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Posts Tagged ‘trade war’

An Expert Military Analysis of War with China, by Fred Reed – The Unz Review

Posted by M. C. on December 15, 2020

The said war is discussed either in emotional terms by idiots or in purely naval terms by those familiar with such things, so we hear of the First Island Chain and the Second Island Chain and whose missiles against the other’s missiles and so on. This would be appropriate if we were fighting World War Two again. Which we aren’t. Let’s take a quick-and-dirty look at how such a war might go.

https://www.unz.com/freed/an-expert-military-analysis-of-war-with-china/

Fred Reed

The Correlation of Armed Forces: U.S. goods and services trade with China totaled an estimated $634.8 billion in 2019. Exports were $163.0 billion; imports were $471.8 billion. The U.S. goods and services trade deficit with China was $308.8 billion in 2019. Trade in services with China (exports and imports) totaled an estimated $76.7 billion in 2019. Services exports were $56.5 billion; services imports were $20.1 billion. The U.S. services trade surplus with China was $36.4 billion in 2019.

There is talk within the Washingtoniat of a possible war with China. Steve Bannon, who apparently was dropped on his head as a child, actually favors such a war. We hear the usual shoo-the-boobs alarm about how the Chinese are doing something terrible and we must gird our loins and American values and show them what for, bow wow, woof. The danger is that the current game of who-blinks-first in Asian waters might actually provoke a shooting war. You know the kind of thing: One warship refuses to get out of the way of another, a collision ensues, some retard lieutenant who signed up on waivers opens fire, and we’re off and running. It is not a good idea to let children play with matches.

The said war is discussed either in emotional terms by idiots or in purely naval terms by those familiar with such things, so we hear of the First Island Chain and the Second Island Chain and whose missiles against the other’s missiles and so on. This would be appropriate if we were fighting World War Two again. Which we aren’t. Let’s take a quick-and-dirty look at how such a war might go.

To begin the war, America would overestimate itself and underestimate China. This is doctrine in the Pentagon. There is probably a manual on it. Inside the DC Bubble, fern-bar Napoleons would assure us that it would be a short war, a cakewalk, a matter of days, not weeks. You know, like Vietnam, Laos, Cambodia, Afghanistan, Iraq, Syria. When it turned out that the Chinese had other ideas, among which surrendering was not, and the months dragged on, various fascinating things would happen.

Rand, a thinktank wholly owned by the Pentagon, at least mentally, has wargamed both the Taiwan Strait and the South China Sea, concluding that the war could be both very long and a loss for America. We no longer live in 1960.

OK, the war: On day one, all the multitudinous American factories in China shut down. Example: Apple loses its factories, products from those factories, and the Chinese market of 1.4 billion consumers. Its stores close. Tim Cook’s gratitude will know no bounds. American auto manufacturers sell googolplexes of cars in China (or at least lots), mostly made in China. Overnight they will lose factories, cars, and Chinese customers. Overall, China buys many more cars than does the US. This analysis, if anything so obvious may be called analysis, can be repeated for industry after industry after industry. Goodbye, business vote.

Within weeks, Walmart’s shelves go bare. Walk down the aisles and read the “Made in” labels. We are not talking only plastic buckets and mops but chain saws, pharmaceuticals, motorcycles, and blood-pressure cuffs. So much for the blue-collar vote. The US buys 472 billion in goods annually from China, high-tech, low-tech, consumer goods, manufacturing components. No more.

China buys over $163 billion annually in American goods: petroleum, semiconductors, airline engines, soybeans, airliners, on and on. No more. It is hard to underestimate the joy this will cause in influential boardrooms. And of course the American workers who would have produced these things for China will be laid off. As electoral politics, this will prove suboptimal.

China produces a great majority of the rare earth elements crucial to the manufacture of electronics, such as semiconductors. No quick substitute is in sight. Just about everything in America uses these, to include the computers that run the electrical systems of cars. Though I haven’t checked, it is quite possible that the computers themselves are made in China. If you want a new and deeper understanding of the word “hostile,” check the influential CEOs of businesses on their second chipless day.

In a real war, it is likely that China, having thought of the foregoing, would (intelligently) destroy Taiwan’s semiconductor fabs, notably those of TSMC, as well as other factories of electronics. This would hardly be difficult since the Taiwan Strait is only a hundred or so miles wide. Losing these industries would be exceedingly painful for the US since its high-end chips come from Taiwan. It would take America years to replace this capacity domestically. Some of the necessary equipment, extreme ultraviolet lithography machines, is not made in America and in any event cannot be stamped out like beer cans.

In America it would quickly be discovered that the country is rather more dependent on China than some might think. If I may make up an example: The automotive industry finds that its sparkplugs come from China. While America could certainly make spark plugs, it turns out that a decade back the industry found that China could make them for forty percent less. In the cooperative commercial world pre-Trump, this was no problem. Not now. So much for sales of cars. And for the jobs of the workers who make them.

I will bet you all my diamond mines in South Africa and cattle lands in Argentina, that if you went through a parts list for, say, Boeing’s airliners, you would find lots of them made in China. Sure, the US could manufacture most of them, eventually. But companies need parts now, not eventually.

