Xi Jinping Playing Chess, Trump Playing Checkers

Other than returning to the pre-Trump status quo with China, I've not really heard of an alternative strategy in dealing with them. If you have one I would like to hear it. Otherwise, Trump is the only one who has chips in the game.

 

What should be done is the subject of another discussion. If you want to start that topic open another thread and do so. The point here is that what Trump is doing has not been thought out properly and as a result is destructive to both sides. At the end of the day, he will be forced to stand down, and common people, who are already struggling to make ends meet, will suffer needlessly.

I don't have a lot of time to talk about this right now, but as an example I can say this. US apparel and consumer electronics retailers are heavily dependent on import of goods from China. Furthermore, margins are razor thin in these areas. Usually these types of businesses tread water for the year and try to make their money during the Christmas shopping season. IF they have to pay extra for the goods that they depend on from China, you will destroy a sizable portion of that business. What that will mean is huge declines in spending, huge losses, huge layoffs, and declines in values of equities. That in turn will translate in across the board loss of confidence in the economy which will result in economic recession, possibly depression. This will erode the economic and political power of the elites in this country, which will force Trump to concede no later than this time next year.

Sorry don't have time to say more right now, but that's basically the picture.

 

The trade war with China ain't over til it's over. Relax. China has 2 huge problems -- the USA feeds it's people in trade and the USA buys a ton of stuff from China in trade. On the other hand the USA is a self sufficient country, has a strong economy, is very resilient, and it's people are free to innovate. We have the A team and China is the JV team. Trump knows this and that's why he says it's easy to win a trade war with China. China has to put up a good front for a while but Trump is no slouch when it comes to making deals.

 

And China is losing and they know it hence the inflationary devaluation of currency in a last desperate gamble as they hope the coming election will unseat the first American president willing to take them on.

 

Maybe I haven't been watching, but what "deal" has Trump made since being elected?

 

With China none or the tariffs would be gone.

 

I guess you haven't been watching.

 

Then enlighten me. I would love to be brought up to date.

 

You'll be wiser if you do your own research. I'm conservative and I don't like to help people too much cause then they start depending on me. Do you have a computer -- LOL

 

Sounds like you caved. BTW, before you tie any labels on me, check my signature line.

 

I caved and I can't read.

 

So in other words, you don't have any answer, just that Orange Man Bad.

 

I like the characterization as a chessgame but neither of you have much "color" in your commentary.

The trade war between the US and China is just one battle on the geopolitical chessboard. Trump is not just in a trade war with one nation (China) - he has chosen to engage in a trade war with near every significant nation in the world - at the same time.

This bold and risky move on the chessboard was purely political (having nothing to do with analysis of the position period) and/or was based on a flawed analysis of the position. I think it was a bit of both.

In decades past the US needed only whisper its desires in the ear of some Nation and they would come running to submit. This was because the US was pretty much the only economic game in town and everyone wanted to play.

This is no longer the case. China now has more purchasing power than the US - India and a few others have that of the US - the EU has that of the US.

Rather than whisper desires however, Trump has taken the tactic of trying to club nations - including our allies - into submission - with respect to the Iran and now Venezuela sanctions. This action is a big part of this game.

The reaction from our allies could not have been more visceral. The strongest language was used - not in private - but on the international stage from allies such as Germany and France -among others. "You are messing with our sovereignty".

While Trump has been going around using the club - China and Russia have been making deals. Major nations who we used to be pretty close with are giving the US the middle finger - something that was previously unfathomable.

This is not what winning looks like - this is what losing looks like.

Germany is going ahead with Nord Stream 2 - against heavy protestation from the US.
India and Turkey are going ahead with the S-400 system - against heavy US protestation. India is also bucking the sanctions and doing other major deals with China Russia.
Italy just signed on China's "Belt and Road" initiative - against heavy US protestation - as have numerous African nations.
We will not be rebuilding Venezuela - Russia and China will be. Other South American Nations are also looking favorably towards Russia and China.
The Middle east is a write off. Obviously Russia is in control of Syria and Iran. Iraq is now signing bills which will remove US troops from its soil. Yemen is a lost cause - Qatar has moved toward Iran. The fact of the matter is that China is now the largest purchaser of Saudi Arabian Oil - and thus El Saud is doing things like entertaining the Petro Yuan.

This is not what winning looks like. Our corporations used to have VIP status - and did not have to even stand in the line up. This is no longer the case - even worse there is a push not to use US companies.

Nations do not like to have their sovereignty messed with. The Politicians - even if they do not like it - are being forced by the people of these nations to take a strong stand "against" the US. This is not going to affect sales of Apple and other US products in the US - it does however affect consumer decisions in these other nations. It also affects who big contracts are awarded to.

Regardless of what the intentions were - or what the analysis of our position on the geopolitical chessboard was - the moves that were made turned out to be big blunders - and the longer this goes on - the worse it gets.

In this respect you are right Principle - China plays the long game - and the longer this goes on the more damage is done to US economic hegemony.

Trump has chosen to use the "nuclear option" - threatening to block a nations banks out of the international system of payments - if they do not comply with sanctions. That and threatening corporations of these nations.

The benefit the US receives from the dollar being the world reserve currency can not be overstated. This privilege is something the other nations "Allowed" us to have - on the basis that we would not abuse it. Abusing this privilege is exactly what Trump has done.

