Trade War with China

[xiabonan]

I have been following coverage of the trade war by Chinese media (especially official media) since Trump first introduced the tariffs, and I couldn't help but get the feeling that Chinese government and leadership is becoming increasingly (though perhaps also painfully) accepting the fact that there is a trade war and it's not going anywhere any time soon.

The tone of these reports and coverage is becoming increasingly automatic and mechanical, or "cold". It's becoming less and less hopeful and inviting in terms of asking the US side for a resolution through negotiation.

I'm not sure when was the point of no return, but we're certainly long past that point. From here onwards it's not going to be easy to back down. Honestly I don't think China should, as it could really be an opportunity if used right. New economic data shows consumption contributed to about 75% of quarterly growth, and the role of export continue to slide. By now I think China must have at least mentally prepared for the US to slap tariffs on all Chinese exports to the US. The question then is, are American consumers and Trump gang prepared?

 

[tidalwave]

Biggest issue is Trump and his team consider trade war with China a "Free Play" meaning it launches trade war and later they find out it doesn't work then they climb back down. Essentially, they take free shot at China. That's why Trump love tariffs, he can always deescalate if needed but he will swing few punches first to see how it goes.
How can China punish this type of behavior even if trade war dropped later on?

 

[Anlsvrthng]

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US imported 505 billion $ from China, China imported 129 billion from US --- 2017 data

USA exported 1320 billion to the world , and the world exported 2120 to the USA in 2016.

It gives a trade imbalance of 0.75 trillion, but with services it drop to 0.
5 trillion.

2016 GDP of the US is 18.57 trillion, means the trade imbalance REDUCED the US GDP by 2.6%.

USA gives about the quarter of the world GDP , but absorbing around the half-two third of the world trade deficit.

Interestingly, the political /economical elite is against the Trump trade policy:

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If you type into the google "Trump trade policy" practically all result will be negative regarding of these issues.

If you type the "south Chinese sea china" into google then the same sources showing negative comments about this.

It means the same political/economical group who interested in the "containment of aggression" is the same who call for to stop melding with the international trade of corporations.

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[xiabonan]

Biggest issue is Trump and his team consider trade war with China a "Free Play" meaning it launches trade war and later they find out it doesn't work then they climb back down. Essentially, they take free shot at China. That's why Trump love tariffs, he can always deescalate if needed but he will swing few punches first to see how it goes.
How can China punish this type of behavior even if trade war dropped later on?

At the point it's no longer free play, this trade war has become Trump's biggest political asset. Almost all his other policies failed or attracted huge backfire. If he backs down on trade it basically meant the end of his political life and it will deal a huge blow to the GOP as well.

 

[xiabonan]

The other thing about a trade war is that there's a limit to how much damage one side can deal to the other side. You can't indefinitely add tariffs because at one point there will just be no exports.

So, if it drags long enough, a new equilibrium will emerge after the pain has been suffered and absorbed.

The meaning of this is, tariffs work best when they're not implemented. If you can't get your opponent, in this case China, to yield before the tariffs are implemented or shortly after implementation, the longer it drags the more those affected industries will be able adjust themselves to the new environment.

 

[Anlsvrthng]

The other thing about a trade war is that there's a limit to how much damage one side can deal to the other side. You can't indefinitely add tariffs because at one point there will just be no exports.

So, if it drags long enough, a new equilibrium will emerge after the pain has been suffered and absorbed.

The meaning of this is, tariffs work best when they're not implemented. If you can't get your opponent, in this case China, to yield before the tariffs are implemented or shortly after implementation, the longer it drags the more those affected industries will be able adjust themselves to the new environment.

US import/export. See the 1920 peak prior of the great depression.
That was the reason why Smoot–Hawley failed.

 

[Jura The idiot]

now I read
China plans additional tariffs on 5,207 items of U.S. products
Xinhua| 2018-08-03 22:54:34

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China on Friday announced its decision to impose additional tariffs of four different rates on 5,207 items of imported U.S. products worth 60 billion U.S. dollars.

The rates of additional tariffs on such products will be 25 percent, 20 percent, 10 percent, and 5 percent, according to the Customs Tariff Commission of the State Council.

"China was forced to take the countermeasures" in response to a U.S. plan to raise tariffs to be imposed on 200 billion dollars of Chinese goods from 10 percent to 25 percent, the commission said in a statement.

"If the United States act willfully and puts its additional tariff measures into effect, China will instantly implement such tariff measures," the commission said.

"The United States violated consensuses reached by multiple bilateral negotiations and once again unilaterally escalated trade frictions," the commission said, noting that the move severely violated World Trade Organization rules, hurt the global industrial chain and free trade mechanism, substantially damaged the interests of China and the Chinese people, and will also have negative impacts on the economic development of the world including the United States.

China has taken the countermeasures to safeguard its own legitimate rights and interests and to curb the escalation of trade frictions. Meanwhile, the measures are expected to lower the impact on the domestic production and people's lives as much as possible, it said.

After implementing the countermeasures, authorities will evaluate the effects together with all sectors of society and strive to minimize the influence on production and lives, the statement said.

"China promises that it will continue to unswervingly push forward reform and opening-up based on established arrangements and pace, firmly support economic globalization, firmly safeguard free trade rules and multilateral trade mechanisms to realize joint development and share prosperity with all countries that pursue progress," the commission said.

Full lists of U.S. products subject to different levels of additional tariffs are available on the website of the Ministry of Finance.

 

[Orthan]

Larry kudlow, director of the National Economic Council, had tough words for china. He warns china not to underestimate the US stance on trade, says that china´s 60 billion dolar retaliation against the US is weak, and talked about china´s currency.

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IMO this means that the trade war still has no end in the horizon.

 

[tidalwave]

Instead of tariff,China can be creative in taxing US companies at China market.

Like 50% of all US companies profits earned at China. That should offset alot of tariff US placed on Chinese goods

 

[tidalwave]

Larry kudlow, director of the National Economic Council, had tough words for china. He warns china not to underestimate the US stance on trade, says that china´s 60 billion dolar retaliation against the US is weak, and talked about china´s currency.

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IMO this means that the trade war still has no end in the horizon.

In my opinion, at least need 3 yrs. Read my other post why 3 years

Trump was hoping for quick result. That's why he escalating so much in just short time. He wants concessions before Nov election.