
China wasn’t ready for the trade war with the United States - 1PlayerOne
https://www.nytimes.com/2019/05/07/opinion/xi-trump-trade-war-china-leadership.html
======
andreilys
_Mr. Bush also shared a private exchange with Chinese President Hu Jintao in
which he told the Chinese leader that the thing he worried most about and that
kept him up at night was another attack on the United States. Mr. Bush said he
then asked Hu, "What keeps you up at night?" Hu responded, "25 million new
jobs a year."_ [1]

I think it's clear that China has a lot more to lose in this trade war. The
bargain that the Chinese people have made with the government is that they
will sacrifice personal liberties for economic prosperity. Once the latter is
put into jeopardy, chaos will ensue.

[1]
[https://www.realclearpolitics.com/articles/2010/11/15/decisi...](https://www.realclearpolitics.com/articles/2010/11/15/decision_points_an_interview_with_george_w_bush_1079a0.html)

~~~
spectramax
I found your statement about sacrificing personal liberties for economic
prosperity a fascinating way to abstractly summarize CCP's rule.

I resonate with you - I think the Chinese government is hot-pacing through
economic high in the short term but there are major consequences if they
overreach. The more they do so, the more they get push back from the rest of
the world - Streisand effect infiltrates the general populace if they're
unhappy (currently, China is pulling millions out of poverty - a good thing)
and then you see real consequences of trading liberty for economic stagnancy.

In game theory, "a single hawk in a population of doves" is an inherently
unstable state - Hawks will lure other Doves to follow Hawk-like behavior and
eventually you'll have majority of hawks struggling to survive. This behavior
will oscillate between two unstable points until hawk/dov ratio equilibrium is
reached.

The Chinese government has employed a number of hawk-like behaviors in the
global economy - cut loose IP, subsidies for local firms, state-owned
enterprises bypassing law, currency manipulation, driving-out non-Chinese
firms that pose threat of domination, IP theft, cloning, etc. for short-term
gains. I don't see how this behavior can be tolerated for long.

~~~
thefounder
Once China becomes a/the leader it develops its own technology and prevent
others from using/stealing it, just like the US did.

------
hsnewman
Tariffs against China are actually a tax on the American citizens, and only
causes increased prices and unemployment.

~~~
teknopurge
false. no matter how many times people say this your statement is incorrect.

Consumers faced with higher prices will spend less and save more. Taxes are
only applied to transactions. Higher tariffs will shift consumption to lower-
priced goods - you say those goods don't exist?

That's how new business and market opportunities arise. Production will shift
geographies, as the tariffs are geography-specific.

China's government is playing checkers, I never thought I would say this, and
Trump is playing chess.

~~~
mooreds
Both clauses are false?

"Tariffs against China are actually a tax on the American citizens" is
undeniably true.

"Tariffs are a tax on imports. They're typically charged as a percentage of
the transaction price that a buyer pays a foreign seller. Say an American
retailer buys 100 garden umbrellas from China for $5 apiece, or $500. The U.S.
tariff rate for the umbrellas is 6.5 percent for umbrellas. The retailer would
have to pay a $32.50 tariff on the shipment, raising the total price from $500
to $532.50."

\- [https://www.cbsnews.com/news/what-are-tariffs-and-how-
would-...](https://www.cbsnews.com/news/what-are-tariffs-and-how-would-they-
work-trump-2018-06-02/)

The latter clause is a matter of second order effects that people can disagree
with.

~~~
teknopurge
You proved my point. Umbrella seller will sell fewer of those China-imported
umbrellas. In comes African umbrella maker for $4 apiece.

~~~
mooreds
Actually, if the African umbrella maker could make a profit at $4, they would
already be doing that, pre-tariff.

So they are more likely selling at $5.15 (or some other higher number), which
means that the US consumer pays an extra 15 cents per umbrella.