The effects on other countries of a large war against China would be catastrophic if not worse. Other countries also get many things, from China or Taiwan, such as semiconductors. Google on “country x largest trading partner.” A strong pattern quickly becomes clear: China is huge in trading with practically everybody. “Everybody” includes Germany, Japan, Australia, Russia, and South America as a whole. The world economy in its entirety would collapse.

How smart would this be? The United States is already in serious trouble, what with a currency rapidly being debased, a sinking middle class, businesses dying of Covid, jobs disappearing abroad, people living paycheck to paycheck, and social unhappiness resulting in continent-wide riots. Do you suppose the public will gladly support an unfathomably stupid war causing an instant, profound, and murderous economic depression? If so, you probably already have a collection of bridges.

This can be inflicted on the entire earth by a half-dozen loons in or circling around the White House unhindered by a worthless Congress. Six loons. Yes, I know, Trump is unlikely deliberately to start a Third world War, even as a publicity stunt. No, the generals in the Pentagon are not nearly stupid enough. (They might even refuse, pointing out that starting a war requires a declaration by Congress.) The problem is that for years America has been, if not actually looking for a fight, at least daring other countries to start one. For example, murdering Iranian officials, pulling out of arms-control treaties, pushing NATO ever closer to Russia, sanctioning countries far beyond anything that can be called a trade war, and playing chicken with China in the South China Sea. Under these circumstances you can get a fight without quite looking for one.

Write Fred at jet.possum@gmail.com. Put the letters pdq anywhere in the subject line to avoid heartless autodeletion.

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The Benefits of Free Trade Are Canceled Out by Domestic Interventionism

Posted by M. C. on December 6, 2019

What no one recognizes is that the common reason for the breakdown of world economic relations is the combination of interventionist domestic policies and government-led, top-down, faulty trade integration, which serves only interest groups and is subject to perverse incentives.

https://mises.org/wire/benefits-free-trade-are-canceled-out-domestic-interventionism?utm_source=Mises+Institute+Subscriptions&utm_campaign=c869db6738-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-c869db6738-228343965

Foreign policy commentators live in their own bubble. The WTO’s credibility is gone and its survival uncertain due to its lack of impact on world trade over the last two decades. A China vs. USA trade war is still growing and the economic community of European states is in its worst-ever shape. Yet no one stops to wonder if all these failures have anything to do with the kind of economic integration they propose. In fact, the media is now childishly excited about the ASEAN-led Regional Comprehensive Economic Partnership (RCEP), a Trans-Pacific Partnership surrogate many years in the making.

What no one recognizes is that the common reason for the breakdown of world economic relations is the combination of interventionist domestic policies and government-led, top-down, faulty trade integration, which serves only interest groups and is subject to perverse incentives. The positive effects of inter-governmental multilateral trade agreements are minor at best. Their negative effects, however, such as stifling global trade, diversion of trade flows, or increasing red tape, have been growing at an alarming rate.

Trade agreements have thus become obsolete tokens of negotiation in larger geopolitical disputes, protectionist tools for managing and interfering with global trade flows. RCEP’s tentative provisions serve as a great illustration of the adulteration and vitiation of trade deals. For example, RCEP would allow and encourage poorer members to “proceed cautiously and gradually in lowering tariffs on manufactured goods… [over] adjustment periods of up to 25 years” (The Economist, 2019). However, it is precisely the poorer members of such agreements who benefit from reducing their tariffs to zero. According to Mises (1990), “their own policies are the main obstacle to any improvement and economic progress. There cannot be any question of imitating the technological procedures of the capitalistic countries if there is no capital available. Whence should this capital come if domestic capital formation as well as the inflow of foreign capital are sabotaged?”

RCEP would also allow India to “impose some sort of ‘safeguard’ tariffs if imports surged too sharply” (The Economist, 2019). In other words, India could easily withdraw their already weak commitment to this economic partnership without incurring any direct consequences — allowing them to have their managed trade cake and eat it too. However, despite this mollification, India remained reluctant to commit and Narendra Modi refused to sign the current draft agreement, citing the trade deficit with China, the danger to Indian farmers, Ghandi, and his own conscience.

Lastly, the text of the RCEP is littered with “non-committal phrases… [such as] “members shall endeavour to” rather than “members shall’” (The Economist, 2019). As The Economist argues, “in these sort of agreements do and do not are not the only options. There is plenty of “try” (The Economist, 2019). But no rose-colored glasses can make free trade anything but a black and white issue. To reference Yoda again, this is why you fail. Either trade is entirely free, and thus works to bring about prosperity and economic growth, or it is government-managed, thus not free, and bound only to bring about more intervention and economic distortions. In matters of economic freedom, there is no try.

Preparations for the Regional Comprehensive Economic Partnership are now 8 years old and 30 negotiation rounds have already taken place. A fantastic leap of faith is necessary to imagine that, once signed, this agreement will have any beneficial impact, or will indeed be managed efficiently. A leap of faith that should be impossible for any minimally informed and honest commentator. Sadly, much like true free trade agreements, there are few such left.

