China Once Looked Tough on Trade. Now Its Options Are Dwindling | Hacker News Reader

China Once Looked Tough on Trade. Now Its Options Are Dwindling

nytimes.com

200 pointsenitihas374 comments

Extremely one sided comments, with a US centric view. The world is not the US, and HN readers are not only US citizens, so let me express a different point of view.

Assumption: Trump wants fair trade. HN readers want fair trade.

What is needed: fair trading rules, fair IP rules, fair capital structures, and a fair currency.

Tackling some of the unfair trade practices does not address all those issues. In particular it does not address the services trade imbalances, the favouring of US IP holders (as incumbents and head starters), and the massive advantage that the dollar gives to the US economy.

And we have not yet started talking about the weaponizing of the dollar, which can be recently seen in the conflict with Iran.

All this to say that the US demands are not fair.

You can obviously pursue your interests, but you will not sell it as being a "fair" policy.

The Chinese, the Europeans, all countries have equally fair, if not fairer, demands, which must be respected.

The core of the problem is obviously that the initial assumption is false: Trump and HN do not want fairer trade, but trade one-sidedly beneffiting the US.

We will fight this policies, if needed at the personal level, by selectively consuming products according to country of manufacture.

So where are you from?

Not from the US.

There are some real grievances where China is not playing fair - forced partnerships, cheap loans for state-backed companies, etc. Lots of empty promises each year with no change to the rules and approaches. So while I think trump is insane and his policies are mostly harmful to both his country and the remainder of the world, pointing out the false pretences and pretend-market-economy of China is definitely not the worst thing he has done. It will certainly cause harm, but if it gets China to actually stick to its commitments everyone might be better off long term. That might be a long shot though, as Trump is crazy and the Chinese leader currently transforming himself into a dictator. For both of them the main way to stay in power is to pretend they are the only ones that will guarantee their country's standing and respect in the world (even as in realpolitik terms they do the opposite) - fueling nationalism and us vs them thinking.

I wouldn't say the US is strictly playing fair in the economic game either though, even before trump US economic power was a major weapon. The only ones that really seem committed to fait trade are the EU and maybe Canada, Japan, Korea.

Believe me, Trump doesn't want "Fair trade" when your slogan is "Make America Great Again".

Corporate America's welfare is around 100 billion as said by many rather partisan think tanks... but in reality, its trillions of dollars when you figure in realized costs such as below poverty level minimum wages, the collapse of pension and retirement programs, the exploding costs of for-profit healthcare.

> but in reality, its trillions of dollars when you figure in realized costs such as below poverty level minimum wages

Trillions of dollars? You're inventing that claim.

Less than 1% of the US population earns the minimum wage for starters.

There isn't a single developed nation that doesn't massively subsidize its poorest workers via a welfare state. Every country with universal healthcare does for example, without exception.

> the exploding costs of for-profit healthcare.

Private corporations are heavily footing the bill for that healthcare cost increase, as roughly half of the US healthcare system is employer coverage. Which is why companies as diverse as Amazon, JP Morgan and Berkshire Hathaway are desperate to work together to reduce the problem.

> the collapse of pension and retirement programs

Which is occurring in just about every major economy at the moment, thanks to rapidly aging demographics. China has a very bad pension problem for example, and that's on pensions that typically only pay about $100 per month. Simultaneously their economy is already seeing a decline in workers (which means less workers to pay into propping up the eroding pension context).

https://www.bloomberg.com/news/articles/2018-02-05/china-s-n...

> Believe me, Trump doesn't want "Fair trade" when your slogan is "Make America Great Again".

He does if you believe that the current trade is unfairly balanced against the US.

>Corporate America's welfare

Nothing to do with trade policies, but w/e.

>the collapse of pension and retirement programs

That's not welfare.

>the exploding costs of for-profit healthcare.

Also not welfare, especially when many corporations have to pay these costs for their employees.

> Assumption: Trump wants fair trade.

Invalid Assumption: Trump has any understanding of cause-effect.

This is China's problem, right now. Trump doesn't have a specific purpose, so there is no pain point you can drive back at. China should have just tariffed some meaningless stuff, rolled out the propaganda machine, and just let it go.

Never wrestle with a pig. You get dirty, and besides, the pig likes it.

Trump is destroying international trade, with the goal of increasing an already tilted playing field even more in the US's interest. And it has found a good lever to push, so this will work in the medium term. Basically, he is discounting short term pain for long term gain, betting that other leaders are not crazy enough to step up the conflict beyond trade, and that everybody will prefer to accept Trump's demands rather than using the next levers at their disposal. Which are:

1) the dollar

2) military conflict

We'll see

To be fair, China doesn't really want "fair" trade either. China would like to become a high-tech autarky dominating modern global supply chains [1], is very happy to throw its economic weight around to punish countries for doing things it doesn't like [2][3], and has a habit of playing by international rules only when it suits them (America isn't great on this point either) [3][4].

1. https://www.cfr.org/blog/why-does-everyone-hate-made-china-2...

2. https://qz.com/1000541/norway-wants-china-to-forget-about-th...

3. https://www.commentarymagazine.com/foreign-policy/asia/china...

4. https://thediplomat.com/2015/02/u-s-china-relations-the-hypo...

Of course US citizens want a president that looks out for US interests. To think otherwise is laughable and naive. I want the president to fight for us!

Imposing taxes on US consumers is looking out for US interests? That's a strange way of looking at it...

Yes, that's how all tariffs work.

The idea is that it's temporary pain for long-term gain.

Whether that's actually the case is debatable, but people who support those policies genuinely believe so. So you can call them misguided, but not irrational or inconsistent.

> The idea is that it's temporary pain for long-term gain.

No, it's not. There's absolutely no sense in which there is a "long-term gain" from imposing a tax on US consumers because the government decided they were buying the wrong products. If you have an actual argument to make in favor of these taxes, please make it. You're just parroting a talking point and providing no justification for something that doesn't make any sense.

I'm not making that argument. I'm telling you how people who do make that argument think.

Like I said, you can call them ignorant on the basis that there's no actual long-term gain. But they believe there is, and that is why they support this policy, not because they really like shooting themselves in the foot so much.

> I want the president to fight for [bombastic, short-term wins at the expense of long-term global stability/wealth]!

Fixed that for you.

As I said above, you are entitled to defend your interests.

Simply do not claim it is somehow about fairness.

>Assumption: Trump wants fair trade

Where are you getting that from? Trump wants to keep his promise to working class workers that he'll bring their manufacturing jobs back from China.

Looks like you're getting down voted but this whole endeavor seems far more tied to Trump's ego and rhetoric than good policy.

> Where are you getting that from?

From his mouth?

Not that that would be a reliable source, I concede that ...

>the favouring of US IP holders (as incumbents and head starters)

You mean favoring the people that actually invented these things? I understand there isn't much of a notion of IP in China, but are you suggesting that it's unfair to not be able to copy IP and just manufacture without paying?

The allowance for copyright law to exist in the USA is "To promote the Progress of Science and useful Arts"; with a similar intent to patents to eventually bring more quality things into the public domain. So yes, anything outside of that, regardless of invention of non-science/useful-arts, and regardless of profitability, is fair game.

Any other enforcements and punishments are overreaches by government on behalf of lobbying. Many agree that the scope and punishments on the books in the USA far outweigh the punished behavior, and these are being foisted upon the rest of the world in strong-armed multinational agreements, against the will of the people on the receiving ends.

> The allowance for copyright law to exist in the USA is "To promote the Progress of Science and useful Arts"; with a similar intent to patents to eventually bring more quality things into the public domain. So yes, anything outside of that, regardless of invention of non-science/useful-arts, and regardless of profitability, is fair game.

Can you give an example of what is outside of science and arts that you think is fair game?

Not "arts", but "Useful Arts" which are things like industry skills & practices, a specific term from the time of writing.

An easy example would be the Happy Birthday song.

edit: https://en.wikipedia.org/wiki/Useful_arts

The IP laws have been written by the US, for the US, and its terms keep on changing to continue protecting US interests.

The IP laws should be a trade-off: temporary protection of inventors / creators, so that progress happens and consumers get a good deal. Instead, HN is already aware how IP laws get abused. The effects of those abuses are felt largely outside the US: it allows the US to foster its economic and cultural dominance.

All thanks to founding and controlling the international bodies in charge of ruling on IP matters.

"The IP laws have been written by the US, for the US, and its terms keep on changing to continue protecting US interests."

What?

The US has only written IP laws in it's own jurisdiction. Europe, and other nations definitely write their own laws.

Nations make agreements with each other for their own benefit, for example, there is an IP section within the WTO.

If China, or anyone else, thinks they are better of without having IP laws - that's fine. Then nobody should respect their IP either.

The other problem is that China is part of the WTO and they are supposed to actually be doing one thing, but they are actually doing another ... i.e. they are out-of-bounds of their own treaties.

It was perfectly rational, in 1980's and 1990's for China to ignore IP laws, and interestingly - it was rational for the rest of us to allow them to do it.

But if you want a 'seat at the table' of major economies, that needs to change.

And it's in China's best interest to do so as well.

Come on, we all know how the US has asserted itself internationally. Napster, Mega, the list is endless.

this comment provides very little data to back what you’re saying. The WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), negotiated during the 1986-94 Uruguay Round, introduced intellectual property rules into the multilateral trading system for the first time. This was before China entered the WTO. It made the choice to join nonetheless.

I advise you to reflect on the bias of your own view points.

China has been pulling the same bullying tactics towards EU and S.Korea/Japan as well. IP transfer, forced partnership, etc. Notice how EU, South Korea and Japan haven't really been opposing this ordeal between China and US? They would also like to see China start playing fair, unfortunately there is very few economies can standup to China right now.

China has been quite the bully towards EU nations (though not EU as whole yet). Here in Sweden, China went on full on propaganda mode over some Chinese tourists being kicked out of a hostel, and this made it to the Chinese national news yesterday.

The US did initially include the European Union in this trade war, but when the EU threatened to respond with a import levies that affected Harley Davidson motorbikes manufactured in a Republican-voting state, the US backed down [1].

Chinese media (and social media particularly) does regularly cover stories about Chinese people outside of China involved in situations such as these, whether it's a high-profile business figure [2], or ordinary Chinese people involved in non-ordinary conflicts. Including the narrative that Chinese people don't get justice or support from local police when they are victims to criminal activity, that's regularly reported in Chinese media.

UK media does the same thing, any disaster always has a mention of how many British citizens are involved, sometimes who they are. And a regular diet of outrage of British tourists coming face-to-face with the legal consequences of their behaviour across the world.

Brexit revelations shows me that China trades using WTO rules with Europe. There does seem to be movement on that front too. [3], [4]

Though, with trade arrangement with WTO rule, it's worth asking why US aren't resolving their dispute within the WTO. We shouldn't glorify bullies, even if they are bullying other bullies.

[1] https://www.bbc.co.uk/news/business-43926092 [2] https://www.reuters.com/article/us-hna-chairman/chinas-hna-c... [3] https://uk.reuters.com/article/uk-china-eu/eu-pushes-china-o... [4] https://www.politico.eu/article/donald-trump-china-eu-trade-...

>The US did initially include the European Union in this trade war, but when the EU threatened to respond with a import levies that affected Harley Davidson motorbikes manufactured in a Republican-voting state, the US backed down [1].

I suggest you read your own article. The "backed down" part is referring to a previous trade war under Bush.

"but are you suggesting that it's unfair to not be able to copy IP and just manufacture without paying?"

It's a perfectly legitimate approach for some situations. In the 1980's , 1990's it was actually a positive strategy for China to pay no mind to IP. And it was better for us as well because it was the easiest way to move them along at a quick pace. It's better for the 'rest of the world' to have a prosperous China, than a 'broke on it's back' China.

But at some point, it comes home to roost though - you can't 'catch up' to the big players without some kind of basic IP, so by becoming too entrenched in that kind of culture, they might limit themselves.

Why can't you catch up to major players without IP?

I am of the opinion that any IP is antithetical to societal progress. If people are free to copy that means we get to remove the monopolistic pricing of goods. If people are free to improve then our ideas and products become better and better, rather than having a single player guard an antiquated model and prevent others from iterating on the idea. If information flowed more freely people interested in making money would have to continue to innovate and while it may hurt a few individuals who could run with a single idea for 20+ years, it would bring up society as a whole.

Case in point, software has been growing every year, just take a look at newly invented algorithms on Wikipedia, and they end up in new systems too. Especially in distributed systems where we have innovations like consistent hashing, paxos, etc. Imagine if those algorithms had to be licensed. Want a load balancer? Pay license fees. Want horizontal scaling? License it. Watchdog process? License that. Etc. After all, somebody or some company invented those things and it wasn’t really that obvious beforehand. Should they not be entitled to some share of the profits if it benefits other companies? Yet I’d argue that we’re all better off learning from each other’s work.

Without IP there's no incentive to invest in certain things.

Particularly drugs.

The more R&D involved the riskier it is to make something.

It cost $1 Billion to make a new drug, there's no way anyone invests that kind of money without IP protections.

On the creative side, we allow companies to protect their creations like characters, films etc..

You vastly underestimate the cost of investing in IP development - perhaps because you come from a background where research is trivial??

Developing drugs, building special fabs, etc can be hundreds of millions spent in research that needs to be incentivized. If the option to just copy the person that does all of the work is on the table, anyone who does the research investment will be immediately undercut in price and the whole system encouraging expensive R&D will collapse.

>If information flowed more freely people interested in making money would have to continue to innovate

If information flowed more freely without IP protection, the winning move is to not actually invent things and just copy whatever the current leading products do. Maybe that's what you call "innovation", but it's a pretty big regression from actual inventions and major leaps forward.

I think the US is past being "fair" with China, and I believe this is a very good thing. The Chinese are cheating in every arena with everything they've got, and being fair only plays into their hands.

The US has been cheating, bigger, better and longer.

We seem to agree that this is not about fair trade, but that is what Trump is calling the whole thing.

Name one thing where US is cheating? US invents china steals that the only truth. Name one thing chinese have invented? Dont tell me gun powder, something latest.

> Name one thing where US is cheating?

It is an open secret that the US has waged wars and authorized covert action for economical purposes, eg. for control over oil.

> Name one thing chinese have invented?

Electronic cigarettes, passenger drones, synthetic bovine insulin, and the Nobel prize-winning Malaria drug Artemisinin.

(Not that I believe that Chinese companies were not lax with US IP, but that you try to instill the idea that China cannot invent and that the US does not mess international trade, which is not quite true.)

That’s funny, the British used to say the same thing about the US during the industrial revolution where America didn’t respect British IP.

Hollywood exists because California didn’t respect IP from eastern states.

So, stealing is the winning strategy it seems.

The Chinese cheat all the time.

- high subsidiaries for their exports

- blind eye on IP theft

- forced technology transfer

- closed market for many industries and services

- forced "joint ventures" for certain industries

- legal system the favors Chinese companies

- systematic attack on western industries

Feel free to ask and I will give specific examples. Based on the kind of business relationship of the US and China, e.g. Apple products are produces in China and hence also go into the trade deficit, the trade deficit is heavily distorted. (China, Foxconn makes very little profit on assembling apple phones. Yet, Apples makes most profits offshore, e.g. via selling from China to HK and from HK to US). So a trade deficit is not surprising. Trump never said that he wants a zero trade balance, he told Xi to "lower it" and "equalize the playing field". This was a reasonable request.

Xi just could have agreed to this but instead wants to play hard ball. In my opinion Xi can not win this game and the only rational strategy in a game that you can not win is not to play it. It makes me doubt the strategic abilities of Xi but we will see.

"suggested on Sunday that China could deliberately disrupt American companies’ supply chains by halting the export of crucial components mostly made in China." Outstanding idea. I am sure Western companies will love this, invest more in China and don't move production to other countries.

Before you downvote me, give an argument.

I’m sure you are right that the Chinese cheat, but a fair and equitable free trade system must be based on rules and independent arbitration. Trump is doing everything he can to undermine and destroy every vestige of a rules based independently arbitrated global trade system. His policies are explicitly stated to be purely in US interests only, by him personally. That’s not the basis for a free trade system.

Finger pointing at China doesn’t excuse any of this, even Trump’s policies against China, on the basis of free trade.

