8: Trade War

China Tries to Downplay the Trade War’s Effects on Its Economy Faced with economic disruption, Beijing is presenting itself as too powerful to succumb to U.S. pressure. It is also censoring criticism at home. ....... Things will be painful, but it is nothing that the country cannot handle....... and that China could potentially come out stronger as a result. ...... “China is a super economy. We are strong and resilient in the face of the U.S. tariff bullying.” ........ It wants to be seen as a responsible champion of fair trade that is too powerful to succumb to U.S. pressure. ........ China was prepared to weather Mr. Trump’s tariffs because it was no longer as reliant on the U.S. market for its exports. ....... China responded to Mr. Trump’s tariffs by putting 11 American companies on an unreliable entities list, and another 16 on an export control list. It also announced export controls on medium and heavy rare earths. That was in addition to slapping U.S. goods with tariffs of 34 percent to match duties imposed on Chinese goods. ........... China has been trying for months to engage in high-level talks with the Trump administration in preparation for a potential summit between Mr. Trump and China’s top leader, Xi Jinping. But Beijing has struggled to receive much of a response from the White House despite Mr. Trump saying earlier this year that he was open to engaging with Mr. Xi. ............. China “did not close the door for negotiations,” but that it would also prepare for the worst. It said the looming crisis would compel China to continue reforming its economy to rely more on its vast domestic market. ............ “The United States is shooting itself in the foot by tariffs, so we should not shoot ourselves in the foot as well,” wrote the researcher, He Bin, who was deputy director of the academy’s Center for Public Policy Research. “The correct countermeasure is to implement unilateral zero tariffs on imports from all countries.” ............. Then, on Sunday, the Chinese Academy of Social Sciences announced that it was shutting down the center where Mr. He worked. It did not give a reason for the closure but cited internal regulations around the management of research centers. Those regulations state that centers, among other things, “must adhere to the correct political direction.” .............. “Resolutely support the spirit of the central government’s directive!” wrote a military blogger with 4 million followers on Weibo.

EU prefers negotiation on US tariffs, but readies first retaliation Trump's top trade adviser on Monday dismissed tech-billionaire Elon Musk's push for "zero tariffs" between the U.S. and Europe, calling the Tesla CEO a "car assembler" reliant on parts from other countries ........ "The stock markets are already collapsing and the damage could become even greater ... America is in a position of weakness"

China calls US tariffs 'bullying', urged others to continue with consultation The tariffs are "typical unilateralism and protectionism, and economic bullying" ....... U.S. tariffs in the name of reciprocity only served its own interest at the expense of other countries........... "The abuse of tariffs by the United States is tantamount to depriving countries, especially those in the Global South, of their right to development," Lin said, citing a widening gap between the rich and poor in each country, and less developed countries suffering a greater impact. .......... urged countries to jointly oppose all forms of unilateralism and protectionism, and safeguard the international system and the multilateral trading system according to the United Nations and World Trade Organization values

‘The Tsunami Is Coming’: China’s Global Exports Are Just Getting Started A staggering $1.9 trillion in extra industrial lending is fueling a continued flood of exports that could be spread even wider across the world by the Trump tariffs. .......... For decades, the world’s largest car factory was Volkswagen’s complex in Wolfsburg, Germany. But BYD, the Chinese electric carmaker, is building two factories in China, each capable of producing twice as many cars as Wolfsburg........ state-controlled banks lent an extra $1.9 trillion to industrial borrowers over the past four years. On the fringes of cities all over China, new factories are being built day and night, and existing factories are being upgraded with robots and automation. ......... China’s investments and advances in manufacturing are producing a wave of exports that threatens to cause factory closings and layoffs not just in the United States but also around the globe. ........... Chinese leaders are furious at the recent proliferation of trade barriers, and particularly Mr. Trump’s latest tariffs. They take pride in China’s high savings rate, long work hours and abundance of engineers and software programmers, as well as its legions of electricians, welders, mechanics, construction workers and other skilled tradesmen. ......... “It is using tariffs to subvert the existing international economic and trade order” so as “to serve the hegemonic interests of the United States.” .......... Five years ago, before a housing bubble burst, cranes putting up apartment towers dotted practically every city in China. Today, many of those cranes are gone and the ones that are left seldom move. At Beijing’s behest, banks have rapidly shifted their lending from real estate to industry. .......... China is using more factory robots than the rest of the world combined, and most of them are made in China by Chinese companies ........ Lending by state banks is also financing a boom in corporate research and development. Huawei, a conglomerate making items as varied as smartphones and auto parts, has just opened in Shanghai a research center for 35,000 engineers that has 10 times as much space for offices and labs as Google’s headquarters in Mountain View, Calif. ............. Leaders around the world are struggling to decide whether to raise trade barriers to protect what is left of their countries’ industrial sectors. ..........

