Tariffs, China, and the Real Cost of Chinese Manufacturing

This seems to be a hot topic for folks right now. Unfortunately, people seem to miss some key points when discussing this subject.

Disclaimer: the following post is an organized representation of my research and project notes. It doesn’t represent any type of advice, financial or otherwise. Its purpose is to be informative and educational. Backtest results are based on historical data, not real-time data. There is no guarantee that these hypothetical results will continue in the future. Day trading is extremely risky, and I do not suggest running any of these strategies live.

Okay, this is a new thing for me. Usually, I just stick to developing and finance specific research. However, the projects I want to explore for the rest of the year are going to require I do some heavy lifting first in Python. It seems very boring to write about the process and redundant to document it in more than one place. So, I decided to write about a topic I have been thinking about for some time and that seems to be on everyone's mind: US tariffs and Chinese (PRC) manufacturing.

First and foremost, I am not an expert. In anything. So, this is just an editorial or opinion piece. Whatever you want to call it. Where I can, I will reference sources I use to make my points.

Secondly, some of my information is second hand information that I received from US Federal Agents who worked overseas in China around the 2015 - 2019 time frame. So, that information is old, but still applicable. Other portions of my information come from literally living in China. In case you misunderstood that last sentence, I will state it again. I actually lived in China for months or so at a time. My wife lived outside of Shanghai and worked at private Chinese international school for 2 years. So, when I was in Iraq and got leave, I went to China (or other south Asian countries). I was in Hong Kong during the protests against the PRC taking over the SAR of Hong Kong. I will speak later on what happened with that...

Now that we have that out of the way, let's get into it.

A collection of partial truths

I'm going to post a few links here and briefly summarize the points of the speakers.

First up, Tim Cook (Apple CEO). I want to point out that I have been mostly impressed with Tim Cook taking over Apple. I wrote several papers on him in college that revolved around contrasting leadership styles. Anyway, the video is short, and he just gives his opinion on Chinese manufacturing and why they use it.

• Tim Cook says that we don't have the manufacturing infrastructure in the USA that the PRC has.

• He also says they have more skilled laborers and engineers.

Next, we've got one from Substack. I have seen a shit ton of these videos from various accounts, but they all pretty much say the same thing.

• There is a knowledge gap in how this manufacturing works.

• A lot of this technology was developed in China by Chinese engineers and scientists.

• A lot of this technology has never been made in the USA. Full stop.

• White folk don’t tend to research brushless motor technology…

Ok, that last bullet point is a joke, but he did point out that you don’t see many American (or European) names on the research papers, or they aren’t the majority. Brushless motors are pretty specific, so we can chock that up to an anecdotal joke. However, I have a theory as to why you might see this type of disparity and why there are more Chinese engineers and scientists.

These are the only two videos I am going to use because ever since Tim Cook’s comments, everyone seems to be jumping onto this same concept to make points against US tariff’s on China and to try and change the perspective of the American majority that seems to not quite understand everything that is going on here.

I think they missed the point too. As a matter of fact, I believe the information they are giving is purposefully misleading. They aren’t wrong. Not even close. They are stating facts, but they aren’t stating the ones that matter…

Cost

Tim Cook makes the claim that Apple (and presumably other technology companies) doesn’t go to China because it’s cheaper. He says that they stopped being cheap some time ago and that they use them solely for their expertise and infrastructure. I want to break this down, because what he is saying isn’t exactly true. Actually, it's nowhere near true. It omits some pretty crucial points to consider when discussing “costs”.

Let's be real here - China's impressive manufacturing setup didn't just magically appear. It was deliberately built using our money, our technology, and massive government manipulation. The U.S.-China Economic and Security Review Commission (USCC, 2023) documented how American companies handed over billions in tech and manufacturing know-how just to access the Chinese market. We literally funded the creation of our future competition. And according to the Congressional Research Service, the Chinese government then piled on with massive subsidies, practically free land, and artificially cheap energy for manufacturing zones. The type of stuff that would get you slapped with WTO violations in any Western country (Morrison, 2023).

