Trade War with China

now I read
China's additional tariff plan against U.S. products "rational and restrained": MOC
Xinhua| 2018-08-04 00:35:01

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China's new countermeasures to impose additional tariffs on about 60 billion U.S. dollars worth of products from the United States are "rational and restrained," a spokesperson with the Ministry of Commerce (MOC) said Friday.

The Customs Tariff Commission of the State Council on Friday unveiled lists of 5,207 items of U.S. products to be subject to additional tariffs of four different rates -- 25 percent, 20 percent, 10 percent, and 5 percent.

The decision was made in response to a U.S. plan to raise tariffs to be imposed on 200 billion dollars of Chinese goods from 10 percent to 25 percent.

"China's countermeasures with differentiated tariff rates are rational and restrained, and were proposed after extensively soliciting opinions and careful evaluation," the spokesperson said in a statement.

The measures have taken into full consideration factors including the people's well-being, the bearing capacity of companies, and maintaining the functioning of the global industrial chain, according to the spokesperson.

"China always believes that consultation based on the principles of mutual respect, equality, and mutual benefit is the effective way of resolving trade differences, and any unilateral threat or blackmail will only aggravate contradictions and hurt the interests of all sides," the spokesperson said.

The spokesperson pointed out that, because the United States had repeatedly escalated the situation in disregard of the interests of enterprises and consumers of both countries, China was forced to take the countermeasures to protect national dignity and its people's interests, defend free trade and multilateral mechanisms, and safeguard the common interests of all countries in the world.

Commenting on the latest U.S. move to add some Chinese companies into its list of entities subject to U.S. export controls, the MOC said that China stands firmly against U.S. unilateral sanctions on Chinese entities.

China urges the United States to relax its controls over exports to China, and protect and promote the high-tech trade and cooperation between companies from both countries, the ministry said.

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Anlsvrthng said:

Problem is I can't see how the US can loose in the dumping of the treasuries.

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the problem is simply "yourself" who consistently refusing to learn basic macro economic concept

If China was dumping all the treasuries ... it would just like nuclear bomb in the middle of Manhattan ... still don't get it?

I can take the horse to the lake .. but unfortunately I can't force the horse to drink /// hope you get what I meant

tidalwave said:

by itself may not, but coupled with inflation from trade war.
US needs foreign countries to pick up the treasury to finance itself.

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Dumping of treasuries =loosing the money its representing , destroying the Chinese export capability, and cutting off China from the international trade as we know it today.

The dumping serving the interest of the US, not the interest of China.

I think it worth the effort to think about the next:
1. Why the US political elite would construct an international system, where a foreign country can threat the US?
2. Why the US should allow China to buy treasuries, if the mass selling of them doesn't means problem for the US?
3. China didn't know the rules of the system , and haven't had any other option in the 70s . Why anyone think that the system the she participate is in the favour of her?

The trade war started by the US misses the point. The problem with the US economy is the lack of savings which in turn means no capital formation to allow productive capital investments. Making US industry and products less and less competitive in the world. This is the reason why the US has a trade deficit running for the past 44 years. Other factors are the USD as the world reserve currency that helps to keep the USD artificially high. The easy money from foreign inflows has incouraged mal investments and speculation. Shifting resources away from production and savings to speculation and consumption. All of this and more has had a desastreus effect on the US economy.

Today the US total debt to GDP ratio is about 350% of GDP and asset price inflation has reached 500% of GDP while labour productivity in the US has only increased about 0,4% in the latest read from Q1 2018.

And today more and more states and cities in the US are forcing the 15 dollar an hour minimum wage which is another disaster for employment and the economy.

Anlsvrthng said:

Dumping of treasuries =loosing the money its representing , destroying the Chinese export capability, and cutting off China from the international trade as we know it today.

The dumping serving the interest of the US, not the interest of China.

