
China Begins to Question Whether It’s Ready for a Trade War - propman
https://www.bloomberg.com/news/articles/2018-06-25/as-trade-war-looms-china-wonders-whether-it-s-up-for-the-fight
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wonderwonder
An aspect of this is that with the effects of globalization and the reliance
of business in both nations on those in the other we could see entire large
companies vanish almost over night as their supply chains dry up.

If you cant build your product because a component you relied upon is now 25%
more expensive, you're continued existence is predicated on having deep
reserves. Many smaller companies don't and even the larger ones will have to
implement deep layoffs relatively quickly to conserve resources as they won't
know how long the trade war will last.

This in turn will have an effect on the political situations in both countries
although primarily America as its the democracy. Globalization and the
economic relationships amongst nations now has a direct effect on the internal
politics of those same states.

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peterlk
Yep. My view on trade wars is basically: let's all chop off an arm. Last one
standing wins. Whoever wins may discover that they didn't really need that arm
to survive, but is life really better without it?

~~~
SubiculumCode
In some ways a trade war had already happened with China refusing to open
markets and supporting theft of IP. ignored because it was convenient for both
sides for a long time,but China is reach a level of power where their
ambitions are threatening an established world order in the South China
Sea,etc.

~~~
lord_ring_111
So true. China has been waging this quite war for over a decade. Pegging its
currency, flooding us market with cheap (and unreliable) good (which are
expensive when u consider tco and environment), stealing ip to leapfrog us
without needing heavier investment, us loosing manufacturing knowhow, buying
off local realestate causing jacked up prices in us. Its unfortunate that we
took this lonv to react. Not sure if next administration will keep up this
good work to keep china in check.

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duxup
Like a lot of these article's about China... there's very little here to know
what their actual leadership thinks or doesn't think.

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jcarnetts
Yesterday, Xi Tells CEOs He’ll Strike Back at U.S.
[https://www.wsj.com/articles/chinas-xi-tells-ceos-hell-
strik...](https://www.wsj.com/articles/chinas-xi-tells-ceos-hell-strike-back-
at-u-s-1529941334).

However, one can deduce that the dictator is running scared. The stock market
has fallen 25% this year. Yuan has fallen 10%. There's a 400 billion tariff
coming his way, and because of 'saving face', there's no way he will back
down. He has to prop up the real estate bubble:

"price rose 31 percent to nearly $202 per square foot. That's 38 percent
higher than the median price per square foot in the U.S., where per-capita
income is more than 700 percent higher than in China."
[https://www.bloomberg.com/view/articles/2018-06-24/why-
china...](https://www.bloomberg.com/view/articles/2018-06-24/why-china-can-t-
fix-its-housing-bubble)

and he has to also unwind China's 12-18T shadow banking, China's version of
subprime loans similar to 2008 crisis (but way bigger). He has to figure out
how to steal IP to move up the chain when US and the rest of the world has
upped their defense, restricting Chinese tech investments and resisting
hacking attempts. He also needs to deal with the tariffs encouraging
manufacturers to leave China and go to southeast asia or back home via
reshoring or automation. There is also the matter of a lack of consumer market
in China, after it gets shut out of US and europe. Not much Chinese consumers
can buy after $800/month income, after paying most of it to mortgage and
inflated food prices.

~~~
SubiculumCode
One of the few policies of the current administration that I support has been
its efforts with China trade and maybe North Korea. It is not healthy for the
world to have an emerging world power that regularly abuses human rights and
seeks true totalitarianism through electronic surveillance.

~~~
duxup
I'm not really sure the current administration is doing it for the human
rights reasons you noted. I'm not sure they care much about that either way.

I think they could get what they want out of these deals and human rights
would remain the same or worse and they wouldn't care.

~~~
SubiculumCode
Sorry for that unintended interpretation. I don't think that this
administration gives a shit about human rights.

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itchyjunk
Doesn't USA have some 10 trillion loan from China? How does that factor into
all this? Or is that a parallel issue not directly related to this?

~~~
WillEngler
"If you owe the bank $100,000 the bank owns you. If you owe the bank
$100,000,000 you own the bank." Not a perfect parallel to this situation, but
a nice aphorism.

~~~
peterlk
This is simply not true in when both countries can print currency, and the
global markets are heavily reliant on the value of those currencies.

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balls187
What will this mean for all the Chinese purchased real-estate in America?

~~~
balls187
Also, it seems tough to fight a trade war with China, while simultaneously
picking trade fights with the EU, MX, and CA.

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rdlecler1
I think the next step Trump takes is to offer to drop tariffs against Europe
and Canada if they put tariffs on China.

~~~
gonvaled
Maybe, but why would the EU do that? China is a reliable trading partner.

~~~
apexalpha
Also, there are already tarrifs on steel from China and other sectors to
protect our manufacturing.

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nilsocket
Off-topic

Doesn't Bloomberg identify that their users can click on play, when it's
needed.

It's annoying and it's wasting my data.

