Trade War with China
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Jura The idiot
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plawolf
Lieutenant General
It’s clear that Trump’s approach as president is much the same as his approach as a businessman - he doesn’t care about laws or rules, and he will push you as far as he possibly can until you make the costs of going so unacceptably high.
A good case study is the recently announced steel and aluminium tarrifs.
He started with a cross the board tarrif, and is only allowing examptions where countries have pushed back threatening retaliation.
From the swiftness of the announced 3bn Chinese retaliation to those steel and aluminium tarrifs right after Trump announce these latest ones, it is obvious that China had been holding those back ready for this move.
Call that a shot across Trump’s bow, with the sectors outlined like agriculture and steel key bases of Trump support and also to make clear that any industry where Chinese products are targeted, US producers can expect a direct tit-for-tat response.
So once the list of Chinese products Trump plan to slap tarrifs on gets published, expect direct US competitors to those products to start objecting since they know they will get hit right back by China if those tarrifs are applied.
Other stand out areas where China could potentially slap counter tarrifs are include:
- agriculture
- aerospace
- tourism
- professional services, including financial services
- pharmaceuticals and biotech
- cars, especially electric
- entertainment
- fashion and luxury products
- software (25% tarrif on Apply iTunes and Google playstore purchases)
- renewable tech
In addition, China could place new tougher rules on investment in the US by Chinese companies and also make it harder for Chinese citizens to buy dollars (cutting the max allowcance that can be bought each year); it could miss a few US treasure bond auctions; start negotiating with other trading partners to stop settling using dollars.
The list is endless. The priority is to hit marginal the Republican voter base as hard as possible, and also to punish any US industries that might potential benefit from the tarrifs to minimise any US internal support for the tarrifs to start with.
The best outcome is to put enough of a scare into US business that they pretty much gut the tarrif list into pointlessness by strongly objecting to pretty much everything on the list.
If that doesn’t work, then China will gradually but relentlessly up the pain on those US political fault lines until something gives.
Either the Republicans pressures Trump to change tac internally/turn against him, or they get wiped out in the next elections and someone else takes over to reverse his moves.
I would also expect a big acceleration of the Belt and Road initiative as a long term hedge to allow China to create new markets to replace the importance of the American one.
Oh, and also expect significant Chinese military expenditure increases either explicitly or in stealth. As China use military contracts to help out key industries hit, like it has done with the shipbuilding industry.
Corks must be popping in Shenyang today, as SCS’ J31 funding and production contract has pretty much been guaranteed now.
Interestingly, the EU may actually see some price decreases (not while shopping on Amazon tho) if this trade war really kicks off, as both China and the US looks to the next biggest markets to offload products that are now too expensive to sell to each other directly.
Might also see some increased investments as both Chinese and American companies look to set up production in the EU to work around direct tarrifs between them.
So you set up a business in an EU country that isn’t the UK, and do just enough work to allow the product to be counted as made in EU for tarrifs, while buying the rest from China/America, and then exporting to America/China.
Although the EU will also be hurt when both America and China’s growth suffers and they cannot buy as much from the EU as a result. So what the net result is will be anyone’s guess.
A good case study is the recently announced steel and aluminium tarrifs.
He started with a cross the board tarrif, and is only allowing examptions where countries have pushed back threatening retaliation.
From the swiftness of the announced 3bn Chinese retaliation to those steel and aluminium tarrifs right after Trump announce these latest ones, it is obvious that China had been holding those back ready for this move.
Call that a shot across Trump’s bow, with the sectors outlined like agriculture and steel key bases of Trump support and also to make clear that any industry where Chinese products are targeted, US producers can expect a direct tit-for-tat response.
So once the list of Chinese products Trump plan to slap tarrifs on gets published, expect direct US competitors to those products to start objecting since they know they will get hit right back by China if those tarrifs are applied.
Other stand out areas where China could potentially slap counter tarrifs are include:
- agriculture
- aerospace
- tourism
- professional services, including financial services
- pharmaceuticals and biotech
- cars, especially electric
- entertainment
- fashion and luxury products
- software (25% tarrif on Apply iTunes and Google playstore purchases)
- renewable tech
In addition, China could place new tougher rules on investment in the US by Chinese companies and also make it harder for Chinese citizens to buy dollars (cutting the max allowcance that can be bought each year); it could miss a few US treasure bond auctions; start negotiating with other trading partners to stop settling using dollars.
The list is endless. The priority is to hit marginal the Republican voter base as hard as possible, and also to punish any US industries that might potential benefit from the tarrifs to minimise any US internal support for the tarrifs to start with.
The best outcome is to put enough of a scare into US business that they pretty much gut the tarrif list into pointlessness by strongly objecting to pretty much everything on the list.
If that doesn’t work, then China will gradually but relentlessly up the pain on those US political fault lines until something gives.