I don't understand your argument. And if they Chinese tax US cars with 25% and the US taxes them with 2.5% (or was it 5%)? then it is reasonable to request equal tariffs.

Of course it is reasonable, so do that. Pursue them through the WTO or talk to your allies about reforming the WTO if it isn't working to your satisfaction, or scrap the WTO and build something better. If you believe in a global free trade system then build one. The US isn't doing any of that.

I have little to no sympathy for China, but I do believe in equitable free trade based on consensus, a common rulebook and independent arbitration. It's served us very well and even with Chinese protectionism, which they have been gradually rolling back, the US and the rest of the world has profited from it. The economic issues in the West over the last 10 years were entirely home-grown and if anything trade with China has been a resilient economic buffer that's helped us cope with the financial crisis (if unintentionally). Blaming them for all our woes is just a distraction.

Trump and many of his predecessors have gone through the WTO and have very little to show for it. It takes years for any decision and by the time you get the result it’s far too late (see solar panels). Why should any country submit itself to a proven broken system?

The WTO dispute resolution system has actually been pretty effective[1]. It typically takes about 1-2 years, but usually complainants will impose interim measures themselves anyway.

This is just a smoke screen though. Suppose China does make a deal with the US and does agree various measures, what magical secret sauce does the US have to make sure they keep to them and don't violate agreements in the future? There will still need to be a dispute resolution system, a genuine open free trade system can't operate without one. The US policy right now is inimical to that - it's brazenly and explicitly stated to be partisan and based on economic strength rather than equitable free trade. Steel tariffs on close allies on 'national security' grounds? Really?

[1] https://www.wto.org/english/res_e/publications_e/dispu_settl...

Yeah, the wto dispute resolution system is so fair that multinational corporations can no longer export pollution, weak worker safety protections, and fraudulent business practices to other countries. Everyone is on a level playing field. Or not.

Good dispute resolution systems are good. Bad ones provide the facade of justice and merely give credibility to those that have the power to commit injustice.

" Trump is doing everything he can to undermine and destroy every vestige of a rules based independently arbitrated global trade system"

I'm sorry but China is flagrantly violating so many of it's own agreements. The IP agreements of the WTO for one.

There would be little fuss if China was sticking to it's own agreements.

"There would be little fuss if China was sticking to it's own agreements. "

This alone would be very "un-chinese". A signed contract in China is always a contract in negotiation. Can change any time.

It doesn't matter what's on the paper. What matters is what they do.

If they don't respect IP, we shouldn't respect theirs.

If they respect ours, we respect theirs.

And so an eye for an eye leaves the world blind.

So last one, with just one eye, will be the king.

You're out of date, a lot of that is in the past. They've still got a way to go, but they've been rapidly cleaning up their act, largely because so many Chinese companies are developing their own IP. They are doing what the US did. Rip of European IP until they had IP based industries of their own then get religious about it.

You couldnt be farther from the truth. US ripping off European IP? Almost all of the IP in semiconductors in US based not european, yet EU pays nothing by means of producing satellite communication equipments. Name a thing that US ripped from EU?

I think the commenter is referring to further back, i.e. grabbing German Engineers and all that tech maybe?

A bit further even, 18th to late 19th century. The U.S. was stealing every kind of IP it could get from Europe, from patented inventions to reprinting publications ignoring copyright.

example source: https://www.pri.org/stories/2014-02-18/us-complains-other-na...

The history of Hollywood is also a fun read, it basically came into existence by filmmakers fleeing from Edison demanding people to buy licences for patented film cameras IIRC.

Regarding IP, the US developed exactly the same as China does now: First the country was underdeveloped and mostly agrarian. In this period it stole IP massively, bootstrapping its own intellectual niches in this way. After a while those niches build up significant output and want to protect their own IP from others. The country starts to create and enforce its own IP laws.

Another point is that companies manufacturing products in China can get tax deductions by hiring Chinese workers. Essentially rewarding companies for the exploitation of low paid workers and making the company more dependent on Chinese labour. It makes the threat of "do this for us or we'll shut down your China operations" that much more impactful.

The thing is, I can buy many products cheaper in the US than in China. This tells you something.

Due to this and fake products I buy clothes (YES, clothes!), shoes and electronic products only in the EU and the US.

Edit: Don't get me wrong. I love China. But many people now see only the strength of China. They have a strong culture. But it comes with many weaknesses. They once fell behind western culture. They may fail again if they don't fix some things. The downside risks here a HUGE.

> I can buy many products cheaper in the US than in China

Would you list some examples of that products, please?

All “foreign” products even those which are manufactured in China have a foreign goods tax of 25% some have additional taxes beyond that.

China doesn’t want foreign companies selling cheap goods in China so essentially everything needs to be imported even if it’s manufactured down the street from you in China.

"China doesn’t want foreign companies selling cheap goods in China so essentially everything needs to be imported even if it’s manufactured down the street from you in China."

It is possible to buy good products cheap. But there you need to be smart, smarter than I am, and have contacts. A sub contractor might sell excess product under the table for cheap if you know where to find it (I don't).

chinalawblog.com had an article why you should always have your production samples shipped to you and never have any sample batch "destroyed" by your manufacturer. They may just sell it under the table. So you may be able to buy a REAL Gucci bag that was designed by Gucci bad was never available on the market with this kind of design. Really rare. :-)

>It is possible to buy good products cheap. But there you need to be smart, smarter than I am, and have contacts. A sub contractor might sell excess product under the table for cheap if you know where to find it (I don't).

It's possible to buy illegal goods cheaply everywhere but that's just it it's a grey/black market goods since they are dodging the taxation imposed on the by the Chinese government.

Try to buy a branded jeans, shoe whatever here in a street shop. Super expensive. Taobao? How much is fake? How can you know that it is fake? Buy from an expensive seller and hope it is not fake? Try to buy DocMartens, Caterpillar, whatever shoes. They should be cheaper since they are produced here. Good luck.

Okay, you can buy cheap and fake, for example in the "Silk Road" department store in Beijing. I think it is impossible to buy a genuine item there. A fake Armani jeans cost you 100 RMB, now it is more like 160 RMB. Branded underwear 10 RMB. But the quality is very poor. No comparison to the US. And if you buy in outlets in the US or EU then their prices are unbeatable. EU has about 20% sales tax that you can get full or at least 50% reimbursed as a non resident.

IT? It is not really cheaper, no guarantee (2 years in the EU!). Many stuff may be relabled, refurbished, defect or of poorer quality, even for the same brand. Where to buy? Who to trust? Newegg has now a shop in China. If I were to buy my stuff here this would be the place that I would try.

I just checked a Seagate 8 TB HDD. Is was 262 USD (Newegg CN) vs. 249 USD (Newegg US).

I bought a smoothie mixer in a Chinese warehouse. 32 Dollars was the cheapest option. In the US I bought one for 10 Dollars (okay, long time ago). I am sure you can order a cheap one on Taobao, but it gives you an idea.

Also, you may have realized that some super cheap Chinese sites like DealExtreme (DX) are Chinese, but don't offer shipment to China (at least the last time I checked).

> The Chinese, the Europeans, all countries have equally fair, if not fairer, demands, which must be respected.

So when Chinese consumers have to pay a 25%+ "foreign goods tax" on things made in China and bought in China you'd say that's fair would you?

Man i am from India, at the same time you gotta call a spade a spade. US has been too liberal and gave a leeway to everyone to export goods to US without any tariffs. But every country Including my own puts a import tax on goods imported from the US. This isnt fair business, and US has actually lost a lot of money trying to be the leader in fair trade practice and globalisation. Other countries are just plain stealing and not ready to compete on fair grounds. Frankly i love Trumps tactic and i think all countries should embrace the same to balance the trade imbalance between China and the world.

US promoted free trade after WWII, when it was the last man standing and the only manufacturer. Free trade meant "we sell made in America all around the world". Leading by example meant opening their market, at no cost since nobody was in a position to export. The rationale was "open your markets as we do, and we will all get richer". But the real intent was to foster the dominance of American manufacturing

So we did. The whole world has been painfully opening markets for 70 years, and slowly, by finding cracks in the system designed to favor American interests, developing countries have indeed started to grow richer. Still poor compared to the US, but definitely better off.

Those open markets, designed by the US to export, have been used by two actors to import to the US:

- emerging markets (China, India, ...). This was the selling point of opening the markets, so this is perfectly fair

- US capitalists, trying to increase profits by moving production overseas and reduce costs. This is what is causing problems in the US, by losing jobs. This is a homegrown problem, and nothing the rest of the world should care about.

Basically, now that the world is starting to benefit from globalisation, after the US being the main beneficiary for over 50+ years, we somehow need to start caring about internal US problems.

I do not buy this.

If that was true the US would have had giant import tariffs after WW2 and been promoting the absence of them in other countries. Even if you assume the US would have abolished tariffs knowing it'd cost them little immediately after WW2, they'd have put them back in the decades that followed as places like South Korea, Japan, most of Europe recovered and started exporting again. But the US didn't do that, as far as I know. American tariffs are something I didn't hear about until very recently. The US can be criticised for hypocrisy on various issues but this doesn't seem to be one of them.

That isnt true. The countries that participated in the WW-II had industrial capability which is why European nations and Japan were the first to participate in free trade.

Germany and Japan were almost totalled but it took them just a decade to comeback because they still had the weapons factories which they repurposed to produce goods.

> .. painfully opening markets for 70 years, and slowly, by finding cracks in the system ..

Developing nations real problem was their protectionism. When India opened up its markets in 1991 it has seen a lot of progress compared to the previous time. Competition is fair practice, it forces people to produce better quality products or unique goods where they can compete in. India found its strengths and weaknesses so did China. The point is to compete with strength and weakness both, Not to compete on strengths alone. because if you do that others will do the same. This is what trump is doing now, protecting its weaknesses as China and India does.

> This is what is causing problems in the US, by losing jobs ..

US does not have a job problem, the current unemployment is 3%, which is the lowest in a century in American job markets.

> Basically, now that the world is starting to benefit from globalisation ...

US has always benefited from globalisation for being the market innovator, US invented so many things in the last 100 yrs that is indispensable to the rest of the world. For instance Semiconductors, Telephone, Mobile Phone, Television, Light Bulb , Internet, Airplane, Satellite communication. What has china and India invented in the last 100 yrs? The best way to compete is invention and innovation, ofcourse for some the pace will be different than others. China has a lot of funds now what invention comes out of Chinese labs? They are still involved in espionage in US companies so many Chinese spies have been caught in the last 10 yrs itself. I dont think chinese manufacturing has the gall to compete on fair grounds because if they do they should lift import tariffs on everything. Trump too will remove all the tariffs. It is that simple.

"We will fight this policies, if needed at the personal level, by selectively consuming products according to country of manufacture."

No. Nobody really does this. People mostly just buy stuff. Chinese will continue to be enamoured by iPhones. The only change will be any supply/demand function due to price.

'Fair Trade' is not a relative issue.

If China does not respect foreign IP then nobody should respect China's IP. That would be 'fair'.

If China wants to control and invests in strategic winners then it's only fair that Europe and America do not allow those companies to sell into their economies without a big tariff.

It's also not 'fair' that China pollutes quite a lot, and does not have have basic worker protections. So 'fair' would be if the US and EU imposed tariffs for those externalities as well.

I don't like Trump, I don't think he really understands what he is doing - but effectively it's the right thing: 'fair trade' would ultimately for nations to be on equal terms.

So how about: all Chinese software outside of China is open source and they shouldn't have recourse on IP, and there should be tariffs to offset environmental/worker externalizations, state actors face tariffs, and Chinese purchase of external companies and assets are severely restricted.

That would be 'fair'.

That said, it would probably be in China's long term best interest to improve the IP situation, environmental and safety/worker issues, and to have less dependance on central planning. It's totally fine if China wants to 'make it's own' path, that's natural and positive. But all those things will yield long term benefit.

Trump I don't think is smart enough to put it this way - but the world should see his movements as an opportunity to address core and fundamental trade issues that we are facing, since the 'old order' is not going to work.

I hope that in the end they're able to sit down and work it out because there's plenty of room for compromise and it will be a win-win.

>And we have not yet started talking about the weaponizing of the dollar, which can be recently seen in the conflict with Iran.

Not just with Iran, but everywhere. Most people do not realize the monopoly of USD in banking transactions. Essentially US can pass laws or even through executive order control the economic and trade policy of other countries. Turkey and India are barred from buying Russian equipments. This is not free trade. When US uses its monopoly to block India from trade with Iran and tries the same with China, that’s not really free trade either.

You mentioned weaponizing dollar, many people do not realize how it works. We’ve seen a lot of negative news about China recently . I suspect some of it has to do with their decision to open their own oil futures trading that is not run on USD. This could be the largest threat to the USD monopoly. Time will tell..,

edit: additional links and info:

Basic info on Shanghai crude futures [0]

Some early speculative behavior. I wonder with low early volumes in this market can be manipulated to scare off more serious investors [1]

Seems like the Shanghai market had its first delivery on Sep 12 [2], that being said, some predict it might take 10 years before it will have serious impact on the market. But sometimes financial markets move ahead of the physical realities. So, its impact might become palpable in just a few years [3]

[0] https://uk.reuters.com/article/uk-china-crude-oil-futures-an...

[1] https://www.bloomberg.com/news/articles/2018-08-07/oil-specu...

[2] https://oilprice.com/Energy/Crude-Oil/China-Completes-First-...

[3] https://www.scmp.com/comment/letters/article/2139676/will-ch...

Interesting, and related to the Iranian Oil Bourse [1], which was supposed to trade in Euros, among other currencies.

[1] https://en.m.wikipedia.org/wiki/Iranian_oil_bourse

For me it like "Why I cannot trade some Americans? They say that they are free."

You are mismatching unrestricted (wild) market with free market. Market, to be free, requires someone to play role of guard and punish bad actors, who disobey rules. Otherwise, bad actors will convert free market into non-free in no time.

Usually, such power is granted to a government or to an association of traders.

Currently, world have no united government. We have WTO, which is our world trade organization, but it have very limited power.

Why have enough power and strict moral principles to keep market free? As you said, USA cannot do that, of course, so maybe it should be job of Russia, Iran, China, or North Korea?

How is India barred from buying Russian equipment? Russia is one of the largest suppliers of military equipment to India...

I've watched a video[0] from Fox News few months ago, the key point been the "unfair trading" problem should be addressed through WTO rather than direct tariffs, and those tariffs maybe against WTO's rules.

Also, many people here maybe don't know, China is suing the U.S. for those tariffs. Maybe wait until it played out, the everything will be a bit clear.

I don't know how people in the U.S. view this trade war, but in China, many people already start to treat it as a new normal now after realizing it will be a long lasting one. Jack Ma for example, believes it will last for ~20 years.

I also watched another video[1], which is a voice recording from a seminar, the speaker was Jin Yi Nan[2], who is one of the "Hawks" in China. In that recording, other than trying to calm the listener (mainly business man I assume) down, he made few points, which been (I oversimplified it, somebody can do a full translation of the recording if interested):

- We (China) had problems, but the U.S. also had problems. At the same time, they (The U.S.) had advantage, we had ours. We're actually chained together (trade war will be bad for both, and they are hurting themselves while we facing the challenge).

- Chinese business should keep trying to enter international (including US) market and make investment, regardless the trade war.

- Trump's idea is frozen at '40s, and we (China) will be more open (more participation in trading and welcome international investment).

I think it sort of reflects the idea of some people inside the China government, or at least showing how the government want people to think of the trade war.

On the bright side, by the time all of this ends, it will be a very good topic to discuss with our future high-schooler kids.

[0] https://www.youtube.com/watch?v=mGbcsBfPF0g

[1] https://www.youtube.com/watch?v=8svRtTAw_10 (It's in Chinese)

[2] https://zh.wikipedia.org/zh-cn/%E9%87%91%E4%B8%80%E5%8D%97 (Only Chinese version available)

Even if US demands are fair, going around insulting other countries and imposing tariffs isn't exactly a nice way of addressing the issue.

> Assumption: Trump wants fair trade. HN readers want fair trade... The core of the problem is obviously that the initial assumption is false: Trump and HN do not want fairer trade, but trade one-sidedly beneffiting the US.

