Let’s check in on the progress of the US trade war with China that Trump started and Biden continued. 
Balance of Trade Since 2018
- China from -418 to -279
- Mexico from -78 to -152
- Vietnam from -70 to -105
- Japan from -55 to -71
- Taiwan from -10 to -48
- Mexico+Taiwan+Vietnam from -132 to -305
Trump started a trade war with China in 2020 and the numbers generally got worse as the chart shows.
US Balance of Trade Select Countries 2024 Year-to-Date Through March
Year-to-Date Through March Details + Projection vs 2023
- China from -61 to -244 vs -279
- Mexico from -40 to -160 vs -152
- Vietnam from -26 to -104 vs -105
- Japan from -18 to -72 vs -71
- Taiwan from -13 to -52 vs -48
- Mexico+Taiwan+Vietnam from -79 to -316 vs -305
The projection is March data multiplied by 4. If the trends hold, any improvement in China will shift to Mexico, Taiwan, and Vietnam.
On May 14, I noted BYD Unveils the “Shark” a Plug-in Hybrid Pickup Truck Built in Mexico
The Chinese automaker BYD (Build Your Dreams) announces a 700-mile range PHEV that will be built in Mexico, this year.
Also see Biden Wants EVs so Badly That He Will Quadruple Tariffs on Them
Astute readers will immediately notice the title of this post makes no sense. It’s not supposed to. But it is exactly what President Biden is doing.
The EU is too shellshocked and disorganized to do anything. The US is fighting with tariffs and sanctions.
But US sanctions on China and Russia have backfired massively. That actually a good thing because it would otherwise add to inflation.
China Shock II Is Coming, the EU Will Be Hit Hard, Then the US
On May 17, I commented China Shock II Is Coming, the EU Will Be Hit Hard, Then the US
Germany is feeling the pinch of China shock. But the US is on deck too. A global trade war looms.
German exporters are getting crushed by China. The EU as a whole cannot compete. The US is responding with massive tariffs.
China will retaliate against US tariffs. One way might be to stop exports of rare earth minerals used in cell phones, EV, computers, wind turbines, and military guidance systems.
Critical Materials Risk Assessment by the US Department of Energy
Please consider a Critical Materials Risk Assessment by the US Department of Energy
The US Department of Energy has placed some of the rare earth minerals we need for weapons systems, windmills, batteries, and aircraft on a critical materials list.
Nearly all of them are mined or refined in China. Yet Biden just blocked production in the US.
The world is on a huge collision course with China.
So Mish, what do you do about CCP creating overcapacity w/ artificial cost of capital, dumping goods into export markets, and basically keeping the consumer under consumed as percentage of GDP? If not tariffs, what?
“..what do you do about CCP creating overcapacity w/ artificial cost of capital”
You compete with them in the areas which; by arithmetic necessity; have to have their capital confiscated, in order for the CCP to have anything to hand to those it supposedly supports…. After all; despite what illiterate idiots are told to mindlessly regurgitate by their invariably even more illiterate self-styled “leaders”: The CCP are, surprise-surprise, in fact not actual wizards!!! Like all and any government; the only way they can obtain anything to hand to some; is to first take it from others. There’s a politico-economic term for this taking from some to hand to others. It’s called “picking winners.” This “picking winners” capital allocation methodology, by some Communist Party apparatchiks, must obviously; in the minds of particularly well indoctrinated individuals of the species Idiotus Americanus at least; be a much more efficient means of allocating capital than letting free actors on a market do so, judging by how enamored they are all suckered into being about it.
“…dumping goods into export markets..”
You say Thank You, Mr. Xi, for the car, the cellphone, the excavator and the container ship you just bought me. Now that I got all this free/subsidized capital, I’m one of those guys “w/ artificial cost of capital”, too. So now I can produce cheaply and “dump” as well.
“..keeping the consumer under consumed.”
