affecting virtually every single global business that involves import-export.
And then, with each business & industry there is a specific supply-chain, where one hiccup affects the entire thing, kind of like dominoes.
Every single step from the original extraction of the raw material in the earth, to forming it into a shape, to its integration into a component, to its installation into the final consumer product...all the way until it reaches its distribution network and finally the customer...Anywhere along the line where there is an impediment to the "flow", that affects everything after.
Even a small change in cost (for whatever reason) of a small component, part, or material, can affect the larger industry as a whole and every company in between (as well as those employed there), as in evanevery 's example.
Now, BMW, like every company, is profit-driven.
It will utilize the most of its resources to minimize cost and maximize profit.
Right now, there is situation where BMW products (i.e., X5) can potentially be noncompetitive/less profitable because tariffs have increased the cost of getting the USA manufactured BMW vehicle to its distribution network (i.e., dealers in China).
Solution? Well, the plant in Thailand was already planned for in 2016, but BMW is a global company and when the government of a certain country makes it difficult or economically unfeasible to do business, then they will simply reallocate resources from said country to a different country, USA to Thailand, in this case.
So now, that's one more thing the US economy just lost out on.
Only time will tell to what degree the reallocation entails, but you'd be hard-pressed to find any company retaining the same number of factory workers at the same pay to stare at dormant machines when the volume of production slows down.
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Or when one country imposes a 25% tariff on the “import” of the US manufactured X5 you’ll build a plant in that country and shift manufacturing to avoid the 25% tariff.
BUT, is it then less expensive to build the X5 there and do more vehicles get produced in Thailand and shipped to Europe?
Again, just like we’re all saying...it’s not so simple and everyone has an opinion on what they THINK will be the outcome.