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Comment by joezydeco | Hacker News Reader

China can outlast the US on this one. Next up, let's crash the price of oil and flip off the Iran sanctions:

https://www.cnbc.com/2019/08/05/brent-and-wti-price-could-cr...

I don't know about that. What makes China's political situation difficult is that the control and censorship they impose on their people is easier to justify when the economic fortunes of the average Chinese person has risen for decades. "Why complain? Life is getting better!"

Authoritarianism is a lot less appealing when the ruling party doesn't deliver.

In the US there is a sense that the political system is certainly influenced by corporations, lobbying groups, HNI, foreign actors, etc. but generally we are to blame for electing idiots as president. We did this to ourselves.

I think the trade balance is too skewed in favor of the US. It will be painful for both sides, but we have a lot more goods we can tariff than they can.

Of course, they could also dump their US treasuries, but it would be a pyrrhic victory for China. They would hurt themselves too much in the process.

The US Fed would simply buy the dumped treasuries as an emergency measure.

The Fed already owns twice as many treasuries as does China, so it could also just pause the balance sheet reduction program.

It wouldn't dramatically hurt the US long term.

That's a bold statement. We're talking about over $1tn in treasuries. While the US debt is already around $22tn, that's a pretty huge weight

But what happens to all that cash they would use to buy the treasuries with? Where is that $1.1 trillion going to flow into?

Whoever sells the treasuries gets the money. That's how buying and selling works.

You understand that China is unlikely to just leave the cash sitting around, aren't you? That money will probably end up being dumped on Forex crashing the US dollar.

Chinese currency is artificially valued and its foreign value depends on their forex exchange and large US dollar reserves. If china dumps us dollars it will devalue the dollar, and it will destroy the chinese currency beyond saving.

Thats not a one sided situation, that's a situation far more likely to destroy the chinese than the US.

They're using their USD to buoy their crashing currency, not to dump out of spite to try to crash the USD.

they can sell off more of the real estate they hoard and substantially effect that market again

I don't think that would work. There's a huge amount of pent-up demand in many markets for real estate, with buyers just waiting for prices to slightly drop. I'm pretty confident the amount of real estate held by China that they could force sale of would be snapped up by local markets without issue.

Any day, I will take the bet on USA.

China would have a lot more room to move were the Hong Kong protests were not going on. The big problem they face is putting down the protests violently could lead towards pronouncements of them violating the agreement for it being held over. Which will lead toward countries people openly selling heavy weapons to Taiwan and maybe even building bases.

No one is going to build a base in Taiwan. This is not 1985. China is way too powerful and advanced militarily now for the US to provoke them so directly.

I really doubt China cares a bit about the agreement signed with the UK. They are more concerned alienating HK people which is hard not to do unless they put the integration with the mainland on hold for a few good years.

How much impact have the Hong Kong protest had on trade? If I had to my guess, exactly zero.

And more weapons to Taiwan because of that? What for?

Maybe I'm being cynic but I don't see the needle moving here.

Hong Kong is China's Crimea, nobody outside of China is going to go to war over it.

Would be funny to see Iran get really snug with China like Pakistan has... I don't think Iran would mind at all and neither would China... and would pretty much destroy the US's control over Iran's economy.

What do you think the result of that would be for Iran?

(not saying the result would be "right", just what it would be).

China can outlast the US on this one.

I'd take that bet!

> China can outlast the US on this one.

So let's get the story so far. The US put tariffs on China. People complain about this because it's "hurting US importers" and "costing more to American consumers" etc. But it also puts the hurt on China because now their goods are less competitive, and paying 5% more than China to buy manufactured goods from Latin America or some other part of Asia hurts the US a little but hurts China a lot.

So China responds by devaluing their currency. Now their prices are competitive again, even with the tariffs, but the result is that now the thing you used to buy from China for $100 that was momentarily $110 (so that you bought it from Mexico for $105) is now back to $100. That gets people buying from China again, and paying the original prices, only now of the $100 China used to get, they only get $90 and the US treasury gets $10.

Meanwhile this allows the US to raise the tariffs even more for the same cost to the American consumer. Or just leave them where they are forever and enjoy the 10% China has effectively volunteered to discount its goods by.

> Next up, let's crash the price of oil and flip off the Iran sanctions

Then OPEC cuts production because they're a cartel and all they need is to keep oil competitive with renewables, not have it cost significantly less than that. But it may come down some and then Trump gets voter support from lower gas prices. And the lower oil prices allow oil to better compete with the batteries and solar panels that are manufactured in China, causing China to lose business. And China is on the "climate change is especially bad for this country" list, so that's not great for them either. Meanwhile it gives more cover for Trump to escalate the trade war in retaliation for violating the Iran sanctions. Not really the biggest win for China.

The entire European Union along with China ignoring US sanctions will make the US re-evaluate its hegemonic ideology and interests

To get to a more collaborative world, this would have to happen. The risk being that it could lead to a less collaborative world if the US is seen as a toothless world police.

With the EU coming into its own and willing to take a near term economic hit to advance its goals, and China being forced to consider taking an economic hit to maintain its goals, it seems like this is possible now and into 2020.

With the EU coming into its own

In what possible world is the EU 'coming into its own'? It's losing its second largest contributor and still relies on the US to defend its eastern states from Russia.

EDIT: to be clear I would love for the EU to provide a credible deterrence, its in the interest of global stability and peace. But the fact remains it can't.

Coming. Not “is already totally independent”

EU has its own issues such as Brexit, lack of fiscal union, Greece, Italy debt, unemployment, slow growth, no immigration policy, no common foreign policy etc. When you talk about EU you really talk about 27 member states not some kind of United States of Europe.

The EU it's not really in the mood of taking short term hits unless is threatened(i.e with tariffs).

Not to mention that it supports Trump stance on China as it suffers the same unfair treatment(i.e IP theft, closed markets, dumping etc). If US gets a good deal I'm pretty sure EU will ask and get a very similar one.

There is also the internal market and that China is threatening it's diplomacy with some eastern countries bribery.

Europe already benefits from lowered tariff and relaxed ownership rules that China made so far. The only thing that China seemed to be willing to entertain further is large purchase of US products, which means less purchase from everyone else. So Europe and other US allies like Canada and Australia should actually fear a US/China deal. There is a reason why this negotiation is bilateral -- in a multilateral setting you can not demand China to just buy US.

I really doubt that the US can say it got the deal of the century if China buys large quantities american beef or soybean. What everyone wants is open markets. No dumping sponsored by chinese government, enforcement of IP protection laws and many other things would ideally be part of the deal but I believe the market access is the primary issue and a deal could be stroke with that alone. The demand to make large purchase was to stop further tariffs and I'm not surprised China didn't fell for it.

It was using the Euro that really Hurt Greece and other poorer eu members

The same could be said that US dollar hurts the poorer US states. Truth is that you need fiscal union if you use a common currency otherwise you can't make everybody happy.

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