In the most predictable move in modern economic history, China has retaliated with tariffs on 128 American imports, notably food products. This is the least rational trade war since the Depression, which was also caused by tariffs.
Sydney
–
In the most predictable move in modern economic history, China has retaliated with tariffs on 128 American imports, notably food products. This is the least rational trade war since the Depression, which was also caused by tariffs.
China’s response to the US tariffs was as much expected as falling leaves in Autumn. Xinhua has called the US tariffs a “self-defeating” exercise. China acknowledges the massive trade imbalance between the two countries, but has been tactful enough to not reference how many “US” goods are made in China.
The backlash effect was exactly what trade pundits feared. Global trade and protectionism are mutually exclusive. Nobody does tariffs any more, except, of course, the US, which is apparently trying to get back to 1929 as fast as possible.
There’s an inherent unreality in the US position. Even basic capital isn’t necessarily onshore in any particular place any more. Capital travels the world, doing deals, as you’d think most American politicians would realise, being deal-business people themselves.
China, on the other hand, has spent decades tweaking rules for foreign business in China. (After all, whose side are the Chinese supposed to be on?) Terms of trade with the US, however, have been largely unremarkable and pragmatic – “We make your goods, we get X margin, you sell above that”. In fact the US sells well above production costs, and that’s made corporate giants out of many American companies.
IP theft, or how to ignore the obvious for decades, then turn it in to a rationale
The other supposed basis for American hostility and penalizing the goose that mass produces the golden eggs is IP theft. These somewhat disingenuous allegations of intellectual property theft refer to rampant global commercial cyberespionage. They also seem to assume the US doesn’t keep track of foreign IP and do a bit of snooping and swiping of its own.
You can argue that the US has a credible need to keep track of foreign technologies for commercial, military, and other quite good reasons. You can’t argue that this sort of information isn’t a saleable commodity, though. One of the reasons that people have been simultaneously outraged and inactive on the subject of IP theft is that IP is a very valuable commodity. It’s the equivalent of bank robbery, but much more lucrative. You only bitch about it when you’re not getting a cut out of it. Why else the ongoing outrage in US Congress for over a decade, in combination with doing precisely nothing about it?
America’s technological edge IS getting rusty. The non-techs in government have never really understood it, except as sales figures and at other day care levels. The number of things worth stealing from the US has declined a bit over the years, and China, in fact, now has a pretty strong, if not yet world-leading range of IP property assets of its own.
IP theft is pernicious, it is dangerous – And what could possibly give the green light to all-out IP theft better than starting a trade war? A trade war is a license to ignore even the legal theory of basic IP rights. Nobody’s going to worry much about any sort of international law, if you’re fighting a war against the other side in any dispute.
The likely result of a trade war? US takes a hit, China gets a mild boo-boo.
A trade war can achieve precisely nothing. It can only drive global terms of trade backwards. This is no longer the 1950s. America isn’t competing with devastated nations any more. China can sell to other countries as easily as ever. China is NOT dependent on the US market. The US, however, is glued to China in multiple ways in terms of production. China is already far more automated than the US. It’d take years to match Chinese levels of production. The US can consider itself lucky that the Chinese response is only about food, not more critical areas of trade.
What are US companies which have their good made in China supposed to do? What about the exporters to China, all major employers and major companies? China wants their business, but not at the expense of a ridiculous series of tantrum-based economic no-brainer mistakes.
The no-win scenario for the US
The fatal flaw – NOBODY else is going to impose tariffs on Chinese goods. The Europeans certainly won’t. The Russians won’t. Countries with major trade ties to China like Canada, India, Japan and Australia have no reason to do so. It’s a bit hard to support a position which makes no sense at all.
There will be no support at all for America in this war, either. Everybody has too much to lose, and no real reasons to participate. The US tariffs are absurd, at best, and potentially lethal to US trade at worst. Just lose the whole idea, America, ASAP, before you take a lot of quite unnecessary hits.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
