China announces 25% tariffs on $16B worth US goods
cnbc.com
cnbc.com
I don't think so. China has a huge amount of power over the US economy[1].
What Happens If China Called in Its Debt Holdings
China would not call in its debt all at once. If it did, the demand for the dollar would plummet. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone else's.
China could crash the American economy any time they want. It'd hurt them, but it'd hurt America a lot more. Especially because oil exporters would immediately switch to doing oil trade in Euros, which would make it exceptionally hard for the dollar to recover.
[1] https://www.thebalance.com/u-s-debt-to-china-how-much-does-i...
But their likely action, according to the article you linked, might actually help the US economy by making its exports more competitive:
> China would not call in its debt all at once. If it did, the demand for the dollar would plummet. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone else's.
> It's more likely that China would slowly begin selling off its Treasury holdings. Even when it just warns that it plans to do so, dollar demand starts to drop. That hurts China's competitiveness. As it raises its export prices, U.S. consumers would buy American products instead. China could only start this process if it further expands its exports to other Asian countries and increases domestic demand.
China only amassed so much US debt because it sells RMB to buy dollars to keep the RMB down and fuel exports. Reversing that policy would make Chinese exports less competitive on the world market. Ultimately, that could thwart the CCP's ambitions to create "national champions" by limiting them to their domestic market.
How does this affect the US any more than whether they measure oil volume in metric or not? It's not something that changes the real economy, it's just a matter of which ruler you're using. If the oil company has European employees, it still has to pay them in Euros. If the oil company has American employees, it still has to pay them in dollars. Likewise for customers. You have currency coming in, and if it's not what you need, you trade it for what you need.
If you owe the bank a billion dollars, you own the bank.
China would be hurt gravely.
It might affect the price of the next sale of Treasuries, but that's the limit of its impact.
China economy would suffer more.
https://voxeu.org/article/china-s-wto-entry-benefits-us-cons...
https://www.thebalancesmb.com/top-countries-exporting-to-the...
China's #1 customer is the US, by a large margin. Around half of their exports come here. China has far more to lose in a commercial war.
It'd hurt them, but it'd hurt America a lot more.
Nope. The only way they can hurt the US is by economic suicide (dumping all debt). And I mean total annihilation: they'd be shooting themselves. And the USD would suffer, true. But it would recover, US economy has far more autarky.
Meanwhile everything in the US is "made in china" and our entire manufacturing infrastructure and knowledge has deteriorated while China was slowly taking over...
But everyone knows GPU's are the key to economic dominance.
I think people get a distorted picture of that as an artifact of labeling rules. The US exports a lot of industrial equipment, for instance. Most of the economy does not involve the final step of constructing consumer products that leads to the label "made in..." on the shelf of Wal-Mart.
https://www.cnbc.com/2018/07/04/eu-could-agree-a-us-autos-ta...
They estimate 20 and 43 million died, if not caused by, then exacerbated by policies implemented under Mao.
"Since June 2015, all Wikipedias redirect HTTP requests to the corresponding HTTPS addresses, thereby making encryption mandatory for all users. As a result, Chinese censors cannot see which specific pages an individual is viewing, and therefore cannot block a specific subset of pages (such as Ai Weiwei or Tiananmen Square) as they did in past years. As a result, Beijing chose to block the whole Chinese Wikipedia"
https://www.independent.co.uk/news/world/asia/china-re-educa...
The estimated number of inmates keeps growing by the week. I think it's more accurate to call them re-education camps, but it's an issue that I wish more countries would push China on. I don't get why our (German) government spent so much time on negotiating the Liu Xiaobo issue instead.
On the other hand we Trumps incredible negotiating skills. Same ones he used to bring Kim Jong Un to heel and denuclearize North Korea.
In my estimation they seem a hell of a lot smarter than most other countries as well, I don't think they need or deserve help from third parties any longer.
Manufacturing goods is the root of an economy. China is the root, the US is a leaf.
Not any longer.
Once upon a time, agriculture was the root of an economy, but these things change. Manufacturing became the root. But it's not any more - now technology is.
You can literally be taught how to design a car in CAD. It can be done on your computer with a mouse. But to fabricate a car takes a life time of knowledge from multitudes of disciplines.
