The New York Times reports U.S.-China Trade Talks End in an Impasse.
The United States and China ended trade talks in Beijing on Sunday without any announced deals and with Chinese officials refusing to commit to buying more American goods without a Trump administration agreement not to impose further tariffs on Chinese exports.
“If the United States introduces trade measures, including an increase of tariffs, all the economic and trade outcomes negotiated by the two parties will not take effect,” China said in a statement distributed by the state-controlled news media.
The apparent impasse left the Trump administration with the issue of what to do about China’s industrial policies. It also left unresolved an awkward issue for both sides: the Chinese telecommunications company ZTE, which had violated sanctions against North Korea and Iran.
Can’t Lose
When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War! The U.S. has been ripped off by other countries for years on Trade, time to get smart!
— Donald J. Trump (@realDonaldTrump) June 2, 2018
Trump Nonsense
All sides lose in a trade war. One does not win a trade war by losing less.
Also see NAFTA is Dead: Trump Seeks Separate Agreements With Mexico and Canada
For a collection of still more charts on the absurdity of NAFTA bitching, please see Dear NAFTA Bashers: You Need New Charts.
True Source of Trade Imbalance
To understand the origin of trade imbalance, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?
Trump is clueless about trade and barking up the wrong tree.
Mike “Mish” Shedlock
Realist – People signed stupid deals all the time. E.g. Seniors lost money to scammers etc. You are naïve to believe that everyone who signed a deal with the Donald got a good deal. Need I say more?
Realist – Yes, when two individuals freely come to a deal, it is by definition a fair deal. However, when someone makes a deal on behalf of other people, we run into the “Agency Problem”. Wretchard on the Belmont Blog discusses this from time to time – the interests of the Agent making the deal can be quite different from the interests of the people on whose behalf he makes the deal.
Good example – the Clinton grifters. When Bubba made the deal effectively to give the Chinese billions of dollars worth of US research effort on rocket guidance for next to nothing, it was a bad deal for the US population. But it was a good deal for the Clinton Foundation. Similarly with Hillary Rodman Clinton and the Uranium One deal with Russia – bad for the US population, good for the Clintons personally.
Remember that most of the individuals in the DC Swamp making trade deals on behalf of the US people are Ivy League graduates – credentialed rather than educated – with little real world experience and a perspective that owes much to the Gramscian march through the institutions. Generally, they are agents without any personal skin in the game.
And even if a one-sided deal made sense at one point in time (eg diverting global economic growth from the US to China to encourage world peace), it may no longer make sense years later (eg when the US economy is hollowed out and workforce participation is declining).
Real free trade makes sense – unilateral free trade, only occasionally and for limited periods of time.
I say do both. Whatever the options there is a way to split the risk.
Interesting that reasonable people have such different views about unilateral free trade. Maybe it is similar to the difference between day traders and investors?
Day traders can make a good living – at least, some of them can – by taking a very short-term view and trying to front run the crowd; they don’t care about long term prospects. Investors, on the other hand, don’t pay too much attention to near-term fluctuations; they try to assess the long-term potential, and don’t panic when there are some short-term reverses.
Individually, we can make our own choice and put our money where our mouth is. For a nation, it is probably smarter to be an investor than a day trader.
“FAIR VALUE of the S&P 500 has 3 digits.”
Fair value means nothing in world of massive financial fraud- until the day the truth comes out. Martin Armstrong is still talking of DOW 40,000. The Nikkei also hit virtually40,000, then lost some 80% of its value. Capital flows in, then capital flows out.
Trade wars may be lose-lose, but what is 230+ trillion dollars of global debt? Debtors and creditors are in a lose-lose when the bubble bursts. Trade wars are a symptom of the economic situation, just as all the sabre rattling- governments creating external enemies, because the population is restless due to their worsening financial conditions.
OT: John Hussman is now forecasting the S&P 500 index to REACH 1100. This is the same Hussman who famously said 3 years ago that “FAIR VALUE of the S&P 500 has 3 digits.” As all students of market cycles know, markets overshoot on the way down, just as they do on the way up during bubbles. So, I infer that Hussman now recognizes that the S&P 500 index is worth 1700 or 1800, which I think is reasonable. Does he recognize now that his previous valuation was ridiculous or – less likely, given his hard-left politics – has he revalued the economy after Trumps tax cuts and deregulating?
