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America dropped bombs again. America is slapping another round of tariffs, this time on 200 billion US dollars of Chinese goods – that's half of what Americans buy from China in a year.|
What is going on?
To fully understand a situation, one must put themselves in the shoes of others. On the surface, this is about trade deficit. But even President Donald Trump's former chief economic adviser Gary Cohen admitted this is a non-issue. Almost all sane economists agree.
First, the deficit number is overblown and secondly, deficit is not a bad thing for the US. It helps keep prices low and return the money to America as investment. Nothing is further from the truth than calling China a "piggy bank".
There is another story behind this: Reciprocity. The Chinese call it mutually benefits, but it does not mean measure-for-measure equality. America complains about limited market access to China. Yes, China should be more open – and it is opening up more. But zoom out a little bit and you'll see thousands of American businesses making money in China.
No one put a gun to their head. They come, they see and they win. If China is a thief's house or a robber's den, why is it then that Apple, GM, Starbucks, Tesla among many others are expanding their businesses here? Even Google and Facebook are knocking at the door, loud and clear.
But when you come in, you respect the rules of the house. You may have issues with the specifics, but don't even try to own the rules. As Tim Cook says, we believe in engaging with governments even when we disagree.
It can be worse!
So I got confused. I don't know what Mr. Trump wants and I am not sure he does either. But I know right now in America, anger sells and catharsis feels good. But America has become a political animal who refuses to think.
Trade war will open Pandora's box. Yes global trade has left many behind, and they are angry. But trade wars will cause more casualties, and the world will be a place of confusion and pain.
Don't waste a good crisis
But let us not waste a good crisis. The world has seen the bad and it should be ready for the worse. One thousand years ago a Chinese poet who shared similar optimism with Cervantes said, "The brave are not frightened when confronted, the sane are not angered when challenged".
Today China is making its most ambitious social and economic experiment in history: Reforming itself and opening its arms to others. The world is a large place and China will be "in it to win it." It needs to be a better player and it will be. So, even when your partner loses their cool, it makes more sense that you don't.