This trade war is unlikely to resemble World War I, when the opposing powers threw everything they had into the initial weeks of combat. It is more likely to resemble World War II, when the “phony war,” or Sitzkrieg, went on for more than a year before Germany invaded France.
China’s response to the Trump tariffs is limited, and understandably so. Its position is paradoxical: at the same time that it imposed retaliatory tariffs on US goods, it is trying to restore US exports of Qualcomm handset chips to ZTE, which just fired its top management to comply with an expected agreement with the Trump Administration.
If China wanted to hurt the US economy, it has been widely observed, it would encourage Chinese consumers to shun US goods sold in China, from Apple to Starbucks. It has done nothing of the sort. A possible exception is the Chinese court ruling in favor of United Microeletronics Corporation against Micron, which led to the ban of certain Micron chips.
Instead, China will prepare for a more intensive trade war by securing its access to key technologies, especially semiconductors. Handset chips are the most obvious case in point after the ZTE affair.
It will take China a year and a half by the best-informed estimates to establish an alternative supply chain, presuming a virtually unlimited R&D budget and continued cooperation from Taiwan and South Korea, the main providers of semiconductors to China.
Huawei for example powers some of its top of the line handsets with the Kirin chipset. The chips are made by Taiwan Semiconductor. Beijing would have to be confident that Taiwan would support an alternative supply chain in the event of a full-scale trade war with the United States.
What we have not seen, and will not see any time soon, is
1: Chinese government calls for consumers to boycott US brands;
2: Competitive devaluation of the RMB;
3: Politically-motivated sales of US Treasuries; and
4: More aggressive military moves in the South China Sea.
What we will see (and may have to look hard to see) is
1: A crash program to replace key high-tech components with domestic substitutes;
2: Quiet efforts to increase the use of the RMB as a trading currency;
3: Continued deleveraging of financial institutions to buttress China’s banking system against prospective shocks; and
4: Subtle military pressure on Taiwan and South Korea.
China will want to gauge President Trump’s intentions before deciding on future action, while securing its position in the event of a trade war escalation.
Interesting to see how the US economy will perform with increased inflation and interest rate hikes. Should be no problem for the 10% richest Americans, but for the 90% poorest it can be a heavy burden. President Trump must make changes in the US pension funding. The tax payers will have to increase their funding of their pensions. Increased cost for Medicare is too on President Trump agenda. China will probably spend less money buying US Treasury Bonds and spend more money developing new markets in Asia. A lot of promising investment opportunities in Asia.
China’s been watching all movements and cautiously chooses the best ones. Let’s go on checking the likely outcomes.
Vikram Reddy,
I am not concern with the fate of the Americans. I just State a fact to show how stupid are the Americans.
Ivor Large You see how cleverly the CCP is playing the psychological disinformation games through its wumao trolls here? The commie agents worried about US consumers paying more taxes? So funny. Commies are nervous, their stock market is down. I rather have a job and buy more expensive stuff than have no job to buy even the cheap stuff. Keep the money in the country.
Ivor Large
You are racist and pathetic. I hope you are banned from polluting this forum.
‘Quiet efforts to increase the use of the RMB as a trading currency’. That requires China to allow the RMB to float freely, and for China to run a large current account deficit. Where are countries going to get RMB if they don’t?
Is China ready to assume the role played by the US?
Remember, America First slogan!
So then they can vote out Trump in 4yrs, unlike the people of CHina who cant vote out the CCP.
All of China’s neighbors have been wanting CHina stopped from rising again. But of course you’re in London (right, yeah) so you can read other points of view, not just the CCP mouthpeices.
Is there Walmart in China ?
Won’t be long now before nursey comes to change your diaper
Unlike the Chinese who can’t vote.
Are there any Chinese big weapons ?
China is the top dog in trade——they have already won——-I bet a dollar to a donut that Mr Smarty Goldman——-never read the writings of Sun Tzu 544BC–496BC———one man who has is President Xi——a big fan——-a quote "All men can see these tactics where by I conquer, BUT what no one can see is the strategy out of which victory is evolved." Another foolish article by the so called Mr Smarty!!!
Looks like Israel not onboard in this trade war, Mr Goldman is telling us something which I can’t simply comprehend!
I am pissed that I have to pay $35 for 4 pairs of sock instead of $25 at Walmart.
The tariffs that USA imposes on the imports of steel, aluminium, Chinese products, European cars, etc. are tantamount to imposing another tax on products purchased by US consumers. They are like a new kind of sales tax on consumer products. While China and other countries may mitigate the impact of the tariff by the depreciation of their currencies against the US dollar, the American consumers have no way to avoid this 25% “tax” on the products that they buy and consume.
USA is broke and this is a sneaky way to raise taxes on dumb Americans. LOL!
If China responds, Trump will be ousted.
nice