The Sino-American Trade War

There is much panic about a coming trade war with China.  However, China will benefit the faster it can cut a deal with President Trump.  How is that?  The US exports to China $170 billion but imports $479 billion.  That $479 billion (jobs in China) represents just over 4% of the Chinese economy while the $170 billion (jobs in the US) is just shy of 1% of the US economy.  If trade came to a screeching halt (which will not happen), China would take the bigger hit.  This is not to defend tariffs and trade wars but the US has more leverage than the press is reporting.

 

Mostly, the imbalance of trade is our fault.  By increasing the cost of manufacturing in the United States through expensive regulation, foreign countries can easily undercut us.  Scale back the cost of regulations so that they are less than the transportation cost of importing goods and you will see a return of manufacturing to the US.  It isn't rocket science.  If it costs $10 to manufacture a widget on the north side of the Rio Grande and only $5 to manufacture it on the south side, manufacturing will move to the south side as long as importation costs are less than $5.  It's good business.

 

Adversaries of the United States use our belief in free trade against us in much the same way that Islamic terrorists uses our belief in Freedom of Religion against us.  China doesn't believe in free trade any more than Islam believes in Freedom of Religion.  China strikes trade deals that are to their benefit while the US has struck deals that meet an ideal free trade principal that doesn't work as a one-way street.

 

Those who hearken back to the Smoot-Hawley Tariff that exacerbated the Great Depression are comparing apples and oranges.  The depression had already begun when Smoot-Hawley passed whereas the current economy is expanding.  Of course, this trade war is not going to be fully engaged because it will be more damaging to China than to the US.  Trump is renowned for shorting employees and getting high-quality goods on the cheap.  He's like the real life version of William Shatner's Price Line Negotiator.