US President Donald Trump boasted that he is winning the trade war, telling delegates at the recent United Nations General Assembly (UNGA) in New York that the US economy is booming whereas China’s is faltering. In light of the delegates’ snickering and laughing, however, few if any attendees took him seriously, perhaps for good reason.
Official economic data and reality suggest the US economy may not be doing as well as Trump claimed. The number of homeless people rose in 2017. Soybean and other farmers are concerned about losing the lucrative Chinese market for good, while US businesses are worrying that they may be in the crossfire of the trade war. Consumers, who are already struggling to stay above water, worry that the tariffs imposed by the Trump administration might pull them under. These are just a few examples of the latest concerns.
US business concerns
A September survey by the American Chamber of Commerce in China found that more than 60% of US businesses in China will be hurt by Trump’s tariffs and only 6% will be returning home because of them. The last figure is interesting, and telling.
First, the main reason for US firms not returning to the US might be for business interests. The Chinese market of 1.4 billion people, most of whom have sufficient savings and low debts, is too lucrative to give up. Besides, US manufacturing is far less productive than China’s because the latter has built a very comprehensive and efficient infrastructure system, from transportation to supply chains. Thus returning to US soil would make US businesses less competitive.
Second, people have the right to choose and maximize their own self-interest. In a market economy like the US, profit expectation is a key determinant of investment decisions, going where the money is. Trump might in fact be the reason most would not return to the US, because his trade policies increase production costs, such as his steel and aluminum tariffs and the recent United States-Mexico-Canada Agreement (USMCA).
Ford Motor Company has already complained that the steel and aluminum tariffs could reduce its profits by US$1 billion. The automobile-manufacturing provisions in the USMCA requiring 75% local content and increasing Mexican wages to $16 per hour will increase production costs further.
Consumers also want the biggest bang for their buck, suggesting they will buy from whoever gives them the lowest price. Indeed, most US consumers have become addicted to lower-price Chinese goods. Given their increasingly indebtedness, that addiction would rise.
Therefore, it should not be a surprise that domestic and foreign investment in the US is falling and will likely continue to decrease in the coming years if the trade war drags on. According to official government statistics, US inbound investment went into negative territory of -$8.2 billion in the first quarter. Chinese investment in America plunged by 92% because of “national security” concerns.
Farmers’ concerns
Most US food producers – from lobster fishermen to soybean growers and others in between – will tell us that they have worked for years to develop the China market. For example, it took many years to wrestle back Chinese soybean buyers from Brazil. Trump’s tariffs undid those efforts in just a few days because China is turning to Brazil and other soybean-growing countries. Once a business relationship is established with non-US farmers, America could lose the lucrative and huge Chinese market forever.
On other food products, Trump’s tariffs are said to be responsible for billions of kilograms of beef in cold storage looking for buyers. The poultry and pork industries are also concerned with Trump’s “winner-take-all” trade stance because China is by far the biggest market for those two products. Pork and chicken in fact are China’s “national meats” – people there eat every part, from feet to intestines to meat, of the animals. Thanks to Trump, US hog and chicken farmers may kiss 1.4 billion consumers goodbye.
Poverty and homelessness on the rise
According to the US Tax Policy Center and others including the United Nations, the US Federal Reserve, and the US Department of Housing and Social Development, the numbers of poor and homeless people are on the rise or becoming more destitute under Trump.
The Housing Department estimated that nearly 540,000 people slept on the streets in 2017, a year-on-year rise of almost 1%. A recent UN report found that the poor had become more destitute since Trump had been in charge, an assessment concurred by some US politicians such as Senator Bernie Sanders because of increasing wealth inequality. The Fed revealed that more than 40% of American workers are still struggling, living from paycheck to paycheck.
Comparing US and Chinese economic growth
Most reputable economic forecasting organizations – the Organization for Economic Cooperation and Development, the International Monetary Fund, the World Bank and others – expect the second-quarter growth of 4.2% in US gross domestic product will not be repeated in the third and subsequent quarters.
According to the Tax Policy Center, the $1.5 trillion worth of tax cuts pushed through by the Trump administration and Republican-controlled Congress primarily benefited the top 1%. Those findings would suggest future consumption will be low or flat. Besides, the government spending that helped to boost the second quarter’s “robust” growth increased the US budget deficit.
America’s massive fiscal debt could preclude the government from instituting future stimulus packages. The IMF predicts that US economic growth will likely drop by between 1 and 2 percentage points in the coming quarters and years, estimated at 2.9% and 2.5% respectively in 2018 and 2019.
While China’s economy will also be hit by the trade war, the IMF and other organizations project that it will grow 6.8% and 6.5% this year and next. Indeed, HSBC and the IMF predict that China will replace the US as the world’s biggest economy by 2030 if not sooner. Meanwhile China’s public and consumer debts are far lower than those of the US.
And for those who suggest that declining stock prices are a sign that China is losing the trade war, don’t be too sure. China’s stock markets are in essence gambling houses for small investors to make a quick buck. They are not indicative of economic performance like stock markets in the West.
Some economic commentators have remarked that mounting a trade war against China is wrong, hurting America just as much as if not more than China. Perhaps Trump also sees that, because he appears desperate, creating problems and blaming China for them. He even told the world at the recent USGA meeting that China is “meddling in the US midterm and presidential elections” because the “communist” country dared to retaliate against him.
The latest news is the South China Sea “freedom of navigation operation” in which a Chinese destroyer chased an American one out of China’s 12-mile exclusive economic zone. CNN and other news outlets reported that the Chinese navy “behaved irresponsibly and aggressively,” hoping to gain support for escalating the trade and possibly military war against China. It seems that “yellow journalism,” sensationalizing an incident to sell papers or increase viewers, is alive and well in the US.