China’s factory output is bigger than the combined manufacturing of the United States, Germany, Japan, South Korea and Britain.

.......... Chinese companies still sell almost no cars in the United States. That is unlikely to change: With Mr. Trump’s latest moves, Chinese carmakers now face U.S. tariffs as high as 181 percent. ........... In Mexico, Chinese carmakers held just 0.3 percent in 2017; by last year, it was over 20 percent. ......... China is not just building car factories. It has built more petrochemical refinery capacity in the past five years, for example, than Europe, Japan and South Korea together have created since World War II. And China is on track to build these refineries even faster this year. Petrochemicals are then turned into plastics, polyester, vinyl and tires. ........... Robert E. Lighthizer, who was the United States trade representative in Mr. Trump’s first term, said that the latest American tariffs “are long overdue medicine — the real root cause is decades of Chinese industrial policy that has created breathtaking overcapacity and global imbalances.” .............. China is exporting so much partly because its own people are buying so little.

A housing market crash since 2021 has wiped out much of the savings of the middle class and ruined many wealthy families.

............ Some Chinese economists have recently joined Western economists in suggesting that the country needs to strengthen its meager social safety net. At the start of this year, the minimum government pension for seniors was just $17 a month. That barely buys groceries, even in rural China. ............ The country’s best-known economist, Professor Li Daokui of Tsinghua University, publicly called in January for raising the minimum monthly pension several fold, to $110. The Chinese government could afford it, he argued, and extra spending by seniors would stimulate the entire economy. ......... Chinese officials rejected his advice. When the budget came out on March 5, it had an increase in monthly pensions — but it was just $3, bringing them to $20 a month.

There’s a Method to Trump’s Tariff Madness

President Trump’s imposition of high tariffs on friend and foe alike has stunned the world and stumped economists. There is no economic rationale, experts say, for believing these tariffs will usher in a new era of American prosperity.

............ the Mar-a-Lago Accord. Apparently devised by Mr. Trump and two of his top economic advisers, Treasury Secretary Scott Bessent and Stephen Miran, the chairman of the White House Council of Economic Advisers, it seeks to improve the United States’ global trading position by using tariffs and other strong-arm tactics to force the world to take a radical step: weakening the dollar via currency agreements. This devaluation, the theory goes, would make U.S. exports more competitive, put economic pressure on China and increase manufacturing in the United States. ........... There is genuine economic, social and political discontent driving this plan. Given the demise of U.S. manufacturing and the post-Cold War development of a technologically interconnected world shaped by new geopolitical rivalries, some sort of reset of the economic order probably makes sense for the United States. .......... But the slash-and-burn approach of the Mar-a-Lago Accord isn’t the answer. For one thing,

it is hard to find an economist outside of Mr. Trump’s inner circle who thinks it is a good idea

. But even if, despite all the chaos it will unleash, the United States eventually prospers as a result, we will have traded away the core economic and political values that make America truly great. ............. in the 1980s, after Paul Volcker, the Federal Reserve Board chairman, implemented high interest rates to fight inflation, the dollar became irresistible to foreign governments and private investors alike. Foreign capital poured into the United States. ........... The result was a strong dollar — too strong. American-made goods became some of the most expensive in the world, creating a large trade deficit and accelerating the flight of manufacturing from the United States. ............ In the decades since, the dollar has remained the world’s reserve currency. Today, gold and oil are demarcated in dollars, facilitating global trade; foreign nations hold U.S. Treasury bonds in their official accounts as a store of value, a hedge against uncertainty and a way to stabilize their currencies............. To many, the strong dollar grants the United States “exorbitant privilege,” as a French finance minister once griped, cementing U.S. diplomatic, military and cultural dominance. To lose this status would be a doom scenario, potentially leading the United States to default on its debt and plunging the country into economic catastrophe and social collapse. ........... What the Trump administration is arguing, in effect, is that the doom scenario is already here: We have an America where manufacturing has declined, economic inequality has spread and a nation overburdened with debt pays for the military protection of its allies.