Author: wchao37

The Tariff Nation - farther afield at the Break of Dawn [Copy link] 中文

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Post time 2019-5-18 16:11:22 |Display all floors
This post was edited by wchao37 at 2019-5-18 16:12

China's surprise at America's intransigence in the Trade War is due to her ignorance of America's historical racist mindset -- that Cowboys would never give consent to sharing prosperity with Indians.

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Post time 2019-5-18 19:22:52 |Display all floors
wchao37 Post time: 2019-5-18 16:06
Trump's problem is that he doesn't listen to experts.  So far he's fired all of them.  He is sur ...

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His own countrymen have noted his import tariffs have directly resulted in one of the biggest consumer taxations on them in US history. And American farmers have voiced they would rather not be saved by tariff taxes collected out of the pockets of their cousins in the cities even while noting the US grains index has hit a 42-year low for the first time.


Yet some have also tried to excuse his behavior by ascribing to him some transcendental sagacity just because he seems to be doing something for them. Anything is good enough, they still try to conclude. Even if it ends up bad for everyone which all can see from the way the stock markets have yo-yoed in tandem with his tweets and from the number of applications by US companies to be exempted from his tariffs. Something must be wrong somewhere when sensible and savvy corporate boardroom members all over the world have to start their daily meetings by first asking what's the latest tweet from one ex-building developer known more for bullying his suburban suppliers and subcontractors than for any successful billion-dollar deal.

In fact, many have concluded his art of the deal is to make more demands and unilaterally force them when a talk looks like being concluded so that the other side will cave in just to save the deal. In between, he muddies the water by switching on and off the light so as to disorientate the other side who is still trying to cogitate what the translations imply for long-term relationships beyond a deal. Therein the difference. He wants to win next year's election for himself even if it comes at the expense of his fellowmen while the other side is looking towards recovering the original relationship outside the exclusion of being treated as a strategic rival. After all, a good bilateral relationship does not have to follow Pauli's Exclusion Principle because spins which appear to be different are what make this world more stable, dynamic and progressive.

It would just take you the time to walk to the washroom down your office corridor for a leak in order to appreciate China doesn't consider the US a strategic rival so why should the US consider China one?  After all, one is only a rival if one is not already number one in many areas. China's confidence is stable, built on the hard concrete of real work and free from the inadequacies of xenophobes. And all that because she has already outperformed in so many aspects so why are there still some in the US who persist in thinking she is a threat, especially when they have already been profiting handsomely from trading and joint-ventures with her all this while?




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Post time 2019-5-18 19:25:37 |Display all floors
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China’s global leadership

Economy, manufacturing and trade
  • #1 in foreign exchange reserves (>$3 trillion)
  • #1 holder of U.S. debt (>$1 trillion)
  • #1 trade partner for 130 countries.
  • #1 in contribution to global GDP growth for the past decade (25-35%, which is twice that of the U.S.). That is, if the world GDP grows by $100, then $25-$35 comes from China.
  • #1 in steel, cement, aluminum production (link, link, link). In three years (2012 – 2015), China used more cement than the U.S. did in the entire 20th century. (link)
  • #1 in manufacturing of conventional cars (>26 million per year).

  • #2 in hi-tech manufacturing
Agriculture
  • #1 in production of rice, wheat, potato, beer(!), tea, apple, strawberry, grapes and numerous other grains, vegetables and fruits. (link)



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Post time 2019-5-18 19:25:54 |Display all floors
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Poverty and middle class
  • #1 in poverty elimination (800 million lifted out of extreme poverty)

Technology
  • #1 in solar, wind and hydroelectric power (link)
  • #1 in electric cars – manufacturing and sales (link)
Infrastructure  
  • #1 in skyscrapers – more than half of all skyscrapers are in China (link)
  • #1 in high-speed railways or bullet trains (30,000 Km or 18,000 miles)
  • #1 in global infrastructure projects. China’s Belt and Road Initiative (BRI) involves 152 countries and international organizations. (link)
Science, research & development
  • #1 in Artificial Intelligence (AI) funding, startups and publications (link, link)



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Post time 2019-5-18 21:52:26 |Display all floors
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Trump's current bravura is because he thinks the US economy is booming and unemployment is low.