And the human cost? Absolutely staggering. The Lancet found that air pollution from this rapid industrialization killed about 1.24 million Chinese people annually (Burnett et al., 2020). That's not a typo. The International Labour Organization has documented systematic abuse of workers, with hours and safety conditions that would get you shut down instantly in the U.S. (ILO, 2022). Then there's China's "hukou" system, which Harvard's Ash Center studied extensively, that basically creates a second-class workforce of migrants with zero local rights or protections (Liang & Lu, 2021). So yeah, of course Chinese manufacturing is "cheaper" than U.S. production—they're playing a completely different game with different rules, cutting corners that American companies legally can't.

In case you forgot about what working conditions in even Apple’s Chinese factories, here is a post from The Guardian to help remind you:

Life and death in Apple's forbidden city

Expertise

I am going to take the low hanging fruit first. The USA has a population of 334 million and the PRC has 1.4 billion. Do I need to explain how this math works?

When Tim Cook and others brag about China having more engineers and skilled laborers, they're conveniently ignoring basic population math. Of course China produces more engineers - they have more than four times our population! But the story goes much deeper than raw numbers.

What they're not telling you is how China's education system actually works. Unlike America, where students generally choose their own career paths, China's government actively directs education priorities based on national economic goals. The Ministry of Education literally sets quotas for engineering graduates to meet industrial needs (Li, 2019). This isn't about natural interest or market demand - it's central planning in action.

And those Chinese engineers? They earn dramatically less than their American counterparts. According to salary data from Glassdoor, the average engineer in China makes about $35,000 annually compared to $105,000 in the US (Glassdoor, 2023). So when tech execs praise China's "engineering talent," they're really saying "we can hire three Chinese engineers for the price of one American." That's not about superior skill - it's about cheaper labor dressed up as expertise.

Then there's the uncomfortable truth about innovation in China. A 2022 report from the Office of the U.S. Trade Representative estimated that Chinese intellectual property theft costs American businesses between $225 billion and $600 billion annually (USTR, 2022). Much of China's technological "development" comes from stealing and reproducing Western innovations. So when you see those Chinese names on research papers, remember that foundation was often built on technology that was either forcibly transferred or outright stolen.

Let's be honest about what's happening: China's engineering workforce isn't some magical resource that America lacks. It's the product of government-directed education, dramatically lower wages, and a system that has historically rewarded copying rather than creating. That's the reality behind the "expertise" argument.

I'm not suggesting China is incapable of innovation - far from it. In recent years, China has made advances in areas like mobile payment systems, high-speed rail, and renewable energy technology. However, there's an important context to this innovation timeline. The IP Commission, a bipartisan initiative led by Admiral Dennis Blair and Governor Jon Huntsman Jr., specifically recommended in 2021 that the U.S. "set a national goal to delegitimize Chinese indigenous innovation efforts that are dependent on the theft of foreign IP" (IP Commission, 2021). The Commission also noted that IP theft costs the U.S. economy "hundreds of billions of dollars annually and reduces U.S. companies' R&D investment and innovation." China's technological leap forward came only after decades of acquiring foreign technology through joint ventures, technology transfer requirements, and forced technology transfer. It's much easier to innovate when you're building on a foundation of existing technology rather than developing it from scratch. The key point isn't that China can't innovate - it's that their current innovation capacity was jump-started through years of policies that appropriated technologies developed elsewhere at significant cost.

Personal Experience

Like I mentioned in the beginning of this post, my wife actually lived in and worked full-time in China. I spent several months there myself when I was on leave between the years of 2017 and 2020. Something tells me that a lot of people who speak about China, or defend their actions, have never actually been to China.

First, getting a visa isn't easy. Even with my spouse there, I had to hang out in Hong Kong for several weeks to work the system, eventually getting a 10-year business visa. This process wasn't easy, and it required business practices that are probably illegal in the USA.

While I was in Hong Kong, there were a lot of protests and riots. These were in an attempt to keep the PRC from having complete control over the SAR area of Hong Kong. This was a huge deal for the local nationals of the SAR (mostly Cantonese if I remember correctly). Then, in 2020, while the whole world was too busy paying attention to COVID-19, the PRC implemented the 2020 National Security Law and cleaned house. According to Human Rights Watch, this law criminalized virtually any form of dissent with vague charges like "subversion" and "collusion with foreign forces" (HRW, 2020). Within days, pro-democracy activists were arrested, books were removed from libraries, and freedom of speech effectively died. The PRC now has complete control of the area. This is just an example of how their government operates.

