Decouple From China? 

Please consider Trump Again Raises Idea of Decoupling Economy from China.

“So when you mention the word decouple, it’s an interesting word,” Trump told a Labor Day news conference at the White House in which he vowed to bring jobs back to America from China.

“We lose billions of dollars and if we didn’t do business with them we wouldn’t lose billions of dollars. It’s called decoupling, so you’ll start thinking about it,” Trump said.

“If Biden wins, China wins, because China will own this country,” he said.

“We will make America into the manufacturing superpower of the world and will end our reliance on China once and for all.Whether it’s decoupling, or putting in massive tariffs like I’ve been doing already, we will end our reliance in China, because we can’t rely on China,” Trump said.

How?

  1. Consider US cars made in Mexico. What happens to the parts that come from China? 
  2. What about the steel that comes from China? 
  3. What about the Boeing planes that are assembled in China? 

Questions of this nature are endless. 

Nonetheless, let's snap our fingers and assume Trump pulls it off.

What Would it Mean?

iPhone sales in China would go to zero. So would Soybean exports. So would Boeing sales to China. In fact, all trade with China would stop by definition.

The Boeing aircraft would all be 100% made and 100% assembled in the USA, with 100% US-made aluminum.

Hooray?

Not quite. Labor costs in the US would soar. We would make planes for ourselves but Airbus would own the rest of the world.

The same holds true for cars and everything else partially made in the US.

What About the US Dollar? 

Inflation would rise due to rising prices. If the Fed hiked rates, and it would be forced to, the dollar would strengthen making US exports even more uncompetitive.

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He has no idea how international trade even works. 

Trump has been touting "It's Easy" even before he was in office. 

If it's so easy, why didn't he do it?

Mish

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