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China Once Looked Tough on Trade. Now Its Options Are Dwindling

nytimes.com

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Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#81

Post by gonvaled »

rsj_hn wrote: post #80
gonvaled wrote: post #77

Earlier quoted context omitted.

You are giving the dollars to foreigners, in exchange of goods. Nobody is forcing you to do that. If you feel those products are not worth your dollars, do not buy them.

Nobody is forcing you, but the forex rate adjusts so that the appropriate amount of goods is bought voluntarily. If country A bans foreign capital inflows and purchases $10 of foreign assets, then that forces a trade surplus of $10. Yes, that $10 transaction will be voluntary because it's currency will adjust so that the transaction is made. But from the macro point of view, the foreign capital flows drive the "volun…

Well, that is how much the dollars are worth then.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#82

Post by rsj_hn »

rsj_hn wrote: post #80
gonvaled wrote: post #77

Earlier quoted context omitted.

You are giving the dollars to foreigners, in exchange of goods. Nobody is forcing you to do that. If you feel those products are not worth your dollars, do not buy them.

Nobody is forcing you, but the forex rate adjusts so that the appropriate amount of goods is bought voluntarily. If country A bans foreign capital inflows and purchases $10 of foreign assets, then that forces a trade surplus of $10. Yes, that $10 transaction will be voluntary because it's currency will adjust so that the transaction is made. But from the macro point of view, the foreign capital flows drive the "volun…

This is what a lot of people don't understand. They say thinks like "Country A has nothing that country B wants". Suppose we are in a world with only 2 countries, and country A has only apples to trade and country B has beautiful cars. It may well be that B doesn't want goods from A and A wants goods from B, nevertheless no trade deficit will occur unless there are foreign capital inflows. And if neither side allows foreign capital flows, then either A and B wont trade, or A and B will trade so that goods flow in both directions with no deficit.

So, we have to tease apart the question of "do I want to buy this good" with the question of "why do people on one border consistently buy more goods than those on another". The former is up to individual preferences, but the latter -- the trade deficit -- is really just a matter of policy.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#83

Post by 394549 »

tambourine_man wrote: post #35
adventured wrote: post #21

Earlier quoted context omitted.

It would no doubt be disruptive, temporarily. And it would also prompt a multi hundred billion dollar redirection of investment into moving those supply lines to other countries. Vietnam would love to get some more of China's tech manufacturing action, as would a dozen other developing countries. Others would welcome gains to be had in apparel or autos by moves like that by China. One of the biggest problems China ha…

I’m not sure. Tim Cook seemed to suggest the iPhone couldn’t be manufactured anywhere else.

> I’m not sure. Tim Cook seemed to suggest the iPhone couldn’t be manufactured anywhere else.

Translation: Apple invested massively in China-based manufacturing, and he doesn't want to have to repeat that investment elsewhere.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#84

Post by rsj_hn »

gonvaled wrote: post #81
rsj_hn wrote: post #80

Earlier quoted context omitted.

Nobody is forcing you, but the forex rate adjusts so that the appropriate amount of goods is bought voluntarily. If country A bans foreign capital inflows and purchases $10 of foreign assets, then that forces a trade surplus of $10. Yes, that $10 transaction will be voluntary because it's currency will adjust so that the transaction is made. But from the macro point of view, the foreign capital flows drive the "volun…

Well, that is how much the dollars are worth then.

The dollars are worth whatever the relative foreign policies set. If China has a policy to depreciate against the dollar, by printing Yuan and buying dollars with them (what happens now) then the dollars end up being "worth" more, but the underlying capacity to produce of the U.S. hasn't increased, indeed it starts to decrease as people start to buy cheaper foreign output.

So it's a bit disingenuous to say "well, people like these cheap goods" -- I mean, of course they do, but the story here is the foreign capital inflows which create an excessively expensive currency leading to a preference for certain types of goods. The whole ground is moving underneath you as a result of international policies and you don't see it, you just see people "choosing" to act.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#85

Post by 394549 »

makomk wrote: post #43
enitihas wrote: post #12

I initially used to think China might have more leverage against any potential trade war agains the US, as: 1. The Chinese had option of imposing high tariffs on politically significant US agricultural products, like soyabean, which are not very large in $ value, but affect a lot of areas. 2. Since some swing states are highly influential in US elections, the Chinese always had the option of imposing tariffs which im…

Based on the figures I could find, China imported $130 billion dollars worth of goods from America last year, of which $12.3 billion was soya beans. The most likely reason they imposed high tariffs on soya beans is precisely because they had so few actual options. (I know the media portrayed it as some kind of genius move at the time, but that's been looking increasingly dubious. It's not clear that they will be able…

Also, soybeans are a fungible commodity. As China buys up non-American soybeans, American exports will (with effort) be redirected to the customers who were originally planning to buy non-American soybeans that the China bought. The tariffs will be more of a hiccup for American farmers.

