From Birch Gold Group
Donald Trump’s latest interview with the Wall Street Journal, in which he took aim at Beijing’s “One China” policy, is raising concerns over a trade war with China. Already aggravated by Trump’s existing anti-trade positions, China now says that, should our next president move against the policy, they will be forced to “take off the gloves”. If Beijing makes good on that threat, it could mean big changes for the U.S. economy.
Why China Is Ready to Fight
The trade relationship between China and the U.S. is an integral part of the global economy, but Trump feels the existing structure unfairly puts the U.S. at a disadvantage. Therein lies the crux of the issue. Trump wants to step in and level the playing field, but doing so could cause a dangerous retaliation from China.
Trump has advocated for stronger protectionist trade measures against China from the beginning of his campaign, primarily through increased import tariffs. But his idea of an increase isn’t exactly conservative. Just weeks after his election win, he proposed that the current import tariff on Chinese goods – currently just 3% – be raised to a whopping 35-45%.
Now, Trump is going after the “One China” policy, which views the two governments of mainland China and Taiwan as a single entity. The policy has inherent economic benefits for China, and Trump’s threat to oppose it is “strike two” against preventing a trade war.
After initially remaining relatively silent regarding Trump’s anti-trade sentiments, Chinese state media has recently issued some searing responses to his latest comments, saying China would “take the gloves off” if he keeps pushing.
Now we’re left with two crucial questions: Will Trump stand firm against China? And if he does, what will China’s counter-strike do to the U.S. economy?
Does the U.S. Have More to Lose in a Trade War?
The eruption of a trade war would be destructive for both the U.S. and Chinese economies. But who has the most to lose?
According to federal census data, for the past five years, the U.S. has consistently maintained a yearly trade deficit of over $300 million with China. That means that American companies could lose hundreds of millions in business if China gives U.S. imports the cold shoulder.
Winter Nie writes that China might be more prepared to weather the fight (emphasis ours):
“A trade war would be problematic, but it would not be a disaster for China, mainly because the U.S. needs China more than vice versa. Twenty years ago, the situation might have been different. China was dramatically underdeveloped, and it wanted access to Western technology and manufacturing techniques. China has most of what it needs now, and what it doesn’t have it can easily obtain from vendors outside the U.S. While the American market looked enticing a few decades ago, it is relatively mature, and today the newer emerging market countries have become much more interesting to Beijing.”
…
“Trump’s abandonment of existing U.S. trade agreements would accelerate China’s displacement of America as the world’s leading economic power. Both China leading economic experts hope that won’t happen quite yet, but almost anything is possible.”
What to Expect and How to Be Ready
As of now, the likelihood of a trade war is difficult to gauge. Everything depends on whether or not Trump pulls back, how much opposition he gets from his administration, and if China makes more threats of retaliation.
One thing is for certain, something is brewing between the U.S. and China, and a fallback to the status quo isn’t likely. It’s the degree of severity behind whatever comes next that Americans should be thinking about.
One benefit to understand is this: the bigger and more destructive the fight becomes, the higher precious metals will likely climb. Given the inverse relationship that gold has historically had to the U.S. market, trade war is likely good news for the value of the yellow metal, and for those who own it.
Be warned, though. The best time to buy protection is before things take a turn for the worse. Waiting too long could prove to be a costly mistake.
China is dumping treasuries faster than ever and at the moment has the lowest inventory of US treasuries in recent history. They must have figured out that Kissinger is playing “Rope-a-Dope” using Trump to separate Russia and China. Rocky and Kissinger may be older than dirt but they still play a mean chess game.
Doubt most maroons even understand what it unfolding.
“…300 Million yearly trade deficit with China…” I wish.
If they can’t get this number right(they’re only off by $300,000,000,000.00) I’ll take the rest of the piece with a grain of salt…well maybe a barrel.
If China loses a large chunk of the American market, they’re fucked. Oh my, we might have to forego that new flat screen because it’s now a couple 100 more. But they exported almost $500 Billion to us last year.
Tell me again why you think they have the upper hand.
Just so I understand this-
If we are threatened by a foreign power then we’d better do what they say?
How’s that supposed to work long term?
“Trump feels the existing structure unfairly puts the U.S. at a disadvantage.”
There’s no “feel” about it, it’s a fact. They sell lower priced goods in our markets, openly steal product lines and patents, artificially suppress the value of the yuan, sell inferior goods, many that sicken or kill end users, openly practice wage slavery and hold enormous amounts of US Government debt in order to control policy.
