Sitrep : If you want to wage a trade war, don't march on Beijing

14-05-2019 thesaker.is 9 min #156333

by Chris Faure, for The Saker Blog

Let's clarify, a trade war is a war.

Let's clarify, world trade is not a zero sum game where you have a winner and a loser. Where we are in geopolitical danger levels, we've reached the same danger levels in world economics this past week and through this morning in the trade war, US vs China.

Let's clarify, the US administration, Mr Trump's special skill of negotiating has lost this trade war, because China does not have to win. China only has to endure and time for China, is a win. You will find parallels with many other countries in hot water in the geopolitical world, where they don't have to win, but simply endure and win time and wear down the Empire. This is where we are in this trade war. What Trump and his team are arguing for in trade negotiations with China is no different than what they've offered so many others - surrender your sovereignty or face punishment. Unfortunately for the US Administration, the world is saying more and more... Bring it On!

In addition, China stood firm on 3 requirements:

The documentation and tone has to show respect for China's core interests

Demands for what China should purchase from the US should be realistic

China will not, absolutely, not change their internal structures (laws) because the Americans are fearful of BRI or Made in China.

This morning, with monotonous regularly I saw the financial media leading with headlines of how many % tariffs China is placing on how many billions of US imports to China and how many % tariffs the US is placing on how many billions of imports to the US.

That is not where the story lies. In terms of world trade and impact on the financials of these two countries, these are drops in the bucket although they hurt small business badly and has a serious downstream effect on shipping, and everything around moving product.

The story is in the unerring aim that China takes in this trade war, when they need to retaliate. The story is in the fact that neither Mr Trump's carrot, nor his stick could move China one iota, and this morning we are in a position where China, unerringly just an hour or so before the US market open, takes unerring aim, again at US agriculture as they did before. You know, that piece of the economy that takes a year to even plan and grow and where futures trading is long term and which is still causing mega bankruptcies in the farmer communities of the US midwest whose export to China is lying rotting in the fields or in the warehouses, exacerbated by brutal winter and spring weather conditions.  facing surging bankruptcies from farmers hit

The same way  Wisconsin dairy farmers are also going bankrupt thanks to the continued flood of cheap European dairy keeping wholesale milk prices low. Why is this happening? Russia countered European and American sanctions over Crimea with a ban on imports of European dairy.  strategic-culture.org

The same way that Mexican first grade or export grade farming produce is now being sold inside of Mexico, and the Mexicans never had it so good. Whereas before they would buy the avocado with the skin blemish, or the tomato not exactly the right size, now they are buying the cream of the crop as it has become too onerous to continue exports to the US in many cases.

Mr Trump's art of the deal is eating Americas lunch. Bear in mind, we are not talking about Chinese paper lampshades here. We are talking about what we are all going to eat and how much it will cost to fill a basic food basket.

With a short search you can find the various phases in this trade war, where Mr Trump marched on Beijing. It is however only now getting interesting.

Where we stand now, is here.

China's position verbalized by.... chief editor of the Chinese Global Times:

 Hu Xijin 胡锡进  @ HuXijin_GT

The sooner new tariffs on $300 b of Chinese goods come, the better. That means trade war comes to the 1st turning point, shifting from a comprehensive US offensive to a stalemate. The two sides will then compete on endurance. China's political system will ensure we won't lose.

In reality China is unerringly taking further aim at Mr Trump's base itself. China might stop purchasing agricultural products from the US in total. They may reduce its orders for Boeing planes and they may restrict service trade. The PBOC is also modelling the dumping of US Treasuries which will have serious systemic effects, most probably strengthen the yuan and push the cost of doing business with the US much higher. If China is going to dump Treasuries, Chinese pride will follow and they may also be dumping US stocks and real estate. After all, China needs now to protect their trade with the rest of the world.

The US side stands here:

There's a hole in the bucket dear Liza, dear Liza -

With what shall I fix it Dear Henry, Dear Henry.... ? Oh Sh!t!

Mr Trump stands here:

Even at this early stage, we can add up another loss for empire and a very amazing gain in an ongoing systemic change in economics that is necessary in our world, in parallel with the systemic change in geopolitics, all toward a multi-polar peaceful world.

Bellowing at China for problems that were uniquely created by the US itself, will not win this trade war. Tweeting is not going to make one iota of change. China has now settled in for the long haul while still talking (and winning time).

To make the farmers happy (Trump's base), he says the US will buy their own farmer's production from their own farmers and give it (sell it - disaster capitalism?), to poor and hungry countries. It is of course a lie that China will pay for any tariffs. A quick search will show how tariffs actually work.

So, we are in a space where the world economy is in real hot water and China is the only stable force that we have currently from a world perspective. Mr Trump is still hoping that a more expensive product delivered into the US will lead to a type of economic manufacturing reconquista, i.e., on-shoring of manufacturing back to the US. There is a problem with this thinking and it is that no big organization in its right mind will fully return to US shores in the current climate of decay, uncertainty and societal derangement. Oh, they will, eventually, but some issues must be solved first. Trump has no more economic clout left - he can still do damage, but China is making statements that they will keep their internal economics floating on an even keel, in order to create some stability for the world. China will of course act in China's interest and they have been hardening against full tariffs since this trade war started.

We have the world's economic well being in China's hands, with Trump delusional and breaking what he can break, under the mistaken belief that this is all in his hands.

We can only look forward to China hitting back hard, which they have started to do this morning, and then pivoting hard to its own business and its own civilizational well being. What happened this last week, is that Trump gave away his full hand, and China has given nothing yet - and nobody knows what really is in their hand. So what rabbit can be pulled out of Mr Trump's hat now? At this stage, looking at past doubling down from Empire, missiles and aircraft carriers may be the next best thing for the US and that is the terrifying part.

This morning in China news:

Tall tales won't help US win trade war

China has plenty of countermeasures. The US tariff moves are very much like spraying bullets. They will cause a lot of self-inflicted harm and are hard to sustain in the long term. China, on the other hand, is going to aim with precision, trying to avoid hurting itself.

The Chinese government has been blunt about the difficulties and losses that the trade war will bring to the Chinese economy. This is in sharp contrast to the US government seeking to beautify the trade war.

The Chinese side is obviously more realistic while the US is falsifying. This will, to a large extent, influence how the two countries digest the trade war impacts.

globaltimes.cn

If you want to wage a trade war, don't march on Beijing.

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