The proof is in the pudding. China is well known for replicating and ripping off patented designs in seconds because design is trivial once you know how to fabricate something.
The only reason why China can't produce an nvidia GPU is because they don't have the knowledge to fabricate it.
Granted, I don't have the stat for the entire world, so it might be bigger. Considering the US and EU are half of global GDP, I doubt it.
1) https://2016.trade.gov/publications/ita-newsletter/1010/serv...
Let's put your statement to the test then
Can China put tariffs on iPhones, Windows operating systems, Apple computers, Intel/AMD cpus, Nvidia GPUs?
1) Given the current balance of trade between the US and China, each $1 of retaliatory Chinese tariffs has a larger impact as a percentage of trade flow than each $1 of US tariffs.
2) The Chinese economy is much more nimble and diverse than the US, and – especially with government intervention – may have an easier time developing domestic alternatives to US goods.
On an unrelated note, it's interesting that they're implementing a tariff on recyclables. That could be a devastating blow to the already struggling US recycling market.
That doesn't benefit China. What you are saying is that China has less total trade that they can tariff than the US.
>2) The Chinese economy is much more nimble and diverse than the US, and – especially with government intervention – may have an easier time developing domestic alternatives to US goods.
Source? It's common knowledge that the US has the most largest and most diverse economy in the world.
I will concede (2) was not well expressed. I just find it much much easier to imagine – due to differences in labor forces, natural resources, environmental regulations, etc. – a suddenly growing Chinese motorcycle industry than, say, a resurgent US steel industry.
In the short term, the US could potentially get some concessions that it wants. However, things have already gotten further than most predicted, lots of people expected China to give Trump a few crumbs that didn't really matter but allow him to declare victory. Trump seems to not want that, so it might be too late to avoid damage.
Capital is not going to pass this growth up.
Given we're talking about the CCP, I suppose they could right their reverse pyramid using the same brutal means they used to create it. Say, by heavily pushing euthanasia options onto retired folks who can't care for themselves, with financial sanctions for their families if they refuse to comply.
edit: source for those who don't believe me: https://www.kaieteurnewsonline.com/2013/01/17/population-gro...
You may think that the west has a collective interest, but does Trump think so when he gets mad every time he sees a Mercedes car running down Fifth avenue?
http://fortune.com/2018/05/31/trump-mercedes-benz-german-car...
Also Canada is balking at how the US is abandoning NAFTA just so that it could use its larger size in trade negotiations.
The WTO is ineffective and broken. Based on prior precedent, if the US raised objections to the "China 2025" policy, the adjudication of the dispute will probably be finish sometime around 2030. In the past, the Chinese government has typically ignored adverse WTO rulings or dragged its feet until they were moot. IIRC, after all off that, only then will the WTO sanction tariffs. It's basically the definition of too little, too late.
If so, does anyone here know who's next in line after China?
ps: i'm already looking for a potential alternative to AliExpress to buy integrated circuits :)
My company is seriously hurting, where last year we have our best profits in decades, this last quarter was survival.
I hate money in politics, but I'm starting to think that big companies will be supporting politicians that will end these tariffs.
If a country is already producing something they can probably produce a little more: just work some overtime. To do anything more than a little though requires new manufacturing plants. Building them isn't hard, but it takes time: you risk that your expensive new plant opens the day this all resolves. If that happens you go bankrupt.
China has been sinking serious finances and engineering personnel into Africa for about 20 years. The Koreas have been trying too. Basically as soon as the Chinese middle class pushes up wages past the point where manufacturing is viable, they'll need a cheaper workforce.
Thanks to these long-view investments, they'll likely maintain control over manufacture for another few decades, at least.
India is already cooked. Despite their wage inequality, they're practically already post-manufacture. They've missed the boat.
Also, part of the reason the US dollar is the chief world trading currency and the US Treasury is considered the world's safest investment is open trade policy. This preferential place in the world financial system gives the US economy major advantages, including low interest rates.
Attacking the entire world at the same time is a really bad plan. The chance of wringing concessions from China would be much greater if the US would make common cause with the EU, Japan, etc. But the opposite is happening, the rest of the world is moving on w/o the US as we saw with TPP and the recent EU / Japan deal. Expect to see things like China start canceling deals w/ Boeing and inking new deals with Airbus.
