protectionist
Diamond Member
- Oct 20, 2013
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Despite claims to the contrary, we are in the initial stages of a trade war with China. But this is something that China simply can't win. In order to win a trade war, you have to either be even with the other country, or have a trade deficit with them. The one thing you can't have is a trade surplus.
If you have a trade surplus, you don't have any leverage to use tariffs against the other country. And the bigger the trade surplus, the less leverage (or trade war power) you have. In China's case, their surplus isn't big, it is gigantic.
China exports 6 times as much $tuff to the US, as vice versa. So this is like 2 people puttting up money for something. One puts up $10, the other $60. The $60 guy has a lot more to lose.
Making things worse for China, the threat of prices rising when US businesses leave China and return to America, has diminished almost entirely. There's a long list of economic reasons or that. Some of them I remember teaching to college kids 40 years ago. Other reasons have come about since that time, buy they're all piled up right now.
So why, in such a precarious position, does China go head to head with Trump on trade ? I think it's because they're (slimly) hoping that political pressures in the US will dissuade Trump from waging this war. But Trump has put a lot of political capital into the idea of restoring an equitable trade balance, thereby bringing manufacturing jobs back to the US, and making America great again. This is the cornerstone of his presidency. It's not on the table for negotiation with Democrats or anybody else.
Looking at this objectively, China can bluster, and bluff, but she doesn't have a prayer in this thing. China may register a few hits along the way, but Trump is pitching a shutout here, and I suspect the battle will be brief.
If you have a trade surplus, you don't have any leverage to use tariffs against the other country. And the bigger the trade surplus, the less leverage (or trade war power) you have. In China's case, their surplus isn't big, it is gigantic.
China exports 6 times as much $tuff to the US, as vice versa. So this is like 2 people puttting up money for something. One puts up $10, the other $60. The $60 guy has a lot more to lose.
Making things worse for China, the threat of prices rising when US businesses leave China and return to America, has diminished almost entirely. There's a long list of economic reasons or that. Some of them I remember teaching to college kids 40 years ago. Other reasons have come about since that time, buy they're all piled up right now.
So why, in such a precarious position, does China go head to head with Trump on trade ? I think it's because they're (slimly) hoping that political pressures in the US will dissuade Trump from waging this war. But Trump has put a lot of political capital into the idea of restoring an equitable trade balance, thereby bringing manufacturing jobs back to the US, and making America great again. This is the cornerstone of his presidency. It's not on the table for negotiation with Democrats or anybody else.
Looking at this objectively, China can bluster, and bluff, but she doesn't have a prayer in this thing. China may register a few hits along the way, but Trump is pitching a shutout here, and I suspect the battle will be brief.