"Much of the reporting on our ongoing trade war with China has been centered around its alleged ill effects: tepid growth, jobs headed oversees, and certain consumer goods rising in price. Now it seems to be causing panicky drops in the stock market. It appears as though the very idea of this trade war can be blamed for nearly all our perceived economic woes.
While it’s true that perception often impacts the stock market more immediately than reality, when you take a closer look at what the immediate and long term effects of this so-called trade war might actually be, a far different, far rosier picture emerges. "
Tim,
Some excellent points.
The potential rewards for doing this far out weigh the short term negative consequences that are being exaggerate by ...........guess who again.
Most importantly, it's doing the right thing, reversing/undoing some wrong things that have existed for too long.
Is this the right way to go about it?
Without the sharp teeth of tariffs biting hard at China, there would be a near zero chance of accomplishing anything substantive.
Trumps tweets and crazy statements seem to be making this unnecessarily volatile and unpredictable and every body nervous but I presented a new take on this yesterday.
China has been abusing us for a very long time with every US president looking the other way. Their president is not going to suddenly change drastically for Trump because Trump asks or, actually for any reason other than NOT doing so is going to cause extreme pain for China and this can only be imposed if the US is willing to experience some pain at the same time.
So one of the below things apply right now.
1. China will NEVER agree to any of Trumps terms or
2. The pain that he is imposing has not been great enough to cause them to act.
If #2 is the case and China does act and there is a deal, then it would never be possible with a Bush or Obama. It could only be accomplished by this president using this strategy.
Analogy: If you are playing chicken with somebody else, let's say, for example driving a car towards a cliff to see who will turn away first(and lose), before their car potentially goes off the cliff. If you were China's president in one car, would you be more likely to turn first if the guy in the other vehicle was Bush/Obama or if it was Trump?
With Trump in the other car, he's believing his opponent is willing to go right off the cliff. This is how Trump plays.
One thing with certainty. If a deal is ever made, this is the only way that it could have happened.
My belief now is that a deal WILL be made. Trump does not really expect China to suddenly cave in to all of his demands.
He is maximizing the pain on China with the most extreme position and asking for everything, so that when he decides to negotiate the actual deal, it can be maximized in his favor(he will get the most possible, that China is willing to give up).
Ideally, Trump would have high prospects for a 2nd term. That not being the case, means that China sees the cliff for Trumps race car coming before the cliff for Chinas race car in their game of chicken.