Trade War with China


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LesAdieux

Junior Member
America's External Debt


Gross External Debt Position: as of March 31, 2018
U.S. Dollars in Millions

General Government 6,546,130
Short-term 716,203
Long-term 5,829,927

Central Bank 730,845

Deposit-Taking Corporations 2,983,039
Short-term 2,165,362
Long-term 817,677

Other Sectors 7,108,374
Short-term 1,949,736
Long-term 5,158,638

Direct Investment: 1,812,466

Gross External Debt Position 19,180,854

the external debt is what america owns to the foreigners.

Dick Cheney once said: "debt and deficit don't matter". well, that's certainly an interesting point. but to a big debtor like the US, the capacity to finance the deficits and the cost to service the debt certainly matter a lot.

take the current 5% prime rate as the mean rate, then the US needs 1 trillion every year to service its external debt. and the "twin-deficits": 1 trillion budget defict and 800 billion trade deficit need significant foreign financing.

the US need big foreign capital inflow to keep going, and China can set the "dollar house" on fire.
 

Red Moon

Junior Member
Practically it mirrors Michael Pettis 2010 analysis about the Chinese stock market.
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The above analysis agree with Pettis (2010), and saying the same: there is no quality data about economy, companies, audits, ownership enforcement, transfer and so on, and due to that the stock market is simply a casino, not the allocator of resources ( like in the Europe and US).

This is a shame, considering that the ownership transfer mechanism and company evaluation by market IS the secret sauce of the European (later US) success since 1600.
This is bullshit. The cases of England and the US lie at one extreme. In Germany, for example, the banks have historically played a much bigger role than the stock market. This has meant companies can have a longer planning horizon.
 

Hendrik_2000

Brigadier
Here is and excellent article that make sense but unfortunately the beltway politician care only about winning as if this trade war a sport. They want to open more Chinese economy and forgetting that opening China is the cause of all China economy grew exponentially . They better keep China closed as in Mao's time
I think they are just selling the sound bite to please their base
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An even bigger China shock
BY SCOTT SUMNER, OPINION CONTRIBUTOR — 08/19/18 07:05 PM EDT
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By now many of us are familiar with the basic arguments for and against
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’s trade war with China. Over the past few decades, U.S. imports from China have surged. Several academic studies referred to this as a “China shock,” which adversely impacted a number of American regions that focus on manufacturing. At the same time, most economists believe that international trade benefits the United States as a whole. More recently, the Trump administration has made a big issue about our trade deficit.

While all of these events might seem related, on closer inspection there are a number of puzzles that have been widely overlooked.

The biggest puzzle is what the Trump administration is trying to achieve with its trade war. Is it a move to pressure the Chinese to open up their economy, thus reducing barriers to U.S. trade and investment? Maybe, but it was precisely the opening of the Chinese economy that first created the “China shock.”

Indeed, China was no threat at all to U.S. firms when its economy was closed under the leadership of Chairman Mao. An even more open China would create an even bigger shock, resulting in even more economic dislocation in the Rust Belt. Presumably, Ohio manufacturing workers who supported candidate Trump were not hoping China would buy more Hollywood films and computer software, so that America could buy more auto parts from China.


Does the Trump administration see it this way? Probably not. Key trade advisor Peter Navarro and Secretary of Commerce
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hold highly unorthodox views on trade, accepted by very few professional economists—namely that a trade deficit reduces U.S. output and is largely caused by unfair trading practices by other countries.


Most economists believe that the U.S. trade deficit reflects our low saving rate, and that it does not reduce our output. If this conventional view is correct, then any successful attempt to get other countries to accept more of our imports will also result in America accepting more of their exports, leaving the overall trade balance largely unchanged.

Some defenders of Trump’s hardline tactics point to the possibility that they might lead to an agreement where we and our trading partners remove all of our tariffs. That might be a good outcome, but it’s an odd defense from an administration that has made a big issue of its opposition to free trade deals such as NAFTA.

Recent reports indicate that the Chinese are confused by the Trump administration’s negotiating tactics. They don’t seem to understand what the administration is specifically asking for, and after they believe they’ve reached a deal, the U.S. seems to change its mind.

Perhaps there is a split within the Trump administration — some may want a more protectionist America, while others prefer to use hardball tactics to advance a freer global trading system. One can find administration official comments to support either theory. Trump has called the NAFTA agreement, which eliminated tariffs on trade between the United States, Canada and Mexico, the “worst trade deal ever made.” In contrast, he recently advocated eliminating all tariffs on trade between the United States and Europe.

In recent years, the average tariff rate in the United States, Canada, and Europe has been roughly 2 percent, which seems to conflict with the administration’s rather apocalyptic language describing the severe damage we are suffering from unfair trade practices. This creates a quandary: What sort of plausible trade war “win” could fix America’s huge trade imbalance? Perhaps this helps explain the administration’s difficulty in clearly defining its objectives with China.

The Eurozone has by far the world’s largest current account surplus, which is a more comprehensive measure of a trade balance, while the United States has by far the largest deficit. Because a current account deficit is also equal to the difference between domestic investment and domestic saving, the standard method for reducing a trade deficit is by boosting domestic saving and/or reducing domestic investment. To see why, consider what happens if we buy products from Germany but do not export any goods in return. In that case, we exchange U.S. assets such as stocks and bonds for those German goods, which represents a net flow of German savings into the U.S. economy.

