Trump cannot possibly 'win' this trade war!

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neverfail
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Trump cannot possibly 'win' this trade war!

Post by neverfail » Sat Mar 24, 2018 3:58 am

http://www.atimes.com/article/counter-p ... -everyone/

(quote) The retaliation could be massive

China has been measured in its response. Europe has gone the other way, displaying masterful trolling skills. The European Union came up with a list of symbolic targets for possible retaliation to get the attention of specific Washington powerbrokers. On it are Harley-Davidson motorcycles, which is headquartered in Wisconsin, the home state of House Speaker Paul Ryan. So is bourbon, an export vital to Senate Majority Leader Mitch McConnell’s home state of Kentucky.

Yet Asia possesses even greater leverage over the Trump White House. Take China, whose scale as a trading partner and its role as a vital customer of US farmers affords it considerable influence. It has already fired one warning shot Trump’s way: investigating curbs on imports of American sorghum, a cereal grain fed to livestock.

Xi Jinping has a smorgasbord of options to punch back with. The president could devalue the yuan, for example. Canceling all Boeing orders would eliminate about 180,000 US jobs. Slapping exit taxes on goods Apple, General Motors, Walmart and other names assemble in China would slam Wall Street. Targeting soy beans would savage the economies of states from Mississippi to Missouri. Beijing could limit imports of everything from Hollywood movies to beef to pharmaceuticals. And then there’s the ultimate weapon: a fire sale of China’s US$1.2 trillion of US Treasuries.

Japan could do the same of, course, with its US$1.1 trillion of Treasuries. Doing just that has dawned on Tokyo before. In 1997, Prime Minister Ryutaro Hashimoto made a jaw-dropping admission: that “several times in the past, we have been tempted to sell large lots of US Treasuries” to gain diplomatic leverage. One moment of temptation was during tense auto-sector talks.

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Sertorio
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Re: Trump cannot possibly 'win' this trade war!

Post by Sertorio » Sat Mar 24, 2018 4:21 am

neverfail wrote:
Sat Mar 24, 2018 3:58 am
http://www.atimes.com/article/counter-p ... -everyone/

(quote) The retaliation could be massive

China has been measured in its response. Europe has gone the other way, displaying masterful trolling skills. The European Union came up with a list of symbolic targets for possible retaliation to get the attention of specific Washington powerbrokers. On it are Harley-Davidson motorcycles, which is headquartered in Wisconsin, the home state of House Speaker Paul Ryan. So is bourbon, an export vital to Senate Majority Leader Mitch McConnell’s home state of Kentucky.

Yet Asia possesses even greater leverage over the Trump White House. Take China, whose scale as a trading partner and its role as a vital customer of US farmers affords it considerable influence. It has already fired one warning shot Trump’s way: investigating curbs on imports of American sorghum, a cereal grain fed to livestock.

Xi Jinping has a smorgasbord of options to punch back with. The president could devalue the yuan, for example. Canceling all Boeing orders would eliminate about 180,000 US jobs. Slapping exit taxes on goods Apple, General Motors, Walmart and other names assemble in China would slam Wall Street. Targeting soy beans would savage the economies of states from Mississippi to Missouri. Beijing could limit imports of everything from Hollywood movies to beef to pharmaceuticals. And then there’s the ultimate weapon: a fire sale of China’s US$1.2 trillion of US Treasuries.

Japan could do the same of, course, with its US$1.1 trillion of Treasuries. Doing just that has dawned on Tokyo before. In 1997, Prime Minister Ryutaro Hashimoto made a jaw-dropping admission: that “several times in the past, we have been tempted to sell large lots of US Treasuries” to gain diplomatic leverage. One moment of temptation was during tense auto-sector talks.
Seeing that the US is a superpower, if I were American I would suggest replacing the dollar with a differently denominated currency and exchange the old dollars for the new currency only to American firms and citizens...That would create quite a stir around the world...

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Doc
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Re: Trump cannot possibly 'win' this trade war!