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Dumping of US Treasury serves the interest of US?? Lol.

thought I might mention here what I read in Russian Internet some time ago and which is summarized in English in
Russia cuts Treasury holdings in half as foreigners start losing appetite for US debt

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• Foreign governments have pared back their holdings of U.S. debt, reducing the total by nearly $10 billion in March and April.
• Russia was notable among the group stepping back with a nearly 50 percent cut.
• The U.S. government needs buyers of its debt as the Fed continues to reduce its holdings and the budget deficit is projected to surge in coming years.

by the way good for about 61 thousand Cayman Islands inhabitants to hold a quarter of a trillion, no? LOL

Anlsvrthng said:

Dumping of treasuries =loosing the money its representing , destroying the Chinese export capability, and cutting off China from the international trade as we know it today.

The dumping serving the interest of the US, not the interest of China.

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Lol. If you have too much Treasuries in the market, they will soak up all the investors purchases, which doesn't leave them with the money or the incentive to purchase the new Treasuries you are going to issue to cover your deficit. Supply and demand right? This is a situation where you have a supply of too much Treasuries. So as a result, you have to increase the interest rates of the Treasuries you have to issue to attract these investors to buy the new Treasuries instead of the older ones. That increase of interest rates is passed on to the economy overall increased borrowing costs. You also have a situation where you have less buyers, less Russia, Japan and China. Too much supply of Treasuries, not enough buyers. Higher costs of loans means less loans are going to be made, which tightens the money supply and strengthens the dollar. Makes exports less attractive and imports more attractive, while economic growth slows down. At least Trump knows this, which is why he criticized Fed for planning to increase interest rates.

Treasuries are used to pay the bills of the US government because US politicians like to spend money. Do you think it's a one time deal? It's used to pay for government programs to keep running every year. Every year the US government needs to sell treasuries to keep paying those bills. Because every year the US government needs someone to buy treasuries to keep paying those bills in excess of what the US can make on its own, any drop can cause havoc as in how US government shutdowns are of concern every year. There's a cascade effect when the US can't pay the bills. Do you think there's just a big pile of cash because of treasuries the government has like a slush fund when needed? American don't know how to save hence why there's a debt. Just look at what happened in Europe after the last Western financial crisis where some countries had citizens violently protest against any cuts to any government programs. Their governments are spending more money than it can make so they borrow.

If China made a significant retreat from US Treasuries, it doesn't matter if American entities are the majority owners because that money is already spent and any drop means the US government has to cut, budget, and shift money around. That's where partisan fighting happens and thus gridlock the US Congress is known for. If you look at the US Army, do you think all of them fight on the frontline? No, the majority actually plays logistics and support to those on the front line. So what happens when the front line instantly disappears? And who's the frontline? Anyone that sells off larges amounts of treasuries. Who's more likely to sell off? The American people or other countries that face the fickled politics of the US government? Foreigners are first blamed in the US no matter if American are responsible.

If you're spending all your time paying bills, how do the people who you borrow from ever get paid back? You certainly can't pay them back with interest all at once. In the end when Bernie Madoff's exclusive investment fund that everyone wanted to be a part of was running out of gas, he went to China looking for investors so he can take their money to make his business look legit and payoff earlier investors to keep his scheme going. Even though some of his investors who sold off early where rewarded nicely to keep up with appearances, the rest who didn't get out early were going to get screwed because Madoff spent their money to pay off people who sold-off. The people who sell-off first will mostly get their money back. China, because it's a large holder of US Treasuries, is in a position where politics will force China to sell and panic everyone else to sell afterwards leaving them holding the bag. That's when chaos ensues because the US government won't have as much money to run the government and then they also have to pay Treasury holders fleeing.

In the end the US government will be able to survive because there's no higher authority but they'll have to screw everyone else in the process. But then the US is a democracy where the government can be instantly removed by the vote. Anything that tries to prevent that is not democracy. That's what you call chaos in the end.

There is always option of QE and debt monetizing