I realize your comment is not from a pro-US perspective, but try not to conflate a leader of a country with a group of users coming from that country. Many people on HN have nuanced views of the value of trade. If you read anything Trump has said or written on the topic its clear that he has no idea what international trade is or how tariffs work. Attributing any plan or intelligent design behind these things is one of the biggest mistakes we have made in addressing the problems created by this president. Its just what people "ooo" and "aaah" about at his rallies and that's all he cares about, but it attracts political allies that share that belief for their own reasons and that is who we see being selected to carry out US policies.

This actually looks like the start of the disentanglement between the US economy and the Chinese economy. What will likely happens next (my best guess) is

1.) 40-60 percent of a company’s supply chain moves out of China

2.) China restricting the movement of capital/equipments out of China (similar to what happened with Korean companies last year)

3.) China growing homebrew competitors to the foreign companies leaving, part of the ‘made in 2025 in China’ strategy, via state enterprises or state spendings in startups. China will also make US companies’ operation in China very hard, either with license restrictions, or increased local ownership.

4.) China will disincentivize Chinese consumers from purchasing US (or foreign) products, via propaganda, taxes, or control (similar to what happened with Japanese and Korean products last few years). This would be hard, as Chinese consumers prefer higher quality, higher brand value, and higher perceived value foreign products.

5.) China will have to target US farmers with tariffs, as there isn’t much US imports to tax otherwise. Plus, there is also face saving.

6.) US will increase the tariff coverage to all Chinese imports, either triggered by tariffs on US farmers, or threats to US companies.

7.) China local governments will try to seize US owned corporate assets, or prevent factories from shutting down by its owners. This will escalate the urgency for US companies to move out of China.

8.) 70-100% of company’s supply line will be out of China

9.) Eventually, most direct trades between both countries shrink down to less than $50B. Down to a significant level where it starts to effect GDP for both countries (China way more than US)

10.) China will have no choice but to embrace its lost decade, ala Japan. It will tighten controls on its citizens. It will try to contain high inflation and high unemployment rate. It will try to unwind its debt for the next 10-20 years. Its gdp growth will go towards 0 or negative. Its GDP will shrink 20-30%.

(posted this in another thread but didn't get any discussion)

It's interesting because you can replace "China" with "The United States" and most of those bullet points are still true.

The US doesn't implement capital controls so this replacement fails at step 2.

Possibly even at step 1. How many companies have 40-60% of their supply chain in the US? I would guess very few.

I mean, it doesn't have to be order numnuts

Ok, so ignore #1, and #2. What else? I actually don't see much at all on the list that is applicable in reverse.

I guess you could reverse the last two, and ignore the rest, but then it seems the whole point of parent comment is lost.

If you keep posting uncivil or unsubstantive comments we're going to ban you, so would you please stop?

The idea here is: if you have a substantive point to make, make it thoughtfully; if you don't, please don't comment until you do.

https://news.ycombinator.com/newsguidelines.html

I have no idea how likely that is, but that looks like an ideal scenario for the White House, and a possible existential threat for the Chinese Communist Party. People have a habit of putting up with a lot when the economy is growing dramatically and their lives are noticeably improving, but they might not be so happy with an increasingly oppressive government and a struggling economy that isn't giving any sign of future greatness.

Ya, the CCP has also taken a paternal-like responsibility for much of the economy, making guarantees about future positive economic performance and creating a lot of moral hazard in the process. This is why they are trying to avoid even a recession at all costs, or a property market bust.

Thing is, an oppressive government can deal with more discontent from the citizenry than a democracy like US. So it's not just a question of relative GDP and balances etc - purely economic issues - it's also a question of who is more resilient politically. I'm not so sure US is, if only because politicians have to chase votes, and even relatively minor economic pains among important constituencies can blow up very quickly.

I think it goes both ways. As a democracy, America has a pressure valve if things are going poorly, and a peaceful transition of power to the other side of politics is always an election away. (It could fall as a democracy, but it's hard to see a trade war with China being a cause for that.) Maybe America might discover a lack of political will, but there's also a chance it could be wrapped up in nationalism and sold to voters, and action against China is one of the rare things that a number of strongly anti-Trump people do support.

As the rulers of a one-party totalitarian state, the CCP is setting itself up to take the credit and blame for everything in China. Following the "century of humiliation", China is attempting a century of rejuvenation. It started poorly with the Cultural Revolution and tens of millions dying in famine and violence, but it has made remarkable progress since Mao. It appears that the government is well-liked today (although nobody knows anything about China [1]) and economic development is continuing. The government can easily deal with a bit of discontent if required (by, say, putting a million people in concentration camps), but if there was a genuine crisis and people realised that the government had terribly mismanaged things or economically stagnates long before it becomes truly wealthy, the CCP might find that the mandate of heaven has shifted.

1. https://foreignpolicy.com/2018/03/21/nobody-knows-anything-a...

As far as I know most of those are already happening today.

Even though the US are China's biggest trading partner, US trade "only" accounts for about ~18% of China's total trade.

China is still trading with other countries. While it may take a hit from US companies pulling some manufacturing out of China, some of those will be replaced by other - both Chinese and foreign - companies. Especially other foreign companies operating in China will profit from reduced competition for Chinese labor / manufacturing, encouraging them to move more manufacturing there. This will blunt the impact of manufacturing for the US market disappearing.

Also US companies will only withdraw in part from from China, since they can still manufacture goods intended for anywhere else in the world there - just not for the US.

In the end China will take a hit, but nothing close to requiring those measures you're picturing.

The US will have to bootstrap a lot of manufacturing to replace Chinese labor. This will sound good on paper and look good on some economic metrics, because it requires domestic investment. But since the American lifestyle won't be "subsidized" by cheap and exploitative Chinese labor anymore, the average American may actually find himself to have less than before.

And the rest of the world will profit from having two major players intentionally cripple each other.

"The US will have to bootstrap a lot of manufacturing to replace Chinese labor."

They just have to move to cheaper countries to replace Chinese labor. One time upfront asset cost, but lower expense over time.

"US trade "only" accounts for about ~18% China's total trade"

Once China is not part of the trade flow between US and X country (Taiwan, South Korea, Japan, etc), the total trade for China will fall even more than 18%.

"they can still manufacture goods intended for anywhere else in the world there - just not for the US"

US is the largest consumer market in the world. Japan is second at 1/3 of the size of US. EU consumer market is mostly fragmented. There is just not that much singular consumer demand outside of US. Plus other countries are enacting tariffs on China as well - India for example.

"Especially other foreign companies operating in China will profit from reduced competition for Chinese labor / manufacturing, encouraging them to move more manufacturing there."

There are lots of countries that have way cheaper labor costs than China, there's no reason for the foreign companies to go there in the face of increasing tariffs. Nike is 30% in Vietnam. Samsung is producing more of its phones in Vietnam. Uniqlo increased its presence in Vietnam by 40%.

"US companies will only withdraw in part from from China, since they can still manufacture goods intended for anywhere else in the world there "

Again, tariffs and cheaper labor costs elsewhere will entice companies to move out of China entirely. Not to mention the threat of Chinese government takeover of assets, or capital outflow restriction.

> Once China is not part of the trade flow between US and X country (Taiwan, South Korea, Japan, etc), the total trade for China will fall even more than 18%.

If those are actually further up the value chain leading to exports to the US (as you seem to suggest), those would largely be imported goods.

Edit: Moot point really. Those would just be a consequence of manufacturing happening in China. It's better to have a direct look at the amount of manufacturing happening in China, instead of guessing at parameters directly which are actually a dependent on it. That would be like trying to guess whether a taxi company will buy less fuel if you're no longer a customer (maybe they'll have other customers instead), and on top of that wondering whether that's a bad thing. It's just the wrong aspect to focus on.

> US is the largest consumer market in the world. Japan is second at 1/3 of the size of US. EU consumer market is mostly fragmented. There is just not that much singular consumer demand outside of US.

Which apparently doesn't seem to mean much - as proven by the fact that plenty of brands have no trouble selling basically everywhere despite "fragmented" markets. Also what do you mean when you say the EU consumer market is fragmented? The main selling point of the EU is that it is literally a single market.

> Plus other countries are enacting tariffs on China as well - India for example.

India already appears to be backpedaling on their earlier posturing.

> There are lots of countries that have way cheaper labor costs than China, there's no reason for the foreign companies to go there in the face of increasing tariffs.

The most noteworthy tariffs are China <-> US right now. There's little reason for non-US companies to go elsewhere, especially now that Chinese labor and manufacturing is going to become cheaper again - emphasis on manufacturing, not labor, since the infrastructure and know-how already exist in China.

"If those are actually further up the value chain leading to exports to the US (as you seem to suggest), those would largely be imported goods."

The Chinese factories that produce goods destined for US, also produce goods for other countries, leading to trade between China and those countries. When factories move to Malaysia or Vietnam, those trades disappear.

"as proven by the fact that plenty of brands have no trouble selling basically everywhere despite "fragmented" markets" . I was addressing your point "they can still manufacture goods intended for anywhere else in the world there - just not for the US" . You're basically losing 30%-40% of your sales. That's not something that can just be brushed off.

"India already appears to be backpedaling on their earlier posturing." Citation? a cursory search shows otherwise https://www.power-technology.com/comment/india-levies-safegu... https://economictimes.indiatimes.com/industry/indl-goods/svs...

"especially now that Chinese labor and manufacturing is going to become cheaper again"

Why? Wage and rent inflation is skyrocketing in China. Yuan will drop dramatically, which means energy/resource imports will skyrocket.

"30-40%" is literally all exports from China. You're saying that if the US doesn't trade with them, there won't be a single buyer of Chinese goods anywhere in the world? That's pretty far fetched.

>The main selling point of the EU is that it is literally a single market.

The EU is legally a single market, but culturaly and linguistically it's not.

The same is also true of the USA.

92% of the US speaks English proficiently and 80% primarily. Cultural differences across the US are miniscule compared to the differences between EU countries.

Turn on a TV in NYC and in North Dakota, the vast majority of the content is exactly the same. The only differences are local news and advertising for local businesses.

Turn on a TV in France and Poland for comparison.

>Cultural differences across the US are miniscule compared to the differences between EU countries.

Linguistically and culturally, the US has massive differences within it. And the fact that the media landscape does not reflect the breadth of cultures within the USA, has been a point of contention for a very long time.

>Linguistically and culturally, the US has massive differences within it.

Culturally: Compared to a small European country--yes. Compared to the EU-- not at all.

Linguistically: 92% of the US speaks English. Within that group, dialectical differences are relatively small even compared with much smaller countries like the UK.

African American vernacular english is the only major dialect that is different enough to really impact communication, and even then, the majority of African Americans (and speakers of other smaller regional dialects) can easily understand the prestige dialect.

Although many of them are only represented by relatively small populations, the US has a much wider range of languages and language groups than Europe, as it has the languages brought from Europe, the creole languages from the slave trade, as well as the remaining native languages.

>relatively small populations

That's the relevant part for the purpose of calling it a single market.

>the US has a much wider range of languages and language groups than Europe

Unless you're talking about Indigenous languages with less than 10k speakers, that's not true because Europe has experienced significant immigration over the past decades.

If you are talking about those languages, it's irrelevant because fewer than 150k people speak them, and only a few thousand aren't also fluent in English.

> They just have to move to cheaper countries to replace Chinese labor.

You also have to factor in though that one of Trump's stated goals is to bring manufacturing back to the US.

Any company removing itself from China to a place with cheaper labour risks Trump implementing similar measures against that country at some point in the future also.

And does the company uproot its manufacturing again and again or does it just move operations back to the US, taking advantage of tax incentives to do so.

you forgot that China would be the biggest consumer market in the world. comparing to cheaper labor, western companies may prefer more market shares.

But China protects local emcumbents and new entrants, forces joint ventures and IP transfer. If the Chinese market worth it? For some companies yes if course, but I don't think the Chinese market is always a good idea... Which is exactly what China wants.

> And the rest of the world will profit from having two major players intentionally cripple each other.

We won’t profit from having our two best customers/ suppliers cripple each other.

And, copycat politicians are already watching closely to see how many votes this buys.

> The US will have to bootstrap a lot of manufacturing to replace Chinese labor.

Just abandon the H1B program and make it easier for foreign labour to come in to do the work. Problem solved.

Last time I checked Trump wasn't exactly a fan of immigrants either.

That's especially acute considering China is more and more opening to foreign labour - despite the fact there is no path to Chinese citizenship for foreigners, well, except Nobel prize and Olympic gold winners.

I know a number of people who were non-Chinese "foreigners", but who attained Chinese citizenship. As long as you legally remain in the country for sufficient time it's not impossible.

It would have a completely different effect in China though and serve to raise the average salary rather than reduce it. The fact of the matter is that foreigners are generally paid more in China (speaking from my own experience and that of friends and acquaintances who have also worked in China).

1) 20% is a lot, moreover, others will join, and the US will strong arm others into playing.

2) China has little with which to retaliate. They can do whatever they want to 'American farmers' it won't matter because it's just a commodity: China will buy it's soy beans from Brazil, and Brazil's other customers will buy from the US. It'll have a null effect.

China is right now creating the biggest debt bubble the world has ever seen and it's scary - we don't know where they are going to go next.

See, in 2004 they had so much upside in front of them - but now ... it's not so clear.

I think we're going to see China grow at a more regular rate of 4% and that in the end, nothing existential will come of this trade war. It will hurt China a little worse than the US but it's not like we're going to see a fundamental shift in anything.

> This actually looks like the start of the disentanglement between the US economy and the Chinese economy. What will likely happens next (my best guess)...

I agree with your conclusion but not your map; I see China investing and stepping up ag purchases from Brazil sub-saharan Africa; increasing the militarization of oil-producing countries, and exporting cheap products to Europe, Africa, South America and their southern mining province, Australia. The US will be forced to pay more for everything and so imports will shift to trans-shipment points; US exports will be more expensive as their imports will be more expensive. This seems like a generous gift of price support from the Trump administration to the rest of the world.

The US is a manufacturing powerhouse, but its production is bipolar: super cheap stuff too expensive to ship (paper, chopsticks, etc) and ultra-high-added-value stuff (extremely high precision bearings and the like). Not cars in huge volume but planes: sure! Tariffs don't address this structural issue; if anything they exacerbate it.

"The US will be forced to pay more for everything"

I'm assuming your assumption is because China is taking over all of the resources/production capabilities around the world? I don't think that can even remotely happen. Again, lots of multinationals are already 30% in Vietnam, Malaysia, or India. Companies can source ag or oil from plenty of non-Chinese sources. The consumers have barely felt the supply chain shifts.

"The US is a manufacturing powerhouse, but its production is bipolar"

You would be surprised at how much reshoring and US factories automation have occurred in the last few years in US. It will increase in scope after this current round of tariffs.

>> "The US will be forced to pay more for everything"

> I'm assuming your assumption is because China is taking over all of the resources/production capabilities around the world?

No, it's because the US government is forcing US consumers (and producers) to pay more for the goods than buyers in other countries will -- that's what a tariff is.

> You would be surprised at how much reshoring and US factories automation have occurred in the last few years in US.

Indeed I would be surprised and until recently I bought a lot of manufactured goods. OK, I may have overdone it on the beryllium bearing example: I did see a piece of fancy firefighting equipment being built in the Central Valley for shipment to a customer in NZ. But it was exotic enough that it wasn't worth figuring out how to make in NZ, while the volume was so low (they made 3-4 of them a year, at $100K/pop) that it couldn't keep the lights on. Most of what they made was farm gear and solar mounts for sale in the valley.

Another example: I bought some pressure vessels (about $60K each FOB Redwood City) made in LA: about half a dozen guys, a massive steel roller press and some excellent union welders. I could get them for much less from India, with about 50 guys feeding 2" sheet steel manually into a tiny roller press, excellent welding, also x-rayed and to the same safety standard. After shipping? About $65K. But that same factory in Amedebad is shipping tons of stuff to the oilfields of Central Asia and the Middle East -- they didn't really care if they got our businesses. While the factory in Los Angeles couldn't keep busy. So that's the low end: "not worth shipping". While $150K of high pressure steam boiler had parts falling off it in shipment from Chicago. It would have been cheaper for us to buy from Germany and have it shipped over just in terms of TCO.

So yes I'm pretty familiar, as a customer, of US heavy industry.

