U.S. Sanctions Have Limited Impact on Chinese Economy

The Trump administration's imposition of a 6% tariff on Vietnam has significantly increased uncertainty for foreign companies. The Vietnamese economy has a structural vulnerability, depending on foreign companies for 70-80% of its exports, making it more sensitive to such trade pressures.

The U.S. has effectively banned imports of new Chinese robots and power inverters by designating them as national security threat equipment. However, with Chinese products accounting for 80-90% of the global robot and inverter markets, analysis suggests that the actual impact of U.S. sanctions on the market may be limited.

In the past, a single company would procure necessary parts through a single supply chain. Currently, however, global supply chains are fragmented, requiring every country to establish individual production systems. As countries such as the U.S., China, Korea, Japan, and Germany engage in individual production, demand surges, resulting in a dramatic increase in production costs.

The situation is such that without China, cost-effectiveness is unattainable. Chinese humanoid robot companies like Unitree aim to lower their unit prices to smartphone levels, under $10,000. Neolix, the top company in autonomous freight transport, also shows overwhelming market dominance, indicating that Chinese companies' manufacturing cost competitiveness is virtually unrivaled.

Despite U.S. sanctions, the inherent capitalist pursuit of profit makes it difficult to ignore price competitiveness, so the indirect supply of Chinese components will inevitably continue. If prices are a tenth lower, they will inevitably come through a third country; otherwise, companies cannot meet their break-even points. With Samsung Electronics and SK Hynix focusing on High Bandwidth Memory (HBM) and the resulting shortage of general-purpose memory, U.S. companies face the reality of having to use indirect routes to secure general-purpose memory.

The policy of excluding Chinese products is ultimately causing losses for the U.S. economy. Increased costs for AI infrastructure are reducing the competitiveness of U.S. companies, and already struggling manufacturing is further exacerbated by 'chip-flation,' making it even more difficult for U.S. manufacturing.

The difficulty in the yen's value recovery is a fundamental issue, as it is crucial whether Japan as a nation can maintain its economic fundamentals solidly in the future. The Japanese government's increased issuance of government bonds due to expansionary fiscal policy is intensifying yen depreciation, and lower interest rates compared to the U.S. are further entrenching the weak yen phenomenon. Ultimately, a country's exchange rate acts as a thermometer for its economy, meaning Japan has reduced policy space and is in a difficult situation to prevent further currency depreciation.

Japan is in a serious dilemma with its interest rate policy. Lowering interest rates would further deepen the weak yen phenomenon, but raising them would cause concerns about the liquidation of massive yen-carry trades. Since the liquidation of yen-carry trades could cause a major shock to global financial markets, the Japanese government finds it difficult to raise interest rates easily. This is a clear example of the capitalist reality where government policies cannot overcome economic principles.

Analysis suggests that Vietnam will find it difficult to become 'the second Korea' due to excessively rapid wage increases and demands for labor rights. There is a lack of a favorable environment for foreign companies, which differs significantly from how China treated foreign companies in its early stages of opening up.

In its early stages of opening up, China maintained a policy of not just non-discriminatory treatment but rather preferential treatment for foreign companies over domestic ones for 20-30 years. In contrast, Vietnam saw early demands for labor rights, increasing uncertainty for foreign companies. While China unconditionally favored foreign companies, even to the point where domestic companies faced discrimination, Vietnam's environment for foreign companies was not as favorable as China's.

In 2010, China's GDP surpassed Japan's, making it the world's G2. Subsequently, between 2011 and 2013, as policy demands grew and laws were revised, discriminatory policies against domestic companies began to disappear under the principle of treating all companies equally. This policy shift became a significant turning point, driving the growth of domestic companies within China.