For quite some time the world in general has been calling for a competitor to the dollar status as the "SOLE" world reserve currency. Small efforts have been made to come up with a competitor but if you would have asked me a few years ago I would have said we were at least 2 decades away - if not more.

Now I think will be lucky to maintain SOLE status for another 5 years. Major efforts are being made to create a legitimate competitor -and these efforts are being well received.

Make no mistake - the day that there is a legitimate competitor to the Sole status of the USD is the day the history books will record as the defacto end of the US economic empire... Full Stop.

 

Well, looks like all you have is sterile, pre-fabricated talking points to put forward. If I knew what I know now about computer programming when I was young, it would be fascinating to write a computer program that would automatically produced the type of pre-fabricated responses that people like you give. The hard part would be determining the parse tree of the input message. The easy part would be putting forward your "canned" responses.

 

To see how this stuff really works, consider the US apparel market. According to the American Apparel and Footwear Association, 98 percent of shoes and 97 percent of clothes sold in the United States were imported. Of that around 40% comes from China. Furthermore that industry employs around 3.75 million Americans.

https://www.aafaglobal.org/AAFA/Media.aspx

https://www.usitc.gov/research_and_analysis/trade_shifts_2017/textiles.htm

As I said before margins in that industry are already razor thin. If all of a sudden retailers are having raise prices 10 to 25 percent, that could be enough to drive many of them out of business, which would put a good portion of the 3.75 million Americans at risk of losing the associated jobs.

 

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What Trump does not realize is that this is not some simplistic real estate deal where the two where you have two independent parties, one of which may have a vast preponderance of power relative to the other. Rather the situation is more like two passengers in the same boat. If one does not like what the other is doing, and so starts to shoot bullets at the other, he can end up shooting holes in the very boat that is carrying them both and thus cause the demise of both.

It should be clearly understood that the very goods coming from China that Trump wants to tariff are inputs into the businesses here in the US that employ US workers. Their business models rely on these cheap goods to be competitive in their respective markets. The more they have to pay for those inputs, the less competitive they are and as a result they need less workers. This in turn leads to layoffs and as a result there is an overall decline in consumption. This decline in consumption leads to economic contraction and a decline in confidence in the economic, which becomes a vicious cycle.

I have previously shown how the US apparel industry is heavily dependent on imports from China. Roughly 40% of the shoes and clothes that are sold in the US come from China. These retailers have been struggling which has been evidenced by the number of high profile bankruptcy filings. Companies like Diesel, Charlotte Russe, Payless, Gymboree, Nine West, Claire's, A'gaci, Charming Charlie, and Rue21 have all recently filed for some sort of bankruptcy protection. Therefore it is difficult to see how the apparel industry can withstand price increases of 10 to 25 percent.

Its hard to say for sure, but lets suppose that they are faced with a 25% price increase. Just to get some idea of the numbers, lets assume that such a price increase translates into a 10 to 20 percent reduction in the total workforce in that industry. That would mean between 375,000 to 750,000 workers losing their jobs as a result of tariffs.

And that's just the apparel industry. We haven't got to electronics yet. Perhaps we will talk about that in a subsequent post.

 

I like this analogy. Too often, you hear Trump fans proclaim that we win if we hurt China. No, the issue is that we hurt both, the US and China with the trade war. We may hurt China more, but this is still not winning.

On top of the boat that the US and China finds itself in, there are many other boats. If we sink the US/China boat, the other boats win, for example Vietnam. The apparel industry can't afford to manufacture in the US. If tariffs make manufacturing in China impossible, they'll just move production to a different low-wage country, for example Vietnam. What do we do then? Start another trade war with Vietnam, and a third with South Korea etc...

Finally, it should be noted that it is the US and multinational corporations who exploit the cheap labor overseas. They are the ones to target, yet, they just got a nice tax cut as reward for the off-shoring.

 

Another big factor that affects where products are manufactured is the tax loopholes which allow international corporations to siphon prophets out of the US. This gives those manufacturing products outside the US a drastically unfair competitive advantage over US based companies.

Say US company make a shoe in the US (all in costs say $30) and sells that shoe for $100. Taxes are then paid on $70 in profit.
Another US company (say NIKE) makes as similar shoe in some slave labor nation (assume same $30 cost) - what happens is this shoe is then sold to a numbered shell company in the Cayman Islands. That numbered company then sells the shoe to NIKE US for $90. Taxes are then paid on $10 instead of $70.

 

Although I'm not going off talking points, if you think I am and still can't counter them, that doesn't speak well of your ability to engage in reasoned discussion. So if you think these are talking points, "What is your strategy to deal with China? What are your goals?" Then does that mean you actually have an answer to those questions, but are keeping them secret because...talking points?

 

Why do we need to do anything to deal with China?

 

Because the country (and the world for that matter) made a major mistake in helping to economically uplift a Communist dictatorship into an economic superpower. We need to economically disengage from China. Otherwise we'll just end up being their vassal state.

 

Checkers? If only. Trump is playing Jenga.

 

I would just say that this stuff about "hurting them more" is childish in this situation. If two people burn each other's house down, what's the use of a pissing contest over who sustained the most destruction.

 

Xi is waiting for 2020 and hoping a democrat wins. Then China is home free.