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Comment by baybal2 | Hacker News Reader

>The main question is not whether savings would decrease or investment rise, the main question is how all the spare capacity left will be utilised.

Undifferentiated low end products are more price elastic than brand goods. China will do fine even if USA will declare a 100% embargo.

Edit: specified that I talk about price elasticity

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If they are more elastic it means that demand is more responsive to price hikes. This is opposite to your conclusion

I mean that Chinese manufactures have an option just to do a slight downgrade of their undifferentiated mass consumption goods that were previously sold to America, and sell them to poorer countries, as well as domestic consumer.

This is what happened in 2008. To Chinese electronics industry the crisis was a blessing in disguise. It saw an unprecedented expansion after it reoriented from OEM for "rich American co." to selling own products to places like South Asia, CIS, and African nations.

A bit of explanation:

Pre-2008 industry was very oriented on developed countries with contract manufacturing of high premium goods secured by branding, marketing, IP lockdown and such - in other word, niches with very inefficient market and companies hellbent on profit maximisation. Thus, they had a huuge leeway for trading unit value for volume which they used to devastating effect.

That was right the time when people in places like Africa realised that $20 Nokla is no worse than low end $100 Nokia, the rest is history.

Fair as long as demand is as elastic as it used to be. Like if everyone has a phone now it will be harder to sell new phones. And good for pointing out a critical assumption behind the article - that CA surplus will actually fall as a result of tariffs, as you showed there is a fifth solution - sell to other countries, EU for example, US is not the whole world

They can try that, but I don't think they'll have much success this time around. At least In Indonesia, the government here just hiked rates on imports, as well as implementing a whole bunch of other policies in order to defend the IDR. I can only assume this is going on as well in other non developed markets.

Did you mean that China can just decrease domestic price and sell the goods to domestic consumers?

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