Posted on 05/15/2019 8:04:22 AM PDT by SeekAndFind
The biggest damage from a renewed trade war with the United States will be China’s swing from 25 years as a net domestic saver to a global net borrower.
More than $1 trillion in stock value was wiped out on Monday due to the collapse of the expected U.S./China Trade Deal. The American government mostly ignored the 600 point drop in the Dow Jones Industrial Average and soybean futures hitting an 11-year low; but China’s central bank was forced to inject $3.5 billion into the financial system after foreign investors dumped a record $1.6 billion worth of mainland shares and its yuan currency fell to its lowest exchange rate to the dollar in four months.
U.S. stock markets on Tuesday recaptured half of Monday’s plunge as new data showed tariffs on China have resulted in deflationary import prices, and President Trump backed his base by granting farmers another $15 billion in aid to offset China tariff retaliation.
Standard economic analysis projects that the U.S. tariff increases from 10 percent to 25 percent on $200 billion of imported Chinese goods will shave just under 1 percentage point off of China’s growth rate; while the approximately 8 percent average tariff increase on $60 billion of U.S. exports to China will shave .3 percent off U.S. growth.
But according to Diana Choyleva of Enodo Economics, this analysis does not take into consideration any potential blowbacks as China’s current account balance that peaked at 9.9 percent gross domestic product in 2007, shrunk to .4 percent of GDP in 2018, and is set to plunge into the red this year for the first time since 1994.
(Excerpt) Read more at americanthinker.com ...
We Americans pride ourselves for our freedom. We have many strengths also but the desire for freedom is the greatest.
Not so for the Chinese. They have 4,000 years of pride in their ability to buy and sell, anything. Their merchant class is their highest aspiration.
The Chinese have “seeded” all of SE and E Asia (except Japan) with ethnic Chinese enclaves, more or less merchant franchises. Those enclaves from Singapore to Australia to the Philippines, etc., will simply resell Chinese goods without US tariffs. It’s already happening.
Chinese wack-a-mole. Our trade reps are going to need some strong coffee to beat the Chinese at their own game.
I see this trade war going one of two ways:
We win.
We go to “hot” war.
The stakes are high and Trump is not playing political games here. He’s serious. It’s why we elected him.
I guess we'll have to find another sucker to buy our Treasuries. This won't be good for rates.
China, unlike the USA, has the luxury of having the long-term view BECAUSE she does not have to worry about election cycles.
China’s strategy is to WAIT OUT till the 2020 elections.
If Trump wins, they will re-negotiate and maybe more amenable to America’s demands.
If Trump loses, China rejoices because the Democrat is likely to cave in to THEIR demands.
Funded by what?
RE: I guess we’ll have to find another sucker to buy our Treasuries.
OK, riddle me this, why are America’s treasury yields down instead of up? Does this not indicate BUYING of America’s bonds?
If China tries to dump US treasuries, they will be selling at a loss and consequently shooting themselves in the foot.
And guess what? I believe that there will be OTHER BUYERS of the treasuries that they sell. Why? well for one, what other develop country’s treasuries are as attractive as America’s at this time? Japan? Nah, you get a pittance in interest rates ( negative in fact considering inflation ). Germany? ( same as Japan ).
If China ran down its more than $1.1 trillion of Treasury holdings, investors would perceive the maneuver as a sign that Beijing remained unwilling to back down to U.S. demands, and that an eventual resolution to a trade clash stood far away.
Savvy Investors can point to history to demonstrate the relationship between China’s Treasury holdings and U.S. borrowing costs isn’t so clear-cut, despite Beijing’s status as the U.S.’s largest creditor.
China has sold a sizable portion of its Treasury stockpile back in 2015-2016, when domestic growth was slowing and raising concerns around the health of the global economy.
Speculators shorted the yuan in anticipation that China’s excessive debt levels would force the second largest economy into an abrupt slowdown. To stem the yuan’s weakness, China sold close to $500 billion of U.S. government paper.
But even this failed to dent Treasury prices. In the summer of 2016, appetite for haven assets pushed the 10-year note yield to a record low of 1.32%.
Even if paring back its presence in the Treasuries market lifts U.S. borrowing costs, the retaliatory move would also erode the value of the mainstay of China’s foreign reserves.
Selling Treasuries would weaken the U.S. dollar against the yuan, preventing Beijing policy makers from offsetting the impact of tariffs through a weaker Chinese currency.
So, China dumping US Treasuries and then selling the dollars it gets for other currencies would also put downward pressure on the USD - which is the exact opposite of what China wants, to help mitigate the effect of US tariffs.
Dumping our treasuries is a self-defeating tactic.
China is hurting so they’re bringing out the Race Card
When you are at war, funding is a secondary concern.
All of that is peripheral.
What matters is how much tariffed China good Americans continue to purchase. What matters are decisions by purchasing agents all across America.
Steel is easy. There are lots of producers besides China that will provide a cheaper price than the tariffed China price. Tools are another matter. It might be harder to find tools at a better price. Buy America? The tools might not be existent. I think there are good American suppliers of electric tools.
Then there is Harbor Freight. If you have a Harbor Freight want list you better go buy the stuff now. Harbor Freight is doomed.
For the government, funding is always a secondary concern when they want to spend. The bond market would reckon in real time.
Yup. When the huns are at the door, you don’t base your decision to fight vs surrender on financing.
[Then there is Harbor Freight. If you have a Harbor Freight want list you better go buy the stuff now. Harbor Freight is doomed.]
“The Chinese have “seeded” all of SE and E Asia (except Japan) with ethnic Chinese enclaves, more or less merchant franchises. Those enclaves from Singapore to Australia to the Philippines, etc., will simply resell Chinese goods without US tariffs. It’s already happening.”
Agreed.
But that too can be beaten.
Simply hammer any country that participates. Put ALL their exports at risk of tariff or embargo, rather than trying to figure out which came from China.
A hot war is not going to happen. If China takes steps in that direction, the U.S. will disavow the Treasury bond debt. After all, it would be war. Any talk from the Chinese about taking military action against the U.S. is simply bluster.
RE: Buy America? The tools might not be existent.
Can’t these tools be sourced from another country? Why does it have to be from China only?
-——Can’t these tools be sourced from another country? ———
That is the question. I would argue yes, in theory. In practice though might be another matter. I don’t know
It is my belief that the great American tool maker Stanley has grown by buying up other brands. They have out sourced at least some manufacturing to China. Stanley is American at the top of their game. How fast can the company react to end existing production and move it elsewhere? Do they subcontract the manufacturing or is it all done in Chinese factories they more or less own? Can they crank up old American factories on short notice?
I bet there are lots of American purchasing agents gobbling up Tums and losing sleep at night over concern about what to do.
My belief is that Trump will provide Xi some large face saving action that will in return allow Xi to comply with much of what Trump wants.
This is how you win a war with China without firing a shot.
This is missed by most people.
China got too big for it’s britches in the Western Pacific.
This is gonna hoit...
I have no problem with the Chinese people. It’s their government that needs to evaporate.
A hot war is not going to happen.
But that is assuming we can stay the course. If we can’t, we lose, like a card player with a straight flush folding to a bluffer with two Jacks.
We’ll see what happens.
I think that all major powers now know that any real war would destroy them, no matter who won.
As long as their crap stays out of the USA. Since you admire fascist so much why not move to China?
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