Investigating Trump's Trade War Through the Eyes of China

Mish

Let's take a look at how China sees the escalation of the trade war as described by the Xinhua News Agency in Beijing.

Five World-wide Hazards of the United States Launching Trade War Against China

In a blistering commentary (in Chinese), the Xinhua News Agency in Beijing, a government mouthpiece, announced Five World-wide Hazards of the United States Launching Trade War Against China.

The US government has not only launched a trade war with China, but has been escalating in depth and breadth, and there has been a trend beyond the scope of trade disputes. This has brought more and more uncertainty to the world’s prospects and has become a threat to global interests. A great bane of human well-being.

The US government's thinking on China's economic relations and trade bullying has produced or is currently producing five major world-wide hazards, affecting the international community's perception and understanding of global governance and development.

Point 1: World Economic Growth

  • US investment bank Morgan Stanley warned that if the United States imposes a 25% tariff on 200 billion US dollars of Chinese goods for three or four months, then the global economic growth rate may slow down by about 50 basis points to 2.7%.
  • According to the analysis of the Japanese research institute Daiwa and the general research, Japanese companies will directly lose about 500 million US dollars due to Sino-US trade friction. French Finance Minister Bruno Lemer said that Sino-US trade friction will directly lead to a reduction in the circulation of goods and damage employment opportunities in Europe and France.
  • Due to the deterioration of the world economic environment, some countries will have to relax monetary policy to stimulate their economic growth. This will fuel global debt accumulation, increase medium-term financial risks, and hinder the long-term healthy development of the world economy.

Point 2: Seriously Undermine the International Economic Order

  • By circumventing the WTO dispute settlement mechanism, provoking economic and trade frictions according to domestic laws, and levying tariffs on Chinese goods on a large scale without WTO authorization or violations – this shows the US’s disregard of the multilateral trading system and its self-interest over international rules. The embarrassment above makes the international economic order face an unprecedented danger.
  • What needs special attention is that the United States, which prides itself on "complete market economy," also openly uses state power and technological advantages, and implements a technological embargo on Chinese technology companies such as Huawei in the name of "national security." This is a ruthless trampling on the principles of market economy and the order of commercial civilization.
  • The actions of the United States have already made some technology companies in other countries feel the fear of the cold weather and caused incalculable direct and indirect damage to the development of the world's science and technology industry.

Point 3: Creating a New Imbalance in the Global Economy

  • The direct excuse for the United States to launch a trade war with China is "trade imbalance." In fact, the root cause of the US trade deficit with China is caused by structural problems such as too much consumption and insufficient savings.
  • If the United States does not focus on solving its own problems, it will impose high tariffs on goods from other countries such as China. The result will only be counterproductive.
  • More seriously, the United States itself is one of the main causes of global economic imbalances. Its current practices will not only help the current global economic rebalancing, but will create a new global economic structural imbalance.
  • The direct impact and derivative effects of the US trade war against China and some of the technological embargoes are creating new distortions and creating new structural imbalances in the world economy.

Point 4: "Destructive Government Variables"

  • The U.S. government’s erratic and profit-seeking features are exposed in Sino-US trade negotiations, and the uncertainties in its manufacturing communications have seriously disrupted the expectations and behavior of global market players.
  • Previously, from the withdrawal of UNESCO, the UN Human Rights Council and other international organizations, to the withdrawal of the Paris Climate Agreement, the Iranian nuclear comprehensive agreement, the China-Treaty Treaty and other international treaties, the "American priority" led to a series of destructive acts against the world. The situation of peaceful development constitutes a serious impact.
  • Obviously, the United States is becoming a "black swan" with high vigilance in the international community and a "grey rhinoceros" with strict precautions.

Point 5: Indiscriminate Violation of Economic Sovereignty of Other Countries

  • At the negotiating table, the US government proposed a number of arrogant demands to China, including restricting the development of state-owned enterprises. Obviously, this is beyond the scope and scope of trade negotiations and touches on China's basic economic system.
  • This shows that behind the United States launching a trade war against China, it is trying to invade China's economic sovereignty and force China to damage its core interests.
  • In the 1974 Charter of Economic Rights and Duties of States adopted by the United Nations, it has clearly stated that “Every country has full and permanent sovereignty over all its wealth, natural resources and economic activities, including ownership, use and disposal rights, and Freedom to exercise this sovereignty."

Points Made

Trump has a point. But so does China.

National Security Mockery

Trump took national security and made a mockery of it.

Huawei is supposedly a national security threat. Yet, Trump is willing to include that in a trade deal.

Steel and aluminum are allegedly national security threats.

And what about the alleged national security threat of cars from the EU? No one in their right mind believes that.

Finally, on the verge of having a deal with Mexico, Trump conflated trade with border security.

Pack of Lies or Just Plain Stupid?

  1. If Huawei is a security threat, Trump should not be willing to include Huawei in a trade deal. Yet, Trump offered that.
  2. If steel and aluminum are national security threats, he should not have taken tariffs off Mexico and Canada. But he did, to help his USMCA trade deal, only to put them back on a few days later over border issues.
  3. The alleged national security threat of EU cars is so preposterous that no one can possibly believe it.

So which is it? A pack of lies or just plain stupid? Any votes for both?

