China Is Paying for Most of Trump's Trade War, Research Says
bloomberg.com
bloomberg.com
It seems that they completely omitted analyzing the impact of the retaliatory tariff's; which is odd - as that can often be a major reason not to impose a tariff in the first place.
Since we don't have parallel universes to play with we can never experiment to see which approach is better.
https://fred.stlouisfed.org/series/IMPCH
but the prices of those imports are falling.
https://fred.stlouisfed.org/series/CHNTOT
This can mean two things: either the Chinese are cutting prices to cope with tariffs (a benefit to the US), or Americans are displacing expensive Chinese goods for cheaper Chinese goods -- which means the demand elasticity is high and most of the burden goes to the Chinese producer, as explained by the diagrams in your study.
If a country slaps tariffs on your products it is very difficult not to retaliate. That's true in general and that's especially true in China regarding any foreign action that may be painted as unfair (For historical reasons this is always a big deal).
But they are paying a high price by losing market share. Profits are one thing, but revenues are a whole other. Revenues support jobs, higher revenues typically offer all sorts of "economy of scale" benefits, etc. If Chinese manufacturers lose access to their American consumers, they have a high price to pay
And also, buying fewer.
This may be a big deal if the amount of stopped exports is significant for a manufacturer.
The "green bits" are pumped into real estate across the US (not to mention Canada, the UK, and Auckland), inflating housing prices and making it harder for housing consumers to acquire property (kudos Vancouver for your foreign buyer tax!). Jobs are not created with these investment dollars.
Warren Buffet warned us of this: https://www.youtube.com/watch?v=bGo_NL-eclw (trade imbalances lead to serfdom)
In places that can build more housing, it is done. In places it can't be done, or the local citizens don't want it done, it is not. "Build, baby, build!" is just as ridiculous as "Drill, baby, drill!" [1] We work backwards from those two fundamental truths.
I have a feeling places like SF and NY have already tried this. Considering most of these foreign investors are most interested in these two cities over lets say Nebraska, it's hard to see how NY just needs to "build more supply" is a solution.
> If we had policies that encouraged always building
We have those in Australia, it's called negative gearing. We also have the most expensive houses when compared to average income and our cities have taken your advice and started to build up at rapid paces. Still hasn't worked.
The Aus government is now suggesting we lower our immigration cap from 1% of total pop yearly so maybe that will help.
Isn't it just a strange (legal) tax loophole which enough people take advantage of that it's difficult to get rid of politically?
Also there are other forms of tax besides property tax, so governments don’t need expensive property to fund their services.
Indeed. That was basically post-war US economic policy in a nutshell. The worrying about reducing the trade deficit is a purely political argument. Trump is simply the first person in power to actually believe the nuttery.
The impression that that readers of say the New York Times would be left with at this point is that Trump stupidly imposed tariffs that only hit American consumers, whereas China brilliantly targetted tariffs right at Trump's base. This appears to be the precise opposite of the truth: the tariffs on China are mostly affecting China, and whilst the overall impact of the soy tariff isn't clear it was definitely the result of it being one of the few things the US exported to China in significant amounts rather than of ingenious Chinese planning.
BUT there is a whole other dynamic attached to tariffs. I.e. the foreign producer lowering it's prices to not lose important clients.
It's pushing companies to move their supply chains out of China, as few are expecting that this is a short-term trade conflict.[1] This will go on for decades in varying forms.
The US wins in all scenarios from that effect. Some limited manufacturing comes back to the US; win. Some manufacturing moves to Mexico, whose labor costs are now often cheaper than China's; win. Some manufacturing moves to China's Asian rivals with cheaper labor costs, such as Vietnam; win. The US will push half a trillion dollars into Vietnam via a trade deficit over the next decade, that they can use to develop with. Every dollar of supply chain the US pushes out of China and into smaller neighboring rivals, is a win for the US strategically. The goal is to dilute China and redistribute trade into numerous other Asian nations that aren't a superpower threat. This isn't just a trade conflict, it's the start of a long-term political contest over whether China is going to acquire hegemony over Asia - something only China has an interest in, which leaves the US with a dozen regional allies against that outcome.
