beijingwalker
ELITE MEMBER
- Joined
- Nov 4, 2011
- Messages
- 65,195
- Reaction score
- -55
- Country
- Location
Self-inflicted wound: Trump would severely damage the US if he carries out his China threat
Stephen Bartholomeusz
Senior business columnist
September 8, 2020 — 11.56am
Donald Trump is hardening his threat to "decouple" the US economy from China’s. The prospect that, if he were to win re-election in November, he might actually follow through with that threat ought to send shivers through corporate America and their western peers.
Trump and the hawks in his administration have been muttering about decoupling from China for weeks but, trailing in the polls against Joe Biden, Trump significantly ratcheted up the rhetoric on Monday (US time).
"We lose billions of dollars and if we didn’t do business with China we wouldn’t lose billions of dollars," he said."
"It’s called decoupling. So you’ll start thinking about it. You’ll start thinking they take our money and they spend it on building aeroplanes and building ships and building rockets and missiles."
Having described decoupling as "an interesting word" he went on to threaten to impose taxes and "tariffs" on US companies that "desert America to create jobs in China and other countries" and bar companies doing business in China from being awarded federal government contracts. He also referred to tax breaks for companies than onshore their activity.
"Whether its decoupling or putting massive tariffs on China which I’ve been doing already we’re going to end our reliance on China because we can’t rely on China and I don’t want them building a military like they’re building right now and they’re using our money to build it."
The language is typically clumsy, almost incoherent, and the understanding of trade as flawed as usual but the threat of an attempt to completely sever the economic relationships with China is, given the administration’s history, real.
The administration is already a long way down that path.
Last year’s trade war and the imposition of tariffs on most of China’s exports to the US and, more recently, the assault on China’s tech companies and financial sanctions on Chinese individuals and institutions have seen a continuing escalation of the US aggression towards China.
The notion of a complete severing of economic ties is a step well beyond what has occurred to date, along in keeping with Trump’s protectionist and isolationist tendencies and the Sino-phobia of some of his advisers.
It doesn’t appear to have sunk in with Trump or his trade advisors that the efforts so far to punish China, reduce its trade surplus with the US and repatriate jobs to the US haven’t been particularly successful.
While the trade war has hurt China, and the tightening ban on Chinese tech companies and on technology transfers to China will damage its economy even more, it has also resulted in self-inflicted wounds.
The tariffs have been paid for by US companies and consumers and the trade surplus that provoked the conflict has been widening. China’s exports to the US have fallen but its imports from the US have fallen more.
Trump said on Monday that US farmers were "very happy’ with him citing the near-$US30 billion ($41.2 billion) of assistance provided to farmers to offset the impact on China’s retaliatory tariffs. US farm bankruptcies have risen to their highest levels in nearly a decade despite that US taxpayer-funded assistance.
Whether or not Trump is re-elected and implements his decoupling the economic relationship with China has already changed. A significant amount of manufacturing of products for export to the US has been shifted out of China and into third countries, either in Asia or, most particularly, Mexico.
That doesn’t help America’s overall trade balance but it highlights what might happen if Trump, or Biden for that matter, followed through with a decoupling agenda.
More activity would shift out of China to other low-cost manufacturing jurisdictions. If a combination of taxes, tariffs and incentives did result in re-shoring of activity by US companies and made (as Trump asserted it would) America the "manufacturing superpower of the world" American consumers would pay for it in the form of higher prices and US companies would lose competitiveness.
The US dollar is the world’s reserve currency. It doesn’t appear to have dawned on the administration that supplying the rest of the world with dollars (and obtaining what are effectively interest-free loans and a subsidised standard of living from the rest of the world in the process) implies running large current account deficits.
The dollar’s status is the source of most of America’s non-military global clout – the financial sanctions the administration has been using as its latest option of first resort rely on that status for their effectiveness – but isolationism and protectionism would inevitably undermine it and America’s global hegemony.
There is an interesting question as to whether the combination of carrots and sticks Trump described could completely unwind more than four decades of increasing integration of the US and Chinese economies.
US multinationals plugged into the world’s biggest and fastest-growing consumer market are caught in the middle of what appears an inevitable diminution, if not a complete decoupling, of the economic relationships as strategic rivalry overwhelms the business logic of the relationship.
US companies generate about five per cent of their global revenues and hundreds of billions of dollars of profits a year from a market that is, for some of America’s biggest companies, fast becoming, if it isn’t already, a bigger market than their domestic market.
If the strategic rivalry overwhelms the economic rationale for the relationship the damage to some of America’s largest companies will be severe.
While the impact on China’s economy might be somewhat greater (although blunted by China’s focus on domestic consumption and growth) both economies would suffer from decoupling and, unless the US could convince the rest of the western economies to join it, there’d be mutual pain for little economic gain.
While there does appear to be a loose consensus in the West that China’s increasing assertiveness necessitates a response, to be effective it needs to co-ordinated and considered.
In the fevered atmosphere of a US election, with the incumbent president struggling and desperate to demonstrate he is more hostile to China than his opponent, it is improbable that any rhetoric, or indeed actions, will be either co-ordinated or considered.
www.smh.com.au
Stephen Bartholomeusz
Senior business columnist
September 8, 2020 — 11.56am
Donald Trump is hardening his threat to "decouple" the US economy from China’s. The prospect that, if he were to win re-election in November, he might actually follow through with that threat ought to send shivers through corporate America and their western peers.