Then there is China actual and let me tell you, it reads just like your favorite books about society's potential future. Shanghai was a cool city. Public transportation was really good too. The air quality is terrible (read cancerous) and even if the streets don't have cars on them for miles, no one will cross the street until the crosswalk light turns and they wouldn't cross the street anywhere except where there is a designated cross walk.

At first, I thought that this was just a side effect of a culture built around respect, like Japan. But after actually talking to Chinese people (the few that spoke English well enough), I discovered that isn't the case. What keeps them from jay-walking? Fear. This fear of their government is so real that I had people return change to me at the wet market because they were afraid someone would report them for stealing it. This was change that didn't even add up to fifty cents in USD.

Research from the University of California confirms this observation - China's social credit system has created a pervasive surveillance state where citizens monitor their own behavior out of fear of consequences (Creemers, 2022). Every aspect of daily life - from crossing streets to online comments - carries the potential for punishment. This is the social control system that our manufacturing dollars help support.

I told you that my wife was a teacher, right? One day, while at work, she went to lunch, did some planning with folk, and then went back to her classroom. In the time that she was gone, the government had people inspect rooms (foreigner rooms). She had a bunch of random posters and such on the wall in English. All American-oriented posters (as all of her students were attempting to get into Western colleges) were ripped off the wall and replaced with PRC flags, creeds, and propaganda. Why do I say propaganda? Well, what would you call government advertising that says Tiananmen Square never happened and that Americans made it up?

This isn't isolated. According to a report from Freedom House, the Chinese government employs over two million "internet opinion analysts" to monitor and censor online content and extends this control into every aspect of education and daily life (Freedom House, 2021). What Tim Cook and others conveniently ignore is that when we manufacture in China, we're not just getting "infrastructure" and "expertise" - we're financially supporting one of the most sophisticated authoritarian control systems ever created.

Closer to enemies than friends

While American companies pour billions into Chinese manufacturing, we're overlooking a disturbing reality: China actively works against critical U.S. interests in ways that resemble hostile action more than friendly competition. The devastating fentanyl crisis killing over 70,000 Americans annually has direct links to China. According to a 2022 DEA report, Chinese chemical companies remain the primary source of fentanyl precursors and manufacturing equipment for Mexican cartels like Jalisco New Generation (DEA, 2022). Even after China's supposed crackdown on direct fentanyl production, they simply shifted to supplying the ingredients and equipment to Mexican partners, maintaining their role in a supply chain that's killing Americans daily.

This pattern extends beyond narcotics. The FBI has identified China as "the greatest long-term threat to our nation's information and intellectual property, and to our economic vitality" (FBI, 2023). Their analysis documented over 2,000 active investigations tied to the Chinese government, with new cases opening every 12 hours on average. The U.S. Cybersecurity and Infrastructure Security Agency (CISA) has attributed numerous sophisticated attacks on American infrastructure, government agencies, and businesses to state-sponsored Chinese hackers, including the massive Microsoft Exchange breach affecting tens of thousands of organizations (CISA, 2022). These aren't random criminals but coordinated operations with government backing.

Perhaps most concerning is China's strategic relationship with America's clearest adversaries. A 2023 Pentagon report detailed China's provision of dual-use technology and components to both Russia and Iran, materially supporting countries that openly threaten U.S. interests (DoD, 2023). The report noted that Chinese companies have supplied drone components used in Ukraine and missile technology utilized by Iran's proxies across the Middle East. This creates the disturbing scenario where American consumer dollars spent on Chinese-manufactured goods indirectly fund technologies being used against our allies and interests. When Tim Cook and others defend Chinese manufacturing as simply about "infrastructure" and "expertise," they conveniently omit this darker reality: we're economically strengthening a nation that systematically undermines American security across multiple fronts.

Now, let’s talk tariffs

Finally, we arrive at the topic at hand. When critics suggest that tariffs on Chinese goods are misguided or harmful, they're deliberately obscuring the complex reality we've just explored. Tariffs aren't simply about protecting American jobs or bringing manufacturing back - though these are worthy goals. They're about addressing a fundamentally uneven playing field created by decades of strategic manipulation.

The economic case for tariffs is straightforward: they help offset the artificial cost advantages China has created through labor exploitation, environmental degradation, intellectual property theft, and massive state subsidies. According to a 2023 Economic Policy Institute analysis, the U.S. lost approximately 3.7 million jobs to China between 2001-2021, with the greatest impact felt in manufacturing communities that haven't recovered (Scott & Mokhiber, 2023). Tariffs create space for American manufacturing to rebuild without competing against a system designed to undercut fair competition.