The strongest results will be the long-term supply chain shift that will gradually take place over a decade or more. The longer the US keeps up the pressure the better that outcome.
[1] https://www.bloomberg.com/news/articles/2018-10-23/companies...
I definitely didn't think imposing tariffs was a good idea, but once it was explained that a lot of other countries (including Canada) impose a lot of tariffs on us, and that this action was an attempt to level the playing field, it suddenly seemed like it wasn't such a stupid idea after all, and it may actually be working to the benefit of the U.S.
You're doubling the trade surplus. It was $375 billion for 2017. Total trade was $635 billion.
China's trade surplus with the US for 2018 is running slightly higher, it'll probably come in near $410b. Mostly due to the US consumer and economy being pretty revved up this year.
You forget that in China, you have a dictator who uses violence and fear to keep people in check. They are stuck with his foreign policy abilities, which many analysts will conclude, Xi fucking sucks, including those around him who aren't happy about him being a dictator and praising Mao (has anything ever good come out of ppl who idolize Mao?)
The US is on it's way to prosecuting a Russian KGB asset who has been compromised and being blackmailed to willfully corrupt in order to launder the billions that Putin and his buddies stole from his own fucking country. Thankfully, the US president doesn't have absolute power, cannot stay in power indefinitely, is not immune from the institutions that the American forefathers have created to keep the President in check, a continuity in all the core national security organs such as the CIA and NSA which prevents somebody like Xi from ever pulling the same shit, and cannot just roll over people with tanks and then make a stupid song about how much people love the Tianmen square.
In China, the trade war is having a far more profound impact on society and economy but you will never hear this and neither will the vast majority of citizens in China because information cannot flow freely and it's censored.
If China seems invulnerable and powerful, it's only because they specifically crafted their image in that manner. The fact is China is dysfunctional by and large and anyone who had exposure to their political system knows it can't continue no matter how many active measures they take.
China has become an industrial powerhouse when some modicum of economic liberty was admitted by Deng Xiaoping. Dictatorship stifles internal economic competition, and makes the economy less and less efficient.
If Mao times look too drastic a comparison, you can compare to the USSR, which was also, well, nuanced, and had leaders stat stayed at power for decades. How well did it fare against the US?
Well successful to the republicans and most of the independents. This is politics: it should be assumed that Democrat will oppose anything Trump does no matter how good it is - just like republicans opposed everything Obama did.
No. You are connecting two separate ideas to say that I agree with you. I did not agree. I don't know who will last longer in the trade war. I do know that throughout history, the US has witnessed dictators come and go for the most part.
> Your gripe seems to be with what a horrible place China is.
No. Again, you are trying to twist my words into a "China sucks". Nowhere did I make such claim, I simply highlighted structural problems within China that suggests fragility of the Party vs the anti-fragile nature of US democracy. I used Trump as a good example of how the system is able to flush the turd, not the turd flushing the system. Please don't try to suggest that I'm comparing China to a toilet, I think it's citizens realize the full depth of the country they live in but out of fear cannot speak out in a manner that contradicts the governments view.
> That might be true. Having lived there and done business there I think it's more nuanced than you're making it out to be.
again this isn't the case of "china sucks" and im not saying you can't have a good time or meet good people in China which you've certainly claimed in your anecdote. It certainly is a surprise to me as I live in a highly concentrated neighborhood of Mainland Chinese folks and I have never ever heard them talk positively as a good place to do business.
> But let's say it really is that bad. Does that win a trade war before the next US elections in 2 years when US consumers might already be frustrated with higher prices?
Again, you are trying to join separate ideas that "China could be bad", "trade war", "consumer price index in 2 years" supports your main argument which is "China cannot suck because it will win the trade war".
Not sure what your issue here is. My guess is as good as yours about the future. I just tried my best to present my opinion, which cannot be taken as the truth and neither can yours. Nothing is solved. Just two HN'ers slugging it out.
We couldn't talk about Xi the way we could talk about Trump because there isn't a way to honestly discuss it without allowing for criticism, or the idea that there's more than the image cultivated by the state. I didn't want to risk anyone's safety if the wrong person heard the wrong thing.