Finally, there's a military dimension to this. China is raising tariffs on US oil at the same time it is saying it won't respect Trump's sanctions on Iran. Its unlikely anything would happen in the immediate term but if this situation persists its not far fetched to imagine things getting tense.
How deeply have you thought about the issue? I mean really, really thought about it. Trying to poke holes in your own deeply held beliefs, that kind of thinking.
“He who knows only his own side of the case knows little of that. His reasons may be good, and no one may have been able to refute them. But if he is equally unable to refute the reasons on the opposite side, if he does not so much as know what they are, he has no ground for preferring either opinion... Nor is it enough that he should hear the opinions of adversaries from his own teachers, presented as they state them, and accompanied by what they offer as refutations. He must be able to hear them from persons who actually believe them...he must know them in their most plausible and persuasive form.”
― John Stuart Mill, On Liberty
I can think of several ways things could play out in this trade war that would end in terrible results for the US, China, the whole world, and every different combination you can think of.
Can you think of even one scenario where the current status quo might produce bad results for even one nation? Or, do you truly believe that our current model (which objectively is still very much protectionist, in a variety of very complicated ways) happens to be designed absolutely perfectly to produce the optimum outcome for everyone under all scenarios that our infinitely complex and unpredictable world throws at us?
Personally, I believe a better approach is for everyone to get out of their ideological mental straight jackets and practice critical thinking, conversation, honesty, and cooperation skills. And if we can pull that off, then maybe then we can hold our respective political leaders to some sort of a similar standard.
China has been playing by their own set of rules from the rest of the world and it's time to end it.
Why is a trade deficit bad? Is there some reason the capital account surplus needs to flow out instead of in? What negative effect do you perceive the trade deficit as having in the economy?
Trade deficits are basically neutral. They fund the foreign investment in the US and purchases of US bonds by foreign governments.
The biggest worry over a trade deficit that I'd have are National Security implications due to the dependance on trade with that county. To explain why that would matter, consider the following:
- Because of the much lower wages and regulatory costs, manufacturing here in the U.S. seems to have been strangled in the last few decades and mostly moved over to China.
- This has caused a shift in the way the U.S. economy works, with cheap parts / goods from China being considered a given and a transition to businesses that depend on those cheap imports.
- Once our economy wholly depends on that overseas manufacturing in China, that gives China large leverage over us because we don't have the factories here in the U.S. anymore to pick up the slack if China stopped trading with us and instead found another buyer for their goods.
- MUCH more importantly though, is the affect this dependance on a foreign nation would have on us if China decided to do things that we find reprehensible in the world. Think about what Russia did with Crimea. Now imagine China doing something similar. With Russia we were able to slap strong economic sanctions on them... but if our economy is strongly intertwined that makes taking any strong stance against that nation extremely difficult. I don't think anyone wants their future and safety dependent on strangers from a different society that have different cultural values.
https://www.bloomberg.com/news/articles/2018-06-12/the-1-4-t...
Where are you going to get a good price for steel (and not only steel) when you add a 25% tariff on it when it comes from China? It'll lead to American products also being more expensive and it'll lead to a lower purchasing power in the US.
Other countries can also higher their prices for the US because why wouldn't they? The US isn't gonna get it cheaper from China... This leads to an endless price war that is not good for anyone.
Edit: also see thinkcontext's comment: https://news.ycombinator.com/item?id=17716933
Of course who knows if he will succeed. Ask me in 20 years what the real result was.
Yeah, China doesn't have to worry about elections.
I'm not squeamish about putting some pain on China, but who's to say they won't resume the same tactics later on?
As far as I can tell, as long as the economy runs super well and everybody trusts that it'll continue to do so, we are all able to collectively defer debt among ourselves to invest in augmenting our production capacity right now. In practice this means people trust that the work (or product) that they are doing (or delivering) now can be payed later, so they can wait to be paid. Meanwhile that work (or product) can be put to use _right now_ to increase production as a whole.
I'm certain someone with a more formal grasp of macroeconomics can explain this better.(Maybe even yourself, if that was a rhetorical question)
* many caps apply, and IMO foremost the accelerated consumption of natural resources is the most critical one. Eternally growing economies mean eternally accelerating change of the natural environment.