Mike "Mish" Shedlock

Comments (23)
No. 1-12
we_will_be_Ok
we_will_be_Ok

Appealing to security is the only way to override the supremacy of shareholder value as the sole principle of economic activity. Also, security is the only pretext available to Trump to implement his economic policies.

Matson
Matson

When Trump speaks of trade, I believe he thinks the average person is stupid, so lieing is not so bad. When he speaks of security, I suspect that it's almost exclusively lieing. Politicians lie to get elected, and lie to stay in power. Why should anyone actually believe any of them!?

Greggg
Greggg

All this is insane public display is to cover up what is really an israel first policy. Israel wants - israel gets and they are the only one winning.

Matt3
Matt3

Mish You are so stuck on lies. It's a negotiation. Lot's of stuff is thrown at the wall and exaggerated in importance. Then you can give away "important things" that never really were important. Seems like most of the people commenting have never negotiated anything.

Tariffs and restrictions are levers to be used. The fact that you don't know which are truly important and which are not is the way it should be done. The public should not know. If they did, then the other side would also know.

I think most on this site thought the tariff plan for Mexico was a mistake. Seems like the threat of tariffs brought results. Surprised?

Mish
Mish

Editor

"Seems like the threat of tariffs brought results. Surprised?"

Of course not - I talked about this kind of BS in advance. Here is an excellent summation from someone else.

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/2zBchyquLEyHdWokamJXZg

I would have been surprised if this did not happen. I would also have been surprised if Trump Trade illiterates did not give it praise.

Result: I am not at all surprised by either.

Mish
Mish

Editor

When you manufacture bullshit security reasons like the boy who cried wolf, three things happen.

  1. You open yourself up to other countries to respond with fake security reasons
  2. When real security concerns happen, people might not take them seriously
  3. Allies have a hard time believing anything you say

In short: It's just plain stupid

Trump does not need to appeal to the base. He needs to appeal to those on the fence.

Webej
Webej

Trump tactics boil down to whim and caprice.

Those are not conducive to long term plans, security, investment, or business. Trump is liquidating the so-called rules-based international order and America's good will on the global balance sheet. Many think the international order is worthless, but are forgetful that the alternative to an admittedly imperfect order is war, chaos, naked expoitation and aggression, might is right. There is no such thing as a deal in a world in which any agreement can be ignored the next day.

As for national "security", this has been a BS reason to conduct the affairs of state out of the view of the populace. For every valid invocation of national security, there are a 1000 declared for venal and private purpose. It's the ultimate trump argument to not have to reason. National security secret intelligence services mark the end of democracy, which for brevity I will define as setting policy on the basis of rational argument.

shred1
shred1

"This shows that behind the United States launching a trade war against China, it is trying to invade China's economic sovereignty and force China to damage its core interests."

Why help the Chicoms?

2banana
2banana

"When you’re so accustomed to privilege, equality feels like oppression."

China (+$500 trade surplus per year, must have an 50% Chinese partner to import, must give up intellectual property to import, higher tariffs on imported goods which are also being produced domestically, such as automobiles, zero tolerance for any criticism, etc.)

American blacks (affirmative action, black only scholarships, black only government contracts, black only housing, black only graduations, black only fraternities/sororities, black only colleges, black only congressional caucuses, black only police organizations, black only firemen organizations, black only journalist organizations, black only engineering organizations, lower standards to be hired, lower standards to be admitted into college, bonus points to be hired into jobs, able to sue for when fired for any perceived racism, black only Television stations, black only awards, able to riot and destroy without consequences, bonus points on the SAT/ACT, etc.)

Illegals (federal laws don't apply, state laws don't apply, free medical, free housing, free education, send home $ to build nest egg/housing in home country, pay no taxes, free food, in-state tuition, ignore court dates, claiming the earned income tax credit, no penalty for identity theft, DACA, etc.)

And on and on and on...

Carl_R
Carl_R

A very important sentence in the above post is: "In fact, the root cause of the US trade deficit with China is caused by structural problems such as too much consumption and insufficient savings."

The US could very easily solve the trade imbalance by solving the structural problems. When it comes to tax policy, what you want to remember is "Tax what you want less of." The US derives most of it's tax revenue from Income taxes and property taxes, and to a lesser degree excise and sales taxes. By contrast, in Europe they tend to rely on VAT.

Applying the principle of "Tax what you want less of":

  1. By taxing income, we discourage people from trying to make more money.
  2. By taxing property (and via estate taxes), we discourage savings
  3. By keeping sales taxes low, we encourage consumption
  4. Excise taxes we do correctly - we tax things like cigarettes that we want less of

Now, say we wanted to solve the structural problem (which we don't seem to), what should we do? We should reduce income and property taxes, and replace them with sales or VAT taxes. Voila! Then would suddenly be an increase in income and savings, and a decrease in consumption. Also, interest rates would be naturally low without the need for QE. With more savings, and less consumption, the trade balance would get back into balance (sorry, China).

Casual_Observer
Casual_Observer

Mish you are easily fooled by Trump. It is both a pack of lies and plain stupid.

ronbruce
ronbruce

China has a 5000 year history - USA 200+ years. I've got my money on China winning this argument over Trump.


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