Critics argue that tariffs ultimately hurt American consumers through higher prices. This narrow view ignores the broader economic and social costs of our China dependence. A RAND Corporation study estimated that IP theft alone costs the U.S. economy between $225-600 billion annually - costs that are distributed across all Americans whether they realize it or not (RAND, 2022). The Peterson Institute calculated that increased production diversity and reduced supply chain vulnerability resulting from reshoring critical industries would provide long-term economic benefits that outweigh short-term price increases (Lovely & Xu, 2023).

Beyond economics, tariffs represent one of the few meaningful policy tools available to address China's systematic human rights abuses. The U.S. Holocaust Memorial Museum and the State Department have officially recognized China's treatment of Uyghurs as genocide, with forced labor being a central component (USHMM, 2021). When American companies manufacture in China without consequence, they become complicit in a system that violates our most basic values. Tariffs create economic consequences for this complicity and provide leverage for demanding change.

The fundamental question isn't whether tariffs will cause some short-term economic disruption - they will. The question is whether Americans are willing to pay a modest premium on consumer goods to support a manufacturing system that doesn't rely on authoritarian control, environmental destruction, worker exploitation, and technology theft. When viewed through this lens, tariffs aren't just economically justified; they're a moral imperative for a nation that claims to stand for freedom, fairness, and human dignity.

My Conclusions

I want to make sure that you understand that the conclusions I draw from this are personal. I know that people will see things differently than me. That's cool. It's good for conversation. The points that I bring up here are all backed by sound references and are rooted (to the best of my ability) in some core truths about China and how they operate.

So, what is my take?

I look at this through a very simple lens. I am not just American, I actually believe in what we are supposed to stand for and represent: freedom and equality for all. I don't believe that any company that sells to Americans should be able to profit more by abusing countries that do not have the standards and beliefs we do. I believe when you look at the facts, and the terrible/inhumane history of modern China, it becomes very difficult to support ANYONE who wishes to take advantage of disadvantaged people.

The fundamental disconnect in how we talk about Chinese manufacturing comes down to values. When Tim Cook and others frame their manufacturing choices as being about "infrastructure" and "expertise," they're deliberately avoiding the moral dimension of their decisions. According to business ethics research from the University of Pennsylvania's Wharton School, companies engage in this type of "ethical fading" when they reframe moral choices as purely business decisions (Tenbrunsel & Messick, 2021). This allows executives to sleep at night while their companies profit from systems they would never tolerate in their home countries.

What's particularly frustrating is the dishonesty. If Cook simply said, "Look, we manufacture in China because it's dramatically more profitable despite the ethical concerns," I'd at least respect the transparency. Instead, we get this carefully constructed narrative about Chinese manufacturing superiority that conveniently omits the human rights abuses, environmental devastation, and authoritarian control that make their "efficiency" possible. As documented by the Business & Human Rights Resource Centre, American companies have repeatedly failed to meaningfully address forced labor in their Chinese supply chains despite public commitments to ethical standards (BHRRC, 2022).

The tariff debate ultimately isn't about economics or even politics – it's about what kind of world we want to live in. When we purchase products manufactured in China without any economic consequences, we're tacitly endorsing a system that contradicts our most fundamental values. The Princeton philosopher Peter Singer has argued convincingly that our purchasing decisions have moral weight – they reflect what we're willing to accept and what we're willing to ignore (Singer, 2022). By this measure, our current trade relationship with China represents a massive moral compromise that we've normalized through clever marketing and willful ignorance.

I'm not suggesting we cut off all trade with China overnight or pretend there aren't complex economic realities at play. What I am suggesting is honesty about what we're actually doing and the true costs involved. Tariffs represent one imperfect but necessary step toward a trading system that aligns with our values rather than undermining them. If that means paying a bit more for our iPhones or accepting that some things can't be as cheap as they once were, that seems like a small price to pay for a world where prosperity doesn't depend on exploitation.