That 15 cents is additional and what people refer to as a "tax", though it
isn't a traditionally levied tax.

~~~
merpnderp
You make the perfect point that fair trade advocates push for. China's $5
umbrellas are heavily subsidized by the government (and mostly through debt
and near zero environmental controls). African umbrella companies can now sell
at $5.15 without subsidies, setting the actual market value for an umbrella
without the Chinese government causing an over-investment in umbrellas through
the market distortion of (grossly unfair) subsidies.

~~~
mooreds
> You make the perfect point that fair trade advocates push for.

Totally get it. There's a line between a country being good at making a
product through "natural" causes (having a climate to grow grapes for wine)
and the government subsidizing the production of wine because they want a wine
growing industry. Where that line is depends on a lot of actors, but some
things fall on one side of the line and others on the other.

However, for the end consumer in the importing country, they win if the
government of the exporting industry wants to subsidize wine production. The
consumer gets cheaper wine.

Now the argument for fair trade is that the local producers of wine will be
hurt. And I get that (especially when you are talking about job losses and/or
loss of strategic capability around food production or technology).

But overall the consumer in the importing country wins. If China wants to give
dollar bills to the American consumer for umbrellas, why shouldn't the
consumer take them?

~~~
merpnderp
I see what you're saying, but there's one further point you should address.
It's not the Chinese free market that's giving the US consumers $5 bills for
wine, it's the Chinese government. So consumers are enticed to buy wine which
they might not have in a market distortion, which hurts not just US wine
producers, but Chinese beer producers who compete in the tasty alcoholic
treats export market. Maybe a short term gain for US consumers who enjoy their
nightly reds and whites, but in the long term, market development will be
unnaturally stymied.

~~~
mooreds
> market development will be unnaturally stymied.

I understand where you are coming from, but markets are created by the rules
of the government. Some governments (The Netherlands, CA) say that selling
marijuana is OK. Some say that it is ok for some people to buy marijuana
(medical) and others can't. Some US states say that no one can buy marijuana.
Which is the "natural" market?

I understand that you are saying that the Chinese government is causing
distortions and there is a fairer way to "trade" but that's something for the
Chinese state and political actors to decide. This is the same as the way that
the USA has decided that trucks are different than cars and should have a
different set of import limitations--in both cases this is a political
consideration.

~~~
merpnderp
Very good metaphor and I see what you’re saying. And I’m convinced you are
correct now. The only thing I’d add is people would still have to weigh the
indirect costs of the Chinese wine which might have an emotional cost from
supporting economic injustice or lax environmental laws. But the data is
pretty clear that nearly zero consumers care about this and would be better
off with their $5 (Chinese) chuck.

------
wtootw
Relevant: trump is raising tariffs on $200B Chinese goods to 25% this Friday,
and coming soon, 25% on additional $325B Chinese goods as well.

This is the disengagement of US economy with the Chinese economy as we speak.
No more IP theft, no more US factories for China, no more knowledge transfer,
no more opioids from China.

Perfect timing, what with US growing healthy at 3% and wage growth, and China
suffering from debt overload and demographics decline

~~~
terryschiavo22
To what end? Xi Jinping can just wait until the next president to negotiate
away the tariffs. The public certainly hates them. Right or left, I don't see
how anyone can see these surviving through another administration.

~~~
CharlesColeman
> The public certainly hates them. Right of left, I don't see how anyone can
> see these surviving through another administration.

Citation needed. Free traders certainly hate the tariffs, but only a tiny
fraction of the public are committed free traders. Also Democrats are
dispositionally far more favorable to tariffs and protectionism than
Republicans, so unless Trump doesn't run or the Libertarians win the
presidency (ha!), I don't see the next administration being much of a swerve
in the direction of free trade.

~~~
borkt
This affects some of my family directly and has a very noticeable impact on
local businesses who had become accustomed to and were investing pretty
significantly in attracting Chinese interest in their products (California
wine industry). While the industry existed for a long time before the Chinese
market became a factor, starting in the recession their was definitely a push
to attract Chinese individuals to california wine, to the point where many
major tasting rooms were recruiting people who speak mandarin, and some folks
I know regularly had relatively wealthy recent Chinese college graduates
working harvest jobs. I have not been aware of a Chinese intern in our circle
for years, and also haven't seen a listing looking for Mandarin in months if
not longer.

