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Comment by tw04 | Hacker News Reader

I think the US has proven that numbers on a spreadsheet mean literally nothing if you've got a strong enough military and control enough of the economic power of the globe. What are we going to do if they decide they're done being the US's manufacturing state? Like, if they literally halted all shipments to the US overnight. It would take us YEARS to rebuild in the US, and in the meantime people would be screaming bloody murder over here (I'm sure Walmart and Target would be thrilled to have bare shelves). It would collapse our economy as well.

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if they decide they're done being the US's manufacturing state?

What you're suggesting is essentially reverse-sanctions, and that would be a foolish move.

The economic "essentials" based on innate human needs are water, food, shelter (housing and clothes), and - in today's world - energy. The US has plenty of resources, space, and people to produce all four of those at home.

If China decided to shut down all manufacturing such that we would stop receiving all of our consumptive goods, electronics, etc... The US would take a hard look at what it really needs as a people and then decide to load balance its needs across both itself and other countries.

What would need rebuilt is all the infrastructure for automating supply chains, and such an aggressive economic move would be highly likely to unite the American people in a singular cause against their new economic foe.

I agree with you in every paragraph but the last and maybe even then. While the economy is obviously different than it was 70 years ago, what made the US so dominant in WWII was our ability to design and build things. In four years, we built something like 300,000 airplanes, 10,000 ships, an atomic bomb, etc.

I'm reading A World at Arms (https://www.amazon.com/World-Arms-Global-History-War/dp/0521...) at the moment, and what has struck me most so far is what a mistake the Axis made underestimating American manufacturing mobilization.

Today, I'm not sure if we could ramp up actual production as quickly.

An interesting story from that time period - German intelligence was reporting that the US had a locomotive that weighed 1.2 million pounds (including the tender) and could pull a 3,600 ton (US) consist of railcars up a 1.14% grade, and also run at 80 mph on flat land. This was the Union Pacific articulated Big Boy. And Hitler didn't believe such an engine was possible, much less that the UP had 25 of them in service. So he directed that the forecasts of American transportation exclude these "absurd" numbers.

http://www.steamlocomotive.com/bigboy/

The US has plenty of resources, space, and people to produce all three of those at home.

Eventually. Not immediately. Factories and supply chains and aren't built over night.

The US would take a hard look at what it really needs as a people

Or, much more likely, its people would flood the streets in anger and demand a return to normalcy.

In the mean time, black markets and therefore crime would explode.

Huge swaths of the economy, depending on Chinese imports in their supply chain, would cease to function. Unemployment would surge, throwing even more angry bodies onto the streets and even more desperate bellies into the Jail cells.

Fringe political movements would capitalize and the US would face an existential threat to its democratic heritage.

Skilled workers and those with large amounts of capital would quietly leave for greener pastures in the EU and stable parts of South America and Asia, making recovery that much more difficult.

At least, that's what typically happens when trade wars create extreme shortages of key goods and services (we have a lot of data points on this). Perhaps the USA is exceptional, but I wouldn't count on it...

> Factories and supply chains and aren't built over night.

The US also has multiple trade partners around the world. China does not hold a monopoly on US imports. If anything, it's more of a final assembly point for many things, and the US could do more business with southeast Asia.

On top of that, the usual workings of supply and demand would make it quite profitable to divert $STUFF from another economy to the US. Heck, if China still traded any goods the rest of the world at all, firms in the rest of the world could just sell us back many of the exact same goods, with a competitive markup for the indirection, unless and until China puts a complete stranglehold on all its trading partners' deals with the US.

It'd be bad, but at worst it'd be more like 2008 bad than 1930s bad. People did "flood the streets" a little back then, of course (our friends at Occupy Wall Street). It was pretty easy to ignore, though.

Now, if we want to talk of the disruptions associated with an outright war, that's another matter, but we'll also have to worry about the war, which will likely be far worse.

This all is potential, but also seems to be based purely on your own opinion. Are you referencing a scenario that already happened in a different country?

Yes. Two give the two most relevant and potent examples:

ABCD in Japan prior to ww2.

Chile prior to Pinochet. Chile is agriculturally rich but suffered food shortages none the less.

Neither is exactly this scenario but there are enough similarities to suggest likely outcomes. People don't typically "toughen up and deal with" severe and abrupt changes to availability of common household items, and even countries with the potential for self sufficiency often have painful transitional periods.

In many of our lifetimes, see the Oil crisis in the 1970s when the ME embargoed the west. Go read up on that, it worked out well for the west and bad for the ME. People were pissed about having to wait in line for gas...for awhile...and carter lost re-election, but there were no angry people in the streets.

So ya, we do toughen up, and no, china doesn't have much leverage over the west at all, even less than the Middle East.

If China reverse-sanctioned the US, a significant portion of the Chinese population would fall into extreme poverty and starve. The Yuan would likely plummet, China would almost certainly face a national default, and it would risk a revolt against the current regime.

Meanwhile, within months, the US would have all its cheap shit imported from Thailand, Vietnam, Mexico--even Japan and Korea. We have enough retail reserves that aside from slight price increases on some inessential goods for a few months, likely nothing else would happen.

How can the rest of the world just pick up China's manufacturing capacity in a few months?

Because a large portion of the important and high-value stuff is not actually made in China, is is just assembled there. Your iPhone might be "made in China", but most of the parts that make it an iPhone are made in other countries. If you were to consider the things that we think of as being essential then the fraction of things that are made in China becomes even smaller. Yes, we would need to do without cheap bras and Levis for a short while, and the strategic plastic shit stockpile would dwindle, but the nation would somehow get through these dark days.

China, OTOH, would likely never recover from having all of its revenue generating export goods evaporate to other countries in SE Asia and elsewhere.

