I Predict The US/China Trade War Will Last For Months

We buy less than 20% of China's exports. That hardly amounts to holding all the cards.

 

And that's exactly what will happen, if the tariffs persist. In fact, Mexico, South Korea and Taiwan may be the winners. Some companies currently producing in the US are even considering shifting production to Mexico to make up for increased steel and aluminum prices from the tariffs.

https://www.newsweek.com/trade-war-...-killing-steel-china-aluminum-economy-1280740

Unintended consequences are important here. However, I don't think trump ever thinks that far, considering his policy making based on gut feelings.

 

Unless, of course, the US wins. And I'd rather be on the outside looking in rather than on the bottom looking up.

 

We are the largest consumer market the world has ever seen.

Where else are they going to sell that 20%?

Nowhere?

Exactly.

 

I'd be interested is seeing what a US 'win' would look like, especially since the Chinese have now declared this a "People's War" as a matter of principle and pride. China won't fold and could make up for all exports to the US just by one year's growth.

Remember, too, that China is our biggest creditor.

 

Guess you never heard of the BRI.

On the flip side, what would happen to our debt market if China decides to start dumping a sizable portion of the $1 trillion+ in US debt it holds?

 

So 20% of Chinese exports is no big deal, but 5% of US debt would sink the country?

Japan owns as much debt as China does.

 

A US win would be increased US exports to China, rebuilding the US industrial base and thwarting Chinese imperial ambitions.

"China’s economy lost steam in April, underscoring the fragility of the world’s second-largest economy as it girds for an intensified face-off with the U.S. over trade.

Industrial output, retail sales and investment all slowed more than economists forecast. The state sector continued to boost investment while private business eased off, and growth in manufacturing investment came in at the slowest pace in data dating back to 2004.

Faltering credit and consumption at home coupled with a weaker global economy means China is running out of steady growth engines right when it needs them. The soggy data spurred expectations the government will need to boost stimulus to cushion the blow from the escalating trade war, sending Asian stocks mostly higher."

https://www.bloomberg.com/news/arti...st-momentum-even-ahead-of-trump-s-new-tariffs

 

By selling to... who exactly?

Malaysia? Nigeria? The -stan countries?

The problem with your theory is that their economy is slower now than it was 50 years ago, so in theory they could, but they wont.

 

The US also is running trillion $ deficits annually. So who is gonna soak up all that debt if China quits?

Here's something to consider:

China’s position verbalized by …. chief editor of the Chinese Global Times:

Hu Xijin 胡锡进‏ @HuXijin_GT

The sooner new tariffs on $300 b of Chinese goods come, the better. That means trade war comes to the 1st turning point, shifting from a comprehensive US offensive to a stalemate. The two sides will then compete on endurance. China’s political system will ensure we won’t lose.

In reality China is unerringly taking further aim at Mr Trump’s base itself. China might stop purchasing agricultural products from the US in total. They may reduce its orders for Boeing planes and they may restrict service trade. The PBOC is also modelling the dumping of US Treasuries which will have serious systemic effects, most probably strengthen the yuan and push the cost of doing business with the US much higher. If China is going to dump Treasuries, Chinese pride will follow and they may also be dumping US stocks and real estate. After all, China needs now to protect their trade with the rest of the world.

 

Just repetition of mercantilism. Have you even heart of comparative advantage?

 

They are hoping for Biden:

"Former vice president Joe Biden on Wednesday dismissed the notion that the United States should be worried about China as a geopolitical competitor, prompting criticism from Sen. Bernie Sanders (I-Vt.) as well as some Republicans who argued that Biden is underestimating the world’s second-largest economy.

The argument is one Biden has frequently made in speeches throughout the years, but it is drawing increased attention due to his status as the apparent front-runner among Democrats running for president."

https://www.washingtonpost.com/poli...ory.html?noredirect=on&utm_term=.26e4f3890c5a

----

China bought Biden back in 2013:

"Joe Biden's son Hunter flew to China on an official visit by his father in 2013 and ended up inking a deal for his hedge fund with the Bank of China within days of the visit."

Hunter Biden accompanied his father aboard Air Force Two on a visit to China, where the vice president met with Chinese President Xi Jinping.

https://www.dailymail.co.uk/news/article-5507429/Bidens-son-Hunter-deal-Bank-China-fathers-trip.html

 

It has already been going on for over a year.

 

So, Bloomberg or the IMF?

The International Monetary Fund maintained its economic growth forecasts for China while trimming global growth projections for 2019 at the World Economic Forum in Davos, Switzerland.

