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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (22445)	9/5/2007 10:16:16 AM
From: TimF	Read Replies (1) \| Respond to of 71588

NATO countries wouldn't suspend trade with the US (except under unusual circumstances), they might suspend trade with China if the war was started by naked aggression by China against Taiwan (if it was started by aggression against anyone else they would be more likely to do so, but since Taiwan is formally considered "part of China", the reaction might be smaller). If the war was serious enough and not just a skirmish, the US navy should be able to cut China off from most trade and supply by sea. Few nations or corporations would even try to go through an American blockade or "exclusion zone" or "quarantine" (we don't usually formally declare blockades anymore as they are considered acts of war and we don't declare war anymore). Right now an invasion attempt would probably be defeated quickly. China probably can't successfully invade Taiwan even if the US doesn't intervene, but they are moving in the direction of gaining that ability. OTOH they could attack Taiwan with aircraft and missiles, or try to cut Taiwan off with those things and submarines. Taiwan would be pretty vulnerable to such a plan without US help, and even with heavy American military involvement Taiwan would take a lot of damage Patriots aren't a very good defense against missile attack, and Taiwan needs trade. I'm not sure if Taiwan can produce enough food for its people, even if it can the economy would be devastated by any cut off in trade. They could rebuy at lower rates to keep the market volatile without completely losing their investment. They could but its problematic. The price would go down as they sell. They would have already taken that loss. If they buy back its a new investment subject to all the uncertainties of any other investment. The price moves up as they buy, so they have to pay more than the new lower rate. When they stop buying it may move back down because people will be less confident in the dollar after the initial drop, and because the demand from their buying would dry up. Or if they keep buying than any hope to harm the US would be reduced, and they would still have taken the initial loss. Also to the extent they lower the value of the dollar they hurt their imports to the US. They harm wouldn't just be in currency terms, there would also be a much larger anti-China sentiment in the US. With the US and China in some sort of monetary war (or an actual shooting war), I imagine the Euro and the Yen would shoot up. China might try to sell more to them. With no actual shooting war this might work but it has limits. If there is an actual shooting war than the war itself would disrupt trade and the aftermath might cause countries to approach China in a cooler fashion, and perhaps listen more to their protectionist lobbies. Basically any attempt by China to hurt the US will hurt both countries, and really the whole world. You would probably get a lot more protectionism, less trade, less wealth and growth. If the suffering in China is bad enough it might even effect China's political stability and the security of its current government.