The CCP was clearly engaging in abusive trade practices for a very long time, and U.S. leadership failed to do anything about it, all the while China…
The impact that trade wars are having on the flow of billions of dollars of goods and central banks’ monetary policy around the globe appears to have jumped out of the frying pan and into a fire at the town square, as the following chart is a sign that global trade is collapsing to depression levels:
As recently as last spring and summer, tensions escalated between the U.S. and China, and the IMF expressed their concern two months ago. A few semantic swipes also appeared on both sides of the bargaining table.
China accuses U.S. of ‘blackmail’ amid reports of higher tariffs – Politico, Aug. 2018
Steve Bannon: We are in an economic war with China – CNBC International, July 2018
U.S.-China trade war poses biggest risk to global stability: IMF’s Lipton… “The U.S.-China trade war poses the biggest risk to global stability and fiscal stabilization is needed to respond to economic shocks in Europe. Obviously, this is not a matter for Europe alone. The United States needs to get its fiscal house in order as well… Each EU member state should strengthen their defenses ahead of a potential downturn, including those countries that have not addressed glaring vulnerabilities, notably Italy. A serious recession could be very damaging for these countries, because they will be shown to be ill-prepared.” – Reuters, Mar. 2019
Ongoing negotiations have panicked world stock markets with episodic bouts of news-driven risk-on and risk-off volatility, magnified by automated trading and a reversal of Federal Reserve monetary policy that blunted its quantitative tightening dream, which resulted in flip-flops between a pause in policy or quantitative easing to infinity. Doves at the Fed and the POTUS have been talking about interest rate cuts in recent days.
Trump says US will win trade war if Fed cuts interest rates – CNBC, May 14
Surprise slowing in US, China economy as trade war escalates – CNBC, May 15
Retail sales declined in April as Americans cut back on spending… “Retail sales have been on a seesaw pattern, rising at a healthy pace in January, then falling in February, followed by the big jump in March and now a drop in April. The data suggests Americans are reluctant to spend freely, despite steady job gains and modest wage increases.” – CNBC, May 15
Despite early data points that could be telegraphing a consumer slowdown, there are alternative views to consider before claiming that tariffs are a primary cause.
“Talk of tariffs imposing high costs on U.S. consumers is mostly globalist propaganda. Here is why: 1. Supply chains can source in non-tariff nations. 2. Distributors can eat some of the tariff. 3. Consumers can buy other goods. 4. Consumers can skip purchases. It does hit China.” – Jim Rickards, May 15
Lloyd Blankfein also chimed in with his view on tariffs and the U.S. consumer.
Another concern is over China reducing their treasury bond holdings, as they own 17.7% of our debt and refer to it as a “nuclear option.”
Why China Finds it Difficult to Weaponize the Yuan and US Treasuries – Marctomarket, May 14
“Tariffs are not just about economics and manufacturing jobs. It is about self-worth, identity, and people having jobs.” – Steve Bannon
What is missing from discussion in the Western media is China’s motivation and perspective based on their history, as they appear not to accept that economic integration with other countries through globalization has consequences and will inevitably weaken national sovereignty.
A history of “barbarian handling” influences China’s CCP leadership, which is a tradition of making adversaries become dependent on their economic largesse, subsequently pressuring foreign leaders to shift over to their value systems. The practice prejudices the CCP to see other nations as hegemonic or a vassal state instead of coequals and pushes them to create economic dependence so they can manipulate foreign elite opinions to view Chinese power as advantageous. Those practices result in CCP anxiety that they are always facing the threat of surrender or domestic political disunity.
Too many corporate entities and foreign executives that benefited from the boom in China did not seriously consider the risk or downsides. The CCP was clearly engaging in abusive trade practices for a very long time, and U.S. leadership failed to do anything about it, all the while China had its cake and ate it while ignoring trade rules, laws, and contracts. China has a severe sensitivity to the thought of being pushed around and is unlikely to adapt to a premise that it should behave like everyone else.
China declares a ‘people’s war’ after Trump’s latest tariff hikes – Supchina, May 15
Beijing calls for “people’s war” against Washington’s “greed and arrogance” – NYPost, May 15
Bannon: “Clinton, Bush, Obama, have all blinked. Trump didn’t blink” – CNBC, May 15
China vows a “fight to the end” in trade feud with America – Economist, May 15
CGTN – The Point: China strikes back against weaponzied U.S. tariffs.