Quick Thought Of The Week: Globalisation
It’s not quite working out the way the US administration had hoped. Those penal tariffs that the US government have slapped on Chinese-made goods were supposed to bring manufacturing jobs back onshore.
But some US companies don’t seem to have read the White House’s script.
Action-camera maker GoPro (Nasdaq: GPRO) said that it would move most of its products destined for the US market out of China. GoPro hasn’t said where it will move its factories to, yet.
Chances are, it won’t be the US, though. The labour cost is much too high in America….
…. A US factory worker earns in a day-and-a-half what a counterpart in Vietnam would make in one month. A Thai worker takes home in 30 days what a US worker would earn in just 17 hours.
It doesn’t take a genius to work out why another company, Harley-Davidson (NYSE: HOG), chose to mothball one of its two plants in Kansas City in favour of Bangkok.
Of course, GoPro isn’t abandoning China altogether. The Chinese market is much too big and far too lucrative for that. It will continue to manufacture in China those products that are targetted at Chinese consumers….
…. some of those products could even find their way into markets that are on good trading terms with China. But they won’t be making their way to America.
The sad part about the Sino-US trade dispute is that for an administration that purports to understand capitalism, The White House just doesn’t seem to understand it at all. It’s too wrapped up analysing trade deficits.
Capitalism is the efficient use of money to generate a return on the funds employed. And capital is mobile. Capitalists will move money to where it could be best used.
For us investors, there are opportunities galore. The moving of supply chains, the re-allocation of capital and the re-deployment of resources could create prospects that were otherwise unthought of.
The opening up of South-east Asia, the raising of living standards and the utilisation of spare capacity in the region should be music to the ears of canny investors.
Globalisation is not about to come to a grinding halt, just because obstacles have been put in its way. Capitalism is much too clever for that. Follow the money. Look at where consumers are spending their money, if you want to find investing opportunities.