You would be surprised at how much reshoring and US factories automation have occurred in the last few years in US. It will increase in scope after this current round of tariffs.

Here's real manufacturing output: https://fred.stlouisfed.org/series/OUTMS

Here's durable and non-durable goods manufacturing employment: https://fred.stlouisfed.org/series/PRS31006013 https://fred.stlouisfed.org/series/PRS32006013

Notice they are lower than before the 2008 recession. The recession that is now a decade old.

In comparison, here's imports of goods and services: https://fred.stlouisfed.org/series/IEAMGSN And here's imports of goods from China: https://fred.stlouisfed.org/series/IMPCH

Reshoring? I'm not so sure about that overall. It's great that US manufacturing is recovering though.

> 2.) China restricting the movement of capital/equipments out of China (similar to what happened with Korean companies last year)

Are companies not subject to the existing money restriction? We can't move more than like 50k per year out or something. Maybe less now.

I have no idea how it works for companies, just individuals.

The Party won't let anything that will lead to (10) happen. Growth=staying in power, this is the fundamental belief from which all their actions are derived. Facing a bad deal and losing face, they'll certainly choose a bad deal--they have a powerful propaganda machine to paint it as a good deal anyway, at least domestically.

Interesting analysis. Oddly, it reminds me of Venezuela’s path.

I think you went way overboard toward the end. Only 37% (and declining) of China's GDP is from trade.. and only <20% is from the US. So 20% of 37% = ~7% of GDP.

Meaning, if all trade between US and China was cut off tomorrow, they would only lose 7% of GDP. So how do you get from that to 5X?

Seems like you have a model of the Chinese economy from a decade ago. Fact is, China is much larger now, and much less dependent on trade today.

Also keep in mind, a good portion of our imports from China consist of items that were imported into china for assembly. Look at all the items from other countries inside an iphone... yet when an iphone is assembled in China, the value gets assigned to China. If you adjust for this, it significantly reduces (but nowhere near eliminates) the trade imbalance. So the numbers above, actually overstate the impact on China's economy from cutting off trade.

Edit: corrected a few of my numbers from worldbank data

I didn’t go into the 20-30% loss in GDP in detail, but it factors in loss of millions of manufacturing and management jobs, fake/wasteful GDP boosting stopped, loss of FDI, capital outflow, debt deleveraging, 20-30% further drop in Yuan, etc etc

But where is that coming from? It seems to me you're just throwing out a disaster scenario that isn't backed up by the numbers.

China is much larger and more diversified than you seem to be giving them credit.

If anything, GP is conservative.

If gdp growth stagnates, there's a very real risk that the Chinese housing bubble will collapse and bring down the entire economy with it.

What's the most alarmist position you could take here? Probably cutting off all US trade immediately.

But that doesn't result in a recession in China. They're growing at 7%, about the same as exports to the US. From that 7% subtract imports from the US (which would also be cuttoff and replaced by Chinese companies), and imports for export (which don't produce value for China)... and the result is that an end to US-China trade does not produce a recession for China.. they would still be growing by a few percent (note, the US economy only grows at 2-3%).

So they'll still have a growing economy... and they're still moving people from the rural areas into cities. So it's not clear to me that this collapses the housing bubble there. Possible though? Sure, maybe.

I think you need to be skeptical about their 7% growth figure, the reality is probably quite a bit lower.

A 7% drop in GDP in China would be a disaster - rememberer than in our “Great Recession” that the gdp only dropped -2.8%

That's just China -> US exports. It doesn't account for imports for export, and Chinese imports from the US. They would still be growing if all trade with the US was stopped, after subtracting these.

Net trade globally, they're running an imbalance of 1.5-2% GDP.

They're growing at almost 7%/year. So there's quite a ways to go to get to -2.8.

China will try to avoid this extreme scenario lest they end up like Russia --at least Russia has natural resources to export, if nothing else.

They will have learned that scaring off foreign investment is not good for their economy long-term. They don't want to squander their potential, I don't think.

Still, they have serious problems to address. Issues the US and the EU and other Asian economies have with them vis a vis their unfair trade practices.

If the EU and other Asian economies join up with the US and form one front on this, they will very likely come correct, if reluctantly.

When google chose to quit from the Chinese market, many people told me that China basically cut itself off from the modern world. 8 years on, we all know full well what actually happened. Comparing China to Russia is laughable at best - China's domestic market is 10x the size of Russia, it is comparable to the entire EU but with only one language, one system plus one culture making it much easier to do marketing for whatever products you can think of. In your single sided mind, you consider foreign investment something that makes China progress, yet you failed completely to recognise the fact that many many foreign companies rely on the Chinese market to continue to justify their existence.

The whole concept of US/EU/SEA countries should all team up against China is also laughable. Just look at EU, for Internet companies, mobile and AI, EU lost almost everything to the US dominance, EURUSD dropped 35% from its peak 10 years ago. You seriously believe EU has the interest to further strengthen the US?

Well see, maybe you’re right and I’m wrong. Still think the issues among East Asia, Europe and the US have enough in common in terms of unfair trade practices it behooves them to act in concert to get China to normalize their trade position.

> 1.) 40-60 percent of a [US] company’s supply chain moves out of China

especially highlighting the part that I added: US company.

Does anybody think this is a bad thing for China? I'd argue that this is one of China's core interest. China is now becoming a major sales power itself. It's not recognized for that yet, but especially in the mobile market it's far ahead of he western competitors, maybe also in IoT.

Actually one of the core Problems China is facing is that it can't BUY the stuff it wants to buy for its own production, like chips.

And what it needs to worry about is that through all the complex entanglement at one or two points its public image of the new super power might slip. And this image is very much needed for it's plans in Belt&Road as well as in Africa. So most of its concerns are not related to the US market.

One of the things that seems the most unfair to me about global trade is that for many American internet companies, China just totally bans them. Everything from Facebook and Google to smaller players gets hit by the great firewall. That is way more impactful than a tariff of 5% or 25%. With all of the talk of how China is or is not playing fair, I feel like their internet bans get taken for granted, and I wish there was more pressure to play fairly there.

I agree, but it starts to get awfully close to the subject of encryption backdoors, more censorship/lockdown of political ads and other topics that are more convenient for the government to be handled separately, without the comparison to China, hence they don't bring it up.

> With all of the talk of how China is or is not playing fair, I feel like their internet bans get taken for granted, and I wish there was more pressure to play fairly there.

In a fair environment, you'd be seeing Facebook/Google/Twitter used by hundreds of millions Chinese when most Americans paying their bills using Alipay and talk to their friends using WeChat. US dominance in tech is _NOT_ something called fair.

what's blocking WeChat?

WeChat is not blocked, just like a long list of US internet services not blocked in China - Amazon, NH, booking.com, ebay, uber, airbnb, expedia and many more.

That being said, Huawei and Alipay's expansion into the US has been repeatedly blocked by the US federal government [1]. By citing the same national security concerns, using such logic, Cisco and Microsoft should have long been banned in China - but they are not, both are making good $ in China.

[1] https://www.reuters.com/article/us-moneygram-intl-m-a-ant-fi...

Those companies had to obtain ICP licenses and participate in forced partnerships and open up their servers to the government.

Your claim of fairness here is simply quite laughable

Huawei would like to participate in "forced" partnership and open their servers to the US government in exchange US market access. But still, it's banned by national security. laughable?

Well I guess they shouldn't have put a backdoor in their products then. You're conflating two unrelated things.

Cisco is full of backdoors either.

>Well I guess they shouldn't have put a backdoor in their products then.

Citation needed. I've yet to see any evidence against Huawei and ZTE. Just FUD from the USG.

It seems like you undermined your own point here.

This is an amusing point of view. WeChat is really the worst messenger out there from a technical standpoint. No attempt encryption at all (who knows if they even use SSL?) and the stickers and social networking features still resemble 1st gen. messenger apps

uh, what? it has many more features than any western messenger. what makes it appeal less to western audiences is that it is precisely tailored to chinese taste/lifestyle, which is distinctively different.

Which derails the parent's vision that it would be a popular messenger in the US. Uh, what?

Your post said it’s the worst from a technical standpoint, but I’d argue it failed from a feature standpoint: half assed localization, features tailored for the Chinese market (for instance push to talk is huge there), and regarding the stickers thing, non-western friendly UI (east Asia is used to higher density designs, see any webpage in Chinese or Japanese)..

Even things like lack of encryption are missing features that we care about but Chinese users don’t, not a technical evaluation.

One feature that WeChat nailed is performance in low bandwidth connections common in China in 2010, but it’s not like that’s something we in the west care about on 3G+ connections.

1st gen? are you kidding? millions of its international users love it no mention 1 billion domestic users. it's just mostly designed for Chinese users.

WeChat works just fine in the US. Facebook Messenger, a very similar product, is completely banned in China. In a fair environment, people could try out both of these apps and pick the one they liked better.

China just marks parts of the Internet as a territory and introduces laws that meet the authority's satisfaction. Since free information and speech make people call in questions about the legitimacy of ‘the party leads everything’ and dark past, this situation won't get changed unless we distribute everything(but decentralization violates tech giants‘ interest) or a regime change happened. Otherwise, progress US and other countries made would just hold up a while.

I still think there is a good chance that China will allow more individual freedoms over time. Their people will get richer, get more familiar with the rights allowed in the rest of the world, and demand more individual liberties. The dark past will become more distant and irrelevant. And after enough time, if things go well, economic success and stability will be the source of the legitimacy of the regime, rather than a whitewashed history, so the ruling party will have less to worry about.

I could certainly be wrong. But I don't think it's right to just take it for granted that the Chinese internet will always be censored, especially when there is a discussion about whether China treats companies from other countries fairly where it is very relevant.

Some hard-liners want a more aggressive stance. Lou Jiwei, who retired as finance minister in 2016 but is still the head of the country’s social security fund, suggested on Sunday that China could deliberately disrupt American companies’ supply chains by halting the export of crucial components mostly made in China. But Chinese trade experts dismiss that idea as impractical and not the government’s position.

If anything would play into the administration's hands, it would be that move. By taking themselves offline, the Chinese would be ceding market share to upstart competitors and encouraging further reshoring of mission-critical supply chain components.

It would no doubt be disruptive, temporarily. And it would also prompt a multi hundred billion dollar redirection of investment into moving those supply lines to other countries. Vietnam would love to get some more of China's tech manufacturing action, as would a dozen other developing countries. Others would welcome gains to be had in apparel or autos by moves like that by China.

One of the biggest problems China has in this trade war: they're entirely replaceable. They offer nothing strictly unique that can't be replaced by another country, even though there may be a serious cost involved. The mistake of not being a large technology originator.

> One of the biggest problems China has in this trade war: they're entirely replaceable. They offer nothing strictly unique that can't be replaced by another country, even though there may be a serious cost involved.

I cannot see evidences that China is particularly more so than any other country.

Saudi Oil is a commodity, but many country’s don’t have oil. Every country has low skilled workers.

Low skilled workers doesn’t accurately describe what China brings to the table currently. They effectively are the only place in the world you can source certain parts of the electronic supply chain at the volume currently necessary. They’ve been up the technical ladder for decades at the same time as other places have shed that capability. It would take a long time for Vietnam to come online. I’d guess Korea or Japan would be closest and that would have dramatic price impact.

What is a dramatic price impact in the context of Apple products. 5%? 10%? Would that really stop you? They keep hiking the prices anyway.

for iPhone, maybe it's just 10%, what about the other staff you need to buy daily? Do you count how many staff you using are Made In China right now?

Nationwide ~1/5th of US imports come directly from China, that’s bumped a little when countries manufacture with Chinease parts but stays well under 1/4th of US imports and ~1/37th the US GDP.

Personally, I get very little directly or indirectly from China based on my shopping habits it’s mostly electronic gifts.

There is no absolute standard of low-tech and high-tech.

The question is how replaceable. That is indirect relevant to iPhone or any small sample of particular items.

The point is, overall, how replaceable is China? How is China ranked on the replaceable country list?

I cannot see any evidences that China will be ranked below top3 (US China EU) in the world's least replaceable country when cutting from global trade.

China does a lot of different thinks all the way up to building jet engines. However, the percentage of people employed at mod to high skill manufacturing is not enough to keep things going in the event of a trade war.

Nah, if you see what technologies are used for extracting oil and the geopolitical structure, you'll see how western careful maintains the status such that Saudi is replaceable if needed. Given the oil's strategic value, sure, it's not as easily replaceable like cloth producers. But itself, as compared to any other country with similar strategic value, is certainly as replaceable as any other such country.

Correct. Even if their large industrial integration of all sorts of parts in close proximity was easily replaceable(which is itself very difficult), for them to be easily replaceable, buyers would have to be more price indifferent, which doesn't seem to be happening.

I’m not sure. Tim Cook seemed to suggest the iPhone couldn’t be manufactured anywhere else.

China sources most of the components for Apple Products from different countries.

Here is a list of countries that provide the parts.

https://www.quora.com/Where-is-the-iPhone-originally-made

As you can see it would be fairly easy to for Apple/Foxconn to source these parts and build their products in the USA. I think the big motivator for them is they would rather outsource manufacturing to Foxconn and wash their hands of having to deal with it.

Also Foxconn could move ops back to Taiwan, albeit a bit expensive labor wise.

But still cheaper than the US.

I don't see iPhones being made in the US anytime soon, there are many places in Asia other than China that would be higher up the list than the states.

Yeah. I don’t think it’s likely that production would come back —though not impossible.

That said the main point is Foxconn could move production to other manufacturing centers, if need be, though it would need some transition period to avoid disruption.

I don't think any other Asia countries has same scale of labor, supply chain and infrastructure to manufacture the goods with tremendous demand like iPhone. It's not just cheap labor, it involves a whole manufacture ecosystem.

Taiwan, Japan, Korea all have the infrastructure and expertise. China is a huge market, but iPhones still are considered imports because they are built in SEZs anyways.

Tim Cook has a business reason to make such a suggestion. He doesn’t want disruption; he wants an affordable and reliable workforce and does not want to abandon his investment in technology, capital, supply chain, etc.

And Tim Cook also makes a lot of money from selling iPhones to a highly nationalistic Chinese populace

Apple has been assembling a limited set of iPhone models in India for some time now.

> I’m not sure. Tim Cook seemed to suggest the iPhone couldn’t be manufactured anywhere else.

Translation: Apple invested massively in China-based manufacturing, and he doesn't want to have to repeat that investment elsewhere.

The big problem is that Apple would have to move or rebuy a huge wallop of high-precision CNC machines that they have installed in China.

http://www.iphonehacks.com/2016/10/next-iphone-probably-wont...

Koenig writes. “Apple is such a huge buyer of a particular kind of mill (BT30 spindle drill-tap centers) that Fanuc, Brother and DMG Mori each have factories dedicated to building machines exclusively for Apple.”

Tim Cool spoke to that: " "There's a confusion about China. The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to but the truth is China stopped being the low labor cost country many years ago. And that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the quantity of skill in one location and the type of skill it is."

And China has an abundance of skilled labor unseen elsewhere, says Cook:

"The products we do require really advanced tooling, and the precision that you have to have, the tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here. In the US you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China you could fill multiple football fields." "

https://www.inc.com/glenn-leibowitz/apple-ceo-tim-cook-this-...

If it's truly a skill question alone, US could trivially resolve it by opening the borders to qualified Chinese engineers, until it gets a large enough quantity.

The difference is circumstances aren't forcing the Chinese educated elite to come elsewhere, like my parents, as opportunity exists in China. Even if the probability of success is worse, the question is if the disparity is great enough to outweigh leaving family, friends, and cultural ties behind? Plenty of grad and undergrads are coming to the USA, pit-stopping in the international student community for a few years before heading right back to China. The major bottleneck in China right now is higher level education as many are still compiling resources after getting totally fucked by the government in the Cultural Revolution only 2 generations ago. This is being rapidly solved as the initial generations post Cultural Revolution reach maturity and we will see this differential close in this next generation. My observation is concurrent with the fact that Asian immigration has been significantly slowing both in raw numbers and % wise within the last 10 years, China doesn't have to beat the West, it just has to get close enough.

Trivially asserts that it will be done immediately/soon, which will never happen.

