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U.S.-China cold war would redirect energy flows

9 Comments
By John Kemp

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© Thomson Reuters 2020.

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Trump's trade war with the rest of the world, and China in particular, is a lose-lose proposition for just about everyone. And yet, Putin is working as hard as he can to get Trump re-elected.

-1 ( +1 / -2 )

I see a risk if we decouple and then Chinese technology exceeds our own then we are screwed. Linked economies share and collaborate on new technologies. It is risky.

-2 ( +0 / -2 )

China is not the be-all and end-all in the strategy of decoupling. I see costs attached to that strategy, but those costs will accrue over several decades, and life will go on. Unless there's another global war, and I wouldn't rule that out.

0 ( +0 / -0 )

Why doesn't this article mention trade statistic between the two countries? In 2018 China had a net trade balance of $418 billion with the USA. For 2019 Trump got it down to $345 billion. For 2020 it is estimated to be $250 - 280 billion. The tide is turning and China will soon be going to the USA with its begging bowl if it doesn't change course and start playing ball. Money talks!

-1 ( +0 / -1 )

"Why doesn't this article mention trade statistic between the two countries? In 2018 China had a net trade balance of $418 billion with the USA. For 2019 Trump got it down to $345 billion. For 2020 it is estimated to be $250 - 280 billion. The tide is turning and China will soon be going to the USA with its begging bowl if it doesn't change course and start playing ball. Money talks!"

Well, the 2017 US China trade deficit was $315 billion. It goes up and down but if you graph it over time the scale of the changes are not that dramatic. Trade in general has declined due to Covid-19 travel restrictions. The US is exporting less overall than last year and the US overall trade deficit is spiking higher than it ever has. Businesses may be substituting away from Chinese suppliers but they are using suppliers in other nations, not in the US.

0 ( +0 / -0 )

China's 2020 soybean imports from the US are still well below the level of 2018 when China began to find other nations to supply them with this staple food.

0 ( +0 / -0 )

The trade deficit thingie is elementary thinking. US service and software sales to China is not counted, so the deficit is closer to parity.

You have a trade deficit with your grocery store, drug store, gas station, restaurants and dry cleaners. They buy nothin' from you.

The US forfeited manufacturing to China willingly, intentionally to save costs and get decades of executive bonuses and corporate profits. Americans are not going to work long hours in dirty factories making cheap plastic crap for $3/hour. The proof is that only a drop or two in the ocean of manufacturing has or will return to the US.

Sending it to Vietnam doesn't help the US deficit. And it doesn't matter anyway. Make the stuff you can.

0 ( +0 / -0 )

"he trade deficit thingie is elementary thinking. US service and software sales to China is not counted, so the deficit is closer to parity."

That is incorrect.  The balance of trade counts all trade of all kinds and all cash flows between the nations. While the US does indeed run a trade surplus with China for services and software, the dollar value of that surplus is dwarfed by the sheer size of the deficit in the goods trade. Therefore the US runs an overall trade deficit with China. Of interest also is that cash remittances from Americans to China count exactly the same as US imports from China while cash flows from China to the US are counted as US exports. Even the money we send Waipo in Shanghai is counted in the trade balance.

0 ( +0 / -0 )

"The US forfeited manufacturing to China willingly, intentionally to save costs and get decades of executive bonuses and corporate profits. Americans are not going to work long hours in dirty factories making cheap plastic crap for $3/hour. The proof is that only a drop or two in the ocean of manufacturing has or will return to the US."

The US exacerbates the problem by running endless budget deficits. In a true free trade regime with freely floating currency values there should never be a long term trade deficit. Image nation A trades with nations B, C and D. A runs a trade deficit with B, C and D. All else equal, in a free trade regime the value of As currency in trade should fall relative to the value of the currencies of B, C and D. That will make As goods less expensive in trade while making Bs, Cs and Ds goods more expensive in trade. This should make trade imbalances self correcting over the long term.

The US has short circuited this mechanism. Now let's say A also runs budget deficits. It finances these deficits by selling bonds. B, C and D see an opportunity here. They use their excess currency from A to buy its bonds. This acts to soak up the excess currency from A earned by Bs, Cs and Ds respective trade surpluses with A, and this keeps the value of As currency artificially high in trade. That in turn maintains the terms of trade favorable for exports to A from B, C and D. Meanwhile A has found willing customers for its bonds allowing it to run budget deficits year after year without risking rising interest rates and cheap imports from B, C and D keep consumer inflation low. The only way A will ever bring its trade balance under control is to run budget surpluses and pay down its debt it no longer has to sell its bonds to B, C and D.

0 ( +0 / -0 )

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