True. That's a problem with the China route at this point. In a few years however I'd expect SMIC to be competitive with TSMC. They're doing their damnest to get there and given the pressure and resources thrown at it, I think it's a matter of time.
avidamoeba
joined 2 years ago
I think if NVIDIA moves outside of the US, Trump would have no choice but to keep exempting their products from the import tariffs since there's no US-made alternative at the moment and there won't be one for a while. But NVIDIA may not have a choice but to move out, especially if they want to keep their market position against Chinese firms over the long run. If they stay in the US they face a likely future of being locked into the US market with the rest of the world being dominated by whatever competitive accelerators come out of China. If they move out, and especially if they move to China, they could become the CCP-blessed domestic AI hardware maker, before another Chinese firm is able to get there. They'll have the world market to export to as well as the US, for as long as the US doesn't have a competitive product. After that it'll be just the rest of the world since China's NVIDIA product would always have price advantage compared to US offerings. Of course under a China NVIDIA scenario they likely won't be able to keep their IP fully closed or their profit margins within China, and perhaps abroad.
ICE on their way. 🐗
Team Green plans to get closer to the Chinese markets by building a dedicated R&D center in China as well, which means that NVIDIA is serious about this move.
Yup, of course they are. As I said the other day, US firms for which their userbase is not the product face long term downside as the US state cuts them off of foreign markets or the foreign markets cuts them off as retaliation to the US state trade policies. If they keep their product development in the US they're facing reduced markets and increased dependence on the US state. And of course increased competition by foreign (e.g. China's Huawei) firms catching up to fill the demand gap. If they manage to fill the gap with price competitive product, there's no coming back for NVIDIA.
That would be fucking amazing.
Yeah over some period that could (likely would) occur and increasing the aggregate domestic demand wouldn't necessarily restore the amount available imported goods in the economy, and it could indeed result in additional inflation. That makes sense but it's gonna take a bit for supply chains to reshuffle. I think you're right that it's already beginning to happen.
Switch to Mastodon.
Has unemployment risen? I looked at some numbers and it looks really low over the last few years. Not a Mexican.
The purpose of tariffs is to reduce supply, and allow local producers to increase costs without facing competition. So, supply will be affected, no matter what.
I think you're mistaking change in price with its potential effect. And I think that hides some insight. Tariffs do nothing to supply. They increase the prices of the imported goods. As a result of the increased prices, you expect people to buy less. I think you call this effect reduced supply. That's not a change in the supply though. It's a change in the demand for the good. The supply is unchanged. The supply chain was able to produce and import 10 (or more) units prior to the tariffs, and the US consumer bought 10. Today the consumer can afford only 5, but the supply chain can still produce and import 10. Price rises decrease demand when the demand is elastic. Now you could just shortcut that and say tariffs decrease the availability of a good in the economy since less is purchased but that's not the same as tariffs reducing supply. And that's important for the following reason. If on one hand tariffs increase prices and on the other the government cuts taxes (increases the money supply) by an equivalent amount, people would be able to afford the new, higher price of the tariffed good and again buy the 10 units that can be supplied, effectively nullifying the tariff effect. In such a scenario, the amount of tariffed imported goods in the economy would remain unchanged compared to untariffed state.
The way we'd express this scenario in terms of inflation is that there would be short term inflation (increase in prices with the application of the tariffs) and then "wages would have caught up" (in my example by leaving higher disposable income after lower taxes). A process similar to the one economists are talking about post-COVID inflation. The inflation rate has decreased in most places but the price levels are higher and people are poorer. People began demanding higher wages to cover for the higher prices - which is the wages catching up part.
Now this kind of thing would be largely pointless for local manufacturers since the effective prices of the competing imports haven't increased. It would achieve lowering the value of the dollar though, which would theoretically make American exports cheaper and therefore reduce trade balance. Again, I don't think they'll manage to do this, especially since they're only talking about the tariff part of the scheme, and since there's nothing currently preventing trade partners from moving away from the dollar... Also they could've just subsidized the industries they want to grow... And maybe tariff only their competitors once there's enough production capacity in the US...
It's crazy. I've worked at a bank, and yeah, it's crazy.
Yes. There are plenty hugely successful Chinese companies. The hypothetical I'm considering is NVIDIA becoming a successful Chinese company, not an American company trying to do product development in China. It won't be a foreign company to steal IP from and there won't be a need to replace it with another one.