Post by Doc » Sat Mar 24, 2018 9:36 am

neverfail wrote:
Sat Mar 24, 2018 3:58 am
http://www.atimes.com/article/counter-p ... -everyone/

(quote) The retaliation could be massive

China has been measured in its response. Europe has gone the other way, displaying masterful trolling skills. The European Union came up with a list of symbolic targets for possible retaliation to get the attention of specific Washington powerbrokers. On it are Harley-Davidson motorcycles, which is headquartered in Wisconsin, the home state of House Speaker Paul Ryan. So is bourbon, an export vital to Senate Majority Leader Mitch McConnell’s home state of Kentucky.

Yet Asia possesses even greater leverage over the Trump White House. Take China, whose scale as a trading partner and its role as a vital customer of US farmers affords it considerable influence. It has already fired one warning shot Trump’s way: investigating curbs on imports of American sorghum, a cereal grain fed to livestock.

Xi Jinping has a smorgasbord of options to punch back with. The president could devalue the yuan, for example. Canceling all Boeing orders would eliminate about 180,000 US jobs. Slapping exit taxes on goods Apple, General Motors, Walmart and other names assemble in China would slam Wall Street. Targeting soy beans would savage the economies of states from Mississippi to Missouri. Beijing could limit imports of everything from Hollywood movies to beef to pharmaceuticals. And then there’s the ultimate weapon: a fire sale of China’s US$1.2 trillion of US Treasuries.

Japan could do the same of, course, with its US$1.1 trillion of Treasuries. Doing just that has dawned on Tokyo before. In 1997, Prime Minister Ryutaro Hashimoto made a jaw-dropping admission: that “several times in the past, we have been tempted to sell large lots of US Treasuries” to gain diplomatic leverage. One moment of temptation was during tense auto-sector talks.
The US now is the largest oil and gas producer in the world. That is what drove the trade deficits of the past. But even without huge oil imports of oil the US is still running a huge trade deficit. That cannot and will not go on forever.
“The further a society drifts from truth the more it will hate those who speak it.” … George Orwell

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Alexis
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US-China trade in a nutshell

Post by Alexis » Sat Mar 24, 2018 3:21 pm

neverfail wrote:
Sat Mar 24, 2018 3:58 am
The retaliation could be massive

(...) Take China, whose scale as a trading partner and its role as a vital customer of US farmers affords it considerable influence. It has already fired one warning shot Trump’s way: investigating curbs on imports of American sorghum, a cereal grain fed to livestock.

Xi Jinping has a smorgasbord of options to punch back with.
Here is US-China trade in a nutshell

In 2016:
- The United States exported 116 B$ to China
- Which amounted to 0.62% of US GDP = 18.62 T$
- China exported 482 B$ to the United States
- Which amounted to 4.31% of Chinese GDP = 11.20 T$

Exports to the US are seven times more important to China than exports to China are important to the US.

If US-China trade takes a hit, it's Beijing that will lose the most BY FAR.

neverfail
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Re: US-China trade in a nutshell

Post by neverfail » Sat Mar 24, 2018 7:19 pm

Alexis wrote:
Sat Mar 24, 2018 3:21 pm
neverfail wrote:
Sat Mar 24, 2018 3:58 am
The retaliation could be massive

(...) Take China, whose scale as a trading partner and its role as a vital customer of US farmers affords it considerable influence. It has already fired one warning shot Trump’s way: investigating curbs on imports of American sorghum, a cereal grain fed to livestock.

Xi Jinping has a smorgasbord of options to punch back with.
Here is US-China trade in a nutshell

In 2016:
- The United States exported 116 B$ to China
- Which amounted to 0.62% of US GDP = 18.62 T$
- China exported 482 B$ to the United States
- Which amounted to 4.31% of Chinese GDP = 11.20 T$

Exports to the US are seven times more important to China than exports to China are important to the US.

If US-China trade takes a hit, it's Beijing that will lose the most BY FAR.
Yes Alexis: but you overlook the fact that China's year after year trade surplussed with the US has permitted it to be a globally big buyer of US government debt in the form of US Treasury Bonds - similar to Japan and (on a lesser scale) several other current account surplus foreign trading partners. Imagine if the Central Bank in Beijing conducted a massive selloff of those bonds?

1. It could and probably would trigger off a massive panic stampede by other investors in US bonds to get out before they lost everything.

2. the international 4X value of the US dollar would sink like a stone bring other economic disruptions in its wake.

