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Comment by seppin | Hacker News Reader

It will never happen. What's the worst case scenario, China cuts off its markets completely from western digital products? They already have.

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I suppose that the worst case scenario is that the bond market gets involved. Ugly.

OTOH, maybe it's better to have a small conflict early rather than a large one later.

It's not early friend :(

Having said that, with the amount of Chinese wealth overseas I think there is a vested interest in keeping the status quo

The worst case scenario is that tariffs and other measures against China slow down their economy enough that their real-estate bubble pops. The results of that could easily be political.

Why are you confident that this isn't already "later"?

The worst for China is that we block them from our markets. Which Trump is trying to do

China’s economy is very dependent on foreign markets, both for exports of its manufactured goods and for acquiring the commodities needed for that. Their currency peg further limits their options. If they go too low commodities become unaffordable and if they go too high exports lose competitiveness.

And some manufacturing jobs come back to the U.S.

Not likely. When manufacturing comes back to the US it's because the company calculated the cost of a US-based automated factory was less than the shipping + tariffs on the foreign-produced goods. If manual labor jobs leave China, they will go to other low-cost countries like Malaysia, Vietnam, etc. or be lost forever. Even producing things in Mexico can cut your labor cost in half in comparison to producing here.

An automated factory in the US is more US jobs than a factory in China. It is a net positive even though you don't get all the jobs back.

More importantly it's a strategic positive. Productive capacity is defense capacity. Buying gewgaws, knickknacks, and flipflops from a strategic competitor is one thing, buying defense technology is another, and it's not the path to security.

It could mean more US jobs, but it could also mean fewer if you look more broadly.

Say US companies are having PCBs manufactured in China because that's currently the cheapest option. You cut off that option and US companies are forced use more expensive domestic options. The effects of that can ripple through US companies that directly or indirectly depend on PCBs, and the jobs lost throughout the economy could be greater than the jobs gained from the new automated factories.

The gains by US producers will be outweighed by losses to US consumers.

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

In addition, much of the gain will accrue to a smaller number of business owners, while the losses will be spread across the wider public.

Inevitably, those in control will manipulate the situation to their own advantage.

Exactly. They wouldn’t go from China to the US. They’d go from China to somewhere closer to the economic factors of China - India, Brazil, etc

Even worse for China is if they are blocked from both US and EU markets. Like the US, Europe has found its IP and technology appropriated by China, so with the right strategy Trump might convince EU leaders to also take a hard line against China. Unfortunately Trump's world view doesn't allow for such a strategy.

The big obstacle to this strategy isn't Trump's world view, it's the structure of the EU itself. They just haven't been able to agree on a hard line against any kind of Chinese trade abuses. This has been a problem since well before Trump was elected.

The worst case scenario for China is a complete decoupling of the US economy from China. If US manufacturing is going to remain offshore it should be diversified across many countries with similar values rather than centralized in one country with values completely contrary to those of the US.

All Chinese information technology companies should be banned from operating within the United States. Tick toc, weibo, baidu, etc. Also ban trading with their hardware companies.

Either a deal will be made or the existing relationship between the United States and China is finished.

> The worst case scenario for China is a complete decoupling of the US economy from China.

This is impossible, even if someone wanted to do this (which is like saying you want to commit suicide) they couldn't.

A complete 100% decoupling may be impossible but the US is not so reliant on China that a 90% decoupling could be considered suicide. It would take effort and would result in many lost dollars but the US could move its manufacturing out of China.

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