[https://www.sfchronicle.com/business/article/California-
wine...](https://www.sfchronicle.com/business/article/California-wineries-
shut-out-from-China-amid-13766869.php)

I imagine the situation is similar for many other non-essential exports to
China.

------
spectrum1234
Excellent article with some game theory analysis on this:
[https://www.economist.com/graphic-detail/2019/04/27/why-
you-...](https://www.economist.com/graphic-detail/2019/04/27/why-you-should-
never-start-a-trade-war-with-an-autocracy)

------
inflatableDodo
The United States wasn't either.

~~~
ThomPete
We actually are. With a strong economy that's exactly the time you do it.

~~~
inflatableDodo
Didn't the Laffer curve on bond markets invert recently?

~~~
ThomPete
Inflation is not up even though it was supposed to be.

Lots of things are changing because Trump doesn't follow the "experts" but
have his own way of approaching China for better or worse. Right now mostly
for the better.

~~~
jayd16
Nothing has been better yet. So far it has only been not-catastrophically
worse.

~~~
leereeves
Lowest unemployment since 1969. That's better.

~~~
jayd16
It's the same trajectory it was before the current policies. The trend is
hitting the floor as we're at full employment. (But I can't complain he's not
taking us lower than that)

~~~
ThomPete
So when the economy is turning bad its also obamas fault i take it?

------
MarkMc
I dislike almost everything about Trump, but in this particular case his
policy might be better than his predecessors. If the trade agreement results
in low tariffs and a more level playing field for US companies who invest in
China, maybe it will be worth the pain of a temporary trade war?

~~~
panpanna
But this is affecting other countries too.

China/US trade war have cost some Europeans their jobs. Next time they are out
to buy a car, do you think they will choose American?

~~~
spectramax
The percentage of people losing their jobs due to China/US trade war is
_minuscule_ compared to the total European population and would have literally
zero measurable impact on American car sales.

It’s not like Europe all of sudden has 20% unemployment due to the trade war -
the way you describe it and everyone becomes anti-American.

~~~
panpanna
Have you been to Europe lately?

~~~
spectramax
Actually, yes. Zurich and Dusseldorf.

------
ilamont
This isn't a typical tit-for-tat trade war that gets worked out at the
negotiating table. Several current and former Trump aides want to outright
topple the Chinese Communist Party. Quoting Steve Bannon in an NPR piece
published today:

"I think ultimate success is regime change ... the goal is quite simply to
break the back of this totalitarian mercantilist economic society."

[https://www.npr.org/2019/05/07/719947020/inside-the-white-
ho...](https://www.npr.org/2019/05/07/719947020/inside-the-white-houses-
bitter-fight-over-china)

The other thing going on, alluded to in the same article, is attacking China
is red meat to Trump's base (42% of the American population, according to a
recent poll). He's built it up into one of the primary reasons behind the
collapse of American manufacturing. If the China bogeyman goes away with a
splashy deal, will the base be satisfied? Or will something else have to be
dialed up to replace it as a political and trading punching bag?

~~~
kermitismyhero
>"I think ultimate success is regime change ... the goal is quite simply to
break the back of this totalitarian mercantilist economic society."

The really funny thing is that Bernie Sanders' supporters have the exact same
goal in mind.

~~~
Fjolsvith
Why would that be funny? America broke the Soviet Union with economic power. A
lot of people still remember this.

I'd like to see the Chinese equivalent of the Berlin Wall falling.

~~~
kermitismyhero
I think it's funny because the entrenched establishment politicians like Steve
Bannon are also the ones most opposed to Sanders and his allies.

------
NotPaidToPost
Is it Xin Jinping or China's "fault"?

Despite the tone of this article, it seems to me that the current situation is
a reaction by the US to China's growing power rather than a failure on China's
part.

~~~
ThomPete
China and the Chinese party are two very different things.

The amount of atrocities china commit every single day even relative to their
size is insane.

