China - US Trade Tensions
Chinese are more likely to be losers in the end, no matter which way the trade tensions between China and US end. China has been the net winner in the free trade and globalization perpetuated by President Clinton in 1992. Before that Chinese exported a paltry sum of $10 to $15 billion to the US. It was during Reagan Administration that China was induced into a big friend, if it back stabbed Russia (Soviet Union) from the East when US and NATO will confront them from the West. The Chinese went along with this US policy provided US paid for Chinese developments. This policy took its full roots during Clinton Administration when all the smoke stack industry from the US was taken lock, stock and barrel to China together with FDI to build newer factories in that respect. By roughly 2010 at the rate of about $100 billion a year, the Chinese had received about a trillion dollars in FDI, export market were opened to import tax free goods and Chinese currency Yuan was pegged low enough that goods from China were cheaper than anybody else. The Chinese exports to US zoomed to $500 billion and a similar design was followed by Europe and Japan, because US had taken the lead. The stock market soared up with cheaper imports with only part of the benefits passed on to the consumers, rest retained by the businessmen. The US imported $506 billion in goods from China last year, and Trump has threatened to slap duties on effectively all imports from the Asian nation. China imported $130 billion in goods from the US in 2017, according to US figures. By about 2012, about 40% of Chinese GDP was exports only. The incoming cash was a boon to China. They started to rebuild their infrastructure like no other place. Where as US had got one hundred years to build their infrastructure, the Chinese were trying to rebuild it in 30 years. With all the money at their disposal, they could do it.
Post Clinton, Chinese began to openly copy Western manufacturing technology, their intellectual property rights and copy many other things. When US objected mildly, they arm twisted the highly profitable honchos of the stock market, hence US did not object too much. Moreover, the Chinese was taking full advantage of political and terror turmoil at the start of this century and not so competent Obama Administration, who preferred to let the sleeping dog lie.
This position of Chinese exporting to US about $520 billion worth of consumer goods and other intermediate products and in return buying only $100 billion worth of goods could not continue forever. Chinese wished to take advantage as long as they could. No nation in the world can sustain that kind of negative balancing trade. US had lost 10 to 15 million jobs which were never going to come back. That high ideals of retraining the labor force in the service industry were a high ideal, not very practical. Manufacturing Jobs permanently lost by 45 to 55 years age group cannot be suddenly transferred to service sector. Unemployment soared to 6.2%.
One cause for President Trump’s election, although the Democrats will tell you much more, was midwestern US states were looking at lack of prosperity. Precise reason - manufacturing jobs have vanished to China.
This is what President Trump began his term to reverse. He liked to bring the jobs back, force Chinese to buy more from US, end theft of intellectual property rights and permanently end arm twisting of American businesses to part with very carefully built innovative manufacturing technology. They were receiving it free by letting the manufacturers that without these techniques, cheaper products are not possible.
Here is what Trump did immediately after he took over the administration. To lead the Chinese into a false sense of security, he initiated a trade fight with Canada/Mexico. He also told Europe that easy export days to US are over, but his primary target was China. Initial target was $25 billion worth of exports with 20% import tariff to be escalated later to $200 billion worth of incoming products.
That stunned the Chinese. Although they hollered & cried and used their tremendous paid publicity stunt to force Trump to change his mind but nothing was working. That 20% wall will make Chinese goods more or less at par with if these were made in the US.
Under Chinese and US businessman pressure Trump could buckle, but there is no sign of it. Privately the politicians and business community are pleased at these actions. Business paid lobby by China is overwhelming all this private glee.
Net results in two years, (by the time re-election is due):
1. The Chinese will be buying a lot more from US (more US Jobs).
2. That 20% wall will force, establishment of US Manufacuring.
3. The currency advantage which China has enjoyed will end.
4. Open Intellectual property theft will end.
5. The manufacturing technology will stay in-house in the US.
6. Chinese exports and Imports will begin to balance or close to it.
7. That export cash, which has intimidated Asia will cease.
8. That intimidating military buildup by China will pause.
9. Other developing countries will take a chance to buy & sell to US. Etc.
