Steven Moore, a Trump Fed nominee who backed out, says Trump Will Win the Trade War with China.
“I think by the end of this year I think China is going to relent. I think they underestimated Trump. I think that we’re going to get a trade deal with China that ends some of these abusive trade practices that the Chinese impose on us ,” Moore said Sunday during an interview with John Catsimatidis on his AM 970 radio show.
Calling it the “epic battle of our times” and a new Cold War, Moore said China is stealing technology from American companies and engaging in unfair trade practices in an attempt to unseat the U.S. as the world’s greatest economy.
Win the Battle, Lose the War
CBS News says Trump Could Win the Trade Battle with China but Lose the War.
If China is feeling the effects of the trade war, however, so is the U.S. The latest round of U.S. tariffs and Chinese countermeasures have rattled financial markets, while everyone from farmers and small business owners to Fortune 100 CEOs have urged Mr. Trump to settle the conflict.
David Jacobson, a professor of global business strategy at SMU Cox School of Business and visiting professor at Tsinghua University in Beijing, said Mr. Trump and U.S. trade negotiators are underestimating China’s willingness to suffer a dose of economic pain so long as it preserves the nation’s long-term objective of becoming a global leader in technology, energy and other key sectors.
In the short-term, a bigger obstacle to a trade deal may be Mr. Trump’s in-your-face negotiating style. Americans might be used by now to his Twitter taunts and steamroller exercises of presidential power, but China’s leadership and people are not.
“He says things that are politically targeted toward his base that are particularly offensive to the Chinese,” Jacobson said. “The Chinese are totally respectful of hardball negotiating, but they don’t like to be humiliated.”
Long Game
Jacobson — who has spent years living and teaching in China — also emphasizes that Beijing is playing a long political game, rather than one at least partly tied to election cycles. While Mr. Trump is already in campaign mode for the 2020 election, Xi is likely to remain patient.
“We’re in for a very long conflict,” Jacobson warned. “This is really about the Cold War–it’s not so much about trade.”
He thinks that whatever concessions China makes on trade will be calculated to let Mr. Trump declare victory — a win he may urgently need in what is expected to be a hotly contested political race — while not giving much ground on issues of intellectual property, protecting technology rights and market access.
China Already Lost
Chris Whalen says China Has Already Lost the Trade War
The truth is that China really has very few options to retaliate against the trade sanctions imposed by the Trump administration. Outside of the traditional approach of a currency devaluation, there does not seem to be any way for it to make up for lost exports to the United States. Yet a devaluation of the yuan would also bring with it the danger of a debt crisis affecting heavily indebted public and private borrowers in China.
“China needs the U.S. surplus more than the U.S. needs China’s trade and finances,” notes Spanish author and economist Daniel Lacalle. “And that is why the trade war will not happen. Because China has already lost it. China cannot win a trade war with high debt, capital controls and U.S. exports’ dependence. A massive Yuan devaluation and domino defaults would cripple the economy.”
Economic War – Win Win
In a YouTube video, Steve Bannon, former White House chief strategist, says China has been running an “economic war with the industrial democracies for 20 years.“
“The Chinese business model cannot continue. … We have all the cards. … Wall Street needs to cut of the capital to China. … Trump is looking at the long term. … There is no chance Donald Trump backs down. This is not going to take place overnight. It will take a long time. … Trump could have blinked, but he didn’t. … He’s not going to back down.”
Lose Lose
Trade wars are a lose-lose proposition. Here’s the most recent example:
The pain will be widespread. Washington is the nation’s third-largest exporter of food and other agricultural goods: In 2017, the last year before various trade disputes broke out, nearly a third of the state’s agriculture output, worth nearly $7 billion, was sold abroad.
Already, tariffs imposed by China, Mexico and other unhappy trading partners have cost Washington state producers many tens of millions of dollars in lost exports of everything from cherries and salmon to wheat, apples and potatoes.