Thanks Flyover_country. Trump and a lot of his supporters are certainly unhappy about how the free trade deals have turned out for them.
Perhaps the real blame lies with automation – and the technology industry’s turn will come, after people figure out it wasn’t the Mexicans or the Chinese…
Perhaps, now that I think about it, it is easier from a politician’s point of view, to create an external enemy and let people die in foreign battles, than create internal upheavel…
In negotiations, regardless what they my be, a new house, car or bi-lateral trade, if both parties agree to a deal that both parties are unhappy about, you have reached the optimum deal.
Because no one knows upfront how a deal is going to pan out. When a speculator pays a record price for a house , (s)he doesn’t know if (s)he made the right deal and the market will continue going up; the outcome is visible after years (who knew the Fed would keep the speculator in the black)…
USA made a lot of outsourcing/ free trade deals in the past. Consumers benefitted, but at the expense of local producers; consumers was the larger group then – so it all worked. However, with time, jobs were lost and the number of consumers has declined. Should we continue with the same consumer friendly policies (i.e. free trade agreements) today?
Which group do you think is larger today? The consumers or the local producers who have lost jobs? Trump is in power because he was able to appeal to this second voter group…
Don’t get me wrong – I’m not supporting tariffs! But like all government policy and economic theories, we will go through several iterations until we find a solution that works. Until then, grab some popcorn…
Can’t define economic illiteracy more concisely, precisely and exhaustively than that!
So, the question arises: Was Dimbulb-in-Chief, or the orange-hair-color peddler, the “loser” in that particular deal? Or…. was it perhaps the rest of the world, who got stuck with an illiterate freakshow and a flaming hairdo?
Going into de-stabilising debt to buy products and help enrich others does appear problematic. Who is out of control? The problem is closer to home.
I’m gaining a better appreciation of all these “9D chess” metaphors for Trump’s actions. Apparently in 9D chess there can only be one winner, but the rules are so (depending on your viewpoint) brilliant/idiotic that it’s impossible to tell who emerged victorious.
It’s less like playing moves on a chessboard than it is picking up the board and flinging it across the room. Who won? It’s hard to say, but in a way it seems like both players lost.
Thanks for that bit of sheer stupidity
One more thing- it’s funny you mention China “bribing” the developing world. That’s the difference between them and us. They prefer the carrot (trade) while we prefer the stick (regime change, nation building). Their way can provide mutual benefit whereas ours is damaging and incredibly wasteful. But hey, it enriches the MIC, so it’s all good.
*Edited to say “developing” instead of “developed”
You want to shoot at the Chinese? Go enlist and knock yourself out, keyboard commando. Never mind that in another 20 years we’re likely to have so many problems here in America that nobody will care about what is/isn’t happening halfway around the world.
Speaking of this posturing with China, it seems a convenient way to keep focus, yet again, away from the USA. The talk of MAGA, build the wall, lock her up, drain the swamp, etc becomes a more distant memory with each passing month. All this noise for tariffs that will do nothing for the American middle class they’re ostensibly supposed to help.
China HAS to sell amerika all that overpriced shoddy crap,simply no one wants that cheap junk except gringo’s.Flip side USA has zero to trade China,unless sec 8 vouchers or snap becomes legal in Beijeng.
The report is from the New York Times — what do you expect?
Has anyone ever been involved in a real-world negotiation? Did anyone expect that China would give back without a fight any of the goodies that previous unilateral free trade Administrations had given to them? China has been used to dealing with Obama/Soetero type wimps who would run up the white flag at the first sign of trouble, and feel proud of themselves if they were selling out fellow Americans.
Everything that is happening in these trade negotiations comes under the heading of Normal Business Expectations.
Sorry, “Gen. Mattis”.
Sorry, “Ge.
Gen. Mathis sounded the appropriate warning this week. We need to deal with China now, on trade and their SCS island building, or we will go to war with them in the next 20 years. They are bribing every country in the developing world, building a blue-water navy and Air Force, have many new weapons, and will likely attempt to subdue Taiwan at some point. Are we ready for second-rate status?