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Washington Monthly | Free Trade Is Dead

 

 

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Trump’s Trade War is Already Over — Strategic Culture

Posted by M. C. on May 14, 2019

After that the real energy war starts as Russia completes Power of Siberia and begins pumping natural gas to China. And China directs its state oil companies to buy more oil from Iran while lowering its purchases from Saudi Arabia unless the Saudis accept Yuan for it.

That’s where the real leverage in this whole fiasco lies.

https://www.strategic-culture.org/news/2019/05/12/trumps-trade-war-is-already-over/

Tom Luongo

May 12, 2019

I hate to break the news to China bashers, but the trade war with the US is over. I’ve maintained for months that Trump has no leverage in trade talks with China. If he did China would have done a deal by now.

They haven’t and they likely won’t unless you are talking some form of deal which allows Trump to save face here. But to be honest I’m beginning to doubt whether anyone in the White House cares. This is about the Great Powers Game and the simpleton idea that for one country to win in trade another has to lose.

This is, of course, nonsense.

Trade is not a zero-sum game. Ideally, all voluntary trade is a win-win scenario for both the buyer and the seller. If it wasn’t the trade would not be made. Lost in the numbers is the comparative perceived value of the exchange.

China is still running a massive trade surplus and that is true. But from the perspective of US trade, that is as much a function of Trump’s own profligate spending habits as any structural inequalities.

Trump is running a $1 trillion budget deficit. This is money that is conjured up out of thin air by the miracle of selling bonds. $1 trillion in bonds. Where do you think those $1 trillion in government expenditures goes to?

The moon? Laos?

No. It goes to China. It also finds its way into the US equity market Trump is so in love with and other places that produce goods that we Americans buy with that money. If Trump wants to win the trade war with China he should consider spending a little less money allow consumer prices here in the States to fall and let his tax cuts continue to attract capital for the right reasons – the value the American work force is capable of generating…

 

Over at my blog recently I noted:

China’s not going to implode over these tariffs. It will give Xi and his central bank the opportunity to devalue the yuan in response to the slower flow of dollars. It has to protect the lion’s share of its trade with Southeast Asia and Europe whose currencies are already in trouble.

And it will bail out the most strategically-sensitive banks and businesses over-exposed to them. It’s what they did last year in response to the 10% tariff and it is what will happen this time.

Lastly, however, is the part no one actually wants to discuss which is that China has to protect its trade with Southeast Asia and Europe. The Yuan didn’t devalue in a vacuum. The euro is down 13% from its high as are currencies like the Indonesian Rupiah, the Malaysian Ringgit and Thai Baht.

What Trump and his team are arguing for in trade negotiation is no different than what they’ve offered Iran and Lebanon, surrender your sovereignty or face punishment.

So, China reciprocates and cuts off US soybeans and other food exports. Now, a year later, Midwest banks are facing surging bankruptcies from farmers hit with the double whammy of no exports to China (who now buys them from Brazil) and massive flooding from an abnormally vicious winter and spring.

They have Trump to thank for this. He didn’t help them by not thinking through how we could be hurt by China’s reaction to his belligerence…

Let’s shift gears now and talk about what’s really going on.

Trump’s team would be fine with a trade deficit if China was still recycling that trade surplus into US Treasury bonds. They aren’t. The Chinese have held their stock of US debt between $1.1 and $1.25 trillion for two years now.

They are sending a lot of those dollars back out into the world to fund their massive Belt and Road Initiative (BRI). They are also using them to power swap arrangements with countries feeling the bite of Trump’s sanctions. Countries like Turkey, Pakistan and Iran, for examples.

To the paranoid schizophrenics who run his White House can only see China rising as a threat not a complement to the US.

Again, these are people with a zero-sum view on trade.

They, like Trump, only see things in terms of power. And if China is running a surplus they are gaining it and we are losing it.

The push to sanction the world and stop the unapproved use of the dollar is beginning to have catastrophic effects on the world economy. People like John Bolton and Secretary of State Mike Pompeo don’t care about those things. In fact, the more our ‘enemies,’ as they see them, suffer, the better it is for us. Such is their reductionist view of the world.

In no way do I believe China is somehow blameless or anything. They have taken egregious advantage of the US’s terrible policies for decades. But they are also shifting away from their mercantilist policies as Xi shifts the economy away from exports and towards a domestic consumption model…

After that the real energy war starts as Russia completes Power of Siberia and begins pumping natural gas to China. And China directs its state oil companies to buy more oil from Iran while lowering its purchases from Saudi Arabia unless the Saudis accept Yuan for it.

That’s where the real leverage in this whole fiasco lies…

 

 

 

 

 

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A US Trade War With China? – LewRockwell

Posted by M. C. on September 22, 2017

The takeaway is leave trade to the free market and not government.

https://www.lewrockwell.com/2017/09/no_author/a-us-trade-war-with-china/

If the Trump administration puts sanctions on China, this would hurt America more because it just forces China and Russia and other countries to cooperate, says investor and financial commentator Jim Rogers.

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