The manufacturing ecosystem in Shenzhen (for example) is unique. Any individual element of it is probably replaceable (at a considerable cost), but the presence of all those elements in the same place is not.

The agglomeration benefits of this are HUGE, and losing them would introduce a thousand small frictions into the manufacturing process. Issues that can be sorted out in hours or days in Shenzhen (finding alternate suppliers, repairing specialized machinery, etc.) would take weeks or months anywhere else. That's for individual issues. A complex piece of equipment might have a dozen such issues while scaling and optimizing its manufacturing processes. In Shenzhen, this might cause a few weeks of delay. Anywhere else, the delay would be measured in years.

There are several other such manufacturing ecosystems in China; Shenzhen is just the one I'm more familiar with. Yes, the individual parts may be replaceable -- but the whole is significantly greater than the sum of its parts. Building replacement ecosystems elsewhere would take decades.

It took China roughly two decades to build this kind of ecosystem. Its primary resource for doing so was the ~4 million STEM graduates in produces every year. That's on par with the rest of the world put together. So don't underestimate the difficult of replicating this.

This is a commonly espoused narrative.

I’m sure there were synergies in steel and auto production in US cities connected by rail between Pennsylvania and Michigan.

I’d say the key misunderstanding is that you’re conflating China with “markets” in “it took China roughly two decades to build this kind of ecosystem.” If you read it as, “Markets took two decades to build this kind of ecosystem,” it should be clear that the relationship between prices, time, volume, supply and demand aren’t determined by political prerogatives, but by market ones.

In other words, if your thesis is correct (that there’s something special about Shenzhen), the thing that’s special about it can be reproduced elsewhere. It will probably happen faster than two decades, because it’s proven to be a lucrative setup.

The Shenzhen special sauce is the high density of complimentary industries and specialized workforce.

It's certainly possible to replicate, but history has shown that it can be difficult. It would be like trying to supplant Hollywood.

> The Shenzhen special sauce is the high density of complimentary industries and specialized workforce.

> It's certainly possible to replicate, but history has shown that it can be difficult. It would be like trying to supplant Hollywood.

There's now motivation to take on that difficult job, and the motivation grows the longer the trade war drags on.

Companies may even rediscover the benefits of diversification. Right now Shenzhen is unique, but I'm sure there'd be much less anxiety right now if there was a Shenzhen II in Vietnam, Mexico, or even the US where production could be shifted too in times of crisis.

SZ's special sauce used to just be its proximity to Hong Kong. To think that the role SZ plays has changed so completely in less than 30 years is evidence that it might not be that difficult to replicate.

That’s the worst possible example, because they truly don’t make cultural products like movies and music almost anywhere but Los Angeles.

If it was about market forces, writers would get paid a bajillion times more. On the contrary, they’re paid terribly, relative to the value their product provides. Same with visual effects artists, just not as bad.

Or music: an ecosystem unmatched anywhere but in LA. Even all those Swedish pop artists wind up there.

Before you google counterexamples, just ask someone who actually works in film or music. You can’t just throw money at “it.” What seems to make good writers and musicians concentrate in LA doesn’t seem to be 100% governed by conventional market forces.

Yes, it’s been difficult to replicate Hollywood! I think experiments with subsidies like for VFX in Vancouver, documentaries in Massachusetts and everything in Savannah, Georgia are interesting and nurture communities at different rates of success.

In contrast, Wisconsin gives a $3 billion handout to Foxconn, Wisconsin gets a Foxconn factory. Because it will save money, things adjacent to the plant will be built.

Writers cost nothing! There’s no money to save by locating them in LA, the savings on airfare and lodging and communications for a literal single human being is de minimus compared to the budget of a feature film.

The scary thing about Shenzhen is all the applause for abstract things like skilled workforces and no appreciation for how different that “IP” is in comparison to e.g. Disney IP, like Mickey Mouse. They are not at all the same knowledge economies, electrical engineering and films.

Sure, there's nothing mystical about Shenzhen, and I'm sure it can be replicated elsewhere -- but on a decadal timeframe at best.

There are many different factors which go into producing such an ecosystem. Raw number of STEM graduates is a very crude proxy, but it's probably as good as anything else for representing the "feedstock" of such an ecosystem, and gives an rough indication of how difficult the task might be.

China produces ~8x as many STEM graduates as the US. Therefore, all else being equal, if it took China 20 years to develop such an ecosystem, it should take the US roughly 160 years to do the same.

"But wait!", you say, "The US can be a fast second-mover, learning from Shenzhen and not repeating its mistakes. Plus, we may have fewer STEM graduates, but on average they're better-educated and more entrepreneurial, which would allow us to move even faster". (Note, I'm not endorsing these claims, just saying that it's an argument one could plausibly make).

Fine, granting all that, let's say that each American STEM graduate is worth 10 Chinese STEM graduates. In that case, it would only take 16 years to begin to compete with Shenzhen.

That analysis is almost certainly far too generous towards the US, however -- and even if it were well-founded, what American politician would pursue the necessary policies, given a best-case 16-year ROI? And what American polity would accede to the requirements of such policies?

Answer: none. This just isn't going to happen in the US. India has the scale to pull it off, but not the organisational capacity; Germany has the organisational capacity but not the scale; most other places have neither. Anybody who thinks that it'd be easy to replace China is utterly fooling themselves.

This entire statement is predicated on STEM graduates being a proxy, but you provide no evidence that's the case. Building complex market ecosystems has very little to do with supply of STEM graduates. Having some supply is certainly a prerequisite, but there is no indication that the current supply rate is the prerequisite.

I suggest you read the mythical man month, it illustrates the fallacious thinking behind throwing more bodies at projects to get them done faster.

I've read the Mythical Man Month, and it has no bearing on what I'm talking about here. The problem is that "building Shenzhen" isn't a "project", and never can be a "project". The key feature of an industrial ecosystem like this is its enormous diversity -- hundreds of thousands of companies, large and small, doing complementary and competitive and most importantly different things.

That is not something that can ever be matched by a monolithic "project". But it is something that absolutely requires large number of both bodies and brains. STEM graduates is, as I say, a poor proxy, but I can't think of a better one. Feel free to suggest.

(Hint: it isn't GDP or anything like that, otherwise China would never have been able to do this in the first place.)

>The key feature of an industrial ecosystem like this is its enormous diversity

A bunch of engineers all graduating from the same Chinese school system under the same censorship regime != "diversity".

>and most importantly different things.

Some are doing different things, but that has nothing to do with the number of STEM graduates. Your incorrect presumption here is that a STEM graduate is magically innovative and entrepreneurial, which there is no evidence of.

>STEM graduates is, as I say, a poor proxy, but I can't think of a better one.

So don't use it at all. If STEM graduates were enough, why do you think that China hasn't displaced Silicon Valley in the software game?

>Feel free to suggest.

Incentives, market conditions, and government support. In other words, stuff that can only partially be controlled. Silicon Valley is a direct product of research into military technology driven by the Cold War. No number of STEM graduates can replicate that.

I think the path to get us there (reshoring chips) would be extremely painful, but it certainly would be a better position for the United States to restore our ability to produce these critical components.

Also, just in time for this research to get off the ground:

>If it all works out, the effect could be to make small groups of engineers capable of feats that would take 100 engineers to achieve today.

https://spectrum.ieee.org/tech-talk/computing/hardware/darpa...

Reshoring chips would be far less painful than other types of manufacturing. The tooling is complex but the supply chain is less so.

few companies build chips in china, the most important role it plays in most electronic's company supply lines is assembly/PCB work.

https://en.wikipedia.org/wiki/List_of_semiconductor_fabricat...

Note virtually all of the chinese plants in that list are nowhere near cutting edge process node sizes

27% of IC packaging (turning the raw die into something that can be soldered to a PCB) happens in China with most of the remainder in other south-east Asian countries.

https://www.electronicsweekly.com/news/business/china-no-1-i...

B does not follow from A. Isn't it more realistic that US citizens pay for this trade war with more expensive goods in the short term, while supply chains move to other countries that aren't China but are still cheaper than the US?

As much as some people here may hate Trump, the fact is that he was right when we said that it is difficult for us to lose a trade war with China since we import more from them than we export. Is there going to be some short term pain? Absolutely! But, long term it is likely to create more jobs in the US. As an extra bonus, there won't be as much of a carbon footprint for shipping things half way around the world and we might begin to focus on quality instead of quantity which what we consume if the labor is now a larger part of the price...

His trade war with China (and only China) is one of the few administration's positions I whole wholeheartedly support (as a economics dilettante, no expert).

Our "trade war" with Canada is a proxy trade war with China. Our "trade war" with Europe is, to a much more limited degree, a proxy trade war with China.

A big part of the rationale with all of these little trade wars is to make China stand alone on the global stage, so that they are more easily negotiated with. A secondary effect is to eliminate "Made in $country" goods that are 90% manufactured in China and finished in e.g. Italy or Canada.

That doesn't make much sense at all. Ruining goodwill and relationships (and of course trade) with YOUR MOST IMPORTANT ALLIES is certainly not just proxy economic warfare. The EU economy as a whole is bigger than either China or the US.

Don't try to find a logic when there clearly is none. Trade war with EU and Canada might be the most unhelpful thing Trump has done.

You're providing an emotional response to a logical appeal.

>Ruining goodwill and relationships (and of course trade) with YOUR MOST IMPORTANT ALLIES

That's not how this works. A trade tariff dispute doesn't mean anything about the relationships in other matters unless they are brought up as part of the negotiations. Each country isn't a single person being directed by their feelings being hurt.

So we can certainly negotiate with Canada to get them to lift dairy tariffs or whatever and still count on them not to allow Russia to setup air force bases there.

>>Each country isn't a single person being directed by their feelings being hurt.

Umm, sorry for being flippant, but are we reading the same news about US foreign policy last 18 months...? :-/

>Umm, sorry for being flippant, but are we reading the same news about US foreign policy last 18 months...? :-/

Not sure. I don't recall any news about the US going to war or halting trade with any of its previous allies. I don't remember reading anything about the five eyes agreements changing. Do you have other news sources?

The phrase being used is "ruining relationships". Maybe you have a different definition of "ruined" if you think Trump has ruined any relationships with allies.

> Trade war with EU and Canada might be the most unhelpful thing Trump has done.

Actually it’s an incredibly smart culturally sensitive move - it allows the Chinese to save face.

Instead of making it the West vs China the perception has been shifted to Trump trying to get fairer trade deals for the US even with close allies.

That is something to consider. Interesting. But anyone in the know knows that it is about China. And so, it is about saving face with the general public, not the technocrats.

Sort of - Trump really does intend to get better deals on trade from our allies. It’s not a ruse to deceive the Chinese.

As such even the technocrats know the focus is only on China because they are the worst offender on trade.

It helps keep trade issues limited to trade.

This doesn't make sense - if you are doing trade war against everyone else, then the one standing alone will be you, not China.

Yes, but what’s the actual strategy? According to Woodward’s book, Trump’s true opinion is that “Trade is bad.” These tarrifs aren’t negotiating chips — something unpalatable to get what he wants. They’re what he wants.

Trump may have less to do with it.

Some ass is downvoting all comments critical of China.

We won’t lose more than China does, but we’re still going to lose a fair amount of wealth and standard of living.

How would you define "a fair amount" as a percentage of per capita income or GDP, and what are you going to measure against?

How so? As it is the only people who's standard of living has been rising in the past 30 years has been those at the top while the middle class etc. continue to lose ground.

As a counterpoint, poor people are the ones who benefit from everyday low prices at Walmart.

People will have to wait 2 years instead of 18 months to afford a new iPhone.

Rising cost of goods.

That is true in the US, but worldwide, the drop in poverty has been immense over the past few decades. In 1966, half of the world lived in extreme poverty. As of 2017, that number is now 9%. 9%!

https://www.theguardian.com/world/commentisfree/2018/apr/11/...

This does not remove the real problems we have in the states regarding wealth distribution. But globally, things are pretty amazing compared to how they've been, even within a single lifetime.

We could go from stagnant to losing ground.

This requires trade to be zero sum. It’s not. Even if we “win” the trade war we can lose if not having done it at all was better.

Honest question, how would we lose in that scenario?

There are a few scenarios. One would be Chinese companies are forced to get more efficient to survive. This makes them even more competitive and they can force out American companies in other contested regions.

Another is the inflation caused by the tariffs reducing the profits of industries that compete for the same consumer dollars. If consumers are paying more for plastic goods, then they have less money to spend on discretionary purchases.

Production moving from China to the US puts strain an already tight labor market, which displaces incumbent industries. I.e., shoe manufactures move to the US to avoid tariffs, which makes labor too expensive for the cardboard industry, who moves to another region.

All of these effects cascade to related industries.

Also, the collective "we" can win even if a large number of us suffer as a result of these policies.

"how would we lose in that scenario?"

Trade is usually 'win win'. So when there's less trade, there's less 'winning' on both sides.

Imagine if Chia is the sole source of Silk, and the US is the sole source of Rubber.

If the US 'wins' a trade war with China by doing more damage to then, but there is less trade ... well then there is unmet/latent demand in the US for Silk and in China for Rubber that is not met, which is an economic loss.

That said - trade needs to be in fair terms or it doesn't work. If one side cheats, they can suck all of the 'win' out of the 'win win' for themselves.

Only if growing GDP at all costs at all times is a constraint, and if one gives no consideration to the future when calculating "losing".

A trade war is you and your buddy alternately shooting yourselves in the foot.

If your running a trade deficit how exactly are you shooting yourself in the foot?

A trade deficit means we ship portraits of George out instead of goods that are more useful. I've got a big trade deficit with my barber.

This seems like a good deal to me. The US sends China paper with funny pictures printed on it, and gets back real goods. And as far as I can see, they have the ability to print infinite amounts of the funny paper.

Running a trade deficit doesn't inherently mean you are losing utility from the trade. Your trade deficit with Walmart (or Costco, or whatever) is negative but both of you gained from the trade. China cheats, and there is no doubt in that; but I am not convinced that US's trade deficit is purely or even mostly a result of that.

Trade doesn't really work like that. If I say buy a car off you it doesn't mean you've won and I've lost, just that we've done an exchange. If the government bans or taxes the exchange it probably just makes us worse off. Similarly with China trade there wasn't much of a problem till the stable genius decided to get worked up about things and it will probably cause both sides losses.

I don't see how you can claim there were no problems with trade before the tariffs, China outright bans far more American companies and classes of imports than the reverse.

TBH, I don't see why that's necessarily a problem.

Different countries have different laws, and they all forbid importing some stuff. China is stricter than us, so it stands to reason that we'll produce more products forbidden in their country than the other way around.

https://qz.com/1269172/the-epic-mistake-about-manufacturing-...

Yeah, you live in a bubble. Outside of the bubble, the American working class has been eviscerated.

> we might begin to focus on quality instead of quantity which what we consume if the labor is now a larger part of the price...

I'm hoping the same. I don't think it's likely to happen, but it would be good long term. Short term though, it will be a bit of a shock to see the plastic toy that was $20 now be $100.

> we import more from them than we export.

What that means is a trade war is going to cause prices in the US to rise more than prices in China. Which means either the prices of what the US does export will go up or the USA's standard of living will go down.

In the short term a carefully crafted trade barrier can have positive effects. For example, if the government decides a country should have natural advantage in industry X, but establishing industry X is impossible because of foreign competition than a trade barrier is a reasonable option. In effect the rest of the population is subsidising the initial higher prices and poor quality from industry X until experience and effects of scale kick in.

The danger is a trade barrier can be damned hard to get rid of because inevitably doing so will kill jobs. So hard that killing them it usually requires some sort of crisis. That's what happened in both Australia and NZ a few decades ago, with one Australia treasurer famously saying "if we don't do something we will become a banana republic". The barriers came down, there was an enormous amount of pain (interest rates hitting 20%), and he got voted out. But the country hasn't had a recession since.

If Trump's little war disappears with Trump I doubt it will have much effect on anything. If I was a US citizen, the most worrying line in that article is some democrats support it, so they could stay.

There's not much to support this rosy outlook yet. We were already at 'full employment.' Wages are just inline with inflation as they were before and we have farmers feeling the pain of the trade war.

We can certainly hurt China but that was never in question. Whether this scheme will be any good for the US is TBD.

What have you won?

