The short answer is no, unless industry and the financial markets commit to a pact of economic suicide with Trump.
In “The Art of War,” Sun Tzu states that "Every battle is won or lost before it's ever fought". Détente was used during the cold war for easing strained relations, especially, in using the threat of a pre-empty attack. Today, a battle space has many dimensions which now include cyberspace. The defensive plan may not survive first contact with an adversary, but the general staff will quickly formulates a new plan and adapt making the evolving plan a part of the plan as the pieces move before the actual battle begins. In this scenario, it would be foolish to predict the outcome of a battle where the enemy is fully committed to fight back in any way they can and with whatever resources they muster together. China today is not an underdog to be bullied.
A report last week states that China’s government is contemplating reducing its purchases of U.S. treasury bonds and briefly rattled financial markets. Against the tensions between the two countries, it was widely understood as a warning that aggressive American action on trade might jeopardize the willingness of China to subsidize the drunken spending of the U.S. government.
China is now, and has been for a decade, the largest foreign buyer of U.S. treasury debt, with Japan being a close second. The Chinese central bank has halted new purchases and sold old holdings, each time the Trump administration rattles noise about China, which triggers concerns in U.S. economic circles that a new and dangerous era for U.S.-China relations is about to begin.
Expectations of an eventual conflict, hot or cold, are widespread, from defense policy analyst to Harvard professor Graham Allison who explains that a “Thucydides trap” "What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta." Edward Wong in a recent essay wrote: China’s “Communist Party embraces hard power and coercion, and this could well be what replaces the fading liberal hegemony of the United States on the global stage. It will not lead to a grand vision of world order. Instead, before us looms a void.”
Moreover, as the Trump administration threatens to withdraw aid from countries ranging from the NATO alliance to Pakistan, China has begun a $1 trillion effort to underwrite the void. As Washington turns away from trade deals such as the Trans-Pacific Partnership (TPP), Beijing has been quietly filling the space with regional partners, such as Vietnam, that might prefer the United States as their primary economic partner but are left with China as a result of the American retreat.
China’s foreign currency reserves now stand at more than $3 trillion. In contrast, the U.S. has foreign exchange reserves that hover at around $120 billion. Trump’s tariffs would automatically trigger penalties against the U.S. in the World Trade Organization (WTO), and might even lead to serious disruption of WTO’s years of negotiating or total collapse, which would inevitably lead to higher world tariffs against U.S. exports. Even if it doesn’t take place immediately the sense of turmoil to come would be enough to trigger dire uncertainty for American business and employment. China, on the other hand with a centralized party government system has a better probability of surviving the hard blow of global trade disruptions.
Commerce Secretary Wilbur Ross made clear that the White House intends to scale up its fight over intellectual property theft. If the U.S. continues to escalate its trade actions against China, experts say retaliation is likely to occur most probably where the U.S. is weakest-- its foreign debt and agriculture.
High tariff carry the potential of painful risks to U.S. agriculture mainly in states where it is the biggest industry of the Midwest, like Illinois, Iowa, Minnesota, North Dakota, Indiana and Missouri which are in the heartland of Trump supporters.
No comments:
Post a Comment