Barring a last-minute breakthrough in trade talks between the United States and China, those losses will increase when China’s latest series of tariff increases goes into effect next month.
But the consequences for Washington’s agricultural sector will go beyond the immediate pain of lost sales.
Lost and Gone Forever
Farmers are going bankrupt in record numbers.
Moreover, once foreign buyers switch sources, they don’t easily switch back.
“One reason is cost: Shifting to new sources typically requires importers to make big investments in building new supply chains and marketing programs — investments they’d probably have to write off if they came back to buying American.”
No One Wins
I agree with Whalen 100% on his statement “The truth is that China really has very few options to retaliate against the trade sanctions imposed by the Trump administration.”
But is that winning, or losing more? Perhaps less retaliation means losing less!
Why?
The bigger the tariffs, the more businesses and consumers lose. That logic applies to China as well as the US, whether it’s soybeans, cherries, aircraft, or steel.
Trade War Is Happening
Lacalle also agrees with Whalen’s China has no options logic, explaining his statement: “That is why the trade war will not happen.”
But a trade war is happening!
No reasonable person can deny that. We can however, debate how long it will last.
Who Has More Resolve?
Trump has an election to worry about. China doesn’t.
Also note the scorecard to date.
To help secure USMCA, Trump’s NAFTA replacement, Trump just cancelled tariffs on Canadian and Mexican steel. The final result, after years of bluster, USMCA = NAFTA.
I suggest, Trump, Fearing Trade Wars on Multiple Fronts, Delays Auto Tariffs for 180 Days.
Resolve?
Trump also just postponed tariffs on on the EU.
Resolve?
Trump backed down on the wall.
Resolve?
Speaking of resolve, please note Republican Senator Grassley Warns “Trump’s Tariffs End or His Trade Deal Dies”
Win-Win Proposition
Bannon’s win-win proposal is interesting. But win-win is in relation to a deal.
Deals are inherently win-win. Both sides must believe they have gained, or they do not enter the deal.
This takes us back to the long game.
Jacobson thinks that whatever concessions China makes on trade will be calculated to let Mr. Trump declare victory while not giving much ground on issues of intellectual property, protecting technology rights and market access.
That is essentially my view and has been from the start, but that does not totally negate the positions of Whalen, Lacalle, and Bannon.
Loose Ends
China may seemingly give in on some finer points. But those were points China was ready to concede or do anyway out of necessity.
On this point, both Bannon and Lacalle are correct.
- Bannon says the “Chinese business model cannot continue.”
- Lacalle explains why: “high debt, capital controls and U.S. exports’ dependence.”
I agree with Lacalle and suggest the Chinese model isn’t sustainable no matter what Trump does.
The facts of the matter are: The yuan will not soon displace the US dollar and China Nowhere Close to Becoming a Global Financial Center for Many Reasons.
Conclusion
Trump won’t “win” a trade war. Neither will China. Nobody wins them.
If anything, Trump’s belligerence and poor negotiating style will prolong a lose-lose situation.
Mike “Mish” Shedlock
Let’s just let China continue to cheat and grow until they are biggest superpower in the world. I’m sure then they will play fair and not attempt to dominate the west. However, I wouldn’t put it past the short sighted American people to rather have a Chinese hedge money than pay a few extra bucks for anything.
I’ve seen the IP theft firsthand from Chinese companies. Spies inside US companies posing as employees. Theft at technical conferences. Even if there is a deal this will continue. The mistake was letting China in the WTO. The threat should be to throw them out of the WTO and send them back to the 1980s. Chinese culture and Asian culture to a lesser extent is about cheating and not competing fairly.
Problem is, any “IP” complicated enough to be worthy of “protection” is, by definition too complicated for someone who would waste his time trying to “steal” it at an open, technical conference, to understand.
Only dumb ambulance chasers, patent trolls and Fed welfare queen “asset owners,” benefit from pretending otherwise. To the detriment of American technologists, and American technological progress.
