Trump is convinced that the Chinese have been robbing America blind for decades with lopsided trade agreements which favor Beijing.
Specifically, they're worried that the dollars we're buying Chinese products with are being used to purchase liquid American assets, instead of re-investing in America by purchasing commodity items. The Trump administration believes that China is using these funds to slowly "buy up America" [1]
One thing he's missing out on is the fact that the Chinese government has devalued their own currency for about as long as they've been buying America specifically to keep the dollar strong. There is no way to convert Chinese currency into many other international currencies. For example, for a long time there was no way to turn Chinese money into Japanese money. To accomplish this investors would buy American dollars with Chinese currency, then use the American dollars to buy Japanese currency. This has held the dollar higher in value compared to other, less compatible currencies. Devaluing also helps keep Chinese buying power out of the hands of the Chinese public and into the hands of Chinese billionaire class, who strictly deal in American cash. Hurting the Chinese dollar doesn't impact the Chinese economy nearly as much as hurting the American dollar does.
So our trade war is doing two things. 1) It's pushing China to the table. 2) It's making China reconsider it's reliance on the status quo (The American dollar). If China were to correct the value of their currency; almost overnight the Chinese population would be sipping Starbucks and typing on MacBook Pro's while American's slave away at factories with suicide netting before going home to sleep in dog kennel's.
> One thing he's missing out on is the fact that the Chinese government has devalued their own currency for about as long as they've been buying America specifically to keep the dollar strong.
No, no, no, the opposite is true: China has spent a lot of effort, ever since the Asian Financial Crisis, in keeping their currency strong and appreciating, the exact opposite of devaluation. They are currently in a huge struggle to prevent the yuan from crossing the 7RMB/dollar threshold, which many think will cause a panic when crossed.
> There is no way to convert Chinese currency into many other international currencies.
There surely is a way! I converted most of my earning from RMB to dollars before I left China (just show them my tax receipts as a foreigner), my wife had a $50k/year limit as well as a Chinese citizen.
There are many reasons why this is screwed up, but mostly the opposite from what you are claiming. The yuan is stronger, not weaker, than it ought to be, which leads to a lot of opposing distortions in their economy (not ours).
> If China were to correct the value of their currency...
If it falls above 7 and even back to 8, then we will be back to the early 2000s.
That's exactly correct. There is this notion that the American economy is larger than the Chinese economy, when in fact this is only a product of the strategic and constant devaluation of the Yuan with respect to the dollar. This has only been allowed by the Chinese because they haven't completed the process of moving their surplus to their own economy. In this decade we have already seen the Chinese moving their surplus to create a strong internal economy and when this process is complete they will have every incentive to stop supporting the US dollar and to stop devaluing the Yuan.
There are different ways of measuring how large an economy is.
How much of the US economy is Wall Street and real estate? Does that really deserve to be 'GDP' as nothing is actually made?
Some say that a large finance sector and a rentier class is a burden to the main economy. It is hard to deny even if there is the 'trickledown' effect from the 1%.
What about militarism?
The trillions spent on war is supposed to be good for the economy but I don't see it myself. If all those bullets had been batteries for electric cars then the USA could have sold those electric cars to places like Libya, Iraq and elsewhere blown off the map or crippled with sanctions.
In China, regardless of whether they have stolen IP or not, they do actually make stuff. Making stuff definitely counts as GDP. Chinese folk are industrious and 'lazy' is not a word uttered in the context of China, even by the haters. I don't get the feeling that the Chinese economy has developed to the late capitalist stage where everyone who works is paying off rentseekers, monopolists and usurers. For this reason I think the Chinese economy is a lot stronger than the American one even if the GDP metric would lead one to believe otherwise.
I also think China are leapfrogging the USA when it comes to education. STEM subjects rule in China, they don't in the USA. When it comes to the fundamentals China is on to something. I am not sure USA Inc has a plan for the future.
Exactly. The main point is that the groups that control the US have steered the country towards doing things that are great for the elites but terrible for the population. Banking is excellent for the wealthy portion of the country, but works as a drag on the population elsewhere because banks live off interest and fees, i.e., they subtract from the real economy. Healthcare is now a big portion of the US economy, but it is in fact another big drag on the living standards of its population. Real estate is the sister industry of banking, and as real estate costs escalate this means a reduction of wealth from poorer people to the wealthy and the banks.
This is a very salient point and I'm surprised it was down-voted (it might be because your point #2 could be perceived as being needlessly provocative).
One has to wonder why the U.S refuses to brand China a currency manipulator [1]. You have already stated the answer, but it's worth repeating: it is in the best interest of U.S corporations importing goods from China for the Yuan to be artificially weak. As always, the truth depends on whether one stands to benefit from it or not.
Rest assured that the moment this is not longer the case, the U.S won't hesitate to point the finger and dole out punishment accordingly.
i am not for sure why you are downvoted. i hadn't heard of china devaluing their yuan, but the way you have explained it makes sense. china does indeed seem to be buying a ton of western assets, including real estate and major holdings in companies.
if i am understanding correctly, you are saying china is basically keeping the yuan quiet while they get their economy in the shape they want, benefiting from a strong u.s. dollar. then when the time is right, they'll switch to promoting their own concurrency over the u.s. dollar.
Specifically, they're worried that the dollars we're buying Chinese products with are being used to purchase liquid American assets, instead of re-investing in America by purchasing commodity items. The Trump administration believes that China is using these funds to slowly "buy up America" [1]
One thing he's missing out on is the fact that the Chinese government has devalued their own currency for about as long as they've been buying America specifically to keep the dollar strong. There is no way to convert Chinese currency into many other international currencies. For example, for a long time there was no way to turn Chinese money into Japanese money. To accomplish this investors would buy American dollars with Chinese currency, then use the American dollars to buy Japanese currency. This has held the dollar higher in value compared to other, less compatible currencies. Devaluing also helps keep Chinese buying power out of the hands of the Chinese public and into the hands of Chinese billionaire class, who strictly deal in American cash. Hurting the Chinese dollar doesn't impact the Chinese economy nearly as much as hurting the American dollar does.
So our trade war is doing two things. 1) It's pushing China to the table. 2) It's making China reconsider it's reliance on the status quo (The American dollar). If China were to correct the value of their currency; almost overnight the Chinese population would be sipping Starbucks and typing on MacBook Pro's while American's slave away at factories with suicide netting before going home to sleep in dog kennel's.
1. https://en.wikipedia.org/wiki/China%E2%80%93United_States_tr...