just perusing and responding to e-mail traffic
On 8 Apr 2018, at 8:11 AM, J wrote:
Hello comrades M and R,
One cannot stop free trade, that being an exchange between willing buyers and sellers, except by introducing frictional / transaction costing, or simply outlaw the movement of goods.
As to pain tolerance, am guessing team China can tolerate much more pain than snowflakes of America.
(1) Assuming for a moment that POTUS Trump is insistent to accelerate the global trend of equalisation of cost and therefore re-balancing of revenue, and hurt Joe6Pack more than already hobbled, starting by instituting a 25% tax on all things China, resulting in China slapping back w/ same on all items America, or as Mac reckoned, 25% on 115 B (0.7% of GDP) to China, and 25% on 462 B to China (4% of GDP), as way-point #1
(2) What China buys from the USA, including T-bills, are fungible items, be they grains, energy, and whatever civilian technology, and effect would be neutralised in short order due to fungibility
(3) Unclear how quickly if at all USA can / would re-source China production, especially given the gap between ex-China price vs ex-Walmart value (1:8?), and when needed, adjusting for RMB depreciation (back to 8.3 rmb to the 100 cents?)
(4) If tacked on w/ other easily available and highly unconventional counter-measures, the costs (ala acu-pressure) quickly escalates and hits the spots, lots and lots of spots, all at the same efficacious time
(5) Let us say that at a follow-on way-point, many wastrel governments tack on 25% duties to cut themselves a slice of the action, but the true trading nations demure away from such foolishness relative to cooperating trading partners, what would we have?
(6) Slightly more expensive for some goods, whether by way of tariff or re-pricing, and slightly less valuable other goods, be they by action of depreciation or lessening demand. America gets jacked up w/ higher costs, and
China gets wrapped w/ cheaper capital, less valuable labour, and more alluring innovation.
IOW, same regular programming already in play.
(7) If 8.3 exchange rate did such wonders for China once, imagine what it would do today and going forward.
And the printing power (unleashed by land reform ~250 Trillion) that equalises rural agricultural domain w/ urban industrial arena would be enhanced by way of higher food pricing, which should adjust downward the excess housing stock albeit ameliorated by upward replacement costing - an altogether win win win outcome
(8) Question, can babyboomers Joe6Pack deal w/ the processing with as much equanimity as Wang2Cups? Is core comrade Jinping facing a mid-term election? Time shall tell, and even when told, China can ignore and let play out.
(9) Here is a sample offer to EU: the entirety of China civilian aircraft market for 20 years in exchange for technology transfer in context of JV for worldwide distribution. and RMB drops to 8.3 rate to support such an enterprise w/ global market potential. Do we have a deal?
On 8 Apr 2018, at 8:05 AM, R wrote:
M, I don't think it is a competition between US and China, or anyone else. What matters is how much pain can we take regardless of what happens to China.
Just go to Costco and watched a sample of Americans loading shopping carts with big screen TVs, giant packs of muffins, meats and whatever else, probably not a dime to their name before the end of the month. Americans simply can't handle any tough times.
time.com
The great recession was pretty bad but the next recession is likely going to be far worse. May be the trade war would trigger the reset.
On Sat, Apr 7, 2018 at 4:12 PM, M wrote:
I'd say the US has the advantage in any trade war with China.
The reason? The country with the trade deficit has less to lose than the country with the trade surplus.
2016:
Value of US exports to China:
$115.6 Billion
US GDP
$18.6 Trillion
Exports = 0.7% of GDP
Value of US imports from China:
$462.6 Billion
China GDP:
$11.2 Trillion
Exports = 4.0% of GDP
It seems that overall, China has more to lose.
I think Trump wants to stop the technology theft by China and Chinese companies.
But that horse has pretty much already left the barn - so why China really cares at this stage, I don't know.
But China is determined to "not lose face."
So I don't know how this will play out in the least.....probably not well for either side. |
