US-China trade headlines will undoubtedly dominate the news flow in the days ahead.
“GREAT PROGRESS” was “MADE!!!” over the weekend in Geneva, according to the 78-year-old 13-year-old Americans entrusted with a mandate to dismantle a system of global trade and commerce that’s existed for three quarters of a century.
Donald Trump’s clamorous all-caps aside, I doubt anything substantive was discussed, let alone “agreed to,” as Trump claimed, in Switzerland. And no, that assessment doesn’t stem from some deep-seated disdain for Trump, nor from any “TDS” which condemns me to wish him the worst.
The problem, rather, is that Trump’s negotiating “with a wall,” as I put it last week. He might (read: surely does) think he can swindle the Chinese with a combination of disingenuous carrots and tactlessly-wielded sticks, but there’s a very real sense in which this is just an old man shouting at clouds.
The CCP’s a monolith. These are stone-faced, disciplined ideologues. I hate to sound fatalistic, but you can’t really sway them, and because they’ve made themselves indispensable, you can’t decouple either. The Chinese aren’t exploiting America, they’re exploiting American consumerism, which Xi knows is an incurable disease.
Americans can’t live without an abundance of “stuff,” and the problem’s not reducible, as Trump suggested, to two “dolls” versus 30 dolls. The Chinese make everything. Clothes, dishes, coasters, paper towel holders, bathroom accessories, computer monitors, iPhones, every-damn-thing. Go to the store, lift up the items and check the oval-shaped foil sticker on the bottom. It’s all made in China. All of it. And if it isn’t, the average American can’t afford it.
I keep hearing some version of this argument: Well, no, we’re not going to put American humans to work making commodified consumer products, but production’s anyway going to be mechanized, so we’ll build highly-advanced, fully-automated factories that’ll churn this stuff out just as inexpensively as China, because the only thing cheaper than Chinese labor is no labor.
For one thing, we’re not going to do that. It takes a long time to build a factory, let alone thousands of them, and a farcically convoluted regulatory process virtually rules out at-scale re-industrialization in America. If your response is, “We can reform regulations and permitting!” my rejoinder is, “Yes, we could, but we won’t.”
Let’s assume, though, for argument’s sake, that — and try not to laugh — America embarks on a grandiose, nationwide, factory-building spree that succeeds in standing up a network of the most advanced, automated “stuff”-making facilites on the planet. How’s that bringing back American jobs? Sure, you’d get a one-off boom due to the labor that goes into building the factories, but once that work’s done, what then? These would be automated facilities. And what strategic goals have you really achieved? America’s self-sufficient in plastic patio furniture and shower curtain liners again. Congratulations.
Again, Beijing knows how ridiculously quixotic this is. In fact, according to some accounts, they’re incredulous that the re-shoring of production capacity for bullsh-t is actually a goal of America’s. Who makes that a priority? Who makes developmental backsliding the cornerstone of their domestic economic agenda? A moron. That’s who.
I hate to spoil the suspense, but China’s going to do exactly what they did to Trump during his first term: String him along. For years if that’s what it takes. They’ll make concessions that aren’t really concessions, vague promises they don’t intend to keep and commitments they know are impossible to verify.
They’ll let Trump boast and brag in all-caps on American social media, and they may eventually send somebody (probably not Xi) to a signing ceremony for some incremental bridge “deal,” knowing how much Trump likes his Sharpie parties. And that’ll be it.
I’m not suggesting absolutely nothing will come of this charade. Hell, by the time you read this, Trump might’ve lowered tariffs on China citing more “GREAT PROGRESS.” But I guarantee you that in the end, nothing material, let alone transformational, will come of it. Unless by “transformational” you mean it dead ends in a shooting war or some other calamity like, say, a pandemic.
I loved the lead picture. Looks to me like a “gotcha” grin. The self-confirmed Chinese cultural strategy is to delay, promise and ignore until the opponent gives up. China has been doing this for thousands of years and Russia doing the same for centuries. Neither of them ever loses.
Both of them are giving the Orange Menace plenty of room to negotiate against himself.
And his increments will signal I have no strategy!
Trump/Bessent need to get to down to 50% ish tariffs on China. Their need will only grow.
However, they can’t do so unilaterally without appearing to get something in return. Basically, they need Xi’s assent to retreat from Trump’s impulsive 125%.
What will be Xi’s ask to let the US out of this self-set trap?
He should be thinking big here.
– Fewer restrictions on technology imports from US and West (AI, semicap, etc)? NVDA would pay Trump handsomely for that.
– Less US support for key domestic industries (rare earths, renewables, etc)? Trump campaigned on repealing the IRA and un-greening America,
– Less US support for Taiwan’s defense? Everything’s for sale, isn’t it?
Or bigger.
Anyway, Xi shouldn’t cooperatively dial China’s retaliatory tariffs back to match the US retreat. That would be letting Trump control. Xi should take control.
This will take time. As H says, Xi has all the time to “make a deal”. Trump has months, probably not a year.
Let’s see – all of this bluster won’t result in any meaningful jobs as Americans won’t work in factories or on farms in any meaningful number. Pushing for more oil domestically is self-defeating as oil execs will readily state that they don’t see much use in drilling more as the lower prices will hurt the industry more than help.
The areas where we might see good jobs would be in infrastructure and green energy (not to mention government, healthcare, and education), but Trump is trying to tank each of those sectors. The stupidity knows no bounds, but at least Trump can fly around in his new Qatari-sponsored flying palace shilling meme coins.
I just listened to a piece about how Apple’s iphone production is so completely embedded in China that it effectively cannot be moved elsewhere – an example of what this article is saying.
I can see the argument for Xi realizing Trump needs a win and trying to extract concessions no one recently thought we’d make, especially on tech transfer.
But my default position is Xi won’t burn calories on this. What faith would Xi have in any deal anyway? If Trump’s made one thing very clear, it’s that a deals a deal, at least until he’s done with it. Rename a pedestrian foot bridge after him and move on.
Maybe caution will prevail in Beijing.
But seriously, looking at what the US is doing to destabilize and degrade its relationships, government, system – it’s like Santa Claus has come for China. A hostile, belligerent Santa, throwing cookies and spilling milk, insulting and threatening, but his bag is full of gifts and they are falling out into Xi’s arms.
Maybe Xi will carpe the diem.
H-Man, methinks Xi will call his bluff and give him a dose of “this is what it will look like on your end”. Sorta like going to your local grocery store when there is CAT 5 100 miles offshore, empty shelves everywhere.
How does the Qatar “gift” of a luxury 747 for Trump’s new Air Force One count in the trade balance? What about all the intelligence data that will flow from the plane back to Qatar? Will those be “goods” or “services”?
A shooting war would be worse. If trump gets something he can call a great victory, so be it.