But Trump’s expansionary fiscal policy (deficit spending) is likely to dramatically reduce domestic saving, and over time he hopes to boost investment through corporate tax cuts and infrastructure projects. So it’s hard to see how these policies can do anything other than make the U.S. current account deficit even larger.

There is too much focus on who is “winning” the various trade wars between the United States and our trading partners, and too little examination of what these trade wars are supposed to achieve. The most frequently cited objectives (like fewer foreign trade barriers against our exports) would help the average American but accelerate the pace of creative destruction in some parts of America’s industrial heartland. In addition, there is little evidence that our current strategy would do anything to reduce the overall trade deficit.

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is an emeritus professor of economics at Bentley University and director of the Program on Monetary Policy at the Mercatus Center at George Mason University.
 

tidalwave

Senior Member
Registered Member
On China side, what I seeing is , again government telling banks to open up more loans for infrastructure investment to stimulate economy, their favorite play whenever economic situation in doubt. Thats the only thing get going at this point, other areas are not so optimistic.


The Tibet Water to Xin-jiang project hoprfully would be started.

Whatever the situation in trade war hardshipwise, they prepared to dig in, won't surrender to Trump.

Chinese people should refocus, as long as the country developing technologically, lowering the living standard and some economic hardship are worth it and All good. The people inside China critical of Xi are the ones afraid of lower standard of living. Willing to submit to Trump and give up tech development , preserving their current low and mid level manufacturing and exporting to US. Those are selfish and sellout people.

China will dig in joining US sanctioned Russia, Venezulea, Iran, NK, turkey.
 
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tidalwave

Senior Member
Registered Member
Also, mild moderates, no action people like Hu jintao, and Wen jiaBao joining those critical group, saying Xi is too showboat, drawing ire of US. China should maintain a low profile like what Deng always preached.

Well, China is different now than before , US will attack China economically once it passed the 60% mark GDP wise.

So, the recent article publically by China about Elephant can't hide is to refute those critical of Xi.

Even if China submitted, US still would reduce China in size, making sure China will never able to surpass US economically.

Xi is the one bold enough to have actions in South China Sea solving the problem once and for all. If Hu and Wen still in office. No way they have the guts to change the situation. They can carry their outdated Deng vision to the grave
 

PiSigma

"the engineer"
Also, mild moderates, no action people like Hu jintao, and Wen jiaBao joining those critical group, saying Xi is too showboat, drawing ire of US. China should maintain a low profile like what Deng always preached.

Well, China is different now than before , US will attack China economically once it passed the 60% mark GDP wise.

So, the recent article publically by China about Elephant can't hide is to refute those critical of Xi.

Even if China submitted, US still would reduce China in size, making sure China will never able to surpass US economically.

Xi is the one bold enough to have actions in South China Sea solving the problem once and for all. If Hu and Wen still in office. No way they have the guts to change the situation. They can carry their outdated Deng vision to the grave
I don't know where u get the idea that there is wide opposition to Xi in China. You say you read a lot of Chinese media, but how many people in Zhongnanhai do you know?

Hu/Wen is a compromise leadership and was also suitable for that time.

The amount of opposition to Xi is actually pretty minimal right now. Compared to the headwind Hu/Wen had to work against for their programs, Xi have gotten it easy now. Xi is strong enough to get rid of his opponents while Hu had to compromise with his.
 

tidalwave

Senior Member
Registered Member
I don't know where u get the idea that there is wide opposition to Xi in China. You say you read a lot of Chinese media, but how many people in Zhongnanhai do you know?

Hu/Wen is a compromise leadership and was also suitable for that time.

The amount of opposition to Xi is actually pretty minimal right now. Compared to the headwind Hu/Wen had to work against for their programs, Xi have gotten it easy now. Xi is strong enough to get rid of his opponents while Hu had to compromise with his.
I didn't say wide or narrow, i only say there are people critical of him. It's from various sources, manifestations, symptoms, and signs. It's a long story. Also, trade war affect alot of people in China and it's common sense that there will be people critical of him, it would be abnormal if everyone agree with him.
 

nugroho

Junior Member
Also, mild moderates, no action people like Hu jintao, and Wen jiaBao joining those critical group, saying Xi is too showboat, drawing ire of US. China should maintain a low profile like what Deng always preached.

Well, China is different now than before , US will attack China economically once it passed the 60% mark GDP wise.

So, the recent article publically by China about Elephant can't hide is to refute those critical of Xi.

Even if China submitted, US still would reduce China in size, making sure China will never able to surpass US economically.

Xi is the one bold enough to have actions in South China Sea solving the problem once and for all. If Hu and Wen still in office. No way they have the guts to change the situation. They can carry their outdated Deng vision to the grave
In case Hu Jianto, Wen jiaobo etc wrote , is this the article the news come from?
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the author is Akio Yaita, do you believe a deputy director of the Sankei Shimbun Foreign News Department would know Zhongnanhai so deep?
and the phrase " According to well-informed sources" means there was no source at all.
 
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