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A Showboat to China

By Mahons On May 10th, 2019

Do you think Trump’s Tariff move against China is less an economic policy and more a manifestation of wall envy?

China’s economic games have long been a sore spot but I’m not certain tariffs are a sound counterpunch. Certainly conservatives have long been opposed to such tactics as government interference. I am sure in the Trump Era (error?) they will stand on their heads and say otherwise.

The economy is going along ok so the usual warning bells arent sounding the usual alarm. A tempermental guy who apparently lost Carl Sagan money running casinos into the ground may not be the best judge of business steps, but few in his party are going to say the emperor has no clothes. And the other party isn’t suffering from an overabundance of deep thinkers at the moment.

Calvin Coolidge once said the business of America is business and I hope the President starts listening to some of the leaders there. We are borrowing enough from the future as it is.

45 Responses to “A Showboat to China”

  1. Confronting China on its predatory trade practices is one area where Trump is substantially correct.

    There are many legitimate grievances that the US, Japan and others have against China including theft of intellectual property and forced technology practices as a price of doing business in China.

    China has violated WTO and other rules on a wholesale basis.

    Carter, Reagan, Bush One, Clinton, Bush Two, and Obama kicked this can down the road instead of having the uncomfortable conversation when we had greater leverage. Mr. Trump is correct to have that conversation now. It is a fight being made on behalf of all western countries, not only the US.

    China isn’t some impoverished hapless nation now. It’s well on its way to being an advanced nation. Time to start obeying the rules, Beijing. Good luck, Mr. President.

  2. Phantom I don’t think America I’d in any position to lecture any nation about following international rules, especially under the rule of the great pumpkin

  3. Incorrect, EP

    The president is contemptible on a personal level and is wrong on a thousand different matters but he is right on this one.

    This is very fundamental – for Canada too. You have advanced companies with assets that you should wish to protect.

    The west holds an advantage over China in our intellectual assets. China has been stealing these assets over time.Not borrowing, stealing. If this is allowed to continue, all our countries will be poorer than they otherwise would be, soon.

    Any westerner who doesn’t support him on this one is not only wrong, but wildly wrong.

  4. I was talking about the hypocrisy phantom

  5. I was talking about the hypocrisy phantom

  6. You need to put that aside.

    Support this bum and don’t second guess him when he’s in the right.

    Yes, his actions against Canada on trade are not just unwise on a free trade/diplomatic, they are immoral and are to be condemned. That’s taken for granted among all reasonable persons.

  7. I really love the Wall envy joke…. perfect Mahons

  8. Bombardier and other big and successful Canadian companies are probably quietly cheering for Trump here

    They don’t speak up out of fear of Chinese government retaliation

  9. To use the metaphor that was used on the business news yesterday China played scorpion and frog and stung us as we got to the otherside.

    The chicom economy is more dependent on ours then we on theirs. This is not going to work in their favor because unlike ALL the previous Presidents since Nixon Trump is the only one who knows what he’s doing in this arena.

  10. China has not kept its word on previous agreements with the US and world and yes, they were here backing away from the terms of what was to have been ratified this week.

    Not OK.

    A full trade war will hurt every country in the world, but it is to be hoped that sober business types in China will be listened to and that there a fair deal is hammered out.

    Trump’s tactics may not be perfect, but he is fighting a necessary fight here – one which again is very much in the interests of Europe, Canada and Japan as well.

  11. it’s a fight we have to have, and the chicoms aren’t dumb this is just a tactic

  12. Phantom you only have turnips word on what was agreed or not and we all know what his word is worth

    Pat you would be surprised how undependent China is on the US. While you guys were busy navel gazing China has been grooming the rest of the world. Just wait till China’s one belt system starts operating

  13. EP

    You are eternally negative on everything

    Why is that

  14. to much time behind the wheel

  15. The currency argument is a non-starter for one major fact – it is based on a lie. From 1995 through 2014, China’s exchange rate appreciated against the dollar by 26%. From 2007 to 2014 alone it appreciated against the dollar by 19%. Appreciated, not depreciated. China is not artificially lowering its currency (and if they are they are doing a really, really bad job of it). Largely China’s actions in terms of the yuan are about stability. If the yuan goes up, China acts to push it back down again. If it goes down, China acts to push it back up again.

