China trade

Trump Piles On, Threatens To ‘Crumble’ China’s Supply Chain, Create Massive Job Losses

"16 months PLUS is a long time to be hemorrhaging jobs".

The mood was already pretty dour on Tuesday as the combination of more political turmoil in the UK and darkening prospects for meaningful US-China negotiations weighed on sentiment.

Trump made things worse, as he’s wont to do. “We are doing very well in our negotiations with China. While I am sure they would love to be dealing with a new administration so they could continue their practice of ‘ripoff USA’, 16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot”, the US president tweeted, effectively suggesting that the chances of his losing in 2020 are miniscule.

He continued, ratcheting up the tension for no readily discernible reason. “And then, think what happens to China when I win”, he said. “Deal would get MUCH TOUGHER!” Earlier, reports indicated that the two sides are far apart on agreeing to terms for planned talks in Washington this month and Huawei issued a statement alleging vast abuses perpetrated by the US government against the company and its employees.

Read more: ‘The World Is Sighing’: US-China Stalemate Shows No Signs Of Breaking

Trump continued, warning that while Beijing tries to wait him out, “China’s Supply Chain will crumble and businesses, jobs and money will be gone!”

That may sound like typical Trumpian bombast – and it is – but do note that this comes on the heels of a week during which Trump went out of his way to praise Xi and Liu He in an effort to keep markets from falling further, praise that was itself necessary to clean up for the mess the US president made the previous week. And you can trace the schizophrenia back as far as you like.

One imagines this makes Bob Lighthizer’s job nearly impossible. It’s hard to see how the US trade rep is supposed to work towards convincing the Chinese delegation to fly all the way to Washington this month while Trump is tweeting about “crumbling” supply chains and massive job losses.

Remember, the employment issue is a particularly delicate one. The prospect of social upheaval is a non-starter for Beijing and the Party is especially sensitive to the subject thanks to the situation in Hong Kong, where Carrie Lam is apparently being forced to stay in her position. (On Tuesday, she denied reports that she would prefer to resign and Global Times Editor Hu Xijin is working hard on Twitter to dispel what he’s characterizing as “fake news” from Reuters.)

Tuesday’s tweets are a good example of why one bank’s clients recently complained about “the difficulty, or even inability, of holding onto positions for extended periods of time given the sheer volume of – sometimes conflicting – messages by US President Trump on issues like US-China trade policy and the Fed”. That’s a quote from a Barclays note which carries the title: “A little (blue) bird told me…”


 

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10 comments on “Trump Piles On, Threatens To ‘Crumble’ China’s Supply Chain, Create Massive Job Losses

  1. It must be increasingly clear in Beijing that Trump is not someone with whom a lasting and acceptable deal can be made. Whatever agreement he makes now, when he is weak, will be torn up if he is re-elected and feels strong. From China’s point of view, they are likely conducting negotiations merely as a delaying tactic.

    At some point, China will have to decide if it prefers Trump to lose reelection so it can get a trade deal with a different administration, or if it prefers Trump to get a second (and third, fourth, etc) term so he can continue damaging the West’s alliances and institutions along with the US itself.

    If the former, then China may want to itself escalate the trade war or, more likely, goad Trump into doing so. If the latter, then China may want to allow major progress toward a deal to be shown, or even reach some sort of deal “in principle”.

    • So a Trump reelection is a long term positive for China’s objective of becoming the worlds superpower. Continue to let Trump fuck the USA right into the dirt and reap the benefits down the road. Never thought about it, rings true to their patient character.

  2. Trade wars maybe not so easy to win. This is going to end badly…for everyone. Just hope Trump supporters get hurt the most.

  3. China is not Russia. I don’t think they want to destroy the US, just beat the US. They are where they are because of the US. I think they benefit more from us being functional rather than dysfunctional. They can’t give Trump what he is asking for and apparently he’s really digging in. Its a stalemate. What, if anything, would make Trump give in? I used to think he would accept the appearance of a deal but now I don’t think he will. Man is just as hard headed as he is stupid.