China’s economic growth is projected to be 6.2 per cent for 2019, the same as the IMF’s previous prediction last October. Domestic demand is also estimated to remain robust, aided by policies to boost consumption this year, the IMF said in its Global Economic Prospects.

Figures show growth in China remains robust, in part reflecting resilient consumption. However, industrial production and new export orders have moderated, asset prices have experienced downward pressure, and sovereign bond spreads have risen amid trade tensions.

Prices of newly constructed residential buildings have rebounded, including in first-tier cities after a period of correction, according to the report.

https://www.telegraph.co.uk/china-watch/business/china-2019-imf-growth-forecast/

 

Biden or Trump, it won't matter. Voters in the US will get tired of the effects of the tariffs very soon after they actually feel their effects. So far, consumers have been largely shielded from feeling the effects, and farmers who are affected have been made whole with tax-payer's money (what Trump fans would call socialism).

Chinese leadership doesn't have this problem, so it can be argued that they can outlast us in this game of chicken.

 

I think the key sentence in my quote is:

Industrial output, retail sales and investment all slowed more than economists forecast.

The IMF forecast was wrong, as economic forecasts often are.

 

The Chinese have already said as much themselves.

China’s position verbalized by …. chief editor of the Chinese Global Times:

Hu Xijin 胡锡进‏ @HuXijin_GT

The sooner new tariffs on $300 b of Chinese goods come, the better. That means trade war comes to the 1st turning point, shifting from a comprehensive US offensive to a stalemate. The two sides will then compete on endurance. China’s political system will ensure we won’t lose.

 

The Bloomberg article seems to be only talking about April. Let's see how the rest of the year works out.

 

What makes you think that the CCP is immune to domestic discontent engendered by economic slowdown? My understanding (which long predated the current President) is that CCP legitimacy is predicated on the increasing prosperity of China, the so-called "Mandate of Heaven," and it is rather fragile at the moment.

There is no pithy quote from the following article, but it suggests that Xi Jinping does have a lot to worry about.

https://www.worldpoliticsreview.com/articles/4691/when-the-ccp-loses-the-mandate-of-heaven

 

Would you rather be right and have the US lose the trade war?

 

I had rather the US got aboard the BRI and got a piece of that pie. That will never happen, though, as we operate on a paradigm of win/lose, while Xi constantly trumpets the BRI as win/win.

Meanwhile, much of the rest of the world is signing on to it. China offers development while the US offers "200,000 tons of diplomacy" with aircraft carriers.

Do you really think the rest of the world doesn't see the contrast?

 

For what it's worth .... from Pepe Escobar, on Pompeo's Tuesday meeting with Putin and Lavrov in Socchi:

The real deal was, in fact, not Putin-Pompeo or Pompeo-Lavrov in Sochi. It was actually Lavrov-Wang Yi (the Chinese Foreign Minister), the day before in Moscow.

A US investment banker doing business in Russia told me: “Note how Pompeo ran like mad to Sochi. We are frightened and overstretched.”

Diplomats later remarked: “Pompeo looked solemn afterwards. Lavrov sounded very diplomatic and calm.” It’s no secret in Moscow’s top diplomatic circles that the Chinese Politburo overruled President Xi Jinping’s effort to find an accommodation to Trump’s tariff offensive. The tension was visible in Pompeo’s demeanor.

 

The Chinese are savers, they can take short-term economic pain for long term gain. US consumers, not so much. Instant gratification is all that counts, also when it comes to unpaid-for tax cuts.

 

I'm not understanding how Trump and/or the US defines a trade-war WIN? Is China going to stop building stuff? Is the USA going to start building all the stuff currently imported by the US? Will tariffs remain in place forever simply contributing to inflation?

Using the example of a US car manufacturer, not only do they procure steel and aluminum, but also 25-50% of the subcomponents used in their automobiles. Currently all of this has tariffs of what...10% to 25%. So, there are other places to procure steel and aluminum that don't have tariffs, and cheaper costs than producing them in the US, and if this happens, there is no pressure on US companies to invest and produce more steel and aluminum in the US. All of the subcomponents can be procured from other nations but it will cost billions to set up and years to implement, and again probably won't be produced in the USA because of higher and higher costs. If I'm the CEO, I'm praying Trump gets out of my business ASAP. I can't even begin to plan for change and/or invest in change, when I have no idea what the peckerhead is up to at any given tweet of the day...

 

Of course Xi touts it as win/win. In fact the BRI is "debt trap diplomacy."

https://qz.com/1223768/china-debt-t...bt-overloads-from-chinas-belt-and-road-plans/