What part of that is emotional?
What part is emotional? Only the hemming & hawing, hand wringing and cries that the sky will fall and whatever will we do? Very much reminiscent of the recent bleating by establishment politicians, pundits, the Power Elite & the pretty persuaders on TV regarding the hoi polloi’s presidential pick. hehe.
hmm, right now the dollar is at 1.06 vs the Euro. Only three years ago it was about 0.7
Post Tienanmen China needs us far more than we need them.
In fact, we don’t need them at all since they offer us nothing we can’t do as well or better ourselves outside of de facto slave labor (which is how they have pretended economic and social reforms to their people and avoided another Tienanmen developing).
They are not an ally, not in any sense of the word.
Maybe it’s time we started dealing with them for what they are instead of what we pretend they are in our wishful thinking about them.
Exactly. China has entire cities of empty buildings, a banking crisis that makes 2007 – 08 look like a small blip, and over a billion people that need to be employed or there will be riots. Trump was exactly right in his speeches where he said we have the negotiating power.
If China decides to call Trump out, and “takes the gloves off” I suspect that the US and the world will begin to see the value of hiring a successful business man and negotiator vs. a community organizer rather quickly.
China has been providing our elites with a cheap environmental and employee arbitrage opportunity for almost 30 years. The economic pain we face will simply be reversion to the mean from ridiculous policies and sellouts by previous Government and private industry to a communist regime for personal profit. Bring it on China and you may see what a real sleeping giant can do….
Anon….agree. China is the potemkin village – nobody knows how deep the lies and misinformation run. They’ve got our problems in spades, plus a toxic and polluted water system that ain’t no joke. They’re greatest ‘asset’ is a population that cedes control to the government, and even that is tearing at the seams. They’ve become so accustomed to threatening neighboring shitholes to realize they’re over the tips of their skis when it’s big boy time.
If this ahole starts a trade war,where am I going to buy my adulterated food?
Back off,Trump & get my priorities straight!
Bring our manufacturing home and stop pretending the Chinese Communists are “trade partners.”
Just remember, the price of a trade war will be no more Harbor Freight tools…..where are you going to get a tool shitty enough for maybe one task?
Keep laughing, you will be singing a different tune when the USD is devalued 30% or more . Please give examples of when a trade war worked in our favor?
The comments above make it perfectly clear that we are already in a trade war. Why don’t you understand that?
Reagan and his policies that ended up forcing Toyota and other Japanese auto/manufacturing companies to move much of their US market intended manufacturing to the US.
I agree, no one wins in a price war except the customer…..but when China already has import tariffs on all steel imports – of every kind/type….if the price of winning is to get ass fucked forever what the difference between that and trading personal rights for a little promised security, etc.? Two different worlds maybe, but they are holding a pair of 2’s……
A few years ago I read an article about China & how they are crippled by the Three No s.
No Water,how many of you know that China imports tankers full of water,
No Banks,they’re a basket case,
No Women.
Bush 2 once said that he was talking to the Chinese premier about the toughest part of his job.I forget what W said was his toughest challenge but the premier stated that he had to create x million # of jobs every year to keep up with the # of people entering the workforce & moving out of the rural areas to the cities,otherwise there would be social unrest.
The biggest problem the US has is a lack of leadership & a lack of discpline & courage among the population.
Fair trade. Require that imports from China to the US = Exports from the US to China.
There are various ways to do it. Via tariffs, for example.
Problem solved.
The Chinese ruling class should ponder that if this trade conflict unfolds the way it appears it will, the Chinese ruling class will be forced to start eating locally produced foods, instead of the relatively safe imported foods from the West they have become accustomed to.
In a war, we could defeat China. In a war we could defeat Russia. We could not defeat Russia and China together in a war. Perhaps Trump, by cozying up to Putin and harassing China, is separating the two when they were thrown together by the idiot neo conservatives & Hillary.
The big question is, is Trump playing Putin or is Putin playing Trump? I would go with Putin. Trump’s forte was real estate. Putin’s was foreign policy.
It is going to be one Hell of an interesting year.
The author must smoke the same stuff Obama does. How much Chinese debt does the US hold? What allies does the PRC have as neighbors? The Koreans, Japanese, Ryussians, Vietnamese? Yeah the PRC is itching to get the butts kicked
just like all those social justice warriors.