Since Chinese workers’ consumption have declined so dramatically relative to that of American workers, since Deng took over and the deficit started growing and all…
As well as since Americans, of whom, what 70%?, live hand to mouth with no pensions; are obviously such great role models for how much to consume vs save and all…. Especially for Chinese people who, of all strange, magical and incomprehensible things, can afford health care likely to keep them alive past 70 and all…
Of course, back on planet real world: Nothing is weird. Chinese handily outcompete Americans for exactly the same reason Americans once outcompeted Soviets: China is a much freer country than America now: Chinese workers are freer to seek better opportunities. Chinese capital owners are freer to allocate capital as they see fit. Chinese consumers are freer to choose what, and from whom at what price, to consume.
A literal eternity of economic laws, didn’t just magically stop working one day, a few decades ago. It’s still the same. The place where capitaland labor is permitted to be the most freely allocated, is the place where they becomes most efficiently deployed. Same as always. That place used to be the US. But that’s a long, long time ago. Now, “we” aren’t even a speck in China’s rear view mirror.
Dim sum for lunch? I framed this following 20 years of Pettis. Labor costs are lower in Mexico and have been for some time. Good luck with all that CCP loving freedom.
Right Chinese are freerer now to live under bridges of major Chinese cities because they find themselves increasingly homeless.. Chinese consumers are freer to choose nothing because they can’t afford anything else given the state of the Chinese economy these days!
WTO was setup to transfer all patents/manufacturing to asia/outsourced
now that it is complete
end WTO and stop all trading with china/asia
makes sense to ccp PRIVATE BIDEN
Biden didnt block anything. The Network of Interests that run our government did.
Not sure if you allow links in here Mish, but everyone should watch Scott Ritter’s video explaining our parallel unelected government, starting around minute 14 on the very evil Youtube
Scott Ritter: How Close Is US to War? – Unelected Parallel Government, Night of Long Knives
I like Scott Ritter.
But he becomes over-enthused too often.
Is it finally dawning on we Americans that WE ARE OUR OWN WORST ENEMY by a remarkable amount? WE are doing ourselves in, slowly screwing over many other countries, sanctioning Countries that FEED THE EU cheap NatGas, warring on UKRAINE (Proxy, costly) and Israel’s holding us by the nuts for some reason in Palestine which no one can EASILY explain(?)!!!!!!!
“China will retaliate against US tariffs. One way might be to stop exports of rare earth minerals used in cell phones, EV, computers, wind turbines, and military guidance systems.”
Did we forget to add PHARMACEUTICALS, which are produced in big qty’s in China?
China COULD SICKEN THE USA or people will simply have live without their meds OR prices will skyrocket more than they have already!
We have fair trade with China. US buys made in China goods using a failing currency, which they accept.
China sends exports to US, goods that fail within three months of purchase.
Even Stevens.
Modern (international) version of old Soviet joke – “They pretend to pay us, we pretend to work.”
But kudos to you for pointing out the danger to the US in leaning on a perpetually diluted scrip (the US Dollar) to survive 50+ years of trade deficits (domestic consumption in excess of domestic production).
Eventually, the exporting countries selling the US real asset, survival goods, won’t want much more of the US’ increasingly phoney-baloney, print-on-demand “money”.
In 2018 the yellow + brown was : 132 + 418 = (-) 550 on 20T GDP, or 2.75%. Today : 279 + 305 = (-) 584 on 28T GDP, or 2%. That’s a nice reduction.
We are more diversified and we can buy more bc the dollar is stronger. In 2008 when DXY was 70, at nadir, the yellow + brown was : 225 + 70 = (-) 300 on 15T GDP, or 2%. We can do even better if we trade more from the sugar islands, Venezuela and Argentina, Argentina is a gold mine.
The west should not have turned away from globalization. There is plenty of opportunity on the value chain.
globalization isn’t dead. It’s less focused, more diversified.
Exactly.