IP is mostly a scam. It is a modern legal innovation which would never have occurred in previous eras. Most people in the third world think of it as modernized colonialism. All the warnings on DVDs emphasizing that making a copy is just like snatching an old lady’s purse underscore the main point: these two things are nothing like each other. Who cares if someone makes a copy of your car or TV instead of breaking in. Our generation stands on the intellectual and artistic fruits of countless of our forebears, most of who never benefited from their endeavours.
Yes it is wonderful if creators and innovators benefit from their effort. But today that is still usually not the case. Most of the licenses, research, and patents have been taken possession of one way or the other by legal persons (corporations), much in the same way land that nobody created was conquered and then milked for generations afterwards. IP is far more akin to plunder, conquest, and exploitative land lords than it is to just rewards for (creative) labour.
And why do you think the US is not doing the same thing? Have the Snowden and Manning leaks not shown otherwise? Would we not be stupid to not do our own spying? In a US where rich people bribe their kids into elite colleges you dare to lecture China on cheating and not competing fairly? I have news for you my friend, the narrative of hard work and fair play is a myth perpetrated by those who regularly arrange to take advantage of the average guy. Napoleon said, “Religion is what keeps the poor from murdering rich.” Nothing has changed..
Move to China then if you love it so much. China with its oppression and censorship is obviously better than freedom in America right? Anyone who argues for China is either a Chinese plant, paid by China to lobby, or plain stupid. Which are you?
My policy is to never match wits with an unarmed man.
Did anyone listen to the Bannon interview here? What he said makes perfect sense. The other stuff here is chicken little rhetoric.
The idea that Chinese society will become more like America is a pipe dream. The Chinese will regroup. There is zero chance that America will regain its ascendancy as global hegemon, or that the the Chinese will permanently kow tow.
Two guys have a fight. Both land up in hospital with broken jaw. One guy has a concussion and a broken arm. The other has a broken leg. Who won?
“Trump won’t “win” a trade war. Neither will China. Nobody wins them.”
Who wins in a cycle? Every cycle has an up phase and a down phase. The Roman Empire rose and fell. What the Romans won, they lost. If free trade was a winner, there would be no trade wars. Millions of Americans have been hurt by factories freely moving to China, as they lost their jobs. A story the other day noted that the suicide rate increased 24% in Ohio as a result of de-industrialization in the state.
” If free trade was a winner, there would be no trade wars.”
You could, just as accurately, say the same about peace, as in freedom from hot wars.
There is really no way, in which being barred from seeking a better deal for something, benefits someone. The reason it is still being done, is because there is very much the possibility that some can benefit from robbing and enslaving others, if they can get away with it.
The ones fighting “trade wars,” like the ones fighting other wars, do benefit from them. But the benefit they receive, is matched several times over, by losses for someone else. Such that, netted out, the end tally is still an economic loss. It simply cannot be otherwise
No one, certainly not the average citizens, is going to win in this trade war. U.S. farmers are already being decimated. I’m also curious to see how this plays out in the U.S. residential real estate sector. Chinese have been buying a lot of high end real estate, to the tune of $30 billion per year in residential investment. If that flow is cut off, or even significantly diminished, the U.S. real estate sector could certainly experience some repercussions.
IMO what the US ignores at its own peril is the cultural differences between the two countries. You can see this everywhere in US TV. Most pundits saying how we are winning based their opinions on their stock market. In other words the US measures the effectiveness of trade war using US parameters assuming China is driven by the same metrics. The other thing is that I know Trump will cave just like he has done his whole life when things get real. Did anyone noticed that he no longer talks about Korea, Venezuela and how he has postpone the war with EU… Or how he no longer says trade wars are easy? All are saying that the US holds all the cards. IMO China holds the winning hand endless patient to wait him out
The really sad thing is, that if the US only dropped all pretense of trade wars, and simply opened everything up for all comers, the US really would hold all the cards. There’s not even a fractional snowball’s chance in hades, that a communist dump, nor a socialist/fascist/social democrat constellation of drunks, could hold even half a candle, to a free and open US.