Trump should be aware of the consequences of fighting a war based on “fake news.” He should consult George W Bush, who will likely be tarnished in history by the Iraq war. Lyndon Johnson’s Vietnam War not only cost more than 50,000 American lives, it also cost him a second term. China will be a far more formidable foe.
John Saunders how many people did the gentle American people killed since the last world war invading so many countries like Irak,Lybie,helping the Saudies in Jemen,Vietnam and so many other in South America.better shut-up about your gentle political system!!!!!!!
John Saunders how many people did the gentle American people killed since the last world war invading so many countries like Irak,Lybie,helping the Saudies in Jemen,Vietnam and so many other in South America.better shut-up about your gentle political system!!!!!!!
John Saunders
John Saunders
Saadi Sabyasachi very good question and one that is asked many times in the democratic west. We do not get good answers but at least we are free to ask the questions which they are not in the PRC.
I love when Ken Moak writes, becuase he really bring the stats out and show us how this world is performing. I like his writings.
On the other hand, I paused and ask myself how our USA’s government is taking the entire country down to the abyss, without people noticing about it? But then I read on the social media blogs the constant discrepancy among people about their own beliefs what it is happening. That goes beyond reasoning. Many times those people heard the info from Fox news or NBC and come out energized and ready to repeat like parrots affirming they are the only ones speaking the truth. That is on the people’s level but if you see at the national level, is worse. In the meanwhile the infrastructure is falling, our freeways are congested, married couples have to work two or three jobs and for some of them it is still not enough income to feed their kids, some public schools can not provide the means for a good education because they are over crowded or underfunded. Yet our leader screams outloud that our economy is doing great and better than with past presidents. He also insinuates that we are peaceful people who has been taken advantage for long time. Therefore, screw the world and we will stand firm against it. Well, the problem is that he is not telling us we have about 800+ bases around the world and we are constantly killing thousands and thousands of innocent people around the world. If you dare to ask, they would say, this is for the sake of "democracy". Many journalists in our media world would never speak about it. They would rather go to their press conferences and ask questions and write about it. For many of them their job is done.
He is not telling us that the reason many times we go into a country and destroy their natural habitat is for the simple reason to exploit their natural resources. If, god forbidden they refuse or resist our intentions there we go on our white horse flashing out our democracy flag and talking about human rights.
Yes democracy where the majority rules. By the way, do we have a democracy here? or is it an allusion of a democracy?
People do not choose the president, the electoral college members do. So, then, why we do speak like we have one?
John, funny you brought democracy here.
Do you know Saudi Arabia is not a democracy ?
Then why is US giving full support and selling so many weapons to the Saudi Kings?
The US is a corruptocracy where presidential candidates backed by corrupt money are put on a pedestal to brainwash the people to vote fore them.
Trump inherited more that 431 USD million from his father and engaged in countless tax evasion schemes.
Candidates like Hillary are backed by corporate money with a hidden agenda.
Ken Nguyen there will be a movement of business out of China and into VN but already millions of Vietnamese prefer to live in the democratic west than move to the "glorious PRC" and take advantage of all the wonderful opportunites on offer to other minority groups like the Tibetans and the Uyghurs.
Sunny Tn you mean Wal Mart and Nike have brought 800 million people out of poverty. It was a gift from the US in the hope that the CCP would grope it’s way towards democracy. It appears not to have worked. The CCP will have to learn the hard way like the Japanese and the Germans. I am sure the American people will find the genorosity in their hearts to develop a new Marshal Plan for the poor long suffering Chinese people but there will be no future for the CCP just as there was no future for the Germa
n Nazi party.
John Saunders
If US stay within its boundaries and do not sponsor terrorism all over the globe, there will be less deaths and peace in a prosperous multilateral world
This is a start of the plan to bring china to its knees although usa has much to loose…if trade war remains for nxt 20 years…China is going to suffer more than usa…and thats d plan of pentagon…usa is 3 times wealthier than china…this is the right time to take risk
Who wrote this, Xi Jin Ping?
John Saunders believe what you want including UFOs but China has brought 800 million out of poverty
Ken Nguyen I have met too people from from counteries where government claims to be a "socialist meritocracy" but in fact are just a brutal autocracies. Experience has taught me not to believe what you say. I am ashamed to say once I did believe the lies you speak. Now I have respect for the dead and broken people who have suffered under the autocrats.
You do not know what you are talking about!
China is a socialist meritocracy and not an autocracy. ALL appointments to important government positions are by peer group VOTING that considers the DECADES long performance and character of the candidate.
In USA it is all about big money and control of the media to get elected as President, congressman, etc. Given enough money and loud mouth, even a monkey can get elected!
Trump is addicted to conflict so he can manufacture ‘victories’ which boost his self-esteem. He also yearns to be respected by the American establishment which regards him as an uncouth lout. In combination, these influences are likely to see him accept an inconsequential change to trading rules with China as an end to the stand-off and bray that it’s an even greater historical triumph than the inconsequential changes to NAFTA he’s just finished bragging about. And Xi is astute enough not to contradict him.
This trade war is China’s gain, they should be celebrating.
Dont really know which side to believe, I guess only time will tell who will win. Problem is all these biased reports in the US press is affecting the next presudential election. Dont know if Trump wants a second term.
Underlying the the trade war is the political war and that is never going to go away. Democracy and autocracy and bound to be in conflict. Autocrats and democrats hate each other and war is inevitable. More people in the world want democracy than autocracy therefore in the long term the CCP has a a big problem regardless of what happens in the short term.