Trump and the hawks in his administration have been muttering about decoupling from China for weeks but, trailing in the polls against Joe Biden, Trump significantly ratcheted up the rhetoric on Monday (US time).
"We lose billions of dollars and if we didn’t do business with China we wouldn’t lose billions of dollars," he said."
"It’s called decoupling. So you’ll start thinking about it. You’ll start thinking they take our money and they spend it on building aeroplanes and building ships and building rockets and missiles."
Having described decoupling as "an interesting word" he went on to threaten to impose taxes and "tariffs" on US companies that "desert America to create jobs in China and other countries" and bar companies doing business in China from being awarded federal government contracts. He also referred to tax breaks for companies than onshore their activity.
"Whether its decoupling or putting massive tariffs on China which I’ve been doing already we’re going to end our reliance on China because we can’t rely on China and I don’t want them building a military like they’re building right now and they’re using our money to build it."
The language is typically clumsy, almost incoherent, and the understanding of trade as flawed as usual but the threat of an attempt to completely sever the economic relationships with China is, given the administration’s history, real.
The administration is already a long way down that path.
Last year’s trade war and the imposition of tariffs on most of China’s exports to the US and, more recently, the assault on China’s tech companies and financial sanctions on Chinese individuals and institutions have seen a continuing escalation of the US aggression towards China.
The notion of a complete severing of economic ties is a step well beyond what has occurred to date, along in keeping with Trump’s protectionist and isolationist tendencies and the Sino-phobia of some of his advisers.
He is making China a key plank in his re-election platform, trying to convince US voters that Biden and the Democrats would be soft on China – "if Biden wins China wins, because China will own this country" – even though Biden and the Democrats are also hawkish on China, albeit wary of inciting a new Cold War.
It doesn’t appear to have sunk in with Trump or his trade advisors that the efforts so far to punish China, reduce its trade surplus with the US and repatriate jobs to the US haven’t been particularly successful.
While the trade war has hurt China, and the tightening ban on Chinese tech companies and on technology transfers to China will damage its economy even more, it has also resulted in self-inflicted wounds.
The tariffs have been paid for by US companies and consumers and the trade surplus that provoked the conflict has been widening. China’s exports to the US have fallen but its imports from the US have fallen more.
Trump said on Monday that US farmers were "very happy’ with him citing the near-$US30 billion ($41.2 billion) of assistance provided to farmers to offset the impact on China’s retaliatory tariffs. US farm bankruptcies have risen to their highest levels in nearly a decade despite that US taxpayer-funded assistance.
Whether or not Trump is re-elected and implements his decoupling the economic relationship with China has already changed. A significant amount of manufacturing of products for export to the US has been shifted out of China and into third countries, either in Asia or, most particularly, Mexico.
That doesn’t help America’s overall trade balance but it highlights what might happen if Trump, or Biden for that matter, followed through with a decoupling agenda.
More activity would shift out of China to other low-cost manufacturing jurisdictions. If a combination of taxes, tariffs and incentives did result in re-shoring of activity by US companies and made (as Trump asserted it would) America the "manufacturing superpower of the world" American consumers would pay for it in the form of higher prices and US companies would lose competitiveness.
The US dollar is the world’s reserve currency. It doesn’t appear to have dawned on the administration that supplying the rest of the world with dollars (and obtaining what are effectively interest-free loans and a subsidised standard of living from the rest of the world in the process) implies running large current account deficits.
The dollar’s status is the source of most of America’s non-military global clout – the financial sanctions the administration has been using as its latest option of first resort rely on that status for their effectiveness – but isolationism and protectionism would inevitably undermine it and America’s global hegemony.
There is an interesting question as to whether the combination of carrots and sticks Trump described could completely unwind more than four decades of increasing integration of the US and Chinese economies.
US multinationals plugged into the world’s biggest and fastest-growing consumer market are caught in the middle of what appears an inevitable diminution, if not a complete decoupling, of the economic relationships as strategic rivalry overwhelms the business logic of the relationship.
US companies generate about five per cent of their global revenues and hundreds of billions of dollars of profits a year from a market that is, for some of America’s biggest companies, fast becoming, if it isn’t already, a bigger market than their domestic market.
If the strategic rivalry overwhelms the economic rationale for the relationship the damage to some of America’s largest companies will be severe.
While the impact on China’s economy might be somewhat greater (although blunted by China’s focus on domestic consumption and growth) both economies would suffer from decoupling and, unless the US could convince the rest of the western economies to join it, there’d be mutual pain for little economic gain.
While there does appear to be a loose consensus in the West that China’s increasing assertiveness necessitates a response, to be effective it needs to co-ordinated and considered.
In the fevered atmosphere of a US election, with the incumbent president struggling and desperate to demonstrate he is more hostile to China than his opponent, it is improbable that any rhetoric, or indeed actions, will be either co-ordinated or considered.
Self-inflicted wound: Trump would severely damage the US if he carries out his China threat
The prospect that Trump might actually follow through with his threat to decouple from China if he is re-elected ought to send shivers through corporate America and their western peers.
