China is in a good position for the Tramp

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The writer is a founding partner and head of research in Benkal Dreaklosic

He left a week of the shock of customs tariffs the global economy is much worse than it was on President Donald Trump’s “liberation day”. Trump has risen from the most extreme mutual tariff threats, but we are still 10 percent less on all American imports, 25 percent duties on steel, aluminum and cars, and a 145 percent strange tariff in China.

The President’s team is scrambling to rationalize chaos as a major plan to build a coalition to defeat the Chinese brand. But any such plan is failed. To understand the reason, we first need to get what Trump really wants from the definitions. The usual allegations – that he wants to conduct unfair commercial practices, eliminate the trade deficit, the Industrial District America, and to confront China – do not stand up. Trump often calls for these goals. But these declared goals often contradict each other, contradict other policies or are clearly not achieved.

The best explanation is that Trump is mainly driven by the desire to collect and practice strength, and definitions are the best tool for that power. The purpose of its general commercial war is to remove the restrictions imposed by the global economic system on the unilateral practice of the American Authority, especially the exercise of power by the president.

Definitions are the preferred tool for two reasons. First, Trump believed for decades that the rest of the world would pay any price to reach the American market. Second, perhaps most importantly, until Congress chooses to prevent him, Trump has unlimited personal authority to impose (or withdraw) definitions on any country, at any time, for any reason.

What Trump wants above all is to show domination and extract submission. Countries that have not resisted actively have been granted gently from high rates. The country that dared to challenge was brutally punished.

Most countries now realize that the various economic waves of Trump advisers are just the ambiguity of windows. As long as Trump is an official, the United States is unreliable, and no sane leader will join him in a crusade against China.

The second reason behind the failure of Trump’s trade war on China: last Wednesday’s decline in the “mutual tariff” showed that the bond market determines the size of the tariff stick, which is much smaller than he thought. Trump had to back down from the high definitions after the negative market reaction.

So Trump has lost his influence in commercial negotiations. He cannot raise the tariffs again, because the cabinet market will rotate again. The incentive for most international leaders will be to reduce fast deals as customs duties are reduced in exchange for cosmetic concessions and respect symbols. These promises will not include to detonate their trade relations with China.

The third reason behind the failure of the Chinese trade war is the same China. At first glance, China is now worse than the United States: it has lost access to one of the largest export markets, and it appears to be a diplomatic isolated. But in reality, those who are well ready for an economic warfare war against the United States.

China may lose a request from the United States, but this can be replaced with a request for local consumers, which was abnormally weak thanks to excessive monetary policy, and obsessed with state resources in manufacturing. Shi Jinping reflected the path and is now serious about enhancing domestic demand.

China can also coexist well without imports from the United States. Export controls for five years helped make things without American technology.

Despite some market concerns, China can settle without a significant decrease in the currency. Beijing has set its controls slightly on Renminbi to absorb some tariff pressure, and it may allow it to fall one percent or two. But the convincing step of the order will bring fresh capital flows, which supports the exchange rate.

Meanwhile, the United States faces much higher inflation thanks to the Chinese consumer goods tax. Its dependence on Chinese industrial inputs is three times the dependence of China on American components. High input prices already hurt business investment. China has a demand problem that can be solved by a better macro policy. The United States is facing the shock of a possible supply and stagnation, which can only be resolved by changing the economic system.

If the goal of Trump’s new trade war with China is to get Beijing to excite the knee against the United States, then the result will only be frustrated and disappointed.