China running out of things to tax, doesn’t mean America has actually gained anything. America was stronger, but that doesn’t create jobs.

I initially used to think China might have more leverage against any potential trade war agains the US, as:

1. The Chinese had option of imposing high tariffs on politically significant US agricultural products, like soyabean, which are not very large in $ value, but affect a lot of areas.

2. Since some swing states are highly influential in US elections, the Chinese always had the option of imposing tariffs which impact the swing states mostly.

Both of these thoughts arose from the fact that as a democratic country, the US would have to take into account both short and long term trade prospects. Now reading this article, it seems being a predominantly export driven economy and having a huge trade surplus with the US, the Chinese don't really have that much leverage.

Yeah their leverage ends up being limited but even if they had focused their tariffs on soy beans, it would have hurt them more than not given the Importance of the us in their imports.

Trump has countered the soybean attack by handing out subsidies to soybean farmers.

For now, I belive the subsidies are only going to last a while. Granted considering the current administration's lack of care for deficit spending.... they probabbly would just dial up more subsidies after a while.

Meantime, other soybean manufacturers will dial up production, so when the tariffs are dropped by China, the US soybean manufacturers will be selling to an oversupplied market, dropping the price. And given the US subsidies will almost certainly go when the Chinese tariffs do, the risk to the US soybean industry has only been postponed, rather than countered.

> Meantime, other soybean manufacturers will dial up production, so when the tariffs are dropped by China, the US soybean manufacturers will be selling to an oversupplied market, dropping the price.

I don't think so. Doing some Googling, it looks like China's soybean imports (100 million tons) could be more than satisfied by the production of Brazil and Argentina (139 million tons). US production is 108 million tons.

Soybeans are fungible, so instead of other producers ramping up soybean production, I think we'll see production stay constant while trading relationships reconfigure around the tariffs. For instance: China can replace American soybeans with Brazilian ones, and American soybeans will then go to wherever the Brazilian soybeans were going to previously.

https://www.worldatlas.com/articles/world-leaders-in-soya-so...

https://www.world-grain.com/articles/10955-china-soybean-imp...

China, according to those links, purchases 60% of all global soybean exports.

Looking up the figures, about another 30% is the EU, with 10% for everybody else.

Now, the EU is increasing their US soybean imports, but they cannot make up the shortfall even if they wanted to, and are only really increasing their imports from the US because US soybeans are currently cheaper than South American ones.

Also, the EU are not really that interested in helping the US on this one without first getting concessions in the ongoing EU vs US trade war.

Out of this, the EU have so far managed to get Trump to promise to drop much of the EU trade war in return for the EU buying more US soybeans, which is something the EU were going to do anyway and as I said before, will only cover a fraction of the reduction in US exports to China.

Also, the EU continuing not to target US soybeans exports is all rather dependent on Trump keeping to his word on not continuing the EU part of his trade war, if he restarts it, those reassurances are going to leave the table.

Not quite.

The demand for Soybeans globally has not changed.

Tariffs in China really will just mean that buyers and sellers will shift around.

Chinese will now buy Soy from Brazil, thus avoiding tariffs, and rather than buying more expensive Soy beans from Brazil (because of more demand), those other buyers will shift to buy from the US.

Chinese tariffs on commodity goods won't have an effect if there a good number of buyers and suppliers.

What a strange phenomenon. So essentially Trump is subsidizing the Chinese government.

Point number two has been preoccupying my brain the last few months. Our system of electing presidents tend to hinge on several swing states, and in those states, a few key districts, and this means that our elections are vulnerable to foreign influence much more so than if, say, presidents were elected by popular vote.

Protecting elections may mean ending winner take all electoral college system.

> Protecting elections may mean ending winner take all electoral college system.

I think 2016 proved that the electoral college is not supplying the adult oversight that the founders intended.

Or maybe it is, and the adults actually won.

If I don't like the outcome the system must be broken...

Nope

All you need to disprove this hypothesis is look at the man's own Twitter feed, and read a couple of pages of it.

This seems inconsistent with this article anyways:

https://www.historycentral.com/elections/Electoralcollgewhy....

Is there a more accurate interpretation describing how the founding fathers believed it served the purpose of "adult oversight"? What exactly does that mean by the way?

The very first reason listed.

The electoral college and winner-take-all are mutually exclusive ideas.

Presently, the electoral college benefits rural voters (Wyoming and the like) by increasing vote value. Winner-take-all elections benefit urban voters by disenfranchising rural voters (every non-Democrat county in California).

This is a poorly drawn equivalence as the winner take all system doesn’t imbalance vote value like the electoral college does. IE you’re just saying winner takes all disenfranchises people who don’t vote for the winner which is a tautology.

> doesn’t imbalance vote value like the electoral college does

Of course it does - it imbalances them all the way to zero.

I don’t see how this is an insightful comment. You’ve just provided a different way of saying there’s a winner and a loser.

Disenfranchisement !== losing, it’s being denied the ability to have your vote count the same as anyone else’s.

Under the electoral college system, 50 voters for candidate A in Wyoming get more influence than 50 voters in California for the same candidate.

> You’ve just provided a different way of saying there’s a winner and a loser.

No I haven’t. Let me explain a bit more below.

> Disenfranchisement !== losing, it’s being denied the ability to have your vote count the same as anyone else’s.

> for the same candidate.

Exactly!

It’s a vote for the same presidential candidate regardless of whether you live in California or Ohio. Yet a Republican vote in California is meaningless because California assigns it’s electoral votes as winner takes all based on state level results.

If 51% of voters in California vote Democrat then all 55 electoral votes go towards the Democrats. This clearly disenfranchises conservative voters.

California has the ability to assign it’s electoral votes proportionally and enfranchise millions of conservative voters.

Of course they won’t because it would hurt the Democrats chances of winning unless all the other states followed suit.

Yet if it’s a question of right and wrong then shouldn’t California do the right thing and give conservatives a voice regardless?

I’m sorry but I thought the issue we were talking about was whether global winner-take-all, IE most votes cast in the country determines the winner, is disenfranchising compared to our current electoral college system.

> is disenfranchising compared to our current electoral college system.

I guess my point is we can enfranchise significantly more people than today without moving away from the electoral college.

Yet no state is seriously considering assigning their electoral votes proportionally.

I think that shows the people calling for the removal of the electoral college are playing politics and are only interested in it if it helps their side.

To me your point of view reads as superficially civil but deeply cynical underneath. The current system is unfair, and you criticize people who want to fix it because they won't take a local action which is nominally aligned with the goal but in reality will just tilt the unfairness further.

It's a bit like tritely declaring that people should just opt in to pay more taxes individually if they think tax rates on the wealthy are too low.

> because they won't take a local action which is nominally aligned

Of course - Your collective actions don’t mirror your rhetoric.

> in reality will just tilt the unfairness further.

I thought your argument was disenfranchising voters was immoral and unfair.

Yet I’ve shown you a politically viable way to enfranchise millions more people and you are claiming that enfranchising these people makes the system less fair?

> It's a bit like tritely declaring that people should just opt in to pay more taxes

How so?

> I thought your argument was disenfranchising voters was immoral and unfair.

I don't think I said anything to that effect -- aside from that the current system is unfair -- but you seem to be arguing against a bit of a straw man here already, so I won't stop you from continuing.

> How so?

How not so? You could easily say (and I imagine you in particular would say): you think taxes should be higher? You should pay more voluntarily right now regardless of what the official rates are.

Your viewpoint neglects to consider that certain changes must occur uniformly, at a structural level in order to be effective.

Under your proposal, if CA adopted it and WY did not, 50 voters in Wyoming for Candidate A would get even more voting power relative to 50 voters in California for the same candidate at the federal level. That you think that is more fair makes it difficult for me to believe you're approaching this discussion in good faith. I also sense you're replaying arguments you've had before and aren't looking to change your mind. So we can probably leave it off here.

> aside from that the current system is unfair

Unfair on what basis?

I did assume your basis was the belief that it’s immoral/unfair for one persons vote to be worth less than another’s simply based on which state they live in.

> You should pay more voluntarily right now regardless of what the official rates are.

Why would I say that? I don’t think a single person paying more in taxes would make a difference.

> at a structural level in order to be effective

Yes. And if done at the California state level it would enfranchise millions of people.

I’ll leave it up to you to judge whether that’s good or bad.

> 50 voters in Wyoming for Candidate A would get even more voting power relative to 50 voters in California

The distribution would change to give the minority accurate representation based on their vote count.

So a Californian minority voter would not be unfairly disadvantaged just because they live in California.

I mean it’s the same as when we enfranchised women - men’s votes were obviously diluted.

> and aren't looking to change your mind

I’m simply trying to understand your argument. If you can put forward a convincing case and prove it’s not just a political power play then I will happily change my mind.

Though I must warn you that I’m on the other end of the states vs federal debate:

I’m happy for the individual states to decide where they want their electoral votes to go - even if they don’t want to hold a vote and instead use a panel of experts to decide or even if they just want to flip a coin.

How is an equal voice disenfranchisement or at least how is it any more or less so than the disenfranchisement of Californians under electoral college rules.

There are democrats in Wyoming also, and the system disenfranchises them also in dominantly rural states.

That may or may not be, but in the end it is a different question than the one I raised. One might have an electoral college system without a state by state winner take all, which can lead to particular districts in particular states having outsized influence on the national election, and as such presents itself as a manageable target for foreign influence campaigns. This seems, to me, a national security risk that should be mitigated...and is much easier to mitigate than, for example, depending on efficient removal of foreign state-powered advertising campaigns.

Well for both countries the export to each other is only a fraction of their economy...China is not what it is used to be.

Exports / Imports, % of GDP, 2016 Source: National Accounts at a Glance

https://data.oecd.org/trade/trade-in-goods-and-services.htm

                   Imports  |  Exports

   China             17%    |    20%

   US                15%    |    12%

China seems to be at a fair disadvantage on exports dependence, but you're right, China is far less export dependent than one might think. The devil is in the details of course, but I'd venture a guess that US imports would tend to be more discretionary than China's, but who knows.

Keep in mind much of china's trade with other nations is based upon the presence of US corporation's manufacturing and supply chains.

Based on the figures I could find, China imported $130 billion dollars worth of goods from America last year, of which $12.3 billion was soya beans. The most likely reason they imposed high tariffs on soya beans is precisely because they had so few actual options. (I know the media portrayed it as some kind of genius move at the time, but that's been looking increasingly dubious. It's not clear that they will be able to feed their livestock at reasonable prices.)

To a large extent the tariffs were imposed just before China traditionally started importing from Brazil, so for several months they had little effect on actual supply (a few ships did get turned away, but for the US it was slow season). Brazil has ended their shipments, and China is turning to other countries which are selling at inflated prices and then buying from the US.

Don't paint the above as good for the US - things are bad for farmers, they are selling below what the cost would have been. I'm pointing out that the picture is (as always) complex.

Also, soybeans are a fungible commodity. As China buys up non-American soybeans, American exports will (with effort) be redirected to the customers who were originally planning to buy non-American soybeans that the China bought. The tariffs will be more of a hiccup for American farmers.

On the other hand, most of China's exports aren't fungible commodities, so it will have more difficulty finding substitutes for the reduced demand caused by American tariffs.

> Now reading this article, it seems being a predominantly export driven economy and having a huge trade surplus with the US, the Chinese don't really have that much leverage.

You shouldn't be basing your opinion on opinion news articles. Just 2 years ago, the nytimes was telling us the world was headed to economic armageddon with no end in sight. Look at us now.

One day the news tells you Trump is going to start ww3 with china and the next you'd think china is weak and have to submit to Trump's demand.

> Both of these thoughts arose from the fact that as a democratic country, the US would have to take into account both short and long term trade prospects.

If that was the case, we wouldn't have the rust belt. We wouldn't have the collapse of detroit. We wouldn't have NAFTA or trade with China. Most americans were never for lopsided trade with china or mexico or even canada. I think foreigners have an idealized view of the US, democracy and how things work.

Trade with china for the last 40 years was basically "wage arbitrage" ( which some might call exploitation of cheap chinese labor ). US corporations moved production to china to use the abundant and cheap labor. The reason why we didn't have tariffs on "chinese" imports is because most "chinese" imports to the US are actually american goods. Or it's a sino-american partnership/company. This is why Trump is getting so much backlash from corporate america. The tariffs hurt american goods.

Are tariffs just straight up revenue for the US government, like income taxes?

Yes, but it is relatively small amount of revenue. Even with the new 10% tariffs on extra $200B, China tariffs in total will be less than 3% of federal government revenue.

3% of federal government revenue for tariffs on a single country seems substantial, but I get your point.

They will apparently collect $7.5B from steel tarrifs from everyone by the end of the year. That 10% is going up to 25% in January and China has no real counter to that since they’ve already tarriffed all our exports including some which really harm them. And trump has threatened another 267B.

3% is a substantial amount but I doubt it’ll be close to that much. Supply chains will move to avoid tarrifs, parts will be shipped to Brazil or Mexico and then into the US. Or from China to Vietnam etc. I highly doubt it’ll get to 3% but if it does and the economic impacts of that thus far are fairly minimal, that would be significant. Makes up for the entire tax cut deficit and more when accounted for dynamic scoring but again it’s still monumentally dumb to count on tariffs for revenue which Trump has been stupidly bragging about. I do completely support Trump’s trade war thus far however with the end goal of fair and reciprocal trade and limiting China militarily through the economy.

Yes. There was no income tax for the majority of US history, and tariffs were a major source of revenue for the government back then.

I didn't know this was the case, thank you for sharing. For anyone else reading, it appears federal income tax was first implemented in 1913, more reading here: https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...

Not quite; from same link, "President Abraham Lincoln and the United States Congress introduced in 1861 the first personal income tax in the United States." It was declared unconstitutional in 1895 by the Supreme Court, prompting the constitutional amendment.

Tariffs were a source of bitter controversy between Northern and Southern states from the very beginning. It wasn't until the 1840s or 1850s that controversy over slavery became the dominate dynamic.

Northern manufacturers wanted high tariffs on manufactured goods and low tariffs on agricultural products. Southern farmers wanted high tariffs on agricultural products and low tariffs on manufactured goods--to placate Europeans so they'd buy Southern agricultural products, and to check the economic power of the North. And of course the Federal government relied on tariffs for income--the Articles of Confederation being considered a failure largely because the Federal government had no independent source of income--and as a foreign policy tool.

Everybody was at odds.

(Note that it was also common back then to impose export tariffs, which added considerable complexity to the debate. Today export tariffs are largely unheard of in the U.S. but perhaps ripe for rediscovery. Though we recently loosened restraints on the export of crude oil and natural gas, so it probably won't happen any time soon.)

Yep, that's right.

Yes, but they are paid by the importer and (usually) passed on to the consumer. In effect they become a subsidy for local industry paid by consumers.

It's equivalent to the US implementing a VAT, except superior as it directly encourages replacement domestic manufacturing rather than merely acting as a tax on goods (as in the case of steel and aluminum, which are seeing US steel companies boom again with vast profit growth).

It doesn't merely redistribute wealth from one company to another. It reclaims critical domestic industrial investment and blue collar jobs as well.

Nucor's profit for all of 2016 was $796m, and $679m for 2014 (2015 was a bad year). For just the second quarter it was $683m and they've yet to see the full benefit of the tariffs. Alcoa, which has been a disaster the last several years, produced a billion dollars in operating income in the first two quarters, equal to a full year's operating income previously. US Steel which has been bleeding to death for years, looks capable of producing a billion dollars in annual profit again in the near future ($214m in profit in the second quarter on a large bump in sales).

Yes, we'll pay slightly higher steel & aluminum prices than we would have otherwise if we were getting artificially low dumping-level prices set by the Chinese impact on the global markets. It's worth it to regenerate major US industry back to health and the blue collar jobs that go with that. We can afford the slightly higher prices, we can't afford a hollowed-out industrial base.

It’s not at all like a VAT as it doesn’t impact everyone equally. It’s redistributing wealth to specific market participants from others.

In this case almost all profits that come to the domestic producers of steel come from the domestic consumers (and those impacted by tit for tat tariffs).

There might be very good reasons to prefer some industries to others but as a revenue source tariffs are not at all like a neutral VAT.

and the government collects that money? what do they do with it?

