Monday, May 20, 2019

US China Trade War: A Meeting Of The Hot And Cold Fronts

At some level, it feels like the current US-China trade war was inevitable. It would have happened no matter who had been president. It is as if a hot front and a cold front that were moving towards each other finally met. It has been a tectonic shift perhaps, and not the whim of a whimsical president.

Donald Trump ran for president as a white supremacist. A white supremacist is not attempting to be fair. He is attempting to establish or retain supremacy, or hegemony. The migrant on the Mexican border might not have the power. But China is a similar size economy. White supremacist thinking, meet China!

It is true the US has lost a big chunk of its manufacturing base. But then there was a time when the US also lost a large chunk of its agricultural jobs. Absent sound analysis and a vision for a transition, the blame game fills the vacuum. China did it! Something fundamental is happening. The solution lies along the lines of what Andrew Yang and Bernie Sanders are suggesting. You have to give everyone a Universal Basic Income. Because, if anything, automation is about to accelerate. Retraining is not going to do it. You have to make health care universal. You have to invest in human capital. But all this is Spanish to Donald Trump. He started by blaming Mexican immigrants and ended up at China. Well, looks like China is no pushover.

If the US is running trade deficits not only with China but also Germany, maybe one has to point out that Germany is a democracy like the US, it is a market economy like the US. What's going on? The US trade deficit with Germany is wider.

Almost 160 million people from outside visited China last year. And over 120 million Chinese went abroad and chose to come back. That proves China is not North Korea. On the other hand, obviously, China lacks free speech. They say you are free to speak your mind on most things, just don't challenge the political monopoly of the Chinese Communist Party.

Every surveillance opportunity modern technology throws in the air, the Chinese police jumps at it. There is no counterbalancing force to question that tendency.

There are reports that close to a million ethnic Muslims in the west of China might have been detained for "retraining" purposes. These are likely not vocational training camps. At vocational training camps, you are free to move in and out. China goes unchallenged when it does something like that. Challenging China on trade is perhaps an indirect way of challenging China on the ethnic Muslims. At some point it was inevitable it was going to happen.

The South China Sea is a sore spot. That is where China's exports and imports pass through. And so it is understandable China is paranoid about the South China Sea. But that is why you cooperate on freedom of navigation. But China talks like the South China Sea were a Chinese province. Talk about clashing worldviews. This tension could have been contained in the South China Sea for only so long. At some point, it was going to spill over into something like trade. And now we have it.

And it is also just competition. The two leading economies are competing. Instead of killing the World Trade Organization, they could help reimagine it. Trump's white supremacist fantasy to bark at China to scare the smaller trade partners into submission is not healthy for world trade. And he might not even be around in 2021. The word is, winter is coming. The US is expected to see a recession by 2020. Recessions are not known for reelections.

New Twist In The Trade War: China Devalues Its Currency


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