Either the Republicans pressures Trump to change tac internally/turn against him, or they get wiped out in the next elections and someone else takes over to reverse his moves.
I would also expect a big acceleration of the Belt and Road initiative as a long term hedge to allow China to create new markets to replace the importance of the American one.
Oh, and also expect significant Chinese military expenditure increases either explicitly or in stealth. As China use military contracts to help out key industries hit, like it has done with the shipbuilding industry.
Corks must be popping in Shenyang today, as SCS’ J31 funding and production contract has pretty much been guaranteed now.
Interestingly, the EU may actually see some price decreases (not while shopping on Amazon tho) if this trade war really kicks off, as both China and the US looks to the next biggest markets to offload products that are now too expensive to sell to each other directly.
Might also see some increased investments as both Chinese and American companies look to set up production in the EU to work around direct tarrifs between them.
So you set up a business in an EU country that isn’t the UK, and do just enough work to allow the product to be counted as made in EU for tarrifs, while buying the rest from China/America, and then exporting to America/China.
Although the EU will also be hurt when both America and China’s growth suffers and they cannot buy as much from the EU as a result. So what the net result is will be anyone’s guess.
manqiangrexue
Brigadier
Check out this article for analysis of China's strategy:
Done by David Fickling, it says Beijing is basically allowing the US to injure itself with its own tariffs because as history has it, the initiators of tariffs usually end up causing self-harm. China's tariffs are very small and calculated, targeting things that will not impact the Chinese consumer or the competitiveness of Chinese businesses (for example, if US pork is hit by tariffs, Chinese restaurants can buy New Zealand pork or buy chicken, beef, fish, veggies, etc... but if the US taxes Chinese computers, that makes the cost of business go up significantly for US businesses relying on those computers and it puts them at a disadvantage against foreign firms in international bids when those foreign firms can get those computers at normal price). So what's happening is that the US is like a raging heavyweight boxer swinging haymakers left and right and it looks like he'll be mostly hitting the walls and smashing his own hands and China's strategy is to move and hit him with precise jabs.
IMHO pretty much on the money but China may use Canada/Mexico as well as/instead of the EU (cat amongst the pigeons for NAFTA!) and since Amazon uses Luxembourg as a domicile in the EU price decreases will still come through
In addition funny how practically all the major Steel importers to the US are now off the Steel Tariff list so kiss goodbye to new steel jobs, I suppose like a lot of the so called 'policies' "it's all sizzle and no sausage" as we say round here, they're just a photo op!
Good time to be a Vietnamese pig farmer
Just to complement. The "$3 billion" retaliation is ONLY the response to the "steel and aluminum" issue, not the response to the $60 (used to be 50) billion Chinese imports. For that, there will be bigger and heavier retaliation. This list is still being studied. Deutsch Bank had made an analysis of scenario "light" and "nuclear".
IMHO pretty much on the money but China may use Canada/Mexico as well as/instead of the EU (cat amongst the pigeons for NAFTA!) and since Amazon uses Luxembourg as a domicile in the EU price decreases will still come through
In addition funny how practically all the major Steel importers to the US are now off the Steel Tariff list so kiss goodbye to new steel jobs, I suppose like a lot of the so called 'policies' "it's all sizzle and no sausage" as we say round here, they're just a photo op!
Good time to be a Vietnamese pig farmer
I think that is the truth.
Few month ago, there was reports about China's pig farming being over productive. So the first beneficiary would be Chinese farmers.IMHO pretty much on the money but China may use Canada/Mexico as well as/instead of the EU (cat amongst the pigeons for NAFTA!) and since Amazon uses Luxembourg as a domicile in the EU price decreases will still come through
In addition funny how practically all the major Steel importers to the US are now off the Steel Tariff list so kiss goodbye to new steel jobs, I suppose like a lot of the so called 'policies' "it's all sizzle and no sausage" as we say round here, they're just a photo op!
Good time to be a Vietnamese pig farmer
I think Brazilians would be certainly a winner in this spat. Their share of Chinese market is surpassing US just recently during 2017.
A good chance to lower iPhone's market share in China just like Galaxy last year.
As of Boeing, it depends on how the contract is worded. Contract for immediate delivery may carry penalties for cancellations, it is possible to walk away from the contract without penalty for letter of intention. Some of the $37 billion orders could be just that. Handing over these orders to AB would make EU happier, maybe serving as a sweetener for the negotiation of China-EU FTA.
antiterror13
Brigadier
Also good to encourage (or funding) the research for better soybean farming in China ... in the desert maybe, with new technologies and with the help from Israel and just develop locally
Apart from Brazil and Argentina ... I can see Canada and Australia could replace the US ... but it will take time .. the big question is how to replace US soybean right now? or alternatively make the soybean expensive so the meat is more expensive in China and the Chinese eat less meat ... thats actually a good thing .. higher price soybean means more incentive for farming and research
China is the 4th country that produce most soybean behind the US, Brazil and Argentina
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