Saturday, July 14, 2018

It's a mistake to think that just because China imports a lot less from America than the other way round, America can somehow hurt China more

US exported ~130 billion USD worth of stuff to China in 2017. The reverse flow was ~505 billion. News stories are filled up with analyses / claims / declarations / opinions that because of this huge imbalance - in China's favor (??) - the US has an upper hand in the ongoing US-China trade war [ironically, it's this trade imbalance itself which has caused the trade war in the first place], and that America can somehow hurt China more. The argument is that China can't match dollar-for-dollar the tariffs that the US continues to impose on imports from China [because China imports so little, relatively], and so it'll quickly "run out" of the current Chinese response of imposing matching tariffs on imports from America [once American tariffs cross 130 billion worth of goods imported from China].

Not entirely correct actually. 130 billion is just the direct, visible imports figure. There's another *massive* category of indirect "imports" from America - the locally-made American products that Chinese consumers buy *so prolifically* [Starbucks, GM cars, Apple's iPhone and other iProducts, Boeing airliners, etc.]. Example follows:

"General Motors now sells many more cars in China than it does in the United States...". - [link]

Not sure if America or Donald Trump realizes this, but it's quite easy for the Chinese leadership to *really, really* hurt American companies and thus America by mobilizing its population against American products - whether directly imported or manufactured and sold locally - in the name of retaliation and patriotism. Trump and his team will quickly crumble to their knees under unbearable pressure from Corporate America if the Chinese leadership one day decides to encourage its citizens to vigorously boycott American products and services in favor of goods from German, British, French, Italian, South Korean, Japanese, Taiwanese, Indian, Australian, Spanish, Mexican, Russian, Swiss, Swedish, Canadian, and other developed / powerful nations' companies. The point behind listing the names of these nations is that there are many other developed or otherwise large / consequential countries in the world which'll be more than happy to provide substitutes for American goods and services.

America shouldn't overestimate its power, or underestimate a mighty country like China's. The eras of America hegemony, and of abuse of the rest of the world are ending fast.

Update [May'19]: A comment on a FT article.

No comments:

Post a Comment