    In fact in recent years, as part of their economic liberalisation, the depreciation of the currency reflected a new government policy to allow the yuan’s value to be more determined by market forces. So they have actually stopped tampering with the yuan as much as they used to. The devaluation of the yuan, that Trump used as his campaigning point on China, was actually done to reflect a downturn in the Chinese economy in recent years.

    In fact if China allowed to yuan to float freely, without intervention, it would be more likely to depreciate than rise against the dollar. Trump is fighting a war on an issue that doesn’t actually exist.

    On the other issues the problem is that The Donald has torn up his agreement with Japan and the EU that they jointly fight China’s influence at the WTO. The joint US, Japan, and EU complaint at the WTO was only launched in June of last year.

    It also won’t work. This action will hurt the United States more than it will hurt China. While there will be definite impacts on China, the costs will be maintainable and will not severely damage the Chinese economy. On the other hand the impact on the US economy will be larger.

    Firstly the average American will see greater costs when the go to buy goods at a shop. Say a good costs $20. Previously there was a 10% tariff on it. That good now costs $22. Up that tariff to 25% and the good now costs $25. Now do that with every item in your basket and suddenly that costs builds up on ordinary Americans with ordinary incomes. The extra 15% tariff will not be paid by the Chinese. That’s not how tariffs work. They will be paid by the American buying the product.

    Secondly, American employers, both in terms of export based employers and import based employers, will see problems. Firstly there will be retaliation. So American companies that sell to China will see tariffs imposed on their goods. It will make their goods less competitive in China and see a reduction in business. Now that is what will happen on the Chinese side as well (Chinese companies who sell to America will see a reduction in demand due to their goods being more expensive). The difference is that the Chinese command economy. They can more easily shield their producers from harm. Secondly, it will hurt American companies that import from China. If your inputs are now 125% of cost instead of 110% of cost then that has a major impact on your ability to turn profit. The result is that a lot of American companies will have to either reduce profits, reduce production, or increase prices (thus hurting demand).

  16. He has an endless dislike of all things US.

    Which is why I’m not sure that he’s any real Canadian.

    Canadians tend to be pro US or at least not anti US.

    And I don’t buy Trump as any excuse for his comments – his attitude long precedes this administration.

  17. Seamus

    How should the US and other nations go about ending China’s theft of intellectual property and forced technology transfer

    And please don’t say ” file a lawsuit ” or ” complain to WTO “, as those things are non starters.

  18. “And please don’t say ” file a lawsuit ” or ” complain to WTO “, as those things are non starters.”

    Why? Why is it a non-starter?

  19. he’s bitter, don’t know why

  20. because the WTO is meaningless.

  21. No it isn’t. If it was meaningless then Trump, and his sheep, wouldn’t spend so much time attacking it.

  22. China has shown complete disregard for the rulings of international courts of any kind. I’m not interested in wasting my time.

    They might listen to power politics. They won’t listen to any judge.

    Maybe China should be expelled from the WTO, something that has actually been discussed.

    https://www.theguardian.com/world/2016/jul/12/philippines-wins-south-china-sea-case-against-china

  23. really?

    This presidents default mode is attack.

    The WTO, the IMF, the UN, NATO etc etc none of them mean shit without either the USs money or guns.

  24. that was for you Seamus

  25. Phantom more American hypocrisy about ignoring international laws since America is one of the biggest offenders

    Pat that was true in the latter part of the 20th century but every year that becomes more obsolete

    And I am not bitter but as a Canadian I see much less through the lense of American propaganda

  26. “The WTO, the IMF, the UN, NATO etc etc none of them mean shit without either the USs money or guns.”

    If that was the case why does Trump spend half his time bitching and moaning about them? Saying they are bad for America, when you claim they are all there for American’s bidding.

    “China has shown complete disregard for the rulings of international courts of any kind. I’m not interested in wasting my time.”

    What international ruling from the WTO have they refused to abide by?

    You need to give time for the policies to take effect. And if China continues to refuse to abide by WTO rulings then they should be expelled.