I don't have a solution for our problems, but I don't think we can go wrong if we keep our values and look at this through a lens that considers the humans that make it happen. When we strip away the marketing language, the economic theories, and the geopolitical complexities, we're left with a simple truth: our manufacturing choices have human consequences. Every purchase decision connects us to the hands that assembled our products and the systems that govern their lives. If we truly believe in human dignity, environmental stewardship, and fair competition, then we must demand that our economic relationships reflect these values. Perhaps that's the true measure of "expertise" and "infrastructure" that should matter most. The question isn't just how efficiently we can produce goods, but whether we can do so in ways that uplift rather than exploit the people involved. The most advanced manufacturing system in the world isn't worth much if it's built on human suffering. That's a truth no tariff debate can ever change.

As always, comment if you have something to say. If I got something wrong, let me know. If you disagree with my assessment, tell me why. Just remember, I strongly believe that ALL humans are worthy of freedom, equality, and entitled to live a life of love and peace. If you believe that I am not supposed to apply that to people who aren't American, we can't have a constructive conversation. I don't bend those beliefs just because another country or government doesn't believe in them. The way I see it, if we're willing to compromise on our fundamental values for economic convenience, then those values weren't really fundamental to begin with. And that's a far greater cost than any tariff could ever impose.

References

1. USCC. (2023). Annual Report to Congress. U.S.-China Economic and Security Review Commission. Washington, DC: U.S. Government Publishing Office.

2. Morrison, W. M. (2023). China's Economic Rise: History, Trends, Challenges, and Implications for the United States. Congressional Research Service Report RL33534.

3. Burnett, R., Chen, H., Szyszkowicz, M., et al. (2020). Global estimates of mortality associated with long-term exposure to outdoor fine particulate matter. The Lancet, 391(10130), 1639-1649.

4. ILO. (2022). Labour standards in global supply chains: A programme of action for Asia and the garment sector. International Labour Organization. Geneva: ILO Publishing.

5. Liang, Z., & Lu, J. (2021). Hukou Reform and Migration in China: Causes and Consequences. Harvard Kennedy School Ash Center for Democratic Governance and Innovation.

6. Li, Y. (2019). China's educational policy making: A policy analysis perspective. Journal of Education Policy, 34(5), 763-786.

7. Glassdoor. (2023). Salary Comparison: Engineers in United States vs. China. Glassdoor Economic Research.

8. USTR. (2022). Annual Report on Intellectual Property Protection and Enforcement. Office of the United States Trade Representative.

9. WIPO. (2020). World Intellectual Property Indicators 2020. World Intellectual Property Organization.

10. IP Commission. (2021). The Report of the Commission on the Theft of American Intellectual Property. National Bureau of Asian Research.

11. HRW. (2020). China: New Hong Kong Law a Roadmap for Repression. Human Rights Watch.

12. Creemers, R. (2022). China's Social Credit System: An Evolving Practice of Control. University of California Press.

13. Freedom House. (2021). Freedom on the Net 2021: China. Freedom House

14. DEA. (2022). 2022 National Drug Threat Assessment. Drug Enforcement Administration.

15. FBI. (2023). China's Economic Espionage and Theft of American IP. Federal Bureau of Investigation.

16. CISA. (2022). Chinese Government-Sponsored Cyber Operations: Observed TTPs. Cybersecurity and Infrastructure Security Agency.

17. DoD. (2023). Military and Security Developments Involving the People's Republic of China. Department of Defense Annual Report to Congress.

18. Scott, R. E., & Mokhiber, Z. (2023). The China Trade Toll Revisited: U.S. Jobs Lost, Trade Deficit Increase, Twenty Years After China's Entry Into the WTO. Economic Policy Institute.

19. RAND. (2022). Economic Costs of Intellectual Property Theft: An Analysis of the Impact on the U.S. Economy. RAND Corporation.

20. Lovely, M., & Xu, B. (2023). Resilient Supply Chains and Economic Security in a Post-Pandemic World. Peterson Institute for International Economics.

21. USHMM. (2021). "To Make Us Slowly Disappear": The Chinese Government's Assault on the Uyghurs. United States Holocaust Memorial Museum.

22. Tenbrunsel, A. E., & Messick, D. M. (2021). Ethical Fading: The Role of Self-Deception in Unethical Behavior. Wharton School, University of Pennsylvania.

23. BHRRC. (2022). Beyond Compliance: Effective Reporting Under Modern Slavery Laws. Business & Human Rights Resource Centre.

24. Singer, P. (2022). The Most Good You Can Do: How Effective Altruism Is Changing Ideas About Living Ethically. Yale University Press.