Why back down? China’s Xi will only get one Trump in his lifetime

Until Trump lover of rates has regained the White House, the Biden administration has done a relatively good job in co -opting its allies in Europe, Japan and South Korea in the efforts to cut China access to advanced semiconductors and other key technologies.

The EU was also in tune with the United States in resisting a flood of Chinese electric vehicles, solar panels and wind turbines with its own rates.

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Since China’s domestic economy has sprayed and the spectrum of deflation has obscured, China has experienced a significant excessive capacity within its industrial basis, with consequent flooding of economic exports that was creating an intensifying repercussing within western economies. The foundations for a western alliance led by the United States to reject that wave of tidal exports were placed.

Then came the tariff man, who does not include tariffs or global trade. It does not see trade as a complex mix of the different natural resources and skills, comparative advantages, position, economic dimensions and development and technological progress, but sees it as a zero sum game in which a commercial deficit means that the United States is robbed.

He and his directors believe that a commercial deficit is purely the result of protectionism: a combination of tariff and non -tariff barriers. So, its “mutual” rates.

Nobody can have rational and fair negotiation with him to lower those rates because his understanding of them is irrational. Any agreement in such circumstances will therefore be unfair for the American counterpart, although potentially less harmful than to leave the mutual rates in progress.

Instead of strengthening what could have been an alliance to suffocate China’s exports and protect American geopolitical supremacy, Trump has also forced his allies to reconsider their relationships with the United States and consider their options both for sale and to move their trade elsewhere.

Japan and South Korea have already engaged in commercial discussions with China. Inevitably, the EU should also evaluate the risks (a flood of exports from China and Southeast Asia) and benefits of a stronger relationship with China. The global group of the South of freely affiliated economies could be transformed into something more formal and more directly aligned with China.

Trump, the self -proclaimed “stable genius”, could free the United States from his commercial relations with the world, but in the process he leaves him isolated and poorer while the rest of the world continues to globalize, with China in the center of a new world commercial order.

Obviously China will suffer some economic pain if it does not give up on Trump’s threats.

Then came the tariff man, who does not include tariffs or global trade.

While it is less directly exposed to the US market than it was in 2018-it deviated its purchases of soy seeds, for example, from the United States to Brazil and much of what was the direct trade with the United States was reinceppa through Vietnam, Thailand, Malaysia and Mexico-LE Spened Trump on it and those economies have been redirected by its exported economy.

It has some cheap and levers buttons that can push and pull. It could allow Yuan, which has slightly weakened in recent weeks, to weaken further, dismantling the rates to a certain extent. It can loosen monetary policy, pushing more credit capitals to lowest interest rates in its economy.

It could – and report that it will do – do more to stimulate the economy and internal consumption in particular. While XI sees the stimulus as a waste, his public statements and China policies suggest that his position is moving.

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There is a significant scope to increase the internal private consumption which, to about 39 % of GDP, according to the World Bank, compares with over 52 % in the EU and approximately the same rate in Australia and other economies developed.

Private consumption in the United States takes place at about 70 % which, together with a low saving rate (about 3 or 4 % of the income available against an OECD average of about 23 % and China almost 50 %) could help to explain why the United States have a large commercial deficit.

The shock of the commercial war, which could cost China up to 2.5 percentage points of growth of GDP, halving the 5 % growth rate that is targeting, could also offer XI the opportunity to renovate sectors such as the Chinese car industry, where there is a massive surcharge.

XI has a great advantage over Trump. He, the Communist Party and his policies cannot be challenged, regardless of how much pain generates the commercial war. The Chinese president can survive Trump, who is serving his latest mandate (unless the Constitution of the United States is torn) and will not be contrasted by his party, as Trump could be.

Those republicans who have been silent even if Trump overturned the long -standing republican beliefs about trade, will be increasingly aware of the impact of his rates on the United States economy and families while the medium -term elections next year will begin to loom.

China took revenge against Trump rates, not only with its own rates, but with the prohibitions on the exports of strategic minerals (where dominates) and other restrictions on exports, black lists of some US companies and exporters and a series of anti-dumping investigations.

It is not the retaliation of China, however, that it will damage the Americans more. These are the Trump rates, who kicked this week. Prices of all that US imports will increase, increasing the cost of living, raising the inflation rate and lowering growth.

It won’t be one -off. There are things that the US imports that do not do or cannot produce that now they will cost more, together with many things in which it is not self -sufficient or in which it is so non -competitive that it would never make sense to manufacture them at national level.

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It will take years, perhaps decades, trillions of dollars and the creation of a completely new supply chain to build the internal capacity to produce what is currently imported from the rest of the world. In the meantime, the United States will have significant economic pain.

While China will also be affected hard, XI’s invulnerability means that it has the ability and time to wait to see the economic shock induced by Trump hitting America, while trying to exploit the fracture of western alliances in pursuit of long -term geopolitical ambitions of China.

He will only have a Trump in his life. It is unlikely to waste the opportunity.