How Trump's Latest Threatened Tariffs Could Affect China And Its Leadership


President Trump's threats to impose another $200 billion worth of tariffs is having an impact on China's economy and leading to concerns about its leadership.


Stiglitz in Freefall: America, Free Markets, and the Sinking of the World Economy (2010) seems to have anticipated Trump's trade-friction.  Stiglitz writes that though China's economy is still so much smaller than the United States', the U.S. Imports far more from China than it exports, and these large trade imbalances have generated growing tensions as U.S. Unemployment mounts.  The relationship may be symbiotic—China helps finance America's massive fiscal deficits, [which has now increased with Trump's tax cuts], without China's inexpensive goods the standard of living of many Americans might be markedly lower, and America provides the markets for China's every-growing supply—but in the Great Recession, the focus is on jobs.  Most Americans don't understand the principles of comparative advantage—that each country produces the goods that it is relatively good at; and they find it difficult to grasp that the United States may have lost its comparative advantage in many areas of manufacturing.  If china (or any other country) is out-competing the United States, they believe it has to be because they are doing something unfairly: manipulating exchange rates or subsidizing their products or selling products below costs (which is called “dumping”).

Former USDA Secretary Tom Vilsack on Ongoing Ag Tariffs

23 hours ago

Companies and farmers weathering the Trump administration’s trade policy, which has brought painful tariffs to many industries, could be running out of patience. That’s according to former U.S. Secretary of Agriculture Tom Vilsack, who served as USDA secretary for both of President Obama’s terms. 

Vilsack says that farmers and companies were willing to be patient as the Trump administration took a hard stand with China, but after feeling the impact of tariffs, that patience is now running out.

“We’re in a situation where we obviously have an economy that the Chinese have been utilizing to build their economy. But we’re also in a situation where our political system is probably less patient than their political system,” he says.

“The most important thing is that people need to get back to the table and start negotiating. This thing will not get resolved unless people start talking to one another, and at this point in time there aren’t any serious discussions taking place.”

He says the longer the tariffs are in place, the more likely it is China will find other places to get its soybeans. And that will leave U.S. producers scrambling to sell nearly 25 percent of their harvest, which they’ve grown used to sending to China.

On this edition of River to River, Ben Kieffer talks with Vilsack.

Vilsack is the former governor of Iowa and is currently president and CEO of the U.S. Dairy Export Council. He is in Iowa to speak at Iowa State University. His lecture, “Trade Relations and U.S. Agriculture,” will be at 6:30 p.m. Tuesday, Sept. 4, in the Memorial Union Great Hall.

The second half of today's show features an interview with Sen. Jason Schultz (R), who guided the collective bargaining bill through the Senate in 2017. He responds to Rep. Mary Mascher’s (D) comments last week about the impact of Iowa's 2017 collective bargaining law.

Kieffer also talks with Arthur Tate, Superintendent of the Davenport School District, about how he is allocating $1.13 million to increase security at the district's schools.

Governor Vilsack shows his ignorance of international joint-ownership.  No foreigner can own or run a business in Saudi Arabia without having a Saudi prince or princess as a partner.  Thereby, China is not odd-man-out in this methodology of insuring that Western businesses will not behave like the imperialist that they are.  China is led by their own history of Western colonization, unlike the Africans (Trump's shit-hole countries) that were robbed by Western imperialists giving them the Bible, while they stole the land—fair trade to the Chinese Communists is a 70-30 proposition in their favor.  It is always amusing to hear a /Western Imperialist talk about trade fairness.


Even Stiglitz notes that [even prior to the trade war] there [was] growing reluctance to increasing its lending to the U.S. Government, where returns remain low and risk high.  There are alternatives—China can invest in real assets in America.  But when China has tried to do so, it has sometimes met resistance (as when it tried to buy Unocal, a relatively small American oil company, most of whose assets were actually in Asia).  The United States allowed China to buy its highest-polluting car, the Hummer, as well as IBM's laptop division, which became Lenovo.  While America is seemingly open to critical for national security and are to be protected from such investments, and this risks undermining the fundamental principles of globalization: America told developing countries that they must open up their markets to foreign ownership as part of the basic rules of the game.


If China sells significant amounts of the dollars it holds in reserves, it will lead to a further appreciation of its currency (RMB) against the dollar, which will, in turn, improve America's bilateral trade balance with China.  It is likely to do less, however than one might hope for the U.S. Overall trade deficit—America will just buy its textiles from some other developing country.  However, it will mean that China will take a big loss on its remaining massive holdings of U.S. T-bills and other dollar-denominated assets.


To some, it appears that China is caught between a rock and a hard place.  If it moves out of the dollar, it takes massive losses on its reserves and exports.  If it stays in the dollar, it postpones the losses on the reserves, but adjustment may eventually have to come in any case.  The worry about the loss of sales is perhaps exaggerated: China is currently providing “vendor” finance [especially in Sub-Saharan Africa]—that is, it provides the money to those who buy its goods.  Instead of lending to America to buy its goods, it can lend to those in other parts of the world—as it is increasingly doing—or even to its own citizens.



