Thread by @usacsmret

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Tariff escalation is worrisome for Chinese officials, who are watching ripple effects, from weakening of the currency to crimping future foreign investment. Raising existing tariffs or imposing new ones hits products China needs, like semiconductors, pork, oil and passenger jets.

A wider-scale trade conflict could also force Beijing to further ease credit and boost government spending to shore up growth, doubling down on the stimulus used last year at a time some analysts say it should be ratcheting back such measures.

What is behind this trade controversy? A long history of US accommodation of China, which began as a way to open China to world trade and reduction of tensions with the US.

It began with Nixon in 1972 but continued with Bush, who had been ambassador, and then Clinton who allowed a campaign donor to sell critical missile technology to China.

In 1998, the New York Times’ Jeff Gerth broke a story about the Clinton administration’s willingness to permit two U.S. aerospace corporations to transfer sensitive missile technology to the Chinese.

The CEO of one of the corporations, Loral, had pumped hundreds of thousands of dollars of campaign contributions into the Democratic National Committee. In return the Clinton administration waived controls on Loral’s export of these technologies to the Chinese aerospace industry.

As usual, the US media covered for Clinton.
One of Clinton’s favorite reporters was Walter Pincus of the Washington Post. His son was then the General Counsel at the Commerce Department, which had authorized the illegal transfers.

Despite the obvious conflict of interest, Pincus repeatedly wrote or contributed to Post stories parroting the Clinton line. Pincus did not write the recent story about the Hughes’ fines.

Now, we have a new president who is trying to reverse the huge trade imbalance, against considerable resistance from the usual suspects.

There are going to see multiple geopolitical background moves now as the confrontation shifts to the painful phase…. who can outlast the economic standoff.

Lighthizer and Trump are not only fighting China, they are fighting US politicians who are beneficiaries of China. They are fighting against the US CoC, the multinational corporations, Wall Street and members of both political parties who desperately want to stop any trade reset.

Half, perhaps more than half, of congress has a better financial self-interest if China can gain economic superiority over the US. This congressional hearing, and the severity of Lighthizer toward those purchased politicians, highlights this very tenuous internal challenge.

“Big Ag” will be part of it. Much of US agriculture is now heavily corporatized. The family farm is not common.

The likely response from China will be additional tariffs on U.S. goods and/or refusal to purchase U.S. agriculture products. Their strategy will be to get key BIG AG senators, and the U.S. Chamber of Commerce, to target fire toward President Trump over diminished farm prices.

How will Trump fight this ? What effect will tariffs on Chinese imports have ?
The prices of imported durable goods (stuff from China) will increase, slowly over time; depending on the supply chain for the specific product sector.

However, if China retaliates by stopping import of U.S. agriculture products, the prices for U.S. domestic highly-consumable goods drops quickly.

In this scenario Wall Street is hardest hit. Other than the AG sector, Main Street -and the U.S. consumer therein- actually benefits. The Big Club will go bananas. Corporate America is not necessarily the consumers’ friend. Many decided the US future was as a service economy,

President Trump has begun a process for less dependence on foreign companies for cheap goods, and return to a more balanced US economic model where the manufacturing and production base can be re-established based on American competitiveness, entrepreneurship, and innovation.

No other economy in the world innovates like the U.S.A, President Trump sees this as a key advantage across all industry. The benefit of cheap overseas labor, which is considered a global market disadvantage for the U.S., is offset by utilizing innovation and energy independence.

The third highest variable cost of goods behind raw materials, and labor, is energy. President Trump unleashed the US energy sector and slashed regulations; The US. manufacturing price of any given product now allows for global trade competition even with higher US wage prices.

Here is a Trump speech from 2011.
Interesting. He’s been thinking about this stuff for years.