So at the moment, the trade war seems to be with China
Accent on the phrase “at the moment.” But I do think it’s highly possible that was the intent all along.
China announced on Friday that it will raise tariffs on U.S. imports from 84% to 125%, further escalating the trade war between Washington and Beijing.
The move is largely symbolic. As former Commerce Secretary Wilbur Ross told Fox News host Larry Kudlow on Thursday night, once tariffs hit 50%, further increases have limited practical impact. At that point, Ross explained, leaders effectively signal that they no longer seek a trade relationship. …
China expert Gordon Chang joined Fox News’ Maria Bartiromo on Thursday morning to discuss the mounting conflict between China and the U.S. Chinese President Xi Jinping, he claims, is in an increasingly difficult political position because he can’t do what “absolutely” must be done which is to open up the lines of communication.
“Picking up the phone and calling President Trump would be the economically rational thing to do,” Chang said, “but Xi Jinping has configured the Chinese political system so that only the most hostile answers are considered to be acceptable, which means he’s boxed himself in.” …
“The Chinese don’t have any cards in this,” he explained. “They’re only holding a pair of twos and Trump has a royal straight flush. The Chinese think they can intimidate Trump, they can coerce him into surrendering preemptively.” But Trump is not backing down. …
According to the report, the U.S. and Panama have formally entered into a new defense and security agreement designed to strengthen oversight of the Panama Canal—an initiative Defense Secretary Pete Hegseth described as essential for countering China’s expanding influence in the region.
Is Chang correct? I don’t know. This is not my field of expertise, as I’ve often stated. But it makes sense to me that the goal – or at least one big goal – is to put the squeeze on China. Much of what we get from them is shoddy consumer goods, but there’s also rare earths (do I hear Greenland? Australia? or even the US itself see this) and pharmaceuticals (do I hear India?).
NOTE: See also this.
And our resident condescending British friend has been talking about the bond market. For those who might be curious about that, please see this for some background in terms of the Trump/Vance administration.
It’s been China all along.
Re: Gordon Chang
I share his pessimism about China, however he has been premature. In his 2001 book, “The Coming Collapse of China,” Chang predicted that the Chinese Communist Party would collapse by 2011.
I think Chang has been mostly wrong in his predictions. His sources may not be very good. The CCP keeps the true economic facts from being known. Like all dictatorships, they will impose whatever suffering is necessary on their population in order to win.
However, if the EU sides with the U.S., it will result in a significant reduction in China’s exports. How long can they hold out? No one can be sure.
Maybe it would be a good thing for them to hold out. The U.S. became an industrial giant during the two years at the beginning of WWII. Maybe this is the motivation needed to get re-shoring of our manufacturing into high gear.
IMO, there are no easy answers. This is a re-ordering of world trade that has been getting less fair and free for the last thirty years. As the Brits say, early days. Many twists and turns to come.
It’s bit like Trump is cutting his pinkie off to show how serious he is, and Xi Jinping, to top that, cuts off his whole hand.
I don’t think Trump WANTS to make a deal with China and is content to raise the tariff without limit; as long as China escalates, it’s easy for him to get what he wants (no trade with China at all) and China looks like the ass-hoe.
Who is our “resident condescending Brit friend”? Give it a name.
China is always on the verge of crashing; Brazil is always on the verge of taking off.
I think Trump likes tariffs in perpetuity, like the devil (of Cruz), and his advisor Peter Navarro, but Vance wants free and fair trade, which we don’t have now in the world. Trump’s gut has been more accurate than most economists for years, and he’s not changing that.
When a negotiator with leverage takes the other side to the abyss, holds them over that deep hole so they see how far down they can fall, then brings them back, such a move most often results in a deal better than they would have gotten. (from a billionaire’s tweet, agreeing with me)
With the pause, most other countries have seen the abyss and are reconsidering their own high, often unfair tariffs.
10% semi-permanent tariffs are a small, but real, boost to Buy American, and maybe a few hundred billion USD in revenue. Medium small significance.
Almost all countries have a positive trade surplus with the US — selling more to the US than they buy. Combined with higher tariffs & non-tariff barriers (like regulations), this does seem unfair. Another positive of Trump’s drama is an increased focus on what are the real tariffs. I hadn’t known Canada had 200%+ tariffs on some US dairy products. More fair trade will be a good outcome.
Re-industrialization of the US, especially as robot production is about to become a huge new factor, is very important for US benign military dominance. The alternative of China mfg & military dominance is far worse for the world.
The US govt runs on borrowed money, bonds. Not stock market equity, tho investors are looking for highest risk adjusted returns in all cases, most stock investors are also bond investors. The super high Price / Earnings ratios (p/e) are usually considered the best, tho certainly not definitive, measure of whether a company’s share price is over-valued. Many stock bears have been expecting a big correction for many months, even years. Govt money printing has resulted in these assets having inflated prices.
JJ said that the CCP keeps the true economic facts from being known. They may not know the true facts themselves. This was a problem for the Soviet Union – they lied to themselves and believed the lies to their detriment. That didn’t end well for them.
When a negotiator with leverage takes the other side to the abyss, holds them over that deep hole so they see how far down they can fall, then brings them back, such a move most often results in a deal better than they would have gotten. (from a billionaire’s tweet, agreeing with me)
Tom Grey:
Agreed. I think there are a lot of bare-knuckle negotiations happening. This isn’t your grandfather’s tariff war.
IrishOtter49:
That Brit would be David Clayton.
“They may not know the true facts themselves.” – Mongo
True that. It’s a huge country with an enormous number of people. The Chinese are good at keeping records, but running such a huge country from the Central Committee is a big challenge – like the USSR was. So, maybe they don’t know the real facts about their economy.
My short visit to China impressed me with their work ethic and ability to endure. On the other hand, I saw a lot of infrastructure that was impressive, but with some shoddy features. Fancy hotels where the bathroom water was not safe to drink. Airport toilets that were holes in the floor with two imprints to place your feet while you did your business. Things that no city in the U.S would consider up to snuff. These things I call “Big Diamonds” and “Ragged Underwear” features that come from putting up Potemkin Village-like infrastructure.
Maybe their whole economy is like that. We don’t really know.
Tom Grey thinks that Trump likes tariffs. If so, he has lots of company. It is not fashionable at the moment to speak of the past U.S. Administrations that liked tariffs; or the current foreign ones that are committed to them.
Someone said, ‘free and fair trade’. What a wonderful idea. As we have learned over time, free trade is seldom fair trade. The free trade mantra is usually a blanket to cover many restrictions.
It takes a world of Chutzpah for any Brit to be condescending toward any functional society. The old claim that “there will always be an England” rings rather hollow.