In Trilateral Commission Report #45: “An Emerging China In A World Of Interdependence” (1994), it can be deduced that it was not by accident that China became a world-trade dynamo and envy of the Western countries.  Yoichi Funabashi, Michael Oksenberg, and Heinrich Weiss (authors) write in “A New Rising Power,” that over the past century, the rise of new powers has posed great challenges and opportunities for the established world order.  Thus, the rise of the United States, Germany, and Japan in the late 1800s and early 1900s necessitated massive adjustments to the international system led by Britain and France.  The rise of the Soviet Union disrupted the aspirations for a harmonious post-World War II order led by the United States the postwar rise of Japan and the European community strained international monetary and trading arrangements (and encouraged creation of the Trilateral Commission, among other responses).


Now, the world—and particularly the Trilateral countries—faces the prospect of a new rapidly rising power: China.  Its rise is propelled by its robust economic performance.  With considerable unevenness and starting from a low base, its economy has been expanding at an average annual rate of 7-8 percent for nearly 40 years; and in the past ten years the pace has dramatically accelerated.  The increased economic weight of China is most sharply portrayed using purchasing-power-parity (PPP) exchange rates as in the IMF's revised weights for its World Economic Outlook.  Using the traditional measure of current exchange rates, the Chinese economy's share in the world economy hardly changed from 1970 to 1990, hovering around 2 percent (the smallest of the G-7 economies, Canada, was 2.58 percent on this scale in 1990).  Using a PPP-based measure, the weight of the Chinese economy rose from somewhat under 3 percent in 1970 to over 6 percent in 1990—not far behind Japan at 7.63 percent and well above all other G-7 economies except the United States.  While most of China's 1.2 billion people still rank among the lower third or half of the world's population in terms of per-capita income and consumption, the People's Republic of china is reaching the ranks of many indicators of aggregate economic size.  China is now among the ten largest exporting countries.  Energy consumption in China is exceeded only by the United States.


Clearly, the Trilateral countries have a substantial number of significant interests at stake with China.  The priorities recommended in this report are in the security and economic domains and in assisting development of institutions contributing to china's effective and good governance.  Each of the baskets is important however, and the Trilateral countries should maintain loose linkages among them.  That is, progress on all the issues should be quietly reviewed during regular high-level meetings, and the Chinese leaders must come to understand that failure to advance in one area will restrain progress in other areas.  But preconditions should be avoided, i.e., explicitly demanding progress in one area in order to advance another.


This strategy entails approaching China from positions of strength, weaving china into webs of economic interdependence, engaging China in the global economy and in multilateral security arrangements, maintaining frequent extensive high-level dialogue with Chinese leaders, and recognizing the important roles that NGOs and the private sector must play in integrating china with the world community.   The positions of strength include a forward-deployed American military presence, vibrant Japanese-American and Korean-American alliances, the continued prosperity and stability of Taiwan and the ASEAN states (with that development extending to Vietnam, Laos, Cambodia, and Burma), and the development of regional and sub-regional organizations and processes in which China is involved.

Jean Gimpel in The End Of The Future: The Waning of the High-Tech World (1995) wrote a short essay on the beginning of the future of China as it rises out of the ashes of servitude to the West in “The End Of White Supremacy.”  Gimpel cautions: We should take heed of the fact that de-industrialization will mainly happen in the west and in the former Soviet Union, and that this dramatic trend will mark the end of 500 years of European domination of the world.  In a pertinent book, Pierre Lellouche (Le Nouveau Monde—De l'ordre de Yalta au desordre des nations), wrote in 1992 that, when the USA and the Soviet Union were confronting each other, mankind was witnessing the encounter of two ideologies, the democratic and the Marxist, created by our white reigning civilization.  When capitalism and democracy collapses in the West, as I predict it will following the bankruptcy of our financial system after the disintegration of Marxism in the Soviet Union, we will very possibly be witnessing the twilight of the white race—provisionally we hope.


As is now generally recognized, the center of world trade has moved from the Atlantic to the Pacific.  In 1982, the volume of trade across the Pacific overtook that across the Atlantic.  The developing countries in the Far East grew in 1993 by 7.4 per cent compared with the world's (1.6 percent).  Nevertheless, when Wall Street crashes, triggered off perhaps by a sharp fall of shares in Tokyo, Hong Kong or Singapore, the Pacific Basin will suffer an economic deceleration.  But in the long run the Far East will recover progressively, achieving world economic supremacy while the recover progressively, achieving world economic supremacy while the former countries of our once glorious civilization will become, in their turn developing countries.


China will progressively dominate the Pacific Basin and beyond and for the second time in her long history, she will have entered an era of growth in which her psychological drive and her technological evolution will rise in parallel curves.  China is at the beginning of a cycle that could last a millennium, while Western Civilization stands at the end of a cycle that is already 1,000 years old.

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Comment by mary gravitt on September 7, 2018 at 12:35pm

China did not just hop aboard a moving train.  It was pulled on by capitalist greed.  Japan was pushed off for the same reason.  China will not be a pushover like Japan.  America was founded and made rich by racism and class warfare and Trump's Tariff War is no different.  The Tariff is not with China, but with the people of the United States.  Those who make excuses that Trump is a businessman and not a politician, are just as mad as he is.

Comment by mary gravitt on September 7, 2018 at 12:38pm

Sorry about the spelling in the title.  Sometimes I get too carried away with content.


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