December 30, 2024
China Will Lose a Trade War
Timothy Birdnow
China is talking tough on Trump's tariffs (I dare you to say THAT five times fast!)but can they actually pull it off.
Here is one guy who says no.
A point nobody will make is that China holds considerable amounts of American debt - $859.4 billion worth. They cannot afford us to simply default on it, which we could do if push came to shove.
Also, China imported $154.0 billion from the U.S. in 2022, and no doubt that number has climbed significantly. While the U.S. imports significantly more from them $536.3 billion) as of '22 we can get much of that stuff elsewhere.
Byt what does China get from us?
Here are a few items:
Most of this cannot be bought from just anyone. And the U.S. has a long arm, unlike many of the third parties that may sell to them. We can threaten any of these countries with similar treatment and they probably won't undercut us, at least not with Trump being in office.
While China exports to us:
We are clearly in a better position for a trade war than are they. We get more cheap goods or commodities - they need more of the high tech stuff we can provide.
I dare China to try this, especially now when their economy is struggling and appears to be deep trouble.
This should be a fascinating four years.
China is talking tough on Trump's tariffs (I dare you to say THAT five times fast!)but can they actually pull it off.
Here is one guy who says no.
In December, Beijing tightened controls on exports of raw materials used in the manufacture of advanced electronics and batteries and in other high-tech fields. That move was in response to the Biden administration’s decision to cut China’s access to certain memory chips used in artificial intelligence. Beijing has also extended controls over parts used in the manufacture of drones, which have proved vital to Ukraine’s defense against Russia’s full-scale invasion.
China also has announced an antitrust investigation of Nvidia, the U.S. chip juggernaut, saying it might have violated the terms of a conditional approval it received from Beijing in 2020 for its acquisition of an Israeli networking company.
Beijing also maintains an "unreliable entity list” of companies that face extra hurdles in doing business in China. In September, it said it was considering placing PVH, the owner of Calvin Klein and Tommy Hilfiger, on the list because of reports that the U.S. company had boycotted cotton products from China’s Xinjiang region, where China is accused of using forced labor in its factories. Beijing denies the forced-labor allegations.
Yet analysts said this mix of export restrictions and the targeting of U.S. companies isn’t such a potent set of countermeasures.
Although China dominates the production and refining of critical minerals, it isn’t the sole supplier worldwide. Last year the U.S. imported more raw gallium from Canada than it did from China, and its top supplier of processed germanium was Germany, according to Census Bureau data. Both minerals are critical to the production of semiconductors, missile systems and solar cells.
China’s dominance of critical minerals relies in part on its ability to supply global markets at low prices, making it uneconomic for rivals to invest in alternative production. But export controls risk pushing up the market price, changing that calculus.
"The more of a strain it is to get these things, the more investment goes into processing,” said Matthew Gertken, chief geopolitical strategist at BCA Research.
Moreover, as Russia’s ability to evade Western sanctions has shown, third countries are usually prepared to act as middlemen in global trade, allowing eager buyers to sidestep efforts by sellers to impose restrictions on sales to a particular country. If China got tough on exports of minerals to the U.S., American companies could potentially secure what they need through re-exports by third countries, Gertken said.
Nor is punishing U.S. companies that do business in China the potent threat it once was. China’s sluggish economy and its push to edge out Western brands in favor of domestic rivals mean many U.S. companies are struggling there. As a result, China has become less important to American corporations than it was.
China also has announced an antitrust investigation of Nvidia, the U.S. chip juggernaut, saying it might have violated the terms of a conditional approval it received from Beijing in 2020 for its acquisition of an Israeli networking company.
Beijing also maintains an "unreliable entity list” of companies that face extra hurdles in doing business in China. In September, it said it was considering placing PVH, the owner of Calvin Klein and Tommy Hilfiger, on the list because of reports that the U.S. company had boycotted cotton products from China’s Xinjiang region, where China is accused of using forced labor in its factories. Beijing denies the forced-labor allegations.
Yet analysts said this mix of export restrictions and the targeting of U.S. companies isn’t such a potent set of countermeasures.
Although China dominates the production and refining of critical minerals, it isn’t the sole supplier worldwide. Last year the U.S. imported more raw gallium from Canada than it did from China, and its top supplier of processed germanium was Germany, according to Census Bureau data. Both minerals are critical to the production of semiconductors, missile systems and solar cells.
China’s dominance of critical minerals relies in part on its ability to supply global markets at low prices, making it uneconomic for rivals to invest in alternative production. But export controls risk pushing up the market price, changing that calculus.
"The more of a strain it is to get these things, the more investment goes into processing,” said Matthew Gertken, chief geopolitical strategist at BCA Research.
Moreover, as Russia’s ability to evade Western sanctions has shown, third countries are usually prepared to act as middlemen in global trade, allowing eager buyers to sidestep efforts by sellers to impose restrictions on sales to a particular country. If China got tough on exports of minerals to the U.S., American companies could potentially secure what they need through re-exports by third countries, Gertken said.
Nor is punishing U.S. companies that do business in China the potent threat it once was. China’s sluggish economy and its push to edge out Western brands in favor of domestic rivals mean many U.S. companies are struggling there. As a result, China has become less important to American corporations than it was.
A point nobody will make is that China holds considerable amounts of American debt - $859.4 billion worth. They cannot afford us to simply default on it, which we could do if push came to shove.
Also, China imported $154.0 billion from the U.S. in 2022, and no doubt that number has climbed significantly. While the U.S. imports significantly more from them $536.3 billion) as of '22 we can get much of that stuff elsewhere.
Byt what does China get from us?
Here are a few items:
Most of this cannot be bought from just anyone. And the U.S. has a long arm, unlike many of the third parties that may sell to them. We can threaten any of these countries with similar treatment and they probably won't undercut us, at least not with Trump being in office.
While China exports to us:
We are clearly in a better position for a trade war than are they. We get more cheap goods or commodities - they need more of the high tech stuff we can provide.
I dare China to try this, especially now when their economy is struggling and appears to be deep trouble.
This should be a fascinating four years.
Posted by: Timothy Birdnow at
10:54 AM
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