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mc32
The US has played nicer than most countries were they to enjoy its economic
might and pre-eminence[1]. Few countries would allow their workforce to endure
economic self-inflicted hardship while maintaining an economic advantage in
negotiating trade. But the US has, over the years, put up with unfair trade
from Japan, SKorea, China, Some of Europe in the name of "free trade". I don't
begrudge allowing some disadvantage with regard some developing nations --but
not developed nations. For fair trade to work, it has to be bi-lateral. If you
unilaterally do fair trade but your partner doesn't, you may do your principle
good, but you're selling out your worker for principle.

Since Reagan, maybe before, the blue collar worker of America has seen their
government give in and cower in the face of unfair trade saying, "we'll make
it up in services" or "your goods will be cheaper". But what good does cheap
do you when you have no job and no money? They never saw their lot get better.
People wonder why people are now "working poor".

When I was in middle and HS, my bus drivers and janitors (they were not
"cleaning engineers" just yet), were able to raise a family with decency. No
way that happens now.

As Michael Moore poignantly, albeit ironically, said, finally, someone stood
up to the corporations and said, "no more". I'll stop the hemorrhaging. One
AFL-CIO in PA, the other day, endorsed a Repub. As an atheist, I have to say,
Good God, what happened to the Dems? They sold out the American worker in
favor of the multinational, transnational capitalists. If they don't watch
out, they will lose labor to Repubs.

[1]Just look at how China manages its advantage in Africa, LatAM, etc. Japan
in SEAsia, Russia with Former SU repubs., etc.

~~~
gonvaled
You, and most americans, seem to be fixed with deficit in goods, but at the
same time do not even mention the massive trade surplus that the US has in
services. By some measures, total deficit with the EU for example is fairly
balanced.

I assume that you are in favour for a rebalancing in services trade too?

~~~
mc32
If we are trading in services unfairly, sure. But we're likely not. Others
will put up many different barriers to impede fair trade. The US does less of
that nonsense, on balance.

~~~
gonvaled
What about unfair technological lead due to government support? The internet
is a DARPA spinoff.

What about unfair IP rules due to overwhelming control of international
organizations and standards?

What about unfair tax dodging by US multinationals, not paying tax on profits
in the corresponding countries by abusing an international tax system made by
the US for the US?

~~~
gwicks56
More to the point, what about the "exorbitant privilege" the USA enjoys from
having the worlds reserve currency? If other nations make a concerted effort
to ditch this set up, the USA can no longer run massive deficits. Imagine the
USA trying to run a balanced budget immediately.

~~~
mc32
That's over-stated. I don; think the US cares too much about that at all. In
fact it encouraged the Euro.

~~~
gonvaled
That happened in the golden era of multilateralism, after the fall of the
Berlin Wall and the Soviet Union. The US realized how unfair the situation
was, and took some timid steps to start a rebalancing of the situation,
allowing for the creation of a competing currency.

It is not that the Euro was not a threat to the dollar, it is simply that the
threat was minor then, and that it was plain and simple the right thing to do:
renounce to unfair advantages in order to move to a more just world.

The US continues to unfairly abuse the dollar as world currency, and
dismissing this fact can be a costly misjudgment: fair for the world, but
painful for the US.

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temp-dude-87844
It's interesting to hear Chinese academics take a pragmatic, realist view of
potential impacts. A prolonged trade spat with a US strongman is hardly a
desirable outcome. But even if China's export-oriented industries will suffer
due to trade protection measures brewing in the US, EU, and Canada, Trump's
domestic focus will likely allow many of China's global ambitions to continue
unabated: in Africa, in Central Asia, and possibly in Oceania.

This approach mirrors what the US and Soviet Union pursued during the cold war
by winning favors through a mix of economic assistance and direct foreign
investment. It's a parallel game whose fruits will pay off in the long term,
when China reaches its post-industrial stage, and has to use its network of
connections to ensure continued prosperity for its people.

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3327
I am no Trump supporter I will start with that. I disagree with almost the all
of his policies/actions.

However, China has been playing behind the US back for too long. Tech
espionage, hacking, trade to a certain extent as well. China is not a
developing economy as most think. It is already a superpower.

This is actually pre-emptive war. No weapons, but at some point the US had to
act while the odds were still in its favor.

IF you played Civilization, any strategy game - then you know what I am
talking about (or history books).

>> Loans - But China has tons us US debt!?!?

-Yes they do - do you know the best part about an IOU? you guessed it I - O - U. its paper debt. So better not upset me.

-Both nations are interlocked in a dance. US spends China Makes. But China also has stolen tons of tech. Nuclear weapons, ballistic missiles. Hacking.

-Talk to anyone in the armed forces. The sentiment is bad. There is more going on in the background than we all know.

-Talk to anyone over beers in the armed forces. They will say its long over do.

What do I think? who cares what I think.

cheers.

~~~
davidw
If only there had been some kind of trade agreement with a lot of pacific
nations that would have given the US a lot more clout with other countries in
the region and maybe a common front for some of the real problems that are out
there - as opposed to the ones that exist purely in Trump's mind.

(TPP)

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colordrops
The problem with the TPP was that it also snuck in too many distasteful things
along with the useful policies.

~~~
kyboren
[https://en.wikipedia.org/wiki/Policy_laundering](https://en.wikipedia.org/wiki/Policy_laundering)