For historical reasons, “we” still have the highest concentrations of the brightest minds. And the language that allows “us” to communicate the easiest and cheapest with anyone else. And plenty of space, natural resources and common legal and cultural traditions to make commerce fundamentally less friction constrained than anywhere else. The commies and fascist could plan and plot ’til they were blue in the face; they’d never match the efficiency of a free and open US. Something their best and brightest, like their Soviet forebears, would quickly notice, leading them to want to come play in the big leagues as well; rather than rot away in some overgoverned, restrictive, provincial backwater.
” “we” still have the highest concentrations of the brightest minds. ”
And it is that kind of thinking that sinks nations. Here the real numbers number of graduate students in the US
The issue is not that Americans have become dumb. The issue is that the market decided to reward the MBA types and abandon the sciences. While many of those students + engineers + tech used to stay mostly in the US, Trump has made sure to make them feels unwelcome so I expect them to go elsewhere. The brains is what makes a country great. Trump is too dumb to see that.
BTW It has always being like that. The country with the brights brains win. Trump represents the past sort of like a fundamentalist for the west.
A graduate degree in nonsense doesn’t exactly qualify for inclusion in “brightest minds.”
The top US universities still draw more realistic-potential future Nobel winners from China and India and Russia and anywhere, than vice versa. And the number of Indian nationals and immigrants in absolutely critical, project carrying roles in Silicon Valley, must outnumber ditto Americans in Bangalore by a ratio of about a population-of-India to one…. And while less foreign dependent, the oil tech industry centered in Houston, is similar. Even the top Bollywood talent, come to Hollywood to apply their magic, if given a chance. Ditto Swedish (and other) (aspiring or otherwise) tunesmiths…
But…. the delta is declining fast. In a generation or two, per current trends, Asia will likely be where the main action is, academically. Huawei, and spinoffs and similars, may well be where the most advanced computing machinery is being made. And while I doubt Nashville will be outsourced anytime soon, less overtly American popular music is increasingly being written and produced by young people residing anywhere from Bali to Berlin, Bucharest, Berlin, Lagos or Medellin.
I dont know what you mean by a graduate degree in nonsense. The numbers in the link I posted are all for technical degrees earn in the US by foreigners. I dont call those degrees nonsense. I have work all my life in high tech and most of the works SW and HW is now being done no location specific like Ireland, India, China. The work that is being done in the US is mostly by people of those nationalities. Also, tons of R&D pure and apply is being done outside of the US. Like I said, MBAs will not make MAGA.
I think we are really saying the same thing: Bright people from abroad are still coming here in net large numbers. So, “we” still have more bright guys piled up here, than anywhere.
But that’s changing. And that advantage won’t last long, as opportunities in other places starts outstripping those found in the US. Which is happening, to a large extent because, as you say, the US government and ruling classes, have decided the best way to implement nepotism under guise of a meritocracy, is to redistribute as much as possible of the wealth created by bright people, to either nonsensians with MBAs (and JDs), or directly to deadweights sitting onm their rears and idly owning “assets.”
Who cares who wins.Shows how hopelessly desperate China is lol,They send us trillions of dollars of massively marked up shoddy junk in exchange for our worthless IOU’S and a few container ships full of empty soda cans and garbage.
The Chinese are only one-generation beyond living in the dirt, so they are less susceptible to the economic pain that will come from this. They’ve already started spinning this as a patriotic struggle against the decadent, greedy US. Truth be told, the US has become highly dependent in a number of sectors on cheap crap from China, and taking this trade war to the next level could boomerang by wreaking havoc on major parts of the US economy’s supply chain. At the very least it could be substantially inflationary for those voters at the bottom of the food chain, not the least of which are the farmers, but certainly those whose limited resources are stretched by the cheap imports at places like Walmart. As for the Chinese, they’ll shrug off the initial pain and double down on opening trade to the rest of the world via the BRI. As for telling Google to stop working with Huawei, the US is losing a major back door into China through its Android OSs.
