No one who is under the sun, a citizen of the United States or not, could ignore the United States’ presidential election of 2020 because it’s so polarized and contentious. Check out GZERO video right after the break on the discussion of what is going on while the presidential election (2020) is still underway.
I don’t like to get political and hopefully what I’m writing isn’t too political. I’m thinking that even if president Trump is really wanting to have a trade deal with China to avert the upcoming tariff deadline in March on the Chinese goods, China might not want to see a trade deal gets done even the United States concedes something great.
How come? Well, let pretend to put yourself in a Chinese shoe and think about this for a second. So, if you’re Chinese and you know that the Americans will up the tariff on your $200 billion goods in March from 10% to 25% if the trade deal between China and the United States won’t happen, and so the big question is should you concede to the United States in a big way in order for a trade deal to be happening and the tariff to go away? Well, I think if you’re smart you probably would want the United States to impose the 25% tariff on your $200 billion of goods.
I think China knows that the United States economy is not on a solid foundation otherwise the United States won’t have a government shutdown and such. Furthermore, inflation would go through the roof since the interest rates cannot be raised appropriately. To keep the interest rates low the United States has to continue to print more money. Normal people in the United States will continue to see rising inflation which would cost them dearly in acquiring daily things in local grocery stores and so on. A hamburger meal usually costs like $3 but now is like $7 to $8. So, if you’re the Chinese you would think that higher tariff on the $200 billion Chinese goods must be a great thing for China!
Meanwhile, China is weaning off the reliance on American consumers because of the hostility between the United States and China! This could push China to be more aggressive in finding new markets throughout the world such as in Africa, India, Asia, Europe, South America to replace the North American consumer base. Some other regions might see this as a good opportunity to negotiate with China to get a great deal so they could enter China’s huge growing middle-class consumer base. China may pretend to resist this but could end up agreeing to concede something to these players so they could diversify away from the American consumer base.
I think the long term picture is what China is sought after because China wants to better itself in the overall big picture. This means China doesn’t care if the United States is upping the tariff to 25% or even to 75% or to 100%. When the United States is upping the tariff on Chinese goods, the Americans have to pay more for daily things in their lives. This would put even more stress on the Americans and make the Americans go into debts even more. More Americans in debts could mean a weaker market overall for the United States in the long run. This means more Americans will have to be more prudent on what they will spend so they could have money to pay off their debts. This means the American market will soon see a big cut back from spending by the American consumers. Either this or the Americans who are already in too many debts won’t have money to spend anyway!
Meanwhile, China could just sit pretty and wait out to see another financial crisis that will hit North America. So, in a Chinese shoe, do you think you want to have a trade deal done with the United States? Meanwhile, president Trump may not even want a trade deal done with China since president Trump thinks that he will get more votes for the next presidential race if he goes anti-China even more. In summary, I don’t think by the end of February we will see a trade deal between China and the United States. So, if you’re on the side of wanting to see a trade deal done, you should hope that I’m wrong. So, if you’re on the side of not wanting to see a trade deal done between China and the United States, you would probably want that I’m right. In my opinion, a trade war between China and the United States is not a good thing for the long term economic health of the United States.
What I’m about to write could be controversial for the time we’re living in now. As we all know president Trump’s tariffs on China are the means to push China to negotiate a fairer trade — at least this is how the president promotes to the public. So far China isn’t willing to be a pushover and so they decide to retaliate pound for pound. This means whoever blinks first would lose a lot more in the long run, but in the end, both the United States and China would lose in short-term — well, at least this is how the news programs promote this.
I’m thinking that could tariff be a blessing in disguise for China? How come? China has been known as the factory for the world since they opened up their market and joined the World Trade Organization. This means China can ramp up production of almost anything! As Trump’s tariffs hit China, companies that want to avoid tariffs from the United States and still want to export to the United States would move their operations out of China. Nonetheless, there are Chinese and foreign companies in China that produce the same stuff but have yet to export their products to the United States would find the vacuum suddenly is a lot more pleasant to navigate and do business.
The Chinese government could also be more lenient toward companies that decide to keep their operation within China, thus allowing these companies to prosper while China’s internal consumer market ought to grow bigger in time. Remember Google? Google left the Chinese market a long time ago but now Google has shown signs that it wants to grab a chunk of the Chinese’s huge consumer market. Unfortunately, Google isn’t making much progress in this front and allowing similar Chinese homegrown companies to grow unchallenged within China.