And while I agree with Mish in many things, I’m puzzled that he doesn’t see the benefit of shifting from sole-supplier China, to multiple suppliers (Mexico, Vietnam, India, etc.)
Maybe not the “ideal” of domestic production (but we would have to kill off powerful, longstanding entrenched interests in the US for *that*) but a diversified intl supplier base does beat the hell out of bottomless anchoring to China alone.
The problem is quite simple now: RESTARTING requires a decade to come up to CURRENT DEMAND numbers.
What people do not understand is that a Tariff is a tax on Americans. This will not hurt China at all. Global market. The great minds of the 90s with Globalization. This is the loss of the Free Market. Government and the FED have almost eliminated the free market now. This has made investing very difficult This election reminds me of a old Steelers Wheel song; clowns to the left -jokers to the right here we are stuck in the middle!
West depend on Chinese products. Because of tariffs and sanctions, tariffed Chinese products will come via third countries such as Vietnam, Malaysia, Mexico, etc.
American consumers have to pay more for extra routes or tariffs.
Yes, one way or the other or CHINA CUTS US OFF and allows for their protectionist policies to mess them up, too.
May happen to a degree…but Mexico, etc. have long shown ability to produce world-price competitive goods on their own (not just China reroutes).
Basically, something has to be done to limit 20+ years of ever more debilitating sole reliance on China.
Tariffs are bad…but the very same people screaming loudest about them now, told us in the 90s that de-industrialized US workers would turn into electrical engineers and cutting edge biotechnologists.
Not part time baristas…which is actually what happened.
Ideologies that ignore empirical results end up getting ignored themselves.
It’s about supply chains. Despite the bar graph, the US and West are now even more dependent on China than ever now, not less, due to supply chains. Let me explain.
Those suppliers “other” countires are often Chinese companies dodging the tariffs via final assembly ) in a “different” country. China literally owns 81% of all business measured by sales in all of Asia, and Asia makes 83% of everything on earth and possesses 85% of all global resources (it also now has the majority of the world’s people, wealth, and total global economy). China also essentially owns Africa too, which is handy for natural resources, plus China is called “the Saudi Arabia of metals” for a good reason. And after 4 decades of effort and specialization, China and only China has the expertise of refining or producing topnotch product from those resources like nobody else can or will be able to for decades, at best.
So in a nutshell, China owns the global supply chain. Therefore, chinese companies increasingly control most global industry. Leveraging that, China is now the largest industrial powerhouse in human history and getting stronger every year, not weaker.
Elon Musk knows it, which is why he has long been deeply active in China. Same for Tim Cook, who was the senior exec of Supply Chains Management when Steve Jobs got sick. Jobs “got it” too, which is why he selected Tim Cook to be his successor even tho Cook is no tech innovator by any stretch. Supply chains are the #1 requisite to success (though of course you gotta have something worth building too).
So at the end of the day, it’s not about “cheap labor” as so many writers go on about (china does NOT have cheap labor anymore by any stretch; the median wage and standard of living for a Chinese worker today now exceeds that of the average American worker on a PPP basis). India’s, Mexico’s and VN’s cheap labor doesn’t do anything without supply. That’s where China comes in and those countries’ low-level industries exist on the whim & strateygy of the Chinese firms. It’s 97 more countries now want to join the China-led BRICS.
All these statements don’t mean that I’m chinese or a china fan; they’re just facts that folks ignore at their own peril. As you gotta understand your competitor or adversary to beat them.
And IMHO Mish is correct, sanctions or a trade war will NOT beat china and instead is shortchanging ourselves ultimately. We should be selling tons of stuff China wanted to buy like agricuture, semiconductors, jets, AI, farm & heavy equipment – not sanction it! Example, five years ago we sanctioned chips to China. Now china produces more chips more cheaply, all the way down to 3nm, so in 2024 we now put tariffs on the heaps of chips China makes, instead of selling them by the boatload to China as we used to before the sanctions! Chinese companies *preferred* to buy reliable US chips and wouldn’t buy from chinese chip suppliers, not until US sanctions on chips changed everything so now the Chinese make most of the world’s chips instead of us… so how dumb was that?!!