Yet in recent surveys 51% said they will have to dive into their savings for their basic necessities if they miss even one paycheck, four out of 10 don't have USD400-500 for any emergency, and if faced with a sudden income disruption, 43% would terminate their regular savings, 28% would stop their retirement contributions, 73% would cut off non-essential expenditures and 31% would skip purchase of even essentials if they miss two paychecks. Moreover, 47% admitted they would turn to credit cards if they don't have savings for essentials with 17% willing to go into debts on 400-800% interest rates by taking quick short term loans.


In other words, the majority lower income groups in the US live paycheck-to-paycheck and any disruption to their income stream will put them immediately into financial hardship and exposure to debts that will quickly accumulate from their having to take fast loans to pay for even essentials, rents, utility bills and mortgages.

As Potus, he must surely realize this and what will happen to them when the additional USD800/household in prices increases kick in when his new 25% tariffs take effect.


But even the economists who derived that sum could have been conservative. They could have omitted the multiplier effect that comes about when an item courses from wholesaler to dealer to sub-dealer to retailer to customer. At each step, not only will additional transport add up to more than the original two end-points of contact but each sub-supplier will want to retain his own profit margin.


This is where the multiplier effect can take place. If they each sees risks to their individual level of business from the tariffs, they will hedge in more profit margin for themselves to cover turnover downturns from higher prices. So the price from wholesaler to dealer will be magnified beyond the tariff addition. Next the price from dealer to sub-dealer will also magnify by another margin but that margin will be on the inflated price quoted by the wholesaler. And so on.


By the time the item reaches the consumer, it will be multiplily overpriced beyond the tariff increase at the docks. That USD800/household increase caused by Trump's 25% tariff may soon balloon to USD1,200/household whose effect will be devastating on the millions of American households already living at the edge of financial hardships.

Did Bannon, Navarro, Pillsbury, Ross, Rubio, Schumer know all that? Are Lighthizer, Mnuchin et al aware that they didn't? So if they didn't, would he who only tweets know as well? And if he didn't, what the heck have they all been doing raising tariffs that will hurt the very Americans they said they care about? Besides the millions of parts producers and product assemblers, raw material suppliers and transporters all over the world.

Most businesses anywhere thrive and mom-and-pop shops survive only on low margins; not everyone wants to be a real estate man making (and losing) millions out of others.  Tariffs artificially magnify prices, many for parts that go into machineries that make essentials. If prices of even essentials are raised by such artificial taxations, an inflationary bubble will build with dire consequences for stabilization of monetary policies which in turn will affect investments and global trade. Besides sinking thousands of poor households when they had been able to coast by more comfortably without tariffs.  Furthermore, disrupting global supply chains is more than a pain in the ass; it's a kick on everyone's chin. There will be no short-term pain for long-term gain; it'll only be admitting for a toothache but exiting after a major surgery.


Yet Trump may think he has the scepter of being right just on account of a soporific feeling for American workers. But they are a segment of the whole population of consumers. If half the entire American household population suffer when they needn't, would adding another USD5-15/hour to the wages of the thousands of American workers ameliorate the situation especially when any increase in wages will be eaten up by tariff inflation?

It seems the old saying that the pen is mightier than the sword has been replaced by the new saying that the tweet is mightier than the pen. But the source of that new saying could very well have emanated from the assembly of twits only.





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Post time 2019-5-18 23:13:02 |Display all floors
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Supply chains endure because each component of a supply chain seeks the lowest cost to create the lowest end-consumer price consonant so that disrupting a supply chain by fiat of tariffs will not work because new suppliers whether indigenous or foreign will price closest to the last tariffed price in order to make more profits from the disruption to cover previous loss of business and the eventuality of future downturns.


