Why China will Win the Trade War

By Shan Saeed
Shan Saeed

* Trade War Escapade between China and the US: Who Makes the Final Call

* Dynamics of Trade War economics: global growth gets the hiccup 

 

Currency war and trade war are always arduous nomenclature for the financial markets to fathom and absorb. In my opinion, it’s the biggest trade war in the modern economic history.

It does not bode well for the global economy and might lead into recession.

The world largest economies are vying for the market share and its fairly reasonable. Tariff has not solved any issue in the recorded history.  Rising tariffs are the major impediment to the global economy and free trade.

Global investors need to be wary of the situation. The US has commenced this trade war with China / EU/ Canada and Mexico and might get very bad for the US.

In the same way, China-US trade war has sent negative signal to the global financial markets. Markets have not really priced in the trade tension into the forward price. The trade war between the US and China carries a major risk of escalation that could dampen investment, reduce spending, unsettle financial markets and bring huge collateral damage.

In my opinion, trade war is part of US strategy to contain economic rise of China. But nobody can control China. China is the new global and economic power. President Xi Jinping is leading from the front in terms of global leadership.

There is a misperception in the US that China is a threat to the US economy. In fact, China is a trading partner globally for many countries.

So I find it very strange to comprehend why Trump administration’s is targeting Chinese trade in order to avoid their productivity issue.

The biggest single factor that is hampering the US economy is the dismal productivity among the labor force. Technology is replacing manual jobs and many Americans failed to understand the ground reality.

If trade war continues, both countries might hit recession but China will come out much stronger than the US.

Fiscal and monetary policy collision in US is inevitable. Some experts believe that policymakers can get the economies out of recession.

Be pragmatic and realistic in your economic strategy. It is difficult to imagine such a realignment without a global recession.

Tariffs temporarily push up inflation, making it harder for central banks to cushion the blow.

Economy can’t be played like a piano: you press fiscal / structural / monetary notes to get standard solution with certainty. Mathematics is the only place where you can find fixed answers. Not in the economy to say the least.

It is for this reason Trump’s trade war is off reality! Trump is using the wrong strategy and does not fathom the macro implication of the trade tensions.

 

Tariff to hit the American consumers more, facts speak

On the ground market intelligence report from the US. Many are caught in the line of fire — the US farmers absorbing tariffs on their exports to China, for instance — are fearful.

Trump is giving $12 billion to support their financial position.

The price of soybeans has plunged 13 percent over the past month on fears that Chinese tariffs will cut off American farmers from China, which buys about 60 percent of their soybean exports. Let’s analyze a few items with tariff implication [Sharing on Aug 7, 2018]

Graphic

Sources: Updated July 17, 2018, WSJ, Economist, University of Chicago Library, USA, RT, Financial Times, Tradingeconomics.com

Imported washing machines, which were hit by separate Trump tariffs in Jan 2018, price has surged more than 17 percent. Consumers will have to pay through their nose.

Markets are still hoping that the key players return to the negotiation table.

 

The Calculus of the Economic and Trade War: Wrong Arithmetic Equation

Learning quick mathematics is a virtue. Tariff will make things expensive for American consumers.

Tariff / quotas / protectionism have not really worked for many countries in the past.

70 percent of the US GDP comes from consumer consumption which is going to get hurt.

Ever-since the tariff rhetoric escapade heightens, steel prices have increased by 41 percent in the US.

President Trump is prepared to impose tariffs on up to $550 billion in Chinese imports — a figure that exceeds the $506 billion in goods that China shipped to the US last year.

He seems to believe that because the US has a huge trade deficit with China — actually $337 billion in 2017, not $500 billion — is Trump bound to win the impending trade war between the two countries?

In my opinion, US will not win the trade war. Beijing’s position is actually much stronger, both economically and politically, than that crude calculus suggests.

China is the winner.


Shan Saeed is a Chief Economist at IQI Global, a leading property and investment company operating and advising clients in Kuala Lumpur, Singapore, Hong Kong, London, Melbourne, Makati, Toronto and Dubai [www.iqiglobal.com].

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4 thoughts on “Why China will Win the Trade War

  1. Para los que son pesimistas les dejo la definicion de SUMA= La adición es una operación básica de la aritmética de los números naturales, enteros, racionales, reales y complejos; por su naturalidad, que se representa con el signo “+”, el cual se combina con facilidad de facilidad matemática de composición en la que consiste en combinar o añadir dos números o más para obtener una cantidad final o total. La adición también ilustra el proceso de juntar dos colecciones de objetos con el fin de obtener una sola colección. Por otro lado, la acción repetitiva de sumar uno es la forma más básica de contar.

    Esto sumado a la personalidad del presidente Trump debe darle sin duda la capacidad a quien lee, que las cosas jamas estuvieron mejor para ambos paises tanto como para Estados Unidos asi como para China, ambos polarizando para optener el oligopolio de la proxima decada. Quien pierde? Las terceras opciones. Nadie se atrecera si quiera a intentar incursionar en el dominio de 5G por que el mercado ya esta tomado. Es ese el significado de Sumar en tiempos modernos y no de restar.

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