I would love to be able to buy cheap Chinese hybrid vehicles. We are heading rapidly towards a future where middle class Americans will not be able to afford new cars due to the cost and insurance costs. The future is now here in Los Angeles.
Keeping dinosaurs alive to save a few jobs here in the U.S. siphons capital away from new and creative endeavors
Absolutely correct.
And it’s worse than people realize because tariffs just keep spiraling and making the US less and less competitive in more and more industries which means more and more tariffs until there comes a point where you can’t compete in any market.
For example consider the 12K EV China can make. Imagine we tariff it to the tune of 10K so it becomes 22K. Now imagine a steel worker who needs to buy a car. If he has to buy a 22K car while a steel worker in India can buy one for 12K and the car lasts 10 years on average then right away that worker in the US needs to make 1K more a year in salary (1K a year x 10 years = 10K diff in price). That means the steel mill in the US has to pay 1K more in salaries than the steel mill in India which means the US mill is less competitive on their steel price due to salaries due to car tariff. That means another tariff needed for the steel mill. Then picture another worker at another company that needs that same car (10K extra) plus that company uses steel (some other tariff amount) that competes with another company in India which is now behind by the 10K car + steel tariff. On and on it goes through the economy and the only way the US can get ahead is if there is a real competitive advantage (transportation costs to market or transportation cost of raw materials etc) other wise they are dead in the water.
Good summary.
Fine…but explain the horrible, perpetual trade deficits of the last 50+ years and the horrible employment growth from 2002-2019.
Making likely accurate predictions about tariff consequences is one thing…but you ignore the horrible empirical consequences of the absolutist, “see-no-evil, foreign or domestic”, free trade position.
People are open to alternatives to tariffs…but the alternative of doing nothing has been tried for 20-50 years. Palpable American decline is the result.
Unless you address that, you won’t win the tariff argument.
Middle class can afford new vehicles now and in the future, it’s just that there aren’t many left in the middle class.
As long as one’s definition of “Middle Class” includes, as it would in order to make much sense, the Middle/Median American; The American Middle class now struggles to afford a roof over their head. New car… bwah, ha, ha!!
Mean, median, mode – what is the definition of middle class? If one hedonistically adjusts the definition then there is a consistent percentage of the country’s population is middle class, but I don’t view it that way.
Middle class can afford a new vehicle, they won’t even need one of those 84-month loans. Stories about the hollowing out of the middle class have been around for decades. Middle class households are an endangered species.
If one defines a member of the “middle class” as someone who can afford a new vehicle without a loan, then yes: the middle class can afford new vehicles. Now ain’t that surprising. And informative..
As for usefulness; that definition makes about as much sense as the much more widely indoctrinated one of simply a priori defining America to be a free country; observable reality be darned…
Never mind the latter having been patently false for at least 50 years. Hence why a definition as circular as the former now being required, in order for the (middle class=>can-afford-new-car) relation to still hold.
You’re unnecessarily hung up on an alleged definition when I was responding to a specific statement by Jackula
If one struggles to afford a roof over their head, that certainly isn’t middle class. If you’d prefer ski boat or something more esoteric in lieu of a new vehicle, fill in the blank as you see fit. The point is being middle class results in surplus capital, working class scrapes by living paycheck to paycheck or thereabouts. In the U.S. the working class has grown in (relative) size at the expense of the middle class.
https://ahdictionary.com/word/search.html?q=middle+class
It really is futile. China has labor but no energy resources. Russia has energy but horrible management. US has energy and good management but refuses to use it to crush both of them.
“US has energy and good management.”