3. to staunch the outflow of invested capital and restore credibility to both US government bonds and the US dollar, their Federal Reserve Bank would need to substantially increase returns on bonds: unerringly, bank interest rates would have to rise across the board in the US in the wake of the bond rises.

4. I have doubts about whether the US economy is in a sufficiently robust state of recovery to avoid sinking into a deep recession in the wake of an abrupt rise in interest rates.

Meantime, no doubt the PRC would endure some damage of its own as well. But as a country of surpluses instead of deficits (PRC government debt is only just over 41% of GDP - that of the US must by now be triple that) I judge it to be the stronger of the two to withstand the shocks.

Trump and many other of his supporters still clings to the misguided notion that the rest of the World needs America more than vice versa. Both now seem destined to learn the hard way and at cost that this megalomaniac perception of America's importance is untrue.

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cassowary
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Re: US-China trade in a nutshell

Post by cassowary » Sat Mar 24, 2018 8:26 pm

Alexis wrote:
Sat Mar 24, 2018 3:21 pm
neverfail wrote:
Sat Mar 24, 2018 3:58 am
The retaliation could be massive

(...) Take China, whose scale as a trading partner and its role as a vital customer of US farmers affords it considerable influence. It has already fired one warning shot Trump’s way: investigating curbs on imports of American sorghum, a cereal grain fed to livestock.

Xi Jinping has a smorgasbord of options to punch back with.
Here is US-China trade in a nutshell

In 2016:
- The United States exported 116 B$ to China
- Which amounted to 0.62% of US GDP = 18.62 T$
- China exported 482 B$ to the United States
- Which amounted to 4.31% of Chinese GDP = 11.20 T$

Exports to the US are seven times more important to China than exports to China are important to the US.

If US-China trade takes a hit, it's Beijing that will lose the most BY FAR.
I agree. Both sides lose but China will lose more. China practices mercantilism, It imposes a 25% tax of Elon Musk's cars to get him to build a plant in China. China wants the transfer of technology in exchange for access to the Chinese market. So it insists on foreign investors having a Chinese partner.

China seeks to be the dominant power in the world. Remember China's history. Whenever it is strong, it expands. Whenever it was weak, it contracted. Now it is growing stronger again. It has already taken Tibet which the world has now accepted.



Don't forget Tibet and China's attitude. If it can get away with it, it will. Take a look at current claims China is making.



I believe that if China evolves into a democracy, tensions with its neighbors will decrease. So far, the pattern has been that when countries reach a level of prosperity, the people will want democracy. There is hope yet for China. But the US missed a golden opportunity to get rid of the CCP during the TianAnMen massacre. At that time, communist regimes were falling.

The Chinese people then saw the US people as a role model after being misruled by the CCP for so long. But now, they see democracy as failing. Since Tian An Men, the people saw the economy booming. Chinese exports to the US and other rich countries made the country richer and it has built up its military. The people now think the CCP is doing a good job. So will it become a democracy and throw out the CCP dictatorship?

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Sertorio
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Re: US-China trade in a nutshell

Post by Sertorio » Sun Mar 25, 2018 3:15 am

cassowary wrote:
Sat Mar 24, 2018 8:26 pm

The Chinese people then saw the US people as a role model after being misruled by the CCP for so long.
That would be the day, when Chinese see any westerner as a role model... :D

neverfail
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Re: Trump cannot possibly 'win' this trade war!

Post by neverfail » Sun Mar 25, 2018 3:16 am

I respect the point that Alexis made about the importance of international trade being greater to the PRC economy than for that of the USA. But I still must take issue as Alexis only touched upon the matter of mercantile trade (current account) without bringing into the picture the importance of capital flows (capital account). In the modern world the latter can actually dwarf the former in scale and importance.

For one thing, the USA has relied upon surpluses in its capital account to balance the perennial deficits it suffers in its current account.

The PRC leadership and policymakers seem to be aware of all of this and have taken pains to protect their economy from external assault.

(To continue on from my last post) the important difference between the USA public debt and the PRC equivalent lies not merely in the comparable size (expressed as % of GDP) of the two but in the fact that whilst the USA owes quite a bit of its debt to borrowings from foreign sources; to the best of my knowledge the PRC owes nothing to foreign creditors.