Since Chinese companies that are going to stay in China could ramp up their production unchallenged as the trade war between the United States and China heats up, these companies ought to grow bigger in a more empty but lucrative Chinese consumer market. Perhaps some European companies may want to open up their operations in China to give the Chinese companies some competitions. Anyway, I think Chinese companies could grow unchallenged in their home market and mass produce even cheaper products to saturate the world market even more. In the end, I think trade war could only harm a weaker foe who got no means to fight back and could not ramp up production. In the case of China, I think trade war could be a blessing in disguise for the reasons I surmised thus far.
I’m just wondering! Lately, the headlines are screaming that China is devaluing the Yuan to help cushion the blow of Trump’s tariff on China’s exports to the United States. Although this is a legitimate concern that the headlines raise, I’m wondering if there is another hidden motive for the Yuan to slide.
Could it be that the Chinese government is letting the Yuan slides so the treasury bonds that the Chinese own which Americans are in debt to China could stay valuable? This way China can begin to sell the treasury bonds while the treasury bonds are still valuable. Once China unloads enough of the treasury bonds onto the market, whatever value China receives from such transaction could then be converted to other favorable assets, investments, and currencies.
Of course, China could always convert the selling of treasury bonds into Yuan and then raise the Yuan’s buying power back up to stave inflation — but then it could begin a deflation. How? Well, if too many Yuans that are chasing the same thing could raise the price of whatever, but when the buying power of Yuans get push up the Chinese government then could lend out these Yuans to other countries and International projects such as Belt and Road Initiative projects to stave inflation. A more powerful Yuan could also allow the Chinese to get more bang for the buck whenever they use the Yuans to acquire whatever. Thus they also have to be careful about the deflation.
I’m no economist and so I could be wrong on what I’m suggesting. Nonetheless, I would love to hear other people’s opinions on the suggestion that I’m suggesting. Am I wrong? Am I even close?
I’m no expert in economic matters, but I just want to use my own personal logic to make sense of a few things that are currently happening. People are seeing that the Dollar is weakening as we speak, and the Yuan is growing stronger as we speak. Some people say weaker Dollar is a good thing because export will become more profitable. Furthermore, when export becomes profitable, it also drives up the manufacturing sector at home. That’s the theory for some people, but I feel that it’s way more complicated than this.
Since the United States isn’t a world manufacture hub — China is holding this title — the United States’ exports won’t matter as much unless the United States becomes the world manufacture hub. Sure, with weaker Dollar, the United States’ exports will become more competitive than before. The question is, will a little gain in competitiveness in exports spur the manufacturing sector at home? Meanwhile, weaker Dollar will make the United States’ imports a lot more expensive.
I think the United States currently imports a lot more than exports. The United States’ import is at $2.25 trillion and the export is at $1.45 trillion for the year of 2016, according to Wikipedia. If the United States’ exports continue to slack even with the weak Dollar and the imports continue to grow, the United States could face an even stronger trade deficit. For an example, manufacturer companies in the United States may have to import more expensive materials from the outside to manufacture products at home for selling across the world and at home. This may not make the products at home cheaper for homegrown consumers. Furthermore, this will increase the trade deficit in manufacturing sector if not enough products within the United States get to export to balance out the import costs.
Weak Dollar will increase less buying power for the Americans who go abroad for vacation, business, and so forth. Weak Dollar can make purchases of products from foreign companies through online websites or offline imports more expensive for the American consumers. For an example, I could be buying a music plugin from an online website which belongs to a French company, and with a weak Dollar, I could be paying more for this software.
I guess good things and bad things do exist even when the Dollar is weak or strong. Nonetheless, the most interesting question is can the United States fare better when the Dollar is weaker or stronger. In my opinion, weaker Dollar can help spur export a bit, but if the United States’ exports don’t carry the whole United States’ overall, long-term economy, then the weaker Dollar will be a very bad thing!
What about China? If the United States enters a trade war against China, China can increase import tariff costs for the products from the United States. This could hurt the United States’ export market because weaker Dollar would be neutralized by this move from China. Furthermore, China can also buy up weak Dollar on the cheap to make Yuan stronger if this would serve China’s agenda. Of course, stronger Yuan for China could make China’s exports look expensive. Still, from what I’ve heard, China is trying to spur demands at home to create a bigger home consumer market so China won’t be relying on too much from the export market. If this is the case, then cheap Dollar would be beneficial for China in a big way!