On the other hand, most of China's exports aren't fungible commodities, so it will have more difficulty finding substitutes for the reduced demand caused by American tariffs.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#86

Post by gonvaled »

rsj_hn wrote: post #84
gonvaled wrote: post #81

Earlier quoted context omitted.

Well, that is how much the dollars are worth then.

The dollars are worth whatever the relative foreign policies set. If China has a policy to depreciate against the dollar, by printing Yuan and buying dollars with them (what happens now) then the dollars end up being "worth" more, but the underlying capacity to produce of the U.S. hasn't increased, indeed it starts to decrease as people start to buy cheaper foreign output. So it's a bit disingenuous to say "well, peo…

The US manipulates the currency market in other, more powerful and more fundamental ways, by controlling the global currency.

You do not need to hold foreign reserves, you do not need to pay exchange commissions, you are not blocked to do business with third parties by having capital flows stopped ...

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#87

Post by someone454 »

macintux wrote: post #59
SubiculumCode wrote: post #38

Earlier quoted context omitted.

Point number two has been preoccupying my brain the last few months. Our system of electing presidents tend to hinge on several swing states, and in those states, a few key districts, and this means that our elections are vulnerable to foreign influence much more so than if, say, presidents were elected by popular vote. Protecting elections may mean ending winner take all electoral college system.

> Protecting elections may mean ending winner take all electoral college system. I think 2016 proved that the electoral college is not supplying the adult oversight that the founders intended.

Or maybe it is, and the adults actually won.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#88

Post by wbl »

lgleason wrote: post #36

As much as some people here may hate Trump, the fact is that he was right when we said that it is difficult for us to lose a trade war with China since we import more from them than we export. Is there going to be some short term pain? Absolutely! But, long term it is likely to create more jobs in the US. As an extra bonus, there won't be as much of a carbon footprint for shipping things half way around the world and…

A trade war is you and your buddy alternately shooting yourselves in the foot.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#89

Post by mistermann »

oh-kumudo wrote: post #41
enitihas wrote: post #12

I initially used to think China might have more leverage against any potential trade war agains the US, as: 1. The Chinese had option of imposing high tariffs on politically significant US agricultural products, like soyabean, which are not very large in $ value, but affect a lot of areas. 2. Since some swing states are highly influential in US elections, the Chinese always had the option of imposing tariffs which im…

Well for both countries the export to each other is only a fraction of their economy...China is not what it is used to be.

Exports / Imports, % of GDP, 2016 Source: National Accounts at a Glance

https://data.oecd.org/trade/trade-in-goods-and-services.htm

                   Imports  |  Exports

   China             17%    |    20%

   US                15%    |    12%
China seems to be at a fair disadvantage on exports dependence, but you're right, China is far less export dependent than one might think. The devil is in the details of course, but I'd venture a guess that US imports would tend to be more discretionary than China's, but who knows.

Re: China Once Looked Tough on Trade. Now Its Options Are Dwindling

#90

Post by cuboidGoat »

MarkMc wrote: post #22
enitihas wrote: post #12

I initially used to think China might have more leverage against any potential trade war agains the US, as: 1. The Chinese had option of imposing high tariffs on politically significant US agricultural products, like soyabean, which are not very large in $ value, but affect a lot of areas. 2. Since some swing states are highly influential in US elections, the Chinese always had the option of imposing tariffs which im…

Trump has countered the soybean attack by handing out subsidies to soybean farmers.

Meantime, other soybean manufacturers will dial up production, so when the tariffs are dropped by China, the US soybean manufacturers will be selling to an oversupplied market, dropping the price. And given the US subsidies will almost certainly go when the Chinese tariffs do, the risk to the US soybean industry has only been postponed, rather than countered.
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