Furthermore, suppliers whose goods are tariffed can move their production lines to other countries whose goods are not tariffed so that to maintain the original objective of tariffing, all those other countries will soon have to be tariffed as well. In the end, one tariffs oneself into a corner because those other countries will tariff back. The end result then will be one making domestically for one's own market with few exports. But that will be a vicious cycle because one loses economies of scale from loss of export markets which means the goods made will have to be priced domestically higher which in turn will reduce consumer demand and market share by dollops every month, first overseas then locally, resulting in loss of employment when factories and businesses wind down.


Until Trump tiraded with his tariffs, the world was operating like a well-oiled machine cranked by the invisible hand of best quality to lowest price at fastest time for required quantity. Thinking he could force his way around and bend others to his will like what he had done to his construction subcontractors, he has overturned everything. The nice words of support that he still gets in diminishing dribbles are not just sanitized against reality by the nearest local sycophants but also sanderized (as in his Sarah Sanders) to look superficially good without a modicum of real analysis of true facts. Since he has so far made 10,000 no-facts, maybe that's why his words have resonated like an alarm bell.


The biggest tragedy, however, is what he has really done onto the world by turning his guns on China. He has used his blunt instrument of trade tariffs not just to try to bully and intimidate China but also to threaten his so-called US allies into following his dogma of American exceptionalism and US domination of their right to pick their own suppliers and seal their own sovereign agreements.


They might have meekly followed the US to sanction hapless small nations before and he would have thought they will do so again this time on trade and technology. However they should ask themselves first what is the real effect of following his demands and threats. Another round of wikileak exposures modernized for the 21st century where even one's allies are spied and taunted on with wild abandon? Another round of i-can-tariff-you-but you-cannot-tariff-me? Once follower, always dependent?


These are critical issues that go beyond the old world order for that matter the old schooltie network or even the skulls-n-bones society out of the elites of Yale. Because the issues will balkanize and split the world into camps and clusters against the very multilateral configuration needed to maintain maximum all-round cooperation for the future, one founded on the best-fit global supply chains for invention, manufacturing, trade, supply, investment flows and human resource interchange. Then the poorer and off-circuit countries can also be helped up through better infrastructure and more stable and continuous demand for their raw materials and goods.  Surely those in Europe whose forefathers had imperialistically sundered the East's including the slave states of Africa must realize holding onto the tailcoats of their master in a US that has already come out to say Amerika First means they will for all intents be getting the crumps of a new hegemon history writ large besides not fulfilling the atonement of their past sins onto other nations.


But now that Trump has opened the Pandora box, how will anyone be able to help him put the (his) fly back in? He has stirred the xenophobic emotion in the US congress which is trying to fashion a new clash of civilizations that even Huntingdon the originator would wince and cringe. While President Xi has argued wisely for cooperation and acceptance of a multitude of civilizations for long-term peace and prosperity of the human race, Trump and his ilk are however trying to divide brothers of humanity in the mold of his predecessor two clicks away, namely the Bushian doctrine of "you're either for me or against me" to be read as "all options are on the table" aka "five-eye anglo-saxons above all".

If this continues, what then will happen in 2025 after the break of dawn? Will there be more mini-Trumps to continue the new sport of naked power xenophobic antagonism? Or will Trump be able to arrest the damage of what he is doing by rehabilitating his own Congress and rightwing hawks who have been only spoiling to make sure other nations do not realize their fullest potential because they continue to harbor their aspiration that the US Civil War should have gone southern confederacy instead so that as to make progress from cotton plantation to sovereign state slavery?


As if the genocide of native Americans wasn't bad enough.







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Post time 2019-5-19 06:10:15 |Display all floors
You did a great job fleshing out this thread.  I'm just one person -- I can't do everything, and now you are doing something to help everyone understand the situation better.

Yes, China's GDP based on PPP had passed America's five years ago, but because we don't want them to say that we're now Number One and ought to pay more for this and that, we'll just keep talking about nominal GDP and not PPP GDP.

I agree with the government's stance in this regard because it will save us a lot of unnecessary fees and headaches.

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