Belogour

Belogour

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The eventuality of any income obtained by Americans is that it ends up becoming disposable income.

After paying for necessities such as rent, mortgage, food, car payments and insurance, and maybe some for savings, a significant portion of what is left goes to China.

In the past 40 years, the U.S. economy has transitioned from manufacturing to predominately a service and consumer-based economy. To put it simply, the U.S. does not produce many of the consumer goods that Americans are buying.

Being a consumer economy, the Americans need to consume. When U.S. stimulus checks and Paycheck Protection Program loans hit bank accounts this and last year, they unintentionally stimulated the Chinese economy on an unprecedented level.

When the American economy went into a full shutdown last March and April and then froze in time for the next 12 months, China Inc. was open for business, supplying the United States and the rest of the world with consumer goods.

In the U.S., while Main Street stores and small businesses were ordered to shut down to limit the spread of COVID-19, the big box stores remained open. The U.S. population was given a choice, shop at Walmart or Target or order online at Amazon. Currently, Chinese suppliers make up 70 percent to 80 percent of the merchandise found on Walmart shelves, according to the Alliance for American Manufacturing.

Similarly, according to Marketplace Pulse, in a year, China-based sellers have grown their share of top Amazon sellers from 38 to 49 percent.

With the U.S. economy poised for recovery, the demand for Chinese-made goods will continue to stimulate the Chinese economy.

All in all, in 2020, the U.S. government spent $2.6 trillion dollars in COVID-19 relief assistance. On Friday, the Biden administration released its budget for 2022, proposing $6 trillion in spending for infrastructure, renewable energy, education, healthcare and other domestic programs. To rebuild infrastructure and invest in renewable energy, the U.S. will have no choice but to source Chinese-made equipment, especially electronics.

Therefore, knowing that part of that money will be going to China, the Biden administration is not in a rush to get rid of the tariffs imposed by the Trump administration and would like to keep them in place for as long as it can. Despite the tariffs and political differences with the U.S., China continues to ship consumer goods at an unprecedented rate, successfully passing the cost of tariffs to the U.S. consumers and contributing to rising inflation.

While the monopoly of the big-box stores and Amazon forces U.S. consumers to purchase mostly Chinese-made goods, here in southern Vermont, the effect is multiplied.

Locally, we don’t have these big-box stores, which pushes residents to shop across the border in New Hampshire, Massachusetts or New York. The small number of Vermont-based independent retailers that could have received part of those stimulus checks were shut down for close to a year and what we saw was a perfect money-drain storm. Vermont residents had to spend part of their stimulus checks at big-box stores in other states or on Amazon, propping up out-of-state jobs while buying Chinese-made products.

If one could have ever designed the worst kind of money outflow from the residents of a single state to other states and then to another country, it would not have been as perfect as the response to the pandemic of 2020.

Paul Belogour is the founder of Vermont News & Media, which owns the Manchester Journal. He is an expert on financial markets, technology and the intersection of the two. Nothing in this article should be construed as financial advice. To contact Paul, email pb@vtinbox.com.


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