    And they won’t listen to this power move. Because it largely will hurt the United States and not really hurt China. Additionally it will hurt the US standing in the world. It undercuts the sort of international coalitions needed to take on the Chinese.

    If you think China will blink when going up against the US alone then you are backing the wrong horse. Xi Jinping has probably forgotten more about trade, economics and politics than Trump has ever learned. He is also, out of fear of losing face in China, not going to respond to a bully. He is arguably the strongest leader of China since Mao. He knows the value of his public persona, and has positioned himself as an almost God-like statesman. It would result in a major climb down for him to give in to Trump. So he won’t. They will take their lickings if they need to rather than give in (knowing as well that problems in the American economy hurt Trump more than problems in the Chinese economy hurt Xi).

    An international coalition, using all of the legal powers they have, to reign in China is what is needed. A US/China trade war, one undertaken outside the WTO, will be seen by other countries as a fight between two powers that are equally in the wrong. A pox on both your houses. Because even though China are in the wrong it is America putting out policies that damage their economies. It also risks the lines of argument being blurred. Is Trump doing this because of China’s theft of international intellectual property or is he doing it out of his misguided, moronic belief that a trade deficit is a bad thing?

    The US should build an international coalition at the WTO. But Trump has neither the intelligence, ability or nuance to do so.

  27. Trump made the mistake of the ages by pulling the US out of the Trans Pacific Partnership, an organization designed as a bulwark against China, which pointedly excluded China from joining it.

    But he is correct here.

  28. He’s picking a fight he can’t win. And all he’s going to do is hurt people in the process. And the US will then be back to square one again with the same problems with the Chinese.

  29. You are saying that it is impossible to get China to be any sort of fair trader.

    That is an exceptional display of pessimism.

  30. No Phantom but you can’t force China to your terms

  31. “You are saying that it is impossible to get China to be any sort of fair trader.”

    No I’m saying it is impossible for the United States, by themselves, to get China to be any sort of fair trader.

  32. http://fortune.com/2013/04/15/did-china-steal-japans-high-speed-train/

    FORTUNE — One China defender recently claimed his countryman’s “bandit innovators” could be good for the world. That was small consolation for the Japanese, who say that China pirated their world-famous bullet train technology.

    “Don’t worry too much about Chinese companies imitating you, they are creating value for you down the road,” said Li Daokui, a leading Chinese economist at the Institute for New Economic Thinking’s conference. Such “bandit innovators,” he expanded, would eventually grow the market, leading to benefits for everybody.

    Kawasaki Heavy Industries (KHI), maker of Japan’s legendary Shinkansen bullet trains, bitterly disagrees. After signing technology transfers with CSR Sifang, the builder of China’s impressive, new high-speed rail, KHI says it deeply regrets its now-dissolved partnership. It planned to sue its previously junior partner for patent infringement, but it backed down recently.

    One case among many.

    China stole Japan’s world-leading high speed train technology, used it to build high speed rail in China, and is now directly competing against the Japanese high speed rail companies in foreign markets using the stolen technology.

    Companies are often afraid of speaking up against the practice, since they don’t want to be shut out of China.

    The US is very belatedly taking the lead on this issue, but yes this fight would have been best fought as part of a coalition

  33. No one is denying that China is a bad faith actor in all of this. What I am arguing is there is a way of combating it and Trump is not doing that. That his disdain for internationalism, his “‘Murica First” bollocks etc… is not only not helping in the fight against China, it is actually setting it back.

  34. it is actually setting it back.

    No.

    None of the other countries, US included, EU included, Japan included, did anything over the last 25 years.

    He is doing something.

    Let’s see how it plays out.

  35. All have taken cases in the WTO. Building up case law in the WTO in an effort to get China to either back down or be tossed (the US under the Obama administration for example took 13 successful cases against China to the WTO).

    What Trump is doing is undermining that effort with a pointless trade war, that will not only fail to get China to back down, but will also a) hurt Americans, and b) hurt other countries, thus hurting any chances of building an international coalition on this issue.

  36. The currency argument is a non-starter for one major fact – it is based on a lie. From 1995 through 2014, China’s exchange rate appreciated against the dollar by 26%. From 2007 to 2014 alone it appreciated against the dollar by 19%.

