Is the trade war with China over?

That is the topic of my latest Bloomberg column, here is one excerpt:

The basic problem with any U.S.-China trade conflict is that there is not very much the Chinese are interested in offering, and their intransigence is more than just a bargaining stance. They are willing to buy more American soybeans and manufactured goods (and probably wish to anyway), and they might give U.S. financial institutions freer rein within China. But they won’t dismantle their system of state-owned enterprises, as those companies are among China’s most powerful special interest groups. Nor will China give the major U.S. tech companies free rein in China, if only for reasons of national security and China’s desire to build a surveillance state based on data controlled by China.

Overall, the grievances on the U.S. side are significant, and the possible concessions on the Chinese side are minor. So the most likely outcome is only modest progress in difficult negotiations. It’s also likely that the power and focus of the Trump administration will wane as it deals with investigations from the new Democratic-controlled House of Representatives. It might be said that the trade war you now see is the trade war you are going to get. Foreign relations gridlock will set in.

Nonetheless, it’s not quite fair to describe the trade war with China as a problem that Trump started and then pretended to solve. The reality is that hostility toward Chinese trade practices has been building for some time. Anti-China measures have long commanded bipartisan support not only in Washington but also among corporate leaders, who see themselves as victims of unfair Chinese trade practices and espionage. This is an issue that predates Trump, and he deserves some credit for doing something to help solve it.

Do read the whole thing, which contains other points of interest.


There is one story of interest today, and it is France burning. The folks who run MSM are already burying it beneath tributes to their guy Bush, or pretending the rioters are upset about a gas tax.

Shhh fellow globalists...everybody play it cool and let's talk about other things til the heat passes.

Guillotines are coming out of storage. And to think, after all these years of "surrender monkey" insults, it will be the French who save the world from the scumbag bankers. Enjoy the show.

'it will be the French who save the world from the scumbag bankers'

Seems like maybe you need to be reading some other media than whatever sources you currently access. Mainly because the French don't care about anything but French concerns, and that has always been the case.

France burning is of no interest to anybody outside of France; similar to Greece (and correctly so). Nominal GDP of France (the only thing that matters BTW, "PPP" is feel-good nonsense but I digress) is only $2.6T, about four cities the size of greater Washington, DC. If DC disappeared four times over, would anybody notice? Arguably GDP might even go up!?

As for Trump's trade wars, Trump was right to insist on a harder stance on intellectual property, though arguably he's getting nothing more than he would have gotten with the Trans-Pacific Partnership. If Trump was smarter, he'd embrace a carbon tax on China products for global warming purposes, but that would upset his Denier base.

Carbon tax? How does that have an relation,to IP issues?

I'm surprised that the super genius of the Philippians has trouble understanding why one uses GDP (PPP) instead of nominal GDP here.

@Scared - sorry, I meant to add the last line as a separate line, it's not realted to IP.

@Todd K - still smarting over the spanking you got when you were shown to be wrong about 19th century GDP in the USA a while back? That was a good one, you got spanked by two different people and stumbled over yourself trying to qualify your answers, lol. As for this issue, NGDP is superior since it's marked to market, whereas PPP depends on a fictional international unit that's arbitrarily defined to inflate Third World standards of living. A pizza in NJ (New Jersey, USA, not England) is not the same as a pizza in Manila, not that provincial you would ever know.

What about a Pizza in Naples? Often less than a quarter of the price in NYC, and orders of magnitude better than the average NYC processed-cheese slice of sludge.

What are you rambling about Ray? Where was I wrong about 19th century growth? I'm sure that I simply took Maddison's PPP numbers and posted them. It was Tyler who on a recent podcast got both 19th century and "early to mid 20th century" growth wrong but that is just because he didn't look up the numbers.

Protests in France, like IEDs in Afghanistan, are no longer news. French have been protesting and burning pallets fairly consistently since the 1960’s.

Right. Ignore the flaming automobiles, the defaced Arc de Triomphe, and the hundreds of thousands of people in the streets.

It's just another pallet, folks! Nothing to see here, move along!

Well, then this is going to impress you no end - 'French fishermen threw smoke bombs and hurled insults at British rivals. British boats were heavily outnumbered, according to Ingrid Parot, a maritime official, and were eventually chased from the scallop-rich waters.

“The French went to contact the British to stop them working and they clashed with each other. Apparently there was stone-throwing, but no injuries,” said the Normandy fishing chief, Dimitri Rogoff.

Rogoff said about 40 French boats had gathered overnight in protest at British “pillaging” of the scallop supply.

Footage from local TV channel France 3 Normandie showed boats being rammed and holes in three vessels.'

Good luck at saying such incidents are the spark that will light the fire that cleanse the pustulence that is the globalist banking class, as compared to mundane French behavior in defending what the French perceive to be their interests.

"French have been protesting and burning pallets fairly consistently since the 1960’s"

from 1789 really

I remember them burning one right across the street from our outdoor cafe back in the summer of '71 near the Left Bank. And at the time a big meh.

How many bankers have the French thrown in the slammer? Iceland imprisoned a bunch of theirs. I'm going with Iceland for now.

The US should have gone in with its allies like UK, Germany, Canada, Japan, South Korea, etc, since they all share the same grievances with China. But nope, Trump doesn't know how to work with others especially those who don't work directly under him that he can easily boss around like an episode of the Apprentice. He, worse than Bush Jr, just can't get a single democracy behind him. On the other hand, Trump enjoys the attention from dictators like Kim, Putin, Prince MBS.

Nothing to stop Merkel or Macron offering support and alliance of their own initiative. Doesn't seem to happen.

You are aware that the EU is considerably more protectionist than the U.S. in terms of China, right?

