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tenderloin is correct to see through the US trade war game. It is not trade. It is technology that the US wants to maintain global supremacy and to make sure China doesn't progress further in 21st century technologies.|
Trump has assembled anti-China hawks to ramp through tariffs and anti-investment blockades targeting all of Made In China 2025 objectives. Basically next-generation microchips, semiconductors and microfabrication platforms, 5G, IoT and advanced industrial integration, advanced robotics, autonomous transports, high-tech aircrafts etc. The US is not thinking about lost revenue and IP issues of the past. The US wants to control the industrial revenues of the future. The US wants to make sure Made In China 2025 is not achieved and thus weaken China domestically and internationally.
I have said before the key to future progress for China is to stay focused on technology and technique.
US tariffs target China industrial policy, not trade deficit
Trump action a blow to Beijing’s ambitions for leadership of global economy
US President Donald Trump’s new tariffs against China will not inflict significant short-term pain on the country’s exporters, but the action is a blow to Beijing’s ambitions for leadership of the global economy’s commanding heights.
The White House has not yet specified which products will be affected, but US trade representative Robert Lighthizer said that his office would target sectors included in Beijing’s “Made in China 2025” plan. This industrial policy initiative aims to promote Chinese ascendancy in strategic sectors such as advanced IT products, robotics, aerospace, and electric vehicles.Analysts say that focusing on these sectors alone will make it difficult for the US to reach its goal of imposing tariffs on $60bn worth of Chinese exports — one-eighth of the country’s total exports to the US last year.
Similarly, the latest action will do little to advance the administration’s previously stated goal of reducing the bilateral deficit by $100bn.“These are sectors where China aspires to global leadership and an increasing share of exports, but they’re not where their exports are currently concentrated,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.
Though Chinese exporters have made progress towards moving up the global value chain, the country’s exports still cluster in low-tech sectors such as consumer electronics and appliances, apparel, footwear, furniture and toys.
But Mr Kuijs notes that the White House is constrained in its ability to target such Chinese exports because so many of them are produced for sale under US brands or feature “significant involvement of US companies in the supply chain”.
Indeed, Mr Trump noted that iPhones would be exempt from the latest round of tariffs. Even assuming the US can come up with a list of products that covers $60bn in Chinese exports, such action — based on a tariff rate of 25 per cent — would only dent Chinese growth of gross domestic product by 0.1 percentage points this year, Mr Kuijs estimates.
The White House target of $60bn represents only 2.6 per cent of China’s global exports last year.In fact, the overall importance of exports to China’s economy has fallen in recent years. Gross exports to all countries equalled 18 per cent of GDP last year, down from a peak of 35 per cent in 2006.
Nevertheless, analysts see a logic to the White House action. While Mr Trump’s rhetoric has targeted the $376bn bilateral goods-trade deficit with China, Mr Lighthizer’s statement shows he is focused on challenging Beijing’s aspirations to dominate the industries of the future.China/ If this effort succeeds, the results will not necessarily show up in closely watched figures on goods trade. Rather, leadership in advanced industries manifests itself largely in data on services trade, which include licensing fees paid for the use of intellectual property.
Made in China 2025 shows that Beijing’s focus has also shifted to these areas, even as it continues to reap benefits from its dominance of low-tech export sectors.“The money today matters less than the money tomorrow,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis in Hong Kong. “It doesn’t seem stupid to me. It’s just that it may not add up to what they announced, but $60bn was a crazy number anyway.” Ms Herrero also notes that the focus on high-value-added products makes it feasible for the US to substitute the sanctioned imports with domestic production, since US competitiveness is greater in these sectors.
To be sure, China already exports some high-tech goods and services of the type featured in the 2025 plan. These include rolling stock from state-owned CRRC, networking equipment from Huawei Technologies, and advanced batteries from BYD.China trade chartBut most of these exports are not to the US.
Indeed, President Xi Jinping’s ambitious Belt and Road Initiative to build infrastructure across the developing world is motivated in a large part by his desire to increase Chinese exports of capital equipment to these markets. American regulators, meanwhile, have repeatedly blocked Huawei from selling equipment to US telecoms operators, citing cyber security concerns.
What remains uncertain, however, is whether potential further US actions will target a wider range of Chinese exports. “The next one to two months will be a crucial game of chess between the US and China. Right now the two sides are testing each other, exerting pressure, and feeling out to find the bottom line,” said Zhang Yu, researcher at the International Monetary Institute at Renmin University in Beijing.
and a comment by a FT reader:
(Charlie Murphy)So much political spin. The vast majority of imports from China are products produced by American companies by Chinese workers on minimum wage in sweat shop conditions. This wasn't self-imposed, this was the American corporate playbook.
The American companies then get to grow or maintain their profits, grow their share price, reinvest those profits, hire more people and pay them good wages, reduce the cost of living, buy more stuff and continue to fuel the US economic engine of growth. I mean really, how often do you actually see Chinese branded products on American super market shelves? It might be made in China but it's still an American product, and the profits go to American companies.
This move will simply cannibalise the margins of American companies from within. Why do you think the stock market is crashing and fund managers are selling. This is also why everyone in the so-called "elite", "liberals", "political correct" or whatever name these irrelevant Trump supporters give them are asking WTF.
If you ever visit China and this was highlighted in Xi's recent speech, you can tell from being on the ground that the Chinese economy has moved away from its core manufacturing and industrial driven economy to capital, services and technology driven economy much like the US.
Part of the reason why they've been muted is because they believe long-term, the impact is negligible.China will of course retaliate. Their primary imports from the US are raw material and agriculture. Unlike the US tariffs, by targetting raw material and agriculture, this will actually directly hit the profits of American companies and in turn the workers.
So you see, Trump's tariffs will send the American economy into recession. When it's all said and done, this will prove to be the straw that broke the camel's back and brought down the great American empire. Enjoy the fight chaps but it's not going to be one that you can win. Honestly. It doesn't make sense