    No, China has always manipulated its currency against all other currencies. In December 2003 the yuan traded at 10 cents and now it trades at 15 cents. That appears to be a rise of 50% but during that time the Chinese economy has grown from $1.5 trillion to $12.25 trillion, i.e. by 800%.

    So go figure.

  37. Since 2005 the Yuan has been allowed to do what is known as a managed float.

    https://en.wikipedia.org/wiki/Managed_float_regime

    Simply put they allow their currency to float but maintain it within a plus or minus of the previous. So it allows the currency to generally float but broadly doesn’t allow sizable fluctuations. It helps introduce currency stability.

    The result was that the Yuan should have appreciated more during the boom years but wasn’t allowed to (due to this managed float scheme). Initially the band was +/- 0.3%. So if the currency, via trading etc, was expected to grow 3%, 4%, 5% etc… it only officially grew 0.3%. The band was widened to +/- 0.5% in May 2007. During the Global Financial Crisis it was temporarily stopped and the Yuan was pegged (ie didn’t fluctuate) to the dollar. After the financial crisis the +/- 0.5% was reintroduced, before being widened to 1% in 2012, 2% in 2014. What is happening now is actually, at least temporarily (and cynically I could say temporarily while the Yuan is doing badly) they are allowing it float.

    Part of it is maybe because the Yuan is depreciating. The other argument is that the IMF wanted the Yuan to become part of its Special Drawing Rights programme, a group of international currencies used by the IMF to define its foreign-exchange reserve assets. As part of that the IMF insisted that China continue to liberalise its currency manipulation. It is part of a step that China wants to take to have its currency used as an international currency (much in the way of the Dollar, the Euro, the Pound, and the Yen).

    So we may be seeing the early attempts by the Chinese to fully float the Yuan.

  38. Since 2005 the Yuan has been allowed to do what is known as a managed float.

    China does not appear among the list of “managed float” states in your link.

  39. That’s because, as I explained later in the post, it arguably is no longer in a managed float and is arguably now floating its currency.

  40. There is no doubt that China needs to correct several practices on trade and its economy. But, I am doubtful bullying them with tariffs will work. I agree that TPP would have been a better way to handle this problem. This problem needs good negotiation and that is not something Trump is good at judging by his history. As usual, Trump has put his ego into this matter and that is not helpful. And, I doubt Trump has the right advisors on the matter.

    I have friends who do significant business in China so I know the Chinese are not playing by generally accepted rules. Their thinking, I believe, is too much influenced by their belief that it is inevitable they will become the world’s biggest power. The reality is that it is not inevitable and if they piss off the rest of the world, they will sink.

    The current impasse needs to be resolved quickly as much damage is being done. How that happens I do not know. Hopefully by next week some sanity will enter the situation.

  41. Apologies the list is from 2008 (on the wiki article). And the report it links to only lists the countries officially designated as such by the IMF. As per the wiki article one of the other names for a managed float is the crawling peg. That is what China is designated as in the 2008 report.

    In the most recent report (2018), China is listed as having a “crawl like arrangement”, so slightly different but of the same gist.

  42. Certainly conservatives have long been opposed to such tactics as government interference. I am sure in the Trump Era (error?) they will stand on their heads and say otherwise.

    Likewise, fans of the EU’s onerous tariff barriers against the whole of the world are today suddenly critical of tariff barriers.

  43. it arguably is no longer in a managed float and is arguably now floating its currency.

    LOL. Trump is right on this one.

  44. Likewise, fans of the EU’s onerous tariff barriers against the whole of the world are today suddenly critical of tariff barriers

    Likewise, fans of a no-deal Brexit are so in favour of the UK getting raped by “free trade deals” with Trump and whatsisname in China that Trump is fighting a trade war with. Rather that than staying in the EU customs union which will be able to negotiate much better terms with those protectionist states (and also India) than the UK could on its own.

    LOL

  45. I have very little understanding of the workings of international macro economics trade and currency rules but I have enjoyed reading all of you on this thread and your well informed debate and opinions. I have no idea which tactics or policies are the best way of resolving imbalances and unfairness in International trade but my gut instinct is that tariff barriers are not a good thing.