It is very unlikely, that there has ever been a time and place, in all of history, where “management” has been more singularly and undifferentiatedly incompetent, than in today’s US.
The whole point of central banking, was always to ensure connected idiots are always bailed out; with wealth stolen from more productive, competent people; come what may.
A century+ of nothing but just that, and what we are left with is America today: NOONE, in ANY position of neither wealth nor influence, has ANY competence at ANYTHING whatsoever, AT ALL.
The Presidential candidates are not outliers: Trump and Biden are, literally, the very best and brightest among America’s current “Elite.” None of whom has the intellect nor competence score any better than around 70% at advanced tasks such as stair navigation.
And that’s not hyperbole.
Vivek Ramaswamy seems very smart, although some of his current policies would be vote-losers….
Obviously you don’t have the experience of working in an organization with more than 5 employees.
Russia has energy but horrible management
Really? They just became the 4th largest economy, passing Japan.
How can everything in your post be negative, negative, negative. Isnt there supposed to be a positive somewhere? You know .. for every buyer there must be a seller, etc.?
China has a trade surplus
The US has a trade deficit
It all balances out
Happy?
Why are all the posts negative? Because there are zero positives.
All growth globally for two decades has been based on epic amounts of stimulus — debt, low interest rates, lending to zombie companies etc etc etc…
The world is essentially insolvent. The only positive you can take away is that what they have done has delayed the total collapse of the global economy.
Here’s why:
Conventional Oil Sources peaked in 2008 and the Shale binge has now spoiled US reserves, top investor warns Financial Times.
Preface. Conventional crude oil production may have already peaked in 2008 at 69.5million barrels per day (mb/d) according to Europe’s International Energy Agency (IEA 2018 p45). The U.S. Energy Information Agency shows global peak crude oil production at a later date in 2018 at 82.9mb/d (EIA 2020) because they included tight oil, oil sands, and deep-sea oil. Though it will take several years of lower oil production to be sure the peak occurred. Regardless, world production has been on a plateau since 2005.
What’s saved the world from oil decline was unconventional tight “fracked” oil, which accounted for 63% of total U.S. crude oil production in 2019 and 83% of global oil growth from 2009 to 2019. So it’s a big deal if we’ve reached the peak of fracked oil, because that is also the peak of both conventional and unconventional oil and the decline of all oil in the future.
Some key points from this Financial Times article: Read More
And this is the solution (you won’t like it) https://fasteddynz.substack.com/p/the-ultimate-extinction-plan-uep
The trade war is a populist measure to appease the domestic voters markets and to distract away from corporate kleptocracy
Ain’t that the truth
(1) Its Washington DC (not Trump or Biden or Obama or Bush or Clinton…) that wants higher tariffs. Pay income taxes or pay higher prices from tariffs, but the government bureaucrats want to take your money so they don’t have to work themselves.
(2) Under laboratory conditions (aka not real life), trade tariffs might deter some purchases at the margin. They don’t cause local producers to have lower cost structures. More importantly, tariffs do not cause social justice warriors to miraculously understand calculus or chemistry or software development or product design …
Worthless college majors are just as worthless with no trade tariffs as they are with high trade tariffs.
(3) US workers will get paid based on skills and value added, not based on income taxes versus tariff taxes. But government bureaucrats face a different reality than the public they were meant to serve
Biden has ramped up trade wars well beyond Democrats. The Inflation Reduction Act (more appropriately titled “The Trade War Act”) has put tariffs and trade barriers on steroids compared to Trump.
So, the Yellow bar tells me its time to Invade Vietnam again??
Joe and Hunter Biden are on Xi’s payroll. President Trump is not.
Lol! Take your tongue out of Trump’s ass. A simple search revealed hundreds of Trump’s dealings with China. Here’s a few of them.