Stronger Yuan would allow Chinese who are going abroad to get more bang for the buck. Meanwhile, Chinese imports would become cheaper, and so China won’t have to spend so much money to import stuff. As China’s export market isn’t doing so bad and the imports get cheaper, stronger Yuan allows China to continue to reform her consumption market. Foreign companies would love to enter China’s bigger homegrown consumption market because China has 1.4 billion headcounts and growing. As China becomes an ever more important factor for foreign companies due to the size of Chinese population and market, China can begin to dictate tastes, styles, fashions, and so forth worldwide. Chinese culture will become ever more influential if Chinese market becomes the most important market in the world.
With a weaker Dollar and stronger Yuan, entering a trade war against China might be very bad for the United States! China can sanction the United States’ companies, entities, and so much more to crash the United States economy. Of course, a trade war would be bad for China too, because the United States’ imports from China do matter to China a lot. Nonetheless, as China doesn’t rely on the export market so much, a trade war between the United States and China won’t deter Chinese economic reform plan. After all, China wants to grow the homegrown consumption market! While growing a homegrown consumption market to rely less on the export market, China relies on the cheaper import market to balance out the reduction of Chinese exports. Weaker Dollar and stronger Yuan will allow China to transit from the export market to a service market, also to move to a higher value-added export market — all in all – making this transition in a smoother fashion.
In conclusion, I think China can make the best out of either weaker or stronger Dollar, and the United States — as long as the country stays less competitive — won’t be able to have the upper hand if a trade war occurs between China and the United States. Meanwhile, China can use stronger Yuan to buy cheap debts from United States’ weak Dollar to prop up China Yuan’s strength. This, in turn, will actually help China transits from a manufacturing to a service economy. As the low value-added market goes away in China, China has to accelerate the reform of the manufacturing sector at home so Chinese future export market will be more about high value-added products. Anyhow, if the United States isn’t going to be able to use the opportunity of a weaker Dollar to reform her economy somehow to make the United States’ economy more competitive against rivals such as China, in the long run other rivals will use the weaker Dollar as the opportunity to make their own economies a lot stronger.
A rumor has that China has moved around 150,000 troops to the border of North Korea. Meanwhile, a Chinese minister of foreign affair, Wang Yi, has warned both the United Sates and North Korea to not start a war on Korean Peninsula, and he also said all sides will lose if this to occur. Wang Yi is one of those top 7, if I’m not wrong, people who are directly taking orders right underneath Chinese president Xi Jin ping. His words are to be taken seriously, and so it’s going to be foolish to believe that China isn’t going to protect North Korea from an attack. Lately, online and offline news have surmised that China would help the United States to take out North Korea, but I think these news are too optimistic. I believe that China would use North Korea as a proxy war to drag the United States in once the North Korea war gets going.
United States’ arm forces are spreading thin throughout the world. Russia is tempting to expand further West while China is going to expand further in South and East China Seas. A war with North Korea will be expensive for the United States, because it won’t be a quick war unless the United States uses nuclear weapons. Nonetheless, once a nuclear missile from the West flies toward the East, Russia and China would quick to release theirs toward the West, because they won’t trust the United States’ true targets. This means a nuclear war could happen if a nuke starts to fly off in any direction. Invading North Korea through ground forces requires the United States to persuade ally countries to go along, and the war will be very expensive. Furthermore, if not careful, North Korea war this time could be a repeat of Viet Nam war in which the North would eventually swallow the South.
The United States still has Afghanistan, Syria, and several other places to be worried about, and so adding North Korea to the plate in a time in which the United States is still trying to fix her economy is rather worrisome. Although China isn’t favoring the North Korea position in regarding North Korea’s nuclear development, but China hates to see the South swallows the North even more. This means China would aid North Korea once again once the war starts. In the long run, I think China is going to use the United States to push North Korea to abandon nuclear development and nuclear weapons altogether in exchange for China’s protection. If I’m not wrong, I think China’s position is very clear, because China is strategically regarding North Korea as a buffer between the United States and South Korea. If I’m not wrong, a war with North Korea in our time will pull China into a war against the United States like it had happened in the 1950s (Korean War).
South Korea should be very worried, because once missiles start flying, North Korea will pour down South and try to repeat the Korean War. Basically, North Korea is a very poor country, and so it got nothing to lose. South Korea is a very rich country, and so it got everything to protect. This time with modern weapons, things can be so much worse. Chinese minister of foreign affair, Wang Yi, in the video right after the break warns both the United States and North Korea in not starting a war on Korean Peninsula.