It's jarring to have this happen in real life and realize you suddenly can't have a fulfilling conversation with the other person. The chilling effect is real, and real enough that I'm not sure if I should be posting this, vague as it is.
Of course, I can speak Mandarin so perhaps that’s why they felt comfortable talking to me.
I’m also of Mexican descent, so that might be another factor.
The irony is that I feel more comfortable using a throwaway alt on HN for this comment because I’m afraid of trolls stalking me on my real account for saying nice things about my experiences in China.
I miss the days when only half the country was consumed with insane conspiracy theories.
The watergate journalist wrote a book on him. The guy who prosecuted watergate is looking at finances, money laundering specifically.
I'm not saying this is a 100% thing but it's a more of a case of 99.99999% that current president has been laundering money for the Russian mob since Taj Mahal days. We also see a curious case of a man who was so broke no bank in the world would give him relief....except Russian banks....controlled by the Russian _____ .
I will leave that as a blank for you to complete as an easy exercise.
China is “paying for the war” or “losing” in the sense that more of their soldiers are dying (more increase in cost), but at the end of the day no one is better of in the middle of a war than in peace and soldiers are dying on both sides. Also, at the end of it they may end up winning the war even if they do have larger losses along the way.
Unlike in war, the tariff 'war' casualties is either money being transferred between countries in different direction than per the usual, or more money paid as import/export duties to the governments.
No money is magically destroyed; instead it changes hands - between the private sector and the government. Now the supposed "dying soldiers" is just more money to fund infrastructure, or invest in company's growth.
That aside, I believe the most important outcome will be diversification of supply providers, as discussed upthread. Right now China has unhealthy near-monopoly on certain key goods and components, especially the cheaper ones, and thus is able to hold the low-to-mid earning americans hostage via the implicit threat of price hikes.
Once diversification progresses sufficiently - i.e., a significant chunk of the sourcing and manufacturing moves out of China and into other countries, like India, Vietnam etc. - the USA will be able to negotiate trade with China on much more equal and equitable terms.
The diversification of supply and manufacturing will strengthen all the sides.
That is, consumers spend the same amount of money, but get fewer goods in return. This is an economic loss for the consumers.
Put another way, the "no money is magically destroyed; instead it changes hands - between the private sector and the government" argument taken to the obvious limit would imply that there is no problem with the government just confiscating everything. While some people do think that, the empirical evidence seems to be that this is a bad idea: standards of living drop a good bit when this happens. So on its own this argument is not sufficient to prove that a policy is not causing hits to standards of living.
I am unhappy you condensed my points down to something akin "taxation is theft mkay".
On the point of taxation (of which import/export tariffs are a form of), I prefer as little as practical, and consider it a proper thing to do in general. It's matter of degree, to be decided via normal democratic processes.
However the gist of my post was not immediate monetary costs or returns; instead it's about a long-term balance of strengths in the trade exchanges. Right now certain sectors of american economy are very reliant on single source of resources, components and complete products. This gives the source - China - an undue influence on the prices. Fixing that problem by diversifying sourcing & manufacturing will bring long-term prosperity to americans.
Given the points raised upthread - that the tariffs seem to burden chinese more than american economy - it's more of a game of chicken than a shooting war. The first one to blink ends up picking up the tab - in case of this tariff 'war' that'll mean returning to the bargaining table, ready to make some concessions.
I was definitely not aiming at that, and I'm sorry if that's how my comment came across. I was trying to point out that saying "this just moves money around; money is not created or destroyed" is not a logical argument for anything. The real issue is what happens with actual goods or services as a result of the new distribution of money.
I largely agree with you on the long-term implications here, for what it's worth.
> in case of this tariff 'war' that'll mean returning to the bargaining table, ready to make some concessions
That's one plausible outcome, yes. Another one, though, is that we just keep on as we are, with somewhat reduced standards of living in the US in exchange for a stronger geopolitical position. This might well be worth it, but I think it's important to be clear that this is the real tradeoff we're making here.
I'm sure there is a heck of a lot less reputation management and astroturfing here. That is probably down to the size of this forum though.
this is how it works, right Trump?
I read a few articles... this seems the best. None seemed to make the same connection.
https://www.google.com.au/amp/s/www.wired.com/story/african-...