So-called “experts” tend to say that no one wins in a trade war. But as Pres. Donald J. Trump takes off the tariff gloves, he could decimate China’s economy.
As the trade war with the Asian heavyweight ramps up, some point to China being the largest economy in the world as reason for anxiety. It’s true that China produced more than $23 trillion in 2017 outpacing No. 2 EU at $19.9 trillion, and third-ranked America at $19.2 trillion. But China has some distinct disadvantages if they choose to go toe-to-toe with Pres. Trump over trade.
The communist country has an over-population problem of 13.8 billion people that weighs on its annual GDP. Consider that with only about a $4 trillion difference, the United States has a mere 327 million citizens. China has a lot of mouths to feed.
Couple that economic stress with the fact that the average Chinese family endures a low standard of living, earning less than $17,000 annually. Americans rank over $59,000 in GDP per capita income. The poor standard of living and wages suffered by the Chinese people under the communist regime has allowed its manufacturing base to export cheap goods. However, lack of wealth among its citizens makes China fragile to economic downturns.
If an American family takes a $5,000 hit, they can tighten their belts and go without. If a Chinese family takes such as loss, they’re thrust into abject poverty. China pays its workers badly and has little economic wiggle room for its citizenry.
China has built its economy through nationalized companies and the mass exportation of cheap goods. The government erected towns and cities around its largely state-owned and poorly operated manufacturing outfits. Businesses in the country earn only a 4.9 percent return on asset investment, while private companies generally run more than 13 percent. The communists also return about 9 percent of their annual GDP into infrastructure, which lags behind the United States.
But the more telling numbers are the reliance on exports. China sent 18 percent of all of its goods to the United States in 2017, causing the U.S. to suffer a $375 billion trade deficit. That unfair trade is driven by Chinese companies stealing intellectual property, imposing unequal tariffs and underpaying workers. Simply put, China is a bad actor.
However, the strength of its export sector is not built on a solid economic foundation. China remains the second largest importer of necessities such as soy, oil and metals. In recent weeks, the debate over China imposing tariffs on U.S. soybeans was brushed off by Pres. Trump. He said simply that American farmers would sell to someone else. There are only so many soybeans in the world, and China in no way has the market cornered.
The other argument that has people running scared is that China holds a majority of U.S. Treasuries. While China does hold 19 percent of all foreign-held notes, already that number is declining from its peak in 2013. America appears to be cleaning up its China-held debt as the trade war escalates.
Communist leadership in China responded to Pres. Trump’s imposing higher steel and aluminum tariffs with a shot of their own. In all likelihood, that was an attempt to save face as the American strongman flexes his economic muscle.
Pres. Trump has worked courteously with China to rein in intellectual property theft and develop equal tariffs or free trade agreements. The Chinese declined, and now it’s time for an international heavyweight trade fight. The President of the United States is prepared to go the distance.
“I’m ready to go to 500. I’m not doing this for politics, I’m doing this to do the right thing for our country,” Trump reportedly said. “We have been ripped off by China for a long time.”
Yes, the president is willing to tariff every Chinese import unless they end their unfair and illegal trade methods. Market experts are already predicting that China will take the loss in an all-out trade brawl.
“If we compare the price action between Chinese equities and U.S. equities (particularly the Russell 2000), it’s pretty clear that the market is discounting the U.S. as a relative winner in the outcome,” Renaissance Macro Research’s Jeffrey deGraff says. “That’s not to say trade wars are bullish, but the S&P 500 has absorbed the threat and even body blows substantially better than China.”
Stocks in China plummeted after Pres. Trump threatened to slap tariffs on all of its exports to the U.S. The Shanghai Composite hit a two-year low on Pres. Trump’ rhetoric alone.
Americans should not get anxious about an imminent trade war with China. If one sentence from Pres. Trump can knock down their economy, hitting $500 billion in goods would prove to be the knockout blow.
~ Conservative Zone
China has made a leader for ever. He is a war load. We need the sales out of them now i think
This article states that China has a population of 13.8 billion people?!!!
The Chicoms are NOT our friends. I knew an old Marine who served in WWII and was stationed in post war Manchuria for 2 years. he told me “never trust a Chinese”. China will exploit, steal, cheat all we allow them to do. The loss of Us markets will hurt them far more than vice versa and they know it.
They enjoy an 800 billion dollar trade surplus with us. If they are real stupid, they could lose all that and we would gain because we would de facto have an 800 billion dollar gain due to the fact we would no longer have that trade deficit. I beieve that they can rant and rave all they want but in the end it is us that has them by the short and curly, and they will come to the bargaining table ready to do some major concessions leading to a fair trade agreement.
China’s population….1.38 billion. That darned decimal moved itself over a spot. : )
Fingers. I think they meant 13.8 billion FINGERS. Or maybe you are right about the decimal point.
Go on You Tube China is in trouble on the verge of civil unrest between the common folk and big business. Cities, Towns, Malls all over vacant because the common folk and shop owners can’t afford them. Its all about keeping their GDP up for status It’s a real mess over there. They and all the others part of the G-7 group need us more than we need them. Our GDP is climbing over 21 Trillion which is higher than all those combined. As for the steel mills because of the tariffs we now have mills opening up dead sections and creating jobs, we have more jobs right now then people looking, Black unemployment at an all time low. Big business moving back creating jobs and Investing in America. I can go on all day, Trumps a business man knows how to get things done and he’s pretty smart about it his IQ would astound you. Our Government should be ran like a business with little or no waste with qualified and competent people on board.
exactly may we never see a politician in charge of a 20 trillion dollar business again. The politics are easy when the country is rich and powerful. Ross Perot tried Trump succeeded