I don’t vote, because it’s a waste of my time. But if I did, it sure wouldn’t be for con man Trump. (I wouldn’t vote for Biden either).
https://www.americanprogress.org/article/trumps-conflicts-interest-china/
https://www.forbes.com/sites/danalexander/2023/04/10/china-paid-trump-millions-in-rent-then-he-left-the-white-house/?sh=55dc6eb54f39
http://www.citizensforethics.org/reports-investigations/crew-investigations/trump-made-up-to-160-million-from-foreign-countries-as-president/
https://ny1.com/nyc/all-boroughs/news/2024/01/04/trump-china-saudi-arabia-hotels-trump-tower-report
https://apnews.com/article/0a3283036d2f4e699da4aa3c6dd01727
https://time.com/6279053/hunter-biden-trump-children-scandals/
https://www.politico.com/news/2020/04/24/trump-biden-china-debt-205475
https://www.independent.co.uk/voices/trump-china-bank-account-hunter-biden-ivanka-donald-jr-eric-b1209978.html
https://trumpresearchbook.com/en/home/trump-personal-reports/chinese-interests
Trump championed Operation Warp Speed … and continues to insist the Rat Juice shots were a good idea….
He’s an actor … just like Biden … Obama etc….
Factories in your arm. Biodefense / warfare has been a focus since 9/11. Interesting article. You live or die, not really in the calculus. https://americanaffairsjournal.org/2021/05/inside-operation-warp-speed-a-new-model-for-industrial-policy/
Didn’t China respond to the initial Trump tariffs by not buying our wheat and pork? The farmers paid the price.
No, the Farmers did not pay the price, they received Bailouts from Trump to the tune of tens of Billions of dollars because he needed their votes!
Xiaomi (a phone company) releasing their first car model to compete with Tesla model S, and Porsche Taycan.
https://www.youtube.com/watch?v=qW5Bli6xf7Y
The interesting bits in the video are Xiaomi own casting machines, and materials.
Although the orange robots are from Kuka Robotics (German manufacturer of industrial robots and factory automation systems. In 2016, the company was acquired by Chinese appliance manufacturer Midea Group.)
Moving up the chain is the motto.
Strange that anyone would introduce a new EV … when the legacy players are slashing their EV lineups cuz there is no demand… and Tesla ditched 20% of their workforce and their EVs are piling up unsold in car parks.
Clown World?
Mercedes, BMW, Audi evs have antique batteries mostly requiring overnight charging — and are wildly overpriced. This morning I was at my dealer and saw that an electric 4 series (the lowest cost line) starts at $55k and runs to over $110k. Are you surprised it doesn’t sell? And the electric 7 series is almost twice the cost of the 4.
Jeff Green doesn’t buy new… his sweet spot is 6 yrs old … just a couple of years before the battery warranty expires… he gets these Tesla’s for under $2000.
Jeff is Brilliant.
The portrait of Dorian Gray is a metaphor of the USA.
China understands that. Do you?
China is just as f789ed… think the subprime crisis on steroids… at least with the US debacle the homes were actually built and sold…
China has Ghost Cities… and millions who put down the full cost of units — that will never be built…. but they still have to make payments on that $$$.
Then there is the demographic catastrophe of the one child policy… you can’t make that go away…
China is a diseased 60 year old whore lying in a back alley having just shot a syringe of Fentanyl into her one remaining functioning eyeball.
BTW – I have done business in China for 2+ decades and it pains me to see the dirty old hag in such a sorry state.
Eating breakfast at International House of Pancakes is not the same as working for 2+ decades in China lol. Frankly, the only people who make your kind of comment are ones who have never been in China.
I have done business in China for over two decades… I lived in Hong Kong and Shanghai for many years.
I have a fairly good idea of what is happening in China…
BTW – a good mate was visiting me a couple of months ago — he is head of legal for APAC for a major US Ibank… he has gotten to know a Singaporean who lives in his building — they guy is the CEO of a good sized developer in China
The guy said – whatever negative stuff you read about China… it’s far worse.
This country is unravelling…