> What would need rebuilt is all the infrastructure for automating supply chains, and such an aggressive economic move would be highly likely to unite the American people in a singular cause against their new economic foe

i want to argue the opposing side of this a little. i would argue that present-day America is actually extremely difficult to unite.

i don't believe the imagined "aggressive economic move" would unite the American people. "the American people" is just a diverse bunch of competing economic actors and political interest groups operating inside US geographical boundaries.

WWII is the last thing that really united "the American people" to the extent that you describe, and that was characterized by direct acts of war resulting in human fatalities (e.g. u-boats sinking ships in the Atlantic, Pearl Harbor, bombing raids on our British ally, etc).

a purely economic move like that is a lot less likely to unite the American people than an actual military attack. what's more, today, even real American human fatalities don't unite America. when the San Bernardino attacks happened, half the country was arguing for more gun control laws and the other half was screaming "Islamic fundamentalism." going to a larger event, did even 9/11 unite "the American people" in a way comparable to WWII? if it did, it didn't last long.

when i try to understand why, say, Apple, does its manufacturing in China, i read from various sources that it's not just cheaper labor, but also the availability of a very large number of engineers on short notice and the ability to build factories way, way faster -- no bureaucratic red tape and far fewer environmental reviews and roadblocks. i don't see a way to match that in the US system. a lot of people really love environmental protection laws.

i don't see where something as low-intensity and undramatic as "an aggressive economic move" by China would be enough to unite the people in an effort to repeal environmental laws and motivate sociology and psychology majors switch to EE and CS.

As an example to back up what you are saying, when the Middle East decided to embargo the west on oil, the west focused heavily on fuel efficiency and developing new oil resources, to the point that oil went bust for the most of the 80s and the Middle East hurt badly.

There are always options if the country is rich enough. The USA could redevelop manufacturing relatively quickly or even lean more heavily on Bangladesh, India, and Vietnam. All china would get out of it are newly developed competitors.

>What are we going to do if they decide they're done being the US's manufacturing state?

If China is done being the world's manufacturing state then inflation is going to go crazy and we'll experience something a bit like what we did with the 1973 oil crisis, except with manufactured goods. It would be a good time to set up a repairs shop.

If China is just done being "America's manufacturing state" then we'll see inflation but probably not as extreme - goods could still be shipped to "neutral" states and then shipped on.

In all likelihood if such a breakdown does occur it will form part of a tit-for-tat including shipping blockades, sanctions and proxy wars.

But it would collapse China's economy too if it were done overnight.

The number is 18%.

That's how much of China's GDP is dependent on exports to the US.

A significant paycut as it were, but hardly fatal.

(If they were to stop exporting to us, it would hardly be a fatal blow to us either. There is just not as much there in terms of percentage of GDP as everyone seems to think.)

They would have to cut off trade to much of the west as well, otherwise exports would simply be redirected. They could do USA did with Iran, and refuse to trade with anyone hat trades with the USA, but that is a losing proposition for them.

Basically, china cuti off trade with the USA would be a North Korea style action.

Does that include all the value created locally in order to be able to make those exports? Like food that people eat, vehicles that they have to drive, etc., That much drop in economic activity will surely trigger much worse outlook than you are alluding to.

No, not directly, but indirectly people would be afraid of further radical policy changes by China. Investors would move their money out of China. Or at least, that's what I'd do.

The US is 4% of the world. With other countries developing rich consuming middle classes, that might not be that certain, especially in the future.

4% by population of course, which is what you meant, but I think 40% of the world by wealth. While I understand what you mean by saying there are new middle classes being created from the other 96%, it seems like, absent another even more catastrophic economic screwup than we put ourselves through 8 years ago, American domination of the world market isn't going anywhere any time soon.

In terms of GDP, US is about 20-25% of the globe. It is pretty significant, but I won't go too far to say it has domination.

Well said. Domination isn't the right word; perhaps "importance to" rather than "domination of".

Well, let's hope it does. Other people need to get rich too.

US debt to GDP is not really different than other developed economies:

http://www.tradingeconomics.com/country-list/government-debt...

The question of which country loses more if the US and China stop trading probably doesn't need to be answered; both countries would lose so much that it won't happen abruptly.

Right, which is why everyone let the US slip by when the economy collapsed. If it were some African nation that had their entire housing market collapse, you really think the rest of the world would've just let it slide?

It's no different with China. The world can't afford to let their economy collapse, and so they won't. This isn't Russia we're talking about here, who for all intents and purposes is completely isolated outside of providing arms to the world, space launching (although that reliance is quickly going away), and cheap natural gas to Europe. If/when their economy collapses again, it will have almost no effect on the western world. If China collapses, we're all in trouble.

What are some concrete examples of Right, which is why everyone let the US slip by when the economy collapsed. happening?

My memory is that other parts of the world had their own economic problems at the same time as the US housing crisis and were paying the US government for the privilege of owning US treasury bonds (rates were 0 ish for quite a while).

On the other side of it, shrugging does seem to have been the standard external response to the currency crisis in Zimbabwe.

I dunno, the fact we literally manufactured a trillion dollars out of thin air and the dollar wasn't devalued? Can you cite any other nation doing similar with similar results? The mere SUGGESTION of financial instability as a result of Brexit has ruined the British pound.

*ruined is a bit strong, but it had a serious impact

When we were doing QE, everyone else was as well, so the dollar didn't fall much, but is still worth less. It was probably the right course of action, however, as it was managed well.

> US debt to GDP is not really different than other developed economies

Yes, the other developed economies which have largely given up on developing and embraced stagnation instead. It's not the greatest situation, especially if you're unfortunate enough to be young.

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