Add the fact that the PRC currency, the Yuan, is still not a freely convertible (or freely floating) currency it means that whilst the US dollar can be assailed via a mass selloff of US government debt by foreign (and domestic) creditors the PRC currency is well nigh unassailable.

In that the PRC owes its entire national debt to domestic creditors China seems to have followed the prudent example of Japan; which has globally the largest debt exposure of any country yet is in no apparent danger of fiscal/economic collapse because it owes that entire debt to its own people.

But if China (or Japan) were to inaugurate a mass selloff of US treasury bonds, would they not also suffer fiscal losses on the selloff too? Very likely they would. But China now seems so determined to carve out its place in the sun that I get the impression that the PRC leadership might already have factored that loss into its calculations as an acceptable sacrifice on their part - as long as they could humble the USA in the process.

In any case the USA is by now so heavily indebted that it is doubtful as to whether it would ever be able to repay it all. Again the PRC government would have taken that into consideration and would treat their considerable holdings in US Treasury bonds more as their token on the board than as something redeemable for cash.

However, to embark on such a risky enterprise must be the fiscal/economic equivalent of owning the hydrogen bomb. Best to reserve it for a last-resort scenario when the power you are locked in struggle with leaves you with nom other option but to use it.

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Sertorio
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Re: Trump cannot possibly 'win' this trade war!

Post by Sertorio » Sun Mar 25, 2018 3:20 am

neverfail wrote:
Sun Mar 25, 2018 3:16 am
I respect the point that Alexis made about the importance of international trade being greater to the PRC economy than for that of the USA. But I still must take issue as Alexis only touched upon the matter of mercantile trade (current account) without bringing into the picture the importance of capital flows (capital account). In the modern world the latter can actually dwarf the former in scale and importance.

For one thing, the USA has relied upon surpluses in its capital account to balance the perennial deficits it suffers in its current account.

The PRC leadership and policymakers seem to be aware of all of this and have taken pains to protect their economy from external assault.

(To continue on from my last post) the important difference between the USA public debt and the PRC equivalent lies not merely in the comparable size (expressed as % of GDP) of the two but in the fact that whilst the USA owes quite a bit of its debt to borrowings from foreign sources; to the best of my knowledge the PRC owes nothing to foreign creditors.

Add the fact that the PRC currency, the Yuan, is still not a freely convertible (or freely floating) currency it means that whilst the US dollar can be assailed via a mass selloff of US government debt by foreign (and domestic) creditors the PRC currency is well nigh unassailable.

In that the PRC owes its entire national debt to domestic creditors China seems to have followed the prudent example of Japan; which has globally the largest debt exposure of any country yet is in no apparent danger of fiscal/economic collapse because it owes that entire debt to its own people.

But if China (or Japan) were to inaugurate a mass selloff of US treasury bonds, would they not also suffer fiscal losses on the selloff too? Very likely they would. But China now seems so determined to carve out its place in the sun that I get the impression that the PRC leadership might already have factored that loss into its calculations as an acceptable sacrifice on their part - as long as they could humble the USA in the process.

In any case the USA is by now so heavily indebted that it is doubtful as to whether it would ever be able to repay it all. Again the PRC government would have taken that into consideration and would treat their considerable holdings in US Treasury bonds more as their token on the board than as something redeemable for cash.

However, to embark on such a risky enterprise must be the fiscal/economic equivalent of owning the hydrogen bomb. Best to reserve it for a last-resort scenario when the power you are locked in struggle with leaves you with nom other option but to use it.
Good post, Neverfail. I fully aggree with you.

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cassowary
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Re: US-China trade in a nutshell

Post by cassowary » Sun Mar 25, 2018 5:55 am

Sertorio wrote:
Sun Mar 25, 2018 3:15 am
cassowary wrote:
Sat Mar 24, 2018 8:26 pm

The Chinese people then saw the US people as a role model after being misruled by the CCP for so long.
That would be the day, when Chinese see any westerner as a role model... :D
Tell it to the students for fought at Tiananmen Square.

Image
Statue of Goddess of Democracy at Tiananmen.

There were even top ranking members of the politburo who sympathized with the students - like Zhao Zhiyang.

Image

Zhao with Tiananmen protestors.

America missed a golden opportunity to reshape China into a peaceable democracy.

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