The China Syndrome

By Tim Pennington, Editor

When the U.S. and China start butting heads on trade agreements and tariffs, those who will be hurt most might be the manufacturing and finishing sector.


When the U.S. and China start butting heads on trade agreements and tariffs, those who will be hurt most might be the manufacturing and finishing sector, says Dr. Christopher Kuehl, an economic analyst for the Fabricators & Manufacturers Association Intl., and managing partner of Armada Corporate Intelligence.

Dr. Kuehl’s lecture at the FABTECH conference in early November outlined what could be an on-going battle between the world’s two super powers on currency and trade: because of China’s low wages paid to workers and their cheap cost of materials, the U.S. has imposed tariffs on products such as tires, paper and other goods in an attempt to even the playing field.
 
But the economist says that China will do the same in payback. What you get is two bullies going at it on the world’s playground, and the collateral damage being those who actually manufacture and finish products here in the U.S.
 
In the end, no one will win, Dr. Kuehl says. Some industries will suffer mightily in the short term with higher costs and possibly job losses, and in a few years it will cycle back again.
 
So what should the U.S. do to help thwart China and India from damaging our manufacturing base by offering cheap labor, and often cheaper products? It could be helpful if the U.S. would assist companies in investing more in advanced science research, product development and foster more ingenuity. No one does research better than the U.S. — after all, who do you think has been teaching the Chinese how to build things for years?
 
There may be no easy answer to the problem of U.S. manufacturers competing with $2-per-hour workers in Beijing, but they can beat them in innovation. Tax breaks for R&D will help incentive new product development, preferably done right here on the home soil instead of across the world.