TRUMP’S IGNORANCE OF “GLOBAL TRADE” CONTINUES TO SHOW

…Freighter “Peak Pegasus” that sped up to deliver soybeans before the tariffs hit.

 \

Even China says Trump’s trade war is, “the largest trade war in economic history.”  

Well,, the president promised this during his campaign, but as of this week, the United States imposed the first tariffs on $34 billion in Chinese goods.  China immediately retaliated, launching an equal commercial battle of the tariffs that is feared could shake the markets and cramp US business.

To demonstrate the seriousness of this event, one ocean vessel’s journey to their port in China, the Peak Pegasus, which carried soybeans, it sped to reach its port before China applied the counter tariffs that would hike the cost of its load by 25%.  It’s unclear if the ship made it to port in time. 

China has been fairly mute in reacting to Trump’s noise making about tariffs.  But this time, Beijing fired back with tariffs of its own, and it accused the US of violating WTO rules and setting off “the largest trade war in economic history to date.”  

“In order to defend the core interests of the country and the interests of the people, we are forced to retaliate,” the Chinese Commerce Ministry said in a statement. 

China slapped levies on an equal amount of American goods, including US heartland staples like soybeans, corn, pork and poultry.  So, as expected, Trump can’t be out-done and he has already stated that this requires him to hit China with another round of duties on up to $500 billion in products.

If the tariffs get that high, all of it will cost American's billions of additional dollars.

This is going to get even uglier, and guess who is going to eventually pay the cost?  Yep, that’s you and I, and people that can't afford today's costs.

According to the less than brilliant news casts, “This financial jousting has prompted concern over rising costs for a wide range of goods.”  DUH!!!!

“For industries that are directly impacted by the tariffs, the impact will be immediate and big,” said Yanmei Xie, a China policy analyst at Gavekal Dragonomics, an economic research firm in Beijing. 

But it’s the risk of escalation, specifically Trump’s $500 billion dollar threat, which would cover nearly all of China’s exports to the US.  That is what has the analysts worried. “The countdown is on as to what Trump will do next.”

On the Chinese side, fallout from the first round of tariffs was seen as tough but manageable. 

“The key is whether there will be more, a second round of revenge and retaliation and then a third round,” said Shi Yinhong, a professor of international relations at Renmin University in Beijing

In interviews with lobster fishermen in Maine, Idaho potato farmers and pork farmers in Iowa, they have all said that Trump needs to be more thoughtful for US agriculture.  The effects on these products in not a gradual increase.  The hit is immediate and very large.

If you are dealing with manufactured products, that takes some time to find another supplier.  But with agriculture, you can change from where you get your potatoes, pork, soybeans or lobsters almost immediately, just by canceling one order from the US, and placing a new order from another country.

The issue that drives people crazy in dealing with China is that due to Chinese trade practices, many times they require foreign firms to spill some of their trade secrets to access their 1.3 billion-person Chinese market. 

Because of Trump’s blatant noise about China’s practices, US businesses have warned for months that Trump’s trade threats may do much more harm than good. 

“There are no winners in a trade war,” William Zarit, chairman of the American Chamber of Commerce in China, said in a statement published just moments before the 12:01 a.m. Washington-time deadline. 

“While our 900 member companies continue to suffer from not having a level playing field in China, they are still extremely clear: Increased tensions in the US-China economic relationship will negatively impact their operations in China,” he said.

Some veteran China observers predict that Beijing may increase their tactics which would may go well beyond tariffs.  This could include placing arbitrary quarantines on perishable products and a costly lengthening in customs inspections, among other of China’s regulatory headaches.  Products could sit for weeks or months in China's ports-of-entry.

Shaun Rein, managing director at the China Market Research Group in Shanghai, said the Chinese government’s next play could also be to stoke anti-American sentiments among China’s consumers.  Last year the government ordered a boycott on South Korea’s Lotte Group.  This caused dozens of the company’s convenience stores to close.

“If I was Starbucks or Apple operations in China,” he said, “I would be scared right now.”

Asian markets had slumped over the past weeks amid these trade battles. But on Friday, the main Asian exchanges closed higher, as some traders said the blows from the US-China tariffs had been factored in.  But we’ll see what these latest moves do to future market responses.

The Shanghai Composite Index was up slightly, and Japan’s Nikkei closed with a 1.1 percent gain.  But the tariffs did hit in other ways. As an example, the prices for some key commodities used in manufacturing, such as copper, fell sharply

Trump has vowed for years to tackle Chinese trade practices, accusing Beijing of stealing US intellectual property and slammed the $375 billion US trade deficit with the country. 

But Trump is a reality TV star and a New York builder, not an economist.  Well respected economists say it was both globalization and the rise of automation that cut back the manufacturing operations that US companies in recent years have moved abroad.

But Trump argues that China needs to purchase more American goods, and he has blamed trade with Beijing on the loss of American jobs throughout the Rust Belt.  He refuses to realize that to hold a job in America and to move up the ladder today takes more than a high-school education and personal motivation.  Whether it’s in business or high technology and even in the trades, that takes special education.  Automation and having higher education is the reason for the loss of the nation’s manufacturing jobs.

At his campaign rally in Montana, Trump doubled down on his stance that China is “killing us” on trade, but tariffs aren’t going to fix that problem.  That will only make it worse and we Americans will be the ones paying the price.

Chinese officials are however projecting that their studied confidence will show that the Asian nation is better equipped than the US for withstanding the economic turbulence.

“Our commodity market and job market are relatively flexible, and our foreign-related economic sectors’ ability to make flexible adjustment is more prominent,” said Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, in his interview with the Chinese financial newspaper Financial News.

The Chinese officials see Trump’s threats as an attempt to hold back China’s economic growth.  But China has vowed to match the US move for move. 

Whether it’s through trade war or other means, the end goal is to make China subservient to the United States,” said He Weiwen, vice president of the Center for China and Globalization, in Beijing. “That's impossible. China won’t accept that,” he said, adding “what happens next depends on the United States. China will be prepared to follow suit.” 

Meanwhile, at both American and Chinese ports, cargo ships are docking to a new world of financial consequences. 

I personally think the Chinese are smarter than that less than organized group we have in the White House.

I guess only time will tell, but our own economists seem to agree with the Chinese definition of the real issues.

Copyright G.Ater  2018