I addressed this Asian import pricing issue, very tough
in July the import price index rose 5%
in August it rose 7%
I have no supporting data, only recollection of CNBC screens
the June round resulted in US firms dictating that Asia "eat the loss"
sure, some coerced margin erosion for Asian mfrs
but subsequent rounds saw compromise, sharing losses
the next round will be time for more reciprocity
we Americans like to arrogantly believe we can dictate each round, and force our suppliers to go into bankrupty, for the benefit of the large US market consumers, for the greater world good, pick your insane self-serving reason
but the reality is that if we intend to see our Asian suppliers continue in operations, some compromise will come
the first round saw Asian concession
the next round might see some more, but I doubt it
Asians feel the pain from spring concessions
they will line up in unison for the next round
how about the 3rd round? the 4th round?
eventually the imported component prices rise
here is the real rub
Asian banks hold tons of USTBonds in reserve
they have risen in value some
but in the next rounds, we will see TBond losses in their banks
and we will see erosion in margins further, probably compromised
so some supply mfrs will go bellyup from holding market share just as their banks feel the pain
the net to their economy is that if they make full concessions they pay twice for the dollar decline
ONCE IN SUPPLIER PROFIT MARGINS, AGAIN IN BANK RESERVES
concessions will be made by Hegemous US Distributors
/ jim |
