The other side of the “tariff war” with China

There’s a great deal of talk in the news about the tariffs President Trump has imposed, and/or threatened to impose, on imports from China.  That’s an ongoing issue that isn’t likely to be resolved overnight.  However, it’s worth bearing in mind that, while the US economy overall is larger and stronger than the Chinese, that’s changing fast.One example is that General Motors has for some years sold more cars in China than it does in the United States.  Most recent figures, for the second quarter of 2018, show that GM sold 758,376 units here, and 858,344 in China.  That’s a difference of 99,968 vehicles, or over 13% more sales in China than in the USA.  Other companies are rapidly approaching the same threshold, or even passing it.

Other major economic indicators are also slowly but steadily swinging in China’s favor.  This morning Flight Global reported:

For a one-word summary of the megatrend shaping the world’s commercial airliner fleet, read simply “China”. Our annual World Airliner Census, built on Flight Fleets Analyzer data, reveals that during the past year the distribution of the global fleet crossed a milestone. A year ago, North America – always the biggest fleet region – led the in-service jet table with 30% of the global total, ahead of Asia-Pacific and China, with 29%. This year those percentages are reversed.

(Bold print is my emphasis.)

Tariffs are intended to restore a level economic playing field between the USA and China . . . but, as the saying goes, “quantity has a quality all its own”.  The US population is about 327 million people.  China has approximately 1.415 billioninhabitants – outnumbering the USA by well over four to one.  As China’s population earns more, and is able to afford a higher standard of living, China’s internal markets will become much larger than the USA’s, and its economy will inexorably power past ours in every respect.  Within 50 years, the USA will be far behind China in terms of overall economic numbers (unless something catastrophic happens to change that).

Tariffs can provide a short-term equalization impetus, but they can’t change that reality.  In the not too distant future, China will be in a position to impose its own punitive tariffs on other nations, and make them stick.  It would be wise not to provoke the dragon too much.  It has a long memory.

Peter

11 comments

  1. So. let me get this straight. Allow China to impose high tariffs on American goods today. While demanding low or no tariffs on goods sold to U.S. Plus allow them to steal our technology, today.

    This is supposed to make them play fair, when their economy becomes larger than ours?

    Good luck with that.

  2. Kinda agree, but China is in a negative population growth situation and has been for a generation due to the one male child mandate. Their youngsters are NOT replacing the elders that are dying. It’s going to be a few years, but there will be a significant dip in Chinese workers, and more and more on their version of welfare.

  3. Do you actually think that China will somehow relax their aggressive trade stance in the future just because we backed off or let them win? Not a chance in hades…

  4. I’m not saying we should back off, or “let them win”. I’m saying we should insist on fairness and equal treatment, but in such a way that we don’t humiliate them or give them cause to resent us in future. That might backfire in ways we can’t yet foresee.

  5. Unless something catastrophic happens – like a financial bubble collapsing, or a number of financial bubbles collapsing, or the government over there being replaced by revolutionary overthrow… Not for nothing do they have massive surveillance and communication/net control over there – somebody is afraid of a lot of other somebodies – and the same reason goes for why Chinese investors are moving their money – and themselves and their children out of China to the US and Canada.

  6. The Chinese economy is a house of cards, built on slave labor.
    The could grow to be a mammoth market, it’s just they’d have to kill all the communists, then pollute themselves to lung cancer levels annually with coal to power it.

    Quantity has a toxicity all its own.

    And as NFO noted, their next generation will be smaller, not larger.
    And with fewer child-bearing women in every subsequent generation, it becomes a demographic death spiral.

    They’re already laying people off because of what Trump’s done so far, and it’s sending shock waves through the Chinese economy.

    The last thing they want is economic upheaval. They’d get another revolution, and that 80M dead thing kind of cuts into economic and demographic stability and growth, for about a generation or three.

    Ask Britain and France how that whole WWI generation thingie went for them, then check and see what WWI, Stalin, and WWII did for third-world Russia.

    The average person in Moscow today would happily ask for the Czar back just to get the do-ever.

    In short, China is a paper tiger.

    If they played fair, and also dethroned communism and central planning forever, they could be the economic powerhouse you mentioned. Russia was what happens when communism is corrupt. China is about to become the cautionary tale in what happens when it’s simply turned loose.

    As it is, they’ve climbed just about as high standing on each others’ heads as they can.

    Trump has merely started knocking the guys at the bottom of that human pyramid on their backsides.

    Hilarity follows.

    Just imagine Oliver Twist, except this time, the gerontocracy there has 1.4B people all asking for “More, please.”

    Trump’s tariffs have drilled a hole in the bottom of their rice bowl.
    {cf.: StarWars missile defense and the defenestration of the Soviet Politburo circa 1990.}

  7. How many of those “deliveries” were cars made in the USA? How many were made in China? How much of the money those cars sold for came home to the US?

    Boeing makes planes for China. In China. And hands China a complete set of parts to build another entire plane, for free, with every plane they actually build. Oddly enough, a wholly Chinese owned company is making planes that look remarkably like Boeing’s is now producing aircraft, at exactly the same rate that Boeing does.

  8. Conservative Treehouse has had the best write ups I have seen on Trumps China policy. China is a Dragon, that shows the world a friendly Panda face. Trump is using that same strategy against China, with effusive praise for the Chinese leadership and people, while applying pressure in all ways possible.

  9. I’m very skeptical about the size of the Chinese economy. The numbers simply don’t add up, and there is all kinds of signs suggesting that the books are being cooked.

    And this ignores disruptions that *are* counted in the totals, like the large numbers of “ghost cities”, the high speed trains that nobody rides on, and the debt bubble.

    Maybe they will continue with 5%+ growth a year for the next 30 years. But I don’t think that’s going to happen.

  10. A more permanent solution is clear, of course. Nuke Red China now! Fight global warming with nuclear winter, while making China green.

  11. Boeing makes planes for China. In China. And hands China a complete set of parts to build another entire plane, for free, with every plane they actually build. Oddly enough, a wholly Chinese owned company is making planes that look remarkably like Boeing’s is now producing aircraft, at exactly the same rate that Boeing does.

    So, imagine what sort of cost burden must exist on Boeing in the US to make that worthwhile.

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