HOW THE CHINA TARIFF WAR AFFECTS THE STAMP MARKET
The current tariff war between the USA and China has its
roots in the fact that for decades we have allowed China unrestricted access to
our markets. They took full advantage of
this to develop themselves into the second most important economy in the
world. The present administration has
decided this has been too costly to us and is now seeking to balance the trade
as well as also end the abuses by China which resulted. Needless to say, China recognizes that this
would be a severe setback to its drive for global domination and so, they will
resist in hopes that American resolve will wain or that the Trump
administration will lose the election and a new administration will be less
demanding. Hence, the Chinese strategy
will be one of minimizing the impact of the 10% tariffs on their domestic
economy in the short term and putting pressure on US exports in hopes of
undermining support of the administrations trade policies. Russia is not the only one who wants to
influence US elections!
As a way to mitigate the impact of the tariffs on the volume
of Chinese exports, their government has chosen to devalue its currency by over
10% so that local manufacturers can sell to their US buyers at a dollar price
which is 10% lower and still deliver the same number of Yuans to the Chinese
seller. This, in effect, negates the
economic effect of the tariffs on US demand and frustrates our attempts to
force China to adhere to our trade demands.
It ignores the fact that 10% tariffs can quickly be raised to 25%
tariffs, a level which cannot be negated with currency devaluations without
severe disruption of the Chinese economy.
It also does not offset manufacturers fleeing China for other Asian
countries not subject to US tariffs.
The above scenario is background to the subject of this
article, how will this tariff war impact the stamp market, specifically, the
market for Chinese stamps. The Chinese
stamp market has been the biggest growth market in philately for the past 20
years. As China has grown wealthy, its
citizens have sought places to invest their wealth in a country which limits
investment options and has a banking system which is restrictive on foreign
remittances and totally transparent to its autocratic government. Hence, stamps have become an attractive way
to create portable wealth not subject to government surveillance and control. It is also a convenient underground currency
in a country where doing business means greasing the palms of all levels of
government officials in a covert manner.
This is not an easy thing to do when serious amounts of money are
involved.
The currency devaluations which result from the tariff war
will have a direct impact on the Chinese stamp market both inside and outside
China. Inside the country the demand for
stamps will jump since people know that price inflation is the normal result of
the current and possible future tariffs. Also, the securities markets will be
less attractive as an investment outlet and the real estate market likewise,
but for other reasons. There will also
be added demand for stamps for purposes of smuggling money out of the country,
hence the more expensive a stamp, the better.
Demand for Chinese stamps outside the country will also be
strong, driven by demand inside China.
Dealers should not be surprised by increased eBay activity and
competitive bidding at auction. US
collectors and investors interested in Chinese stamps should focus on the
higher priced items since they will be the first things to disappear. Stamp usage as an investment and as an
underground currency will continue to grow rapidly as websites such as eBay
provide a visible exchange where buyers and sellers can do their covert banking
at reasonable costs. Dealers are failing
to take full advantage of such sites to exploit the opportunities presented by
the situation with China. I noted
relatively few on-line items over $100 being offered and many such need
certification of authenticity with the offer.
Since the China situation is not unique, it won’t be long before digital
currencies streamline this sales process even further.