Winning!
The end of the long running symbiotic relationship between the US and China can only have negative consequences for both parties. Whether right or wrong, changes in that relationship whereby the US benefited from cheap goods produced in China while China purchased US treasuries which helped to reduce US financing costs will have rippling impacts throughout both economies. But the unwind will have the most impact on consumers who will be impacted by higher cost of goods.
The Fed should be happy though, as that inflation they have been stridently trying to achieve will finally become a reality.
I heard it claimed that if it increases internal consumption by 4%, it has equaled US exports. This isn’t a trade war, it’s a war to remain global hegemon – and the US will not win. Pushing all your adversaries into defacto alliance is dumb strategy.
Wait fifty years for the dust to settle.
Anyone who thinks China will submit to being a long-term low-wage manufacturing state for global American corporations is insane.
The same can also be said for productive Americans. Yet, they obviously insist on wallowing in their obvious insanity….
The Chinese chose the path of severe labor repression in the tradition of other Asian tigers except they were far more repressive than the others. They are now in a trap. Eliminate low wage manufacturing, they eliminate million of jobs. The countryside can only take in a small portion of the rural migrant originally sent to the city . Chinese economic czars state exiled migrant will be generating new “entrepreneurial opportunities” in the hinterlands, or more likely, civil unrest.
Huawei alone spent $15 Billion on R&D last year. For a $100 Billion revenue firm, that’s massive. The odds that the designs flowing from that $15 Billion R&D effort don’t step all over existing patents in similar product areas is nil, and the only workable solution is cross-licensing agreements, the same tool used by major western technology firms to avoid consuming their technical brain-trusts in endless patent infringement wars with their major competitors.
Trade secrets versus published patents are also used extensively in the US to prevent theft of intellectual property, but there must be a mutually-agreed arbitration and enforcement apparatus for both patents and trade secrets to work internationally.
These tools work well for us now, but only within our borders and with our strong trade partners. China has been a weak trade partner, from an IP standpoint, and that is the problem. How long will it take for China to also realize that your top notch architects, designers and managers cannot be consumed by the IP legal staff in endless education, depositions, expert testimony etc., and also totally committed to fielding competitive product at ever-accelerating rates?
China and US Inter-company legal smarts need to make the international leap. Nothing else, absent war, will work. How long will it take? I haven’t a clue, but I’m increasingly concerned that nobody seems to be talking the root problem, at least publicly.
Exactly why on earth anyone with enough nukes to have an effective veto on the graft which has destroyed American technological progress, would want to voluntarily engage in mudwrestling with ambulance chasers, is beyond me. The US “technology” patent and IP rackets, are so far beyond any repair, that a hot nuclear war couldn’t make them any more dysfunctional.
If China, with domestic markets even bigger than the ones which originally made the American patent rackets the dysfunctional standards of the West, use their ascendant position in technology to start healing that particular cancerous outgrowth, noone would benefit more than Western technologists. There’s absolutely nothing more depressing, demotivating, wasteful and destructive for young, sharp technologists, to have to waste their prime years dealing with vapid ambulance chasers and “owners” trying to cling on to unearned “importance” by inserting themselves into matters way above their braingrade.
It’s not as if China is some complete free for all, anarchistic nirvana. They have plenty of internal IP “owned” by people well connected to the ruling junta. The chances of them going too far in restricting freedom, is vastly greater than them not going far enough. Heck, they’re communists, fer csakes! But even commies have some shame and decency. Something America’s ambulance chasers, and other leeches feeding at the through of unconstrained coercive, extractive government, obviously do not.