I don't mind this trade wars to continue, after all there will always be dispute between two largest nation.

What I am worried is that this may turn into an actual war. And from what I can tell, China is not ruling out this possibility, it may not happen within next 2 - 3 years, but they are investing heavily into their military.

And if you look into the reporting from US media and Chinese media, they are both extremely one sided. ( But I guess that is... how it suppose to work ? ) Most US citizen do not realise how the USD works, and how currency works today. Most Chinese do not realise how closed their market are and their nation's unfair tactics. If tension continues.....

Well this certainly looks to set start another cold war. The US was not going be the only power for too long. And I think China is in a much better position than the USSR, at least economically. Let's see how this goes.

I'd have to go digging for the article, but one of the more interesting arguments I've heard for why the US won the Cold War is because of our superior manufacturing in-house. Similarly, think of China's advantage today in producing electronics and goods, and how they're so entrenched it's difficult for high security government projects to find parts that are considered safe. I think our slow decline in manufacturing over the previous decades would be what would cause the US to lose.

I am not entirely convinced. At first I thought robotics were still a little far off in all industry ( Apart from Cars ), for many task, they are not as fast as a human worker, at least those in Foxconn who are now trained themselves to muscle memory speed. But now I believe Apple's Dasiy, the disassemble machine, are basically the testing phase of how to do iPhone assembly all by machines, and doing so quickly. Dasiy is already 4x faster than the original Liam, and I believe the threshold os robotics replacing manufacturing may reach a critical point where it makes sense to move back to US, and with ease.

I don't know when will we reach that critical points, as with everything in life, the last 20% always takes the same amount of time as the first 80%. But once it does, China is looking at a potential job lost of 5 - 50M or more.

You're thinking at the assembly plant level (which I do not completely agree with), but think about it at the chip level. How often do you hear stories of Chinese spyware being discovered in electronics? The real question is how much more widespread is it than we realize because of all the spyware we haven't found yet.

Apart from that, I'd argue supply chain logistics for raw materials is better for China after years of investing in Africa.

Although honestly as I type this, I'm realizing just how little I know, so I could be persuaded otherwise. But to me it just feels like America's time in the sunlight is coming to an end.

The value of imports and exports seems like the wrong thinking.

What does matter is the utility for each country. Considering Chinas much lower PPP/capita all tariffs hurt them more.

It's a game of chicken. T is okay with the unpredictability of that game, for he thrives on, well, let's say "activity". China's gov't is, on the other hand, more conservative and cautious by nature. They must feel really rattled. (I'm not picking a winner yet.)

In game theory chicken the unpredictable one wins more often, as long as they don't self destruct.

Then T definitely has the edge, and doesn't seem to worry about the "self destruct" path in the probability tree.

Time is on China's side. The US can throw a tantrum all they want.

They should play a long game. There is no benefit for them in retaliating to hurt the US as long as it does not cause issues in domestic politics. They should focus on not getting hurt too much and let time do the rest.

The US would need to implement tarrifs of several hundred percent to make a difference. A 20% tariff China can just make a small change to the price of their currency and ride it out. An article today has a quote from Jack Ma that he thinks this trade war will last 20 years.

https://markets.businessinsider.com/news/stocks/alibaba-stoc...

It can't last that long. Eventually the disputes will reach a WTO tribunal, at which point both sides will either need to acquiesce, or risk going it alone outside the WTO system, or perhaps destroy the WTO altogether.

U.S. conservatives love bilateral trade deals, but that's only because most trade occurs through the WTO system, making bilateral negotiations tractable. If either the U.S. or China lost the benefit of the WTO system, they would be indisputably worse off. So would everybody else. But in any event the end game will be resolved, for better or worse, long before 20 years is up. If there's still a dispute raging in 20 years then the next 20 years will be filled with economic and political strife much like those of the 20th century.

Trump could easily destory the wto or declare it irrelevant to the us. Similar to his reaction to the icj.

Every president has declared the ICJ irrelevant. The Pentagon would send tanks to the White House if a President so much as hinted at accepting ICJ jurisdiction. And in any event, the U.S. doesn't dispute the usefulness of the ICJ or its jurisdiction over other countries, it just disputes the usefulness of the U.S. being subject to ICJ jurisdiction.

By contrast, the WTO deeply matters to the wealth and security of the U.S. economy. But much like NATO, Congress is willing to call Trump's bluff.

[EDIT: I confused ICJ with ICC. My bad.]

> Every president has declared the ICJ irrelevant. The Pentagon would send tanks to the White House if a President so much as hinted at accepting ICJ jurisdiction.

Are you seriously claiming there would be a military coup in the US over something like that? The US has very strong taboos against military intervention in politics, much stronger than exist in many other countries. That you would make such a claim calls into question much that you've said about the US.

From the US point of view, accepting the ICJ is giving up soverigty to its old colonial masters, and wartime enemies.

It is not a palatable position.

I made a hyperbolic statement to emphasis that it's not politically viable. No, I don't think there'd be a coup. But I also think acceptance of ICC jurisdiction in the near future is about as likely as there being a coup. The military institutionally--the people that embody the military at the Pentagon, in Congress, in the White House, and elsewhere--would never allow it even if a majority of Americans were okay with it.

ICJ (which I confused with the ICC earlier) is a little different because technically the U.S. has a veto as a member of the security council. Nonetheless, we only submit to ICJ jurisdiction on a case-by-case basis; which is to say, when we know we'll win or when we don't care one way or the other.

Agree. I hope we also agree that this is extremely unfair, internationally speaking.

I hesitate to say its unfair because I don't know how to even begin to define what fair would look like.

Look at the situation in Syria. When Obama refused significant interventions (despite his famous "red line"), Europe sharply criticized the U.S. notwithstanding the fact that Europe refused to intervene itself. This example shows how much of the world accepts and affirms the U.S. role as a so-called global policeman, at least when it suits them.

Now imagine a situation where the U.S. bowed to pressure and intervened at Europe's behest, but subsequently was drawn into an ICC prosecution for some action in that country. That hardly seems fair, to assume both the direct cost of the conflict plus the cost of ex post criticisms by parties unwilling to participate themselves. Especially in light of the fact that, relatively speaking, the U.S. has well functioning military courts willing and capable of punishing crimes, particularly the types of serious crimes the ICC was established to handle.

The existing situation is unfair in the sense that the U.S. is a wealthy hegemon, while most countries are poor and vulnerable. But the U.S. putting itself under ICC jurisdiction wouldn't substantially change that. It's such a complex situation I find it hard to criticize the U.S. here. I sort of like Clinton's approach of "plausible ratification", which appreciated both the real politick and idealist aspects. It lent the court legitimacy without risking a crisis where the U.S. repudiated jurisdiction or where the threat of repudiation caused ICC prosecutors or judges to pull their punches. Situations of the latter type would slowly erode the ICC's legitimacy.

> Every president has declared the ICJ irrelevant. The Pentagon would send tanks to the White House if a President so much as hinted at accepting ICJ jurisdiction.

Uhm...as far as 'even hinting' goes President Clinton did sign on to The Rome Statute of the International Criminal Court without any tanks being rolled out.

Signing and accepting jurisdiction are two different things. Clinton's contemporaneous statement (from Wikipedia):

  The United States should have the chance to observe and
  assess the functioning of the court, over time, before
  choosing to become subject to its jurisdiction. Given these
  concerns, I will not, and do not recommend that my
  successor, submit the treaty to the Senate for advice and
  consent until our fundamental concerns are satisfied.

  Nonetheless, signature is the right action to take at this
  point. I believe that a properly constituted and structured
  International Criminal Court would make a profound
  contribution in deterring egregious human rights abuses
  worldwide, and that signature increases the chances for
  productive discussions with other governments to advance
  these goals in the months and years ahead.

Clinton thought that being a signatory with contingent intent would lend the ICC legitimacy even if the U.S. would never submit itself to its jurisdiction, and even if it was obvious to everybody it wouldn't submit itself to its jurisdiction. It's like the opposite of plausible deniability--plausible ratification. According to his logic, the fiction mattered. To others it was pointless.

I meant ICC anyhow.

Trump wants an excuse to pull out of the WTO.

What Trump wants is "a win", which is an extremely subjective assessment on his part and doesn't even necessarily require any material change in position. Everything else is a means to that end, including the endless posturing and 1980s Wall Street-style hardball tactics.

This is true.

But additionally his inclination is against any kind of treaty or multinational body which doesn't involve immediate tribute paid to the US.

> It can't last that long. Eventually the disputes will reach a WTO tribunal, at which point both sides will either need to acquiesce, or risk going it alone outside the WTO system, or perhaps destroy the WTO altogether.

It probably can last that long. It will take years for a WTO tribunal to do its work, and even after the tribunal makes its ruling, there can be years more of foot-dragging. I can see all of that taking at least a decade.

China has deliberately manipulated the yuan for decades now. I first studied and modeled the manipulation while an undergrad in economics 15 years ago. It has helped them remain an export-driven economy, for good and bad. It's not a good move at this point in time. China needs desperately to increase domestic consumption. Manipulating the Yuan further will only lead to more wealth flight out of the country as citizens try to protect their wealth from devaluation.

I haven't fully through this through, but at a naive level it seems to me like the U.S. has the upper hand. Less trade between the two countries means U.S. consumers pay higher prices on non-essential items. But the impact on the Chinese is much more significant: people will lose jobs.

Thinking it through: The vast majority of goods imported from China are sold to US consumers by American companies, employing Americans. A 25% increase in cost of goods sold for these companies requires severe cost cutting, leading to the lay-offs of those American employees.

But, again, a disproportionate impact. It takes way less people to administer buying and selling goods than it does to staff the factory floor.

I would argue time is (and always has been) on US's side. US has the more powerful economy, and the consumer market that China desperately needs to keep afloat. In addition, time will allow US companies to move its supply lines out of China without triggering volatility in its stock prices.

China is approx. the same size as the USA but with 4 times the population.

The US have the more powerful economy today. But given the above, once China is on a development path then it is simply inevitable that it will overtake the US.

When I say 'time' I'm not looking at the next quarter or next year. That's shortsighted. I'm looking at 20, 50, 100 years.

In fact, I would argue that the US government knows that and that's why they are increasingly alarmed.

Not only that: the trade dispute is also consequence of the rising vulnerability of the US in the capital markets.

Once it is discarded as the "one and only option", once real alternatives emerge, once the US loses its dominance, the US could end up being subjected to the same financial constraints that all countries are used to operate in.

That has the powers that be trying to delay the inevitable.

You think the Trump administration and the US congress are looking 50-100 years in the future?

What would happen if say, Foxconn no longer assembled phones? How would Apple, for example, recover their supply in any reasonable time? You can't just spin up that capability overnight.

Seemed to me that if China wanted to amp this up and play hardball, they could just give Tim Cook a phone call and tell him they won't be making iPhones anymore. Estimates I've seen is that about 40% of Foxconn is Apple products. They could probably replace this demand with more Japanese/Korean/Domestic IHVs, combined with banning domestic sale of iPhones and accelerating the marketshare loss that's been ongoing.

Foxconn is a Taiwanese company. Even though many of their factories are in China, the company also has factories across the world, with headquarters located free from Chinese government control.

It's also apparently the largest private employer in China. It seems like it's really easy to shoot yourself in the foot with this trade war stuff...

In what world would you close a billion dollar income stream to “win”?

A billion is small potatoes to the tariffs being thrown around, and Foxconn could probably fill much of that demand from other IHVs as one of Apples common strategies is fighting competitors by locking down parts of the manufacturing and supply chain.

>Proponents of the plan say letting Washington impose more tariffs than Beijing would actually hurt the United States more because tariffs are ultimately paid by consumers and businesses in the countries that levy them.

Well, this is actually the fundamental problem, isn't it? There's no way actual trade evens out, so tariffs are the only real outcome here. Even if we "win", it's not actually winning.

The "winning" scenario for the United States is that China agrees to change its IP policies. IP is America's most valuable product, and the Chinese have been stealing it with 0 consequences for decades. A win on this front would see an end (or at least decrease) in cyberattacks and more US friendly IP laws.

And the "losing" scenario is a WTO ruling like Antigua and Barbuda where China is directly permitted to ignore US copyrights and patents from trade disputes.

Aren't they doing that anyway? It was my understanding that most companies didn't send their latest generation products to be built in China due to them bring consistently stolen and china not backing up the IP protections

Like which IP policy? Any specific policy document that you can point out?

China has been having IP laws and protection since around 1980, and China government never said once that stealing IP is okay. It is IP law execution and enforcement in China that is sub-par. Policing is sometimes hard.

Also, I believe the US really wants to treat IP as an "asset" rather than a "product".

They don't enforce it it's a major issue both for the US and EU.

True, and it is also a major issue for many Chinese companies..

And rather than going to the court for justice, the US place tariffs for a war..

China has actively promoted and condoned IP theft as a way of catching up to the US. I'm surprised you're unaware of the widespread coordinated Chinese industrial espionage, especially by Chinese students studying abroad in America. The IP laws and protections in China exist primarily so they can claim they're following the rules.

Sounds like they are mirroring the behaviour of the US toward Europe in the 18th and 19th centuries.

>Last month, Attorney General Eric Holder announced that the United States was charging members of the Chinese military with economic espionage. Stealing trade secrets from American companies, he said, enabled China to “illegally sabotage” foreign competitors and propel its own companies to “success in the international marketplace.” The United States should know. That’s pretty much how we got our start as a manufacturing power, too.

>The United States emerged as the world’s industrial leader by illicitly appropriating mechanical and scientific innovations from Europe,” the historian Doron Ben-Atar observes in his book “Trade Secrets.” Throughout the late eighteenth and early nineteenth centuries, American industrial spies roamed the British Isles, seeking not just new machines but skilled workers who could run and maintain those machines. One of these artisans was Samuel Slater, often called “the father of the American industrial revolution.” He emigrated here in 1789, posing as a farmhand and bringing with him an intimate knowledge of the Arkwright spinning frames that had transformed textile production in England, and he set up the first water-powered textile mill in the U.S. Two decades later, the American businessman Francis Cabot Lowell talked his way into a number of British mills, and memorized the plans to the Cartwright power loom. When he returned home, he built his own version of the loom, and became the most successful industrialist of his time.

>The American government often encouraged such piracy. Alexander Hamilton, in his 1791 “Report on Manufactures,” called on the country to reward those who brought us “improvements and secrets of extraordinary value” from elsewhere. State governments financed the importation of smuggled machines. And although federal patents were supposed to be granted only to people who came up with original inventions, Ben-Atar shows that, in practice, Americans were receiving patents for technology pirated from abroad.

https://www.newyorker.com/magazine/2014/06/09/spy-vs-spy-3

Not really. That would be true if the tariffs were on all imported goods, from all locations. In this case, it just encourages businesses to look at other cheap markets (Vietnam, Mexico, Bangladesh, etc.), hence China's anxiety.

Additionally when we import from China, we pay with dollars. China can either buy US goods with the dollars, or buy US assets (typically Treasury bonds) with the dollars. If you end the trade surplus with China, you end a cheap source of funding for the US government.

Not clear if this is a feature or a bug.

China hasn't net added much to its treasury holdings in 15 years (it hit around $1 trillion back in 2003, it's now at ~$1.2 trillion). In that time they've probably run a $4 trillion trade surplus. Clearly that isn't how it works at this point, they're intentionally avoiding buying more US paper.

In that time US debt has gone from $6.7t to $21t. Their share has gone from 15% or so, to 5.7%. They're no longer a funding source for new US debt, and are no longer a critical funding source of existing debt (although hey, it's nice to have them squatting on that trillion dollars and not liquidating it).

The Rest of the World has never been a funding source for the U.S. It's impossible, because to purchase a treasury, the Rest of the World must first obtain dollar from an American, which decreases our income. Then, they purchase the treasury instead of the american. If someone grabs your wallet and then buys a share of stock with the money inside, they aren't funding the stock market and you don't need to be grateful to them.

You are giving the dollars to foreigners, in exchange of goods. Nobody is forcing you to do that. If you feel those products are not worth your dollars, do not buy them.

Nobody is forcing you, but the forex rate adjusts so that the appropriate amount of goods is bought voluntarily.