  4. For the past 50 years, China has benefited from a stable, globalized world led by the US. It faces little military threat except occasionally border clashes with India, few obstacles to importing raws and exporting goods under developing nation/WTO rules, enjoys a free flow of Chinese students to and from leading universities, has access to lots of foreign capital when and where the Chinese govt wants to allow it, etc. In return, China allows the developed world’s consumers to enjoy a higher standard of living via inexpensive goods and low goods inflation.

    Perhaps China thinks that it has grown to a size and stature where the rest of the world isn’t going to let that benign model continue. Especially with growing populist discontent in most Western countries.

    China’s leaders must also know that the demographics will make it harder for the country to continue to grow using the past model. The Chinese population is rapidly aging (avg age well above the US) while its income/capita remains quite modest (well below US). As the ratio of workers to retirees shrinks, simply cranking out more mass-market low-value goods won’t work.

    Thus perhaps China thinks it has gotten most of what is possible from the model that it has followed for 50 years. Even without a growing labor shortage, its exports of lower-value goods can’t get that much bigger, there is less scope for productive capital projects, domestic science and engineering has become advanced.

    China is shifting to a more aggressive strategy, aiming for outright leadership in high-value industries, more robust military power projection, building regions of influence over resources and markets. Belt and Road is one example, increasing claims to/control over the South China Sea is another. If China is going to be externally aggressive, it would benefit from a weaker, fragmented, disjointed West and US.

    Does this mean Xi is going to maneuver to help Trump get re-elected? I don’t know, I’m certainly not hearing this theory be advanced or investigated. Most of the Sino-analysts seem to think China is hunkering down to outlast Trump (16 months is nothing), and that would point to being bearish on stocks/bullish bonds.

    But if the Sino-analysts are wrong, at some point there will be a big stock rally/bond rout.

    (This is sort of related to the double-cave scenario)

  5. Jyl, it may not be up to China. If Trump does not give into making a deal that China can accept, it begins to become more clear Trump is aligned with those that seek a new Cold War w China. If the offer is castration or Cold war, the Chinese will take the later.

    • I agree, China will not accept a harmful (to it) deal.

      However, Trump is going to be so anxious to announce a deal that sometime in 2020, he’ll jump at a chance to trumpet “the best ever deal with my close friend Xi” even if it’s just a conceptual deal with all the devilish details (enforcement etc) left to be worked out later or never.

      China has no problem pretending that a deal is close then pulling the plug before the last detail is agreed (they did that last year). Trump has no problem tearing up a deal even after the last detail is signed off (like Mexico learned).

      So the parties could easily engineer an incumbent-friendly stock rally without actually reaching a deal.

  6. Oh definitely China will not knuckle under to Trump. The US doesn’t have enough power to force China to accept an emasculating deal, and Trump himself has limited and diminishing leverage.

    So sounds like you don’t think China will try to help Trump get re-elected?

  7. The most interesting question in global politics right now is what stance on the China question Trump thinks will get him re-elected. My sense is that he thinks that any actual deal before the election can be cast by the Democrats as ‘selling out’ so he will need to play the ‘we’re making progress but aren’t there yet’. If that’s the case, there can be no deal. It won’t be hard for the Chinese to figure this out and plan accordingly.

  8. As China is apparently winning the education war hands down, the US is going to slip quickly down the slippery slope. Once we accept this fact we can adjust to the new reality and concentrate on a more limited scope of work which will be more affordable instead of trying to be all things to all people. We will then be forced to also adjust to a higher level of achievement in education to continue to compete. But we will be playing catch-up and we may never be the number 1 again. May have to be happy being a strong number 2 (or 3). I have no faith in Washington at all. Trump and McConnel are the last straw. I think the ship is taking on water and settling slowly lower and lower in the water. I think Xi is well aware of this and the Chinese are a very patient people. It will be interesting to watch it all unfold.

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