Thread: Trump's Early Trade-War Advantage May Be Slipping by the Day

Trump's Early Trade-War Advantage May Be Slipping by the Day

By Andrew Mayeda
September 19, 2018, 8:18 PM EDT

President has ordered more tariffs on China by Sept. 24
China has the resources to wait out the U.S., experts say

President Donald Trump may find it harder to claim victory over China the longer his trade war runs, even as he points to America’s ebullient economy and stock market as evidence he’s winning for now.

The president this week ordered his officials to slap tariffs on $200 billion in Chinese goods on Sept. 24. In retaliation, Beijing said it would hit $60 billion in U.S. products with duties. Yet even as the conflict escalates, the Trump administration signaled it would still be open to talks as soon as next week.

In confronting China, Trump is using the same strong-arm tactics he employed as a real-estate mogul, taking care to snuff out any suggestion he’s under pressure to strike a deal.

But Trump’s leverage may be short-lived. The president’s political power will be curtailed if the Democrats win the House in congressional elections in November, as they are favored to do. While the U.S. economy has so far appeared resilient to the trade war, the boost from this year’s tax cuts is expected to fade.

Meanwhile, China’s economy is showing some signs of cooling, but it’s still growing at a brisk pace, giving Beijing room to cushion the blow. President Xi Jinping, who cemented his hold on power in March with the repeal of term limits, has reason to be patient.

“The issue of leverage varies with time. If you ask the same question tomorrow, the calculus will have shifted ever so slightly in favor of China,” said Stephen Jen, CEO of Eurizon Slj Capital Ltd., an asset-management firm based in London. “If you ask the question a week from now, things will be even more in favor of China.”

Trump does have a point about how markets have reacted to the conflict. Since the president ordered his officials to ready tariffs on a first round of $50 billion of Chinese goods in March, U.S. stocks have risen about 10 percent, while Chinese equities have dropped more than 16 percent.

There’s a lot to like about the U.S. economy, which is enjoying its second longest expansion on record. Growth in the second quarter was the fastest in four years, while the unemployment rate of 3.9 percent is near its lowest since the 1960s.

China, by contrast, is showing signs of softness. Fixed-asset investment growth in the first eight months fell to the slowest pace since at least 1999. The yuan is down about 8 percent since Trump ordered tariffs.

“China should really wait another five years to stand up to the U.S.,” said Jen.

China’s economy was expected to slow as it relies less on debt and shifts to a growth model driven more by consumption, a shift touted Wednesday in a speech by Premier Li Keqiang. Beijing has already unveiled measures to shield itself against the trade war, including infrastructure spending and looser bank capital requirements. While high debt levels may constrain the ability to respond, Xi still has plenty of ways to ease the pain.

The U.S. has already used a lot of fiscal ammunition. The $1.5 trillion in tax cuts that took effect in February gave the economy a boost, but the IMF expects the stimulus to wear off by 2020, when growth will slow. It still sees China becoming the world’s biggest economy by 2030.

What Our Economists Say

“China already faces a significant challenge with deleveraging; fighting a trade war at the same time would be tough to do. Even so, U.S. strength -- a reflection of substantial and time-limited tax cuts -- will not be sustained. And with major U.S. corporations deeply enmeshed in China as a production base and growing market, escalating the trade conflict risks a self-inflicted wound.”

-- Tom Orlik, Bloomberg Economics chief economist

Xi has sweeping authority to conduct the trade war.

Meanwhile, Trump’s latest weekly approval rating is 38 percent, according to polling firm Gallup. His Republican party could lose control of the House in Nov. 6 congressional elections. Senior Democrats such as House Minority Leader Nancy Pelosi have urged Trump to keep up pressure on China, but Democrats are not guaranteed to back his tariffs.

“We actually have to deal with something called elections,” said Stefan Selig, managing partner at BridgePark Advisors LLC and a former senior trade official in the Obama administration. “Culturally, they are just going to be able to withstand more pain for a longer period of time.”

U.S. business opposition to the tariffs is growing. The administration says it’s trying to minimize the direct cost to consumers. Still, Trump has said he’s willing to slap duties on effectively all Chinese imports, suggesting it’s only a matter of time before mobile phones and other popular items get hit.

“The idea that you’re going to punch China in the face or otherwise make China look weak is not a recipe for resolving our differences,” said Jake Colvin, vice president for global trade at the National Foreign Trade Council in Washington. “The quicker both sides realize that the current situation is untenable, and that they need to come to an agreement that allows each side to see the value, the better off we’ll all be.”

https://www.bloomberg.com/news/artic...ing-by-the-day

What people like the author of this article don't understand is "the gig is up". Americans want our industries back, we want our manufacturing jobs back, we want our economy driven by production that grows and maintains our GDP, creates good jobs, generates multiplier effects on investment and job creation from the industrial sector that spreads to every other sector. We want to make our own things, the way we want them made, we want the profits, jobs, wages, benefits, wealth, security and quality that this delivers for our country and citizens.

Americans can live strong, secure and prosperous lives forever under Trump's Trade Policy even if it means we never bought or sold another thing involving China.

Look at it his this way, just ask any American, do you care whether Jeff Bezos is worth $80 billion under Trump Trade Policies or $126 billion under Free Trade Policies? Not one American gives one damn whether Jeff Bezos is worth $80 billion or $126 billion. What Americans care about is Americans having at least 40 hours a week of work earning at least $20 to $30 an hour in a manufacturing operations making our own products instead of $9 to $12 an hour in an Amazon warehouse shuffling Chinese imports in and out the door.