~~~
NotPaidToPost
I commented about the main point of the article: the trade war.

I don't understand what is the point of your reply...

------
flywithdolp
I disagree with trump in almost every aspect, but I must say that he manage a
country like a business man and he is doing some moves because of it that
other countries (Like China) can't predict.

~~~
inflatableDodo
If he was operating like a business man, he would be a lot easier to predict.
He is still operating like the guy who thinks he is a business man while
bankrupting a casino. And he always has been. Sesame Street warned people
years ago -
[https://eu.usatoday.com/story/life/entertainthis/2017/03/21/...](https://eu.usatoday.com/story/life/entertainthis/2017/03/21/sesame-
street-v-trump-shows-long-history-mocking-donald-grump/99445290/)

~~~
T-A
"The Simpsons" was more explicit about it:

[https://www.hollywoodreporter.com/live-feed/simpsons-
writer-...](https://www.hollywoodreporter.com/live-feed/simpsons-writer-who-
predicted-trump-876295)

~~~
inflatableDodo
And for anyone who has followed Doonesbury for a while, it kinda feels like
the wilder theories concerning the LHC may possibly be true.

[https://www.gocomics.com/doonesbury/1987/09/14](https://www.gocomics.com/doonesbury/1987/09/14)

------
_Codemonkeyism
It will be interesting to see what happens when China no longer eats US
inflation, so hurray for an interesting future!

~~~
_Codemonkeyism
Well it will be interesting. For the last decades the US had printed money
with bonds and exporters to the US have bought those bonds to spend their
dollars and not put pressure on their own currency.

If China is no longer exporting to the US it will no longer need to buy bonds,
so if the us is printing money with bonds where dollars are not parked, those
dollars increase dollar supply and therefor increase inflation. Money 101.

~~~
ThomPete
Money 101 would dictate inflation in us economy, we dont see that. So i guess
we need to ad some more nuance to things

~~~
_Codemonkeyism
China hasn't stopped buying US bonds, or have I missed something?

~~~
ThomPete
[https://www.economist.com/finance-and-
economics/2019/03/28/w...](https://www.economist.com/finance-and-
economics/2019/03/28/why-is-inflation-in-america-so-low)

------
julienfr112
Next time, they will...

------
righteous
I hope this represents a fundamental shift in American trade policy.

American free trade agreements should only be extended to countries that have
roughly symmetrical environmental policies, human/labor rights, market access,
IP protection, among other things.

Any trade deals less this sensibility amounts to the exploration of people,
the planet or of property rights, and should be taxed extensively.

~~~
spectramax
Yep, we should have been more vigilant since 2002 as we kept on importing
goods with an unfair deal. I want China to progress as any other country but
under fairness and without this atrocious 1 party authoritarian regime.
Imagine if they were like Japan or India with free speech and democratic
government, hell I would move to Shenzhen!

------
_Codemonkeyism
About the author:

"Professor Joseph Yi-zheng Lian is a Hong Kong native. He obtained his first
degree from Carleton College, Minnesota. An economist by training, his Ph.D.
was earned at the University of Minnesota.

Prof. Lian taught at the University of California, Riverside and the Hong Kong
University of Science and Technology, and was Chief Editor and lead writer of
the Hong Kong Economic Journal before serving as a Senior Policy Adviser for
the Chief Executive at the Central Policy Unit of the first administration of
the Hong Kong SAR government, from 1998 to 2004. He was dismissed from his
advisory post after a profiled participation in a pro-democracy sit-in in
Central, Hong Kong."

which sounds very different to the NYT bio:

"Yi-Zheng Lian, a commentator on Hong Kong and Asian affairs, is a professor
of economics at Yamanashi Gakuin University, in Kofu, Japan, and a
contributing opinion writer."

~~~
sdwa
What's the problem?

~~~
_Codemonkeyism
The author is a pro-democracy activist from Hong Kong writing about China
politics. It's up to you to decide if if there is a problem for you or not.
It's ok if there is no problem for you. I personally want to know if someone
owns stock he writes about.

