The US has a trade deficit towards China, so China has more to lose in a trade war than the US. Therefore the US can try to impose a limited amount of trade sanctions on goods from China without getting punished for it. It seems just common sense economics to me.
There's nothing common sense about this. It's just stupid. But do few Americans understand economics that I can see the majority falling for it. People will happily vote to cut their own throats in order to punish some out group.
For future reference the giant trade deficit has benefited the USA enormously and increased quality of of life of most Americans. The incredible thing here is not that we import so much from China but that the hyper-productive Chinese exporters and manufactures have been so willing to surrender real goods and labor for the green pieces of paper we call currency which the government can create at the push of the button. This was the trade of the century.
I suspect that this will ultimately only help China and hurt America. China will be forced to develop their own internal markets and diversify their exports more -- which they've been doing already. You'll also just see more action from other low wage exporters like Vietnam. In the end Americans will just as price increases. Tariffs won't bring back jobs, reduce the extreme inequality that's killing the country nor are they real investment.
That's a shortsighted view. As the saying goes, "you can have the free apples, as long as I own the orchard". At some point, there will be no more free apples, and you have no idea how to farm
I agree that the trading with China has benefitted the USA enormously, but, at least money wise, it has benefitted China even more. That's the definition of a trade deficit.
The goal of the tariffs is of course not to stop that trading. The goal is just to pick up some free money under the assumption that China will not dare to start a trade war.
>The US has a trade deficit towards Chine, so China has more to lose in a trade war than the US.
The US stands to lose all of the manufactured (especially electronics) goods China makes. The supply chains for a lot of its companies (especially tech) will be severed. China stands to lose soybeans, civilian aircraft, corn and... chicken feet, I suppose?
Of those, the only one that isn't easily substitutable with imports from elsewhere is civilian aircraft, and China is already pretty far ahead on making its own.
I think, on balance, given the relative substitutability of US vs Chinese imports, China has the upper hand in a peaceful scenario. The US can't really replace the Chinese industrial ecosystem whereas China can get corn and soybeans from elsewhere - assuming that shipping is not blocked.
...which is why I'm worried that the US might try to escalate a trade war to blockades and from blockades to, well, you know...
That said, if the US continues with a policy of unfettered trade while China continues with managed trade, China's hand grows stronger while the US's gets weaker. The US doesn't actually have a lot of good options now - it's about 15 years too late for it to safely reverse this process.
For scale: The net exports (Chines exports less imports from the U.S.) of China to the US are less than 3% of Chinas GDP.
China will certainly notice that, but in the long run the U.S. will certainly lose more from that decision: The heavily (illegaly?) subsidized U.S. agriculture will get a hard hit, as will every industry that relies on Chinese components, from smartphones to cars. It will be a boon for the other continents, though, as their companies will gain market share, because the U.S. products will have to be sold at higher prices.
China import tax on cars is 25%. If you are a company that wants to open a business there you have to do a JV with a local firm. There is a 12% tax on clothes etc.
Trade doesn't work according to common sense, it works according to what's possible. If something's complicated and profitable, trade lets those who understand it profit by it.
Sanctions hurt people on both sides. For example, is a company in California has phones made by a contract manufacturer in China, imports them, and reexports them all over the world at steep prices, who's hurt most if the volume of that trade is limited?
Do you think the limited sanctions will be effective? If I were China I don't think this is significant enough for me to stop my plan. Maybe it's intended as a warning.
I don't like trump at all. But I agree with defending our country. And overall, the less we can rely on China the better.
