Just thinking about the trade war with China. It seems that all we hear is that China is waiting for the election results and hoping that the Dems defeat his candidates and everything will just go back to normal.
Well, again, just thinking about this - why wouldn't China want to come to a resolution prior to the election? First - an agreement would be a huge feather in Trump's hat ahead of the elections. So, as we know in the markets, the incentive for China to get an agreement prior to that looks good, doesn't it? Prior to the elections, China has the most leverage on Donald Trump. After the elections, win or lose, Trump can easily dig in his heels and tell China where to go, and the next year and a half could be a long stretch for China.
Again, just thinking "out loud" here.
China thinking that the dems will impeach and remove from office Trump.Then the dems will give away the store. Just a wild thought.
I don't think anybody has any intention of doing a trade deal with Trump, within current parameters.. I actually think Trump has the upper road on China [in that china does have very restrictive trade barriers both in and out of china] which we all know started way back after WW11.
China then allowed USA companies to come to china for cheap labour, but always with a Chinese partner, thus the transfer of technology
There are a couple [or more] reasons why china won't cave on trade issue, in no particular order of importance.
China has said they will not bargain with a loaded gun at their head, as many other countries have also decided
China will not negotiate with somebody who has essentially said "take it or leave it" China is a nation of traders and negotiators. They want a starting place and then compromise. Failing this they will wait and see. They are willing to suffer any pain as they think they have other avenues to explore, given enough time.
China might think that USA Co.'s with large investments in China will pressure Trump as they will lose millions if a trade agreement is signed. Thus China thinks they have business and lobbyist allies within the USA
China wants to develop a larger domestic market for goods produced within china
China has great hopes that their silk road initiative will bear fruit with trade within Eurasia and beyond. They have had trade issues with Pakistan, so the silk road is not everything they thought but they think they can negotiate with Pakistan. Pakistan wants to supply raw materials to china without the debt that china may impose on Pakistan.
If all else fails, china will do what china has done for 1000's of yrs. They will pull back within their own boundaries and wait out the turmoil
Wall Mart and other Co's that import huge volumes of goods from china will be lobbying for all they can to have a quick resolution to the trade war. Their cheap supply lines will be broken and they have no choice but to raise prices at Wall Mart outlets and other retailers, which will be passed through to the consumer. Higher prices always results in lower sales volume, as many consumers are forced to make choices about reduced buying power. When you max out your plastic, or pay check, there is no choice about any more purchases.
China could slowly start to sell USA treasuries, which in of itself would not be a disaster, but uncomfortable to the USA when if comes time to roll over debt bonds[I don't understand the bond market but I understand bonds have been moving in price] Maybe somebody else could explain recent bond action or possible bond action, better than myself
China may believe that taking small steps in retaliation with the USA may be in their best interest and doing not much of anything in direct "tit for tat" re-action is their best way to save face. Saving face is very important to china and if they see no benefit, with the USA, then they may see if other avenues, such as the silk road initiative, domestic activity, sitting and waiting etc. offers better trade avenues
If all else fails, then China will simply hunker down and wait out the turmoil. Nobody wants to make a deal with a loaded gun pointed at you and most won't make a deal with such a threat.. It simply is not in the other side favour to lose face when threatened, no matter how big[or justified] the threat may be. Bully tactics have their limits. So far Trump has got only one trade agreement by use of bully tactics.
Actually Syria could blow up, [Russia has already lost an airplane with 14 military members aboard]. All of this trade talk could be moot, as all eyes are on the very real danger of war with Russia. Silos with ICBM's are a bigger problem than china. Of course this would be the perfect time for china to engage USA ships in the south china seas at the same time.
We shall have to wait and see how this all plays out.
There is no gun to the head until they lay off 50 million people who are ok with it. See if revolution starts.
Good analysis of all the pieces.