If country A bans foreign capital inflows and purchases $10 of foreign assets, then that forces a trade surplus of $10. Yes, that $10 transaction will be voluntary because it's currency will adjust so that the transaction is made. But from the macro point of view, the foreign capital flows drive the "voluntary" transactions.

Well, that is how much the dollars are worth then.

The dollars are worth whatever the relative foreign policies set. If China has a policy to depreciate against the dollar, by printing Yuan and buying dollars with them (what happens now) then the dollars end up being "worth" more, but the underlying capacity to produce of the U.S. hasn't increased, indeed it starts to decrease as people start to buy cheaper foreign output.

So it's a bit disingenuous to say "well, people like these cheap goods" -- I mean, of course they do, but the story here is the foreign capital inflows which create an excessively expensive currency leading to a preference for certain types of goods. The whole ground is moving underneath you as a result of international policies and you don't see it, you just see people "choosing" to act.

The US manipulates the currency market in other, more powerful and more fundamental ways, by controlling the global currency.

You do not need to hold foreign reserves, you do not need to pay exchange commissions, you are not blocked to do business with third parties by having capital flows stopped ...

I don't think you understand what you are saying here. Yes, the U.S. has the world's reserve currency _because_ it allows unrestricted foreign capital inflows and has a long respect for property rights and rule of law. Try, as a foreigner, buying a house in China. It's illegal. Try, as a foreigner, to buy a house in the U.S. -- no problem. The U.S. opens it's markets to the rest of the world to purchase American assets while the rest of the world closes its markets. If you are a foreigner, you can buy all the corporate and government bonds you want. You can repatriate money out of the U.S. in unlimited amounts. In China, this is illegal. They don't even allow their own citizens to move more than a small amount of money out of their country. There is a great black market of people smuggling money into and out of china because the government restricts cross border capital flows -- like hiding money in your socks or trick suitcases, bribing border guards to let you through stuff.

This is why the U.S. is the reserve currency, and it is also why we have a trade deficit, because as the rest of the world's capital pours into the U.S., that forces our currency to be overvalued enough to have an equal sized trade deficit on the way out.

Whereas you seem to think that that the U.S. "manipulating" it's currency by making U.S. currency more attractive to hold for foreigners -- is somehow a counter or offsets what China is doing, which is making its currency less attractive to hold.

But it's not, these two work together to cause the same distortion and large trade deficits.

Your whole argument comes down to "the dollar is overvalued". What does this mean? Bad things and good things for the US. You are not going to mention the good things, so I will.

For starters, you are using worthless (overvalued) papers to acquire real goods. The American consumer is getting a bargain.

You are also able to buy foreign assets at firesale prices (yes, for all your grandstanding, the US is not the only economy allowing direct foreign investment)

Having the world reserve currency (something the US has allowed / promoted to happen, out of interest) gives the US unfair operative advantages, already mentioned above.

The appetite for the dollar allows the US to be largely independent from the financial markets. It also allows the US to get favourable credit ratings, and financing terms which are unthinkable for other economies. This has been happening for decades, and is continuing until we reach a certain breaking point Incidentally, it is possible that this trade conflict is motivated by that breaking point getting closer.

To summarize: the US has enjoyed unfair, enourmous trade advantages for decades. It has been indulgent with its finances because the market has allowed it to be overspend. And now it wants the world to increase its already existing advantages, by claiming for "fair trade".

It is not going to happen.

> To summarize: the US has enjoyed unfair, enourmous trade advantages for decades. It has been indulgent with its finances because the market has allowed it to be overspend. And now it wants the world to increase its already existing advantages, by claiming for "fair trade".

No, so this is where you are getting signs confused. An overvalued dollar is the same as having a trade deficit. Arguing to reduce that trade deficit is the same as arguing for a weaker dollar. The argument goes "the dollar is too strong and it should be weaker", not "you are saying the dollar is too strong and then you want it weaker also?? How dare you ask for both!" When you make these types of arguments, it worries me because it makes it sound like you aren't groking that I am advocating for a cure to a disease.

> Your whole argument comes down to "the dollar is overvalued".

Well, I think my argument is explaining _why_ we have a stronger dollar -- because we have open capital markets while our trading partners do not. This creates an asset demand for dollars that increases total demand for dollars beyond that which would be consistent with balanced trade.

> You are not going to mention the good things, so I will.

I guess I'm old school in thinking that any systemic distortion is a net harm. For example, you may not realize this, but the strong dollar doesn't actually allow us to consume more, because it reduces our income and forces government benefit spending to bridge the gap. If you look at patterns of household consumption, they have not gone up -- the big gain in consumption was higher healthcare costs, but that's a price inflation thing. Basically those areas that lose out to globalization end up receiving social security disability dollar for dollar.

Next, the trade deficit is primarily offshoring, so instead of buying a wrench made in the U.S., we are buying an american branded wrench made in China. How many chinese brands can you name? You are buying the same american products, except they are no longer made here.

But, it's the same wrench, and in real terms it costs the same. We are not getting an extra wrench, there is no "extra consumption" -- there is just loss of domestic production followed up with increased foreign purchases as large numbers of formerly productive people drop out of the labor force and rely on government assistance. We just stopped producing something domestically and bought it overseas. It's not extra consumption.

How can we afford to buy it? Well, it's those extra government benefit expenditures to make up for all the income lost, together with lower interest rates from foreign demand for our assets and then we get asset bubbles as a side effect. China, more than anyone else, was responsible for the great recession.

That extra government debt also crowds out public spending on public goods -- take a look at our hollowed out cities. So, on net, we are not enjoying any more consumption, rather the ability of our nation to produce is slowly being dismantled and shipped overseas. That's an unmitigated bad.

It is also destabilizing, politically, as we have large swaths of the country that are being written off and this breeds radicalism. Also, it's sad to turn our backs on our fellow americans who worked in factories that have been shutdown and are now living on food stamps and meager benefit payments in broken down cities.

This is what a lot of people don't understand. They say thinks like "Country A has nothing that country B wants". Suppose we are in a world with only 2 countries, and country A has only apples to trade and country B has beautiful cars. It may well be that B doesn't want goods from A and A wants goods from B, nevertheless no trade deficit will occur unless there are foreign capital inflows. And if neither side allows foreign capital flows, then either A and B wont trade, or A and B will trade so that goods flow in both directions with no deficit.

So, we have to tease apart the question of "do I want to buy this good" with the question of "why do people on one border consistently buy more goods than those on another". The former is up to individual preferences, but the latter -- the trade deficit -- is really just a matter of policy.

This is completely backwards. There is a trade deficit with China, not a trade surplus, and the result of that deficit is lost private income which increases the U.S. government deficit as we then pay more benefits to the displaced workers. So trade deficits create budget deficits.

Second, it is impossible for a foreign nation to "fund" the U.S., which is a currency issuer. Rather, because we have open capital markets, we allow foreigners to purchase U.S. assets -- something that most other nations don't allow, including China. What this means is that there is a demand for dollars other than the trade demand, but an asset demand. This allows trade deficits to occur.

If you want to stop trade deficits, then don't impose tariffs, but do what China does and ban capital inflows. With no foreign capital inflows, there are no trade deficits -- the golden rule of international trade is that the changes to the capital account plus the changes to the current account must equal 0. No change to one implies no changes to the other, as a mathematical identity.

The way to understand this mathematical relationship is that when the rest of the world sells a good to the U.S., it gets a dollar, and now it has a choice of using that dollar to buy an asset or using it to buy a good. If it is very hard to buy assets, then you buy a good. In this way, the exchange rate adjusts so that the rest of the world doesn't have a trade deficit or surplus.

The reason why you want balanced trade is that when the foreigner gets a dollar by selling a good, but doesn't spend the dollar on buying an american good, then american economy has 1 dollar less income and it needs to sell off $1 of an asset. Selling assets does not produce income but selling goods does produce income. This is why nations like China basically ban selling assets to foreigners and so it's impossible for them to have trade deficits. There are very few nations that have the open capital markets of the U.S. -- really no nation, and our unique policies on capital are why we have such a uniquely large trade deficit.

This is a bug exploited as feature. Pretty sure this happened organically, it was not a dollar design decission, but it has, and is, exploited to the advantage of the US, economically and politically.

If we want fairer international trade, the dollar must be ditched.

Winning is reaching a better agreement than we have now.

China is still considered a developing country by the WTO, it's very difficult to get into the Chinese market and they don't actually enforce IP rights which is a problem both for the US and EU.

The EU does indeed have the same issues. The single best move Trump can make, is to resolve NAFTA (looks likely), then strike a deal with the EU (also looks likely), along with Japan (up in the air).

The EU has very openly stated that they have the exact same problems with China as the US does. They couldn't any further telegraph their interest in conspiring with the US to tame China's abuses. Indeed it may be the only way to do it, you need truly immense pressure to get China to change behavior, more than the US can bring to the table by itself.

Which is also why it's absurd the EU goes out of their way to distance them from the US because of Trump.

He is in the right on this one despite his style but sometimes that's what you need.

Look at what they do, not what they say. What Merkel says at a podium doesn't matter. It's what she says behind closed doors that matters.

China's good can be produced in other developing countries, like Vietnam. Inflation might not result, or just be temporary.

Irony: In trying to win, the Chinese leaders are enforcing a death spiral. History judges with brutal honesty, and not on intentions.

Play it through: - they can't back down --> means they can't not lose half a trillion per year in current revenue --> means they don't get to spend that money on "Chinese advancement", but they might foolishly think they look "tough".

I can think of five ways out of this where they win. If they are too stupid to do so, then they don't really deserve to be in power, do they. One of the big arguments for the authoritarian structure is that they get fewer pretty faces, and 3/4 the way up the chain of command they should get higher levels of actual capability.

China still hasn't pulled out the boycott card like they have recently done to both Korean and Japanese companies for perceived slights. A lot of F500 companies are reliant on China's consumer market to meet their quarterly goals, and would be vulnerable.

That's because China would be largely punching itself in the face at the same time.

One of the unexpected benefits of China having forced everyone to partner up with local companies. They'd be considerably harming their own companies and economy in the process.

When your country owns the majority of the popular Shanghai Disney park, do you call a boycott on it (via boycotting all things Disney)? When your country owns the majority of all value derived from local McDonald's franchises, do you call a boycott on that American brand? When your companies have partnership deals on manufacturing with GM, such that most Chinese-purchased GM vehicles are made domestically in China, do you call a boycott on those cars? And so on.

China feels a lot more free to play the boycott card in dealing with Japan and South Korea because there's a vast difference in the scale of the benefit in question. China only has a small trade surplus with Japan, of about ~$20b. But China is a very large export market for Japan, equal to 2.5% of Japan's economy in scale, so they can hammer Japan there (by contrast China's imports from the US are merely equivalent to 0.5% of the US economy). With the US, China has a $400b trade surplus that is at risk, the damage is overwhelmingly tilted at themselves in any boycott.

That didn't stop protestors from smashing up Japanese branded cars, which were all built in 51-49 JVs.

I have been asking around if anyone has seen tariff effects yet. So far very little. I have noticed that can soda pop prices have increased about ten cents a can after being stable most of this century. An acquaintance who owns a family farm said the bottom fell out of soybeans- one of the Big Three crops in the US. No one is buying so farmers are putting into storage.

My guess is the traditional Black Friday bargains wont look that good this year due to the tax-everything-from-China policy. Then maybe the US consumer could wake up. The rightwing fake news will blame it on Democrats of course.

My opinion is not a popular one but I'll reiterate-China will not overtake US at least for the next 100 years.

I think this trade war has been very telling, it showed the underlying fragility of China's boasting as a superpower.

All in all, I see USA recovering from the Trump blunder, and I believe that it will come out stronger than ever.

If anti-fragile by Taleb holds true, the US Gov is relatively anti-fragile to Russian or Chinese ones. Note that anti-fragility refers to the recoverability when exposed to unforseen circumstances. We see the US democratic system evolving and we will see a much stronger democratic process as a result.

On the other hand, things don't look good for Russia's economy along with China now facing an exodus of foreign investors and corporations nervous with China's new dictator.

Can you explain why?

China will not overtake US at least for the next 100 years.

On what metric? By GDP PPP, they've already passed us: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

They are a much larger country. At about 15k gdp per capita, they'll match our gdp... and that's just a solid middle-income country... not exceptional. As they start to exceed that, certainly that economic power will start to show itself globally.

For comparison, Taiwan and South Korea are at ~$30k. That would result in a gdp 2x as large as the US (about 40T).

China is in an extremely weak economic position. Their economy is large, but fragile and extremely vulnerable to external disruption. If you doubt me, realize that Chinese leadership also realizes this, which is why they created the One Belt One Road initiative to shore up that vulnerability.

That was a great piece, very insightful and enlightening!

We are running into a problem here: how do you kill a parasite without killing the host? The US is not an export economy, it produces very little tangible goods. Its a very insular economy that because of its superpower history has deeply spread its cancer cells across the global economy. How do you fight it?

A couple of points I’d like to add to your post.

Japan was able to endure a lost decade(s) due to immense social solidarity that few countries, perhaps even the US, possess.

China is known as an unusually fragile country in some ways due to its tendency to break up or devolve into Afghanistan-like warlordism.

A collapse of their economy, which seems probable at some point after 40 years of malinvestment, will crush any cohesion the CCP has built. To maintain it, they will of course try more authoritarian measures as they are doing now.

The bigger picture though is that they will shift this internal “civil war” outside the country in the form of a war against someone else. This solves the lack of manufacturing demand issue, deals with population issues (perhaps unloyal ethnic groups can be put on the front-lines), and would draw on a reservoir of nationalistic fever not really touched since WWII.

Steve Bannon has been clear that he believes WWIII will be a global, non-nuclear war between China and US. I used to think this would only be the case if Trump remained president, but now no matter who is elected, it still seems like a considerable chance.

> Japan was able to endure a lost decade(s) due to immense social solidarity that few countries, perhaps even the US, possess.

Your points make no sense. Civil war, countries breaking up etc. almost always happen only when people's basic needs (food, water, clothing, heat, electricity) are not being met. Even during its lost decade, Japan has been a top 25 country by per-capita income.

I am not a big fan of what’s happening in China but what do you expect them to do at this point? If they let the SV firms come and do business as usual, China is not going to last. Sure, it really doesn’t help that the govt is “investing” in questionable areas and aiding in tech “transfer”. But this whole notion of opening its doors wide open is never going to happen. A billion people effectively slaved through the past two decades and you expect them to just give that away? I think China has all the advantages against Trump. All that said, what this administration is doing to confront China is amateurish at best.

I think a heavy hand with China is absolutely needed. Trade and manufacturing from cheap, and some say abusive, labor practices have done nothing to improve human rights for China, but it's done wonders to prop up the current regime. It seems the only thing China will respond to is losing money. Who would've thought communists would've made such great capitalists.

> Trade and manufacturing from cheap, and some say abusive, labor practices have done nothing to improve human rights for China

Your comments were narrow — you only cited “human rights”, which yes, China is abysmal. But what about quality of life in general? My understanding is that QOL has gone up dramatically in China.

Seems like a more game theory correct response for China is to not copy Trump dollar for dollar, but maybe 50% of that, dollar for 50 cents.

Game theory has much more merit for a country like China given the (lack of) election cycle.

Donald Trump was right about one crucial thing. The leaders of most other nations just don't have any backbone.

Doesn't quite make sense, given that China has not shown any indication of backing down.

Don't forget, "an eye-for-an-eye leaves everybody blind". The Dale Carnegie approach to dispute resolution usually works better than the Yosemite Sam approach by my observation. I'm reluctant to bet on Sam. Hopefully this is a new and improved Sam.

I don't know if this is necessarily fair. The US is almost alone globally in having such a strong economy (right now), and many/most resource and manufacturing based economies are struggling.

The biggest problem with modern representative democracies is that they tend to be myopic.

China should just levy heavy duties on goods from states Trump won big, and the states where Republicans are in peril; while at the same time offering concessions to goods from states where Trump lost and Democrats are doing well.

Then it should start an advertising blitz to highlight how workers/farmers in the former states are suffering.

Advertising would be considered influencing elections, like Russia is claimed to have done. Trying to split the American people that openly would almost certainly backfire and push undecided voters to Trump. China is already, in some ways, doing some targeting specific voters like the soy bean tariffs. What are you proposing to get the middle class growing again?

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