In other words, Trump simply adding his weight to already existing EU frameworks (accepting that one believes that a more protectionist trade policy is worthwhile, which Trump certainly seems to) would have likely created more impact in Chinese trade relations than simply going off on his own?

No it probably would not, because those are built with the EU in mind.

As American trade policy is formulated with the U.S. in mind.

However, if the EU and U.S. were to cooperate on shared goals concerning Chinese trade policy, clearly it would be more effective than either alone.

As it is currently, the EU continues to do an excellent job targeting American trade with the EU in response to Trump's various trade policy proposals regarding the EU. Because it is not just China that causes the EU to use its skill in protectionist trade policies.

I don't think it's clear at all that multilateralism would be easier to coordinate or beneficial in this circumstance than bilateral negotiation.

But it is is, it not for the clearly US to yoke itself to EU-China bilateral negotiation rather than vice-versa.

The US can lead and the rest can follow. Trying to add the other nations only dilutes the process. China may be reluctant to grant concessions to the US for fear that others will make the same demands but that is true whether the others are in the room or not. Trump is trying to do what is best for the US. He does not want leftist to praise globalist efforts. That is a change for the better. If the US gets better trade agreements the world will follow

There is no yoking involved. The EU continues to force China to accommodate EU interests as the EU does not consider its single market to be worthless (just wait to see how Brexit turns out).

If the U.S. and the EU were to take a concerted stance that credibly deprives the Chinese continued access to their markets, the Chinese would be in a weaker spot compared to Trump's go it alone policy.

And unlike the U.S., the EU has never felt that being used as a door mat for the benefit of low, low prices on low, low quality goods is a worthwhile goal.

"The EU continues to force China to accommodate EU interests as the EU does not consider its single market to be worthless"

Yes, Trump and the EU are two peas in a pod when it comes to trade.

Sure. Well, apart from the fact that the EU auto industry is doing quite well, whereas GM - well, the less said the better - and Ford has decided to stop building cars in the U.S. entirely, apparently.

'Ford will not be moving production of a hatchback to the US from China – despite Donald Trump’s claim on Sunday that his taxes on Chinese imports mean the Focus Active can be built in America.

On 31 August, citing Trump’s new tariffs, Ford said it was dropping plans to ship the Focus Active from China to America.

Trump declared victory on Sunday, writing: “This is just the beginning. This car can now be BUILT IN THE USA and Ford will pay no tariffs!”

But in a statement, Ford said it would “not be profitable to build the Focus Active in the US”, given forecast yearly sales below 50,000.

That means Ford simply will not sell the vehicle in the US. Kristin Dziczek of the Center for Automotive Research said Ford can make Focuses “in many other plants around the world, so if they decided to continue to sell a Focus variant in the US market, there are several options other than building it in the United States”.

In April, Ford announced plans to stop making cars in the US – except for the Mustang – and to focus on more profitable SUVs. In May, it stopped making Focus sedans at a plant in Wayne, Michigan.'

The EU doesn't make cars. Neither does Trump. What they share is a mercantilist mentality.

Not sure what 'the EU doesn't make cars' means. Germany, Italy, and France all make cars, all are in the EU...

You should tell the merry Brexiters that - they were convinced that the German car industry had more power in the EU than any nation, and that the German car industry would ensure that the Brexiters would get the trade deal they wanted from the EU.

Even better, maybe you can tell Trump which car company bought out GM's European properties, particularly Opel and Vauxhall. It is in the EU, after all.

But sure, the EU does not make cars in the EU - but then, neither does GM anymore.

Trump once again caves to China. Anybody remember ZTE and all those Chinese jobs?

"The symbolic elements of the deal are at least as important. First, China has acknowledged that exports of fentanyl, a highly addictive synthetic drug, are a very real problem for the U. S., and has pledged to ban them."

This will make the meth dealers happy...

NYTimes article: Meth, the Forgotten Killer, Is Back. And It’s Everywhere.

This part of the column is pure nonsense. Maybe the author is high.
The american doctors are prescribing the medicines.

That is not true. American doctors get patients hooked on opioids, then when they get cut off, the patients seek out other opioids on the street. There is no doubt that fentanyl exports from China were approved at the very highest levels with full knowledge of the consequences for Americans. It is strategy taken straight out of their warfighting manual "Unrestricted Warfare" written by Colonels Liang and Xiangsui of the People's Liberation Army. I quote: "Aside from what we have discussed above, we can point out a number of other means and methods used to fight a non-military war [including] drug warfare (obtaining sudden and huge illicit profits by spreading disaster in other countries)."

Someone please explain to me why we are doing even one dollar's worth of business with China.

The bottom line is that Trump blinked and the Chinese have been rewarded for their intransigence.

That cannot be true. I just heard on the morning German radio news that American cars imported into China will no longer face a 40% tariff.

Trump has singlehandedly, as one would expect from a very stable genius, saved GM.

Just waiting for the official tweet confirmation, between Mueller bulletins.

Surely these trade wars are just tax raisers for the governments on each side? Chinese goods inwards to the USA raise tariffs, ie taxes for the US government, and US goods into China raise taxes for the Chinese. government.

Dismantling SOEs seems like a no-brainer; SOEs are significantly less efficient than private companies. China did dismantle many SOEs in the 90s and was talking about the need to do so even in the last few years, so what changed?

What changed is our policy. For example we recently put sanctions on that Chinese microchip company; some media outlets rushed to justify it by citing alleged IP theft but the official government statement said nothing about IP and said only that it was a national security risk if that company outcompeted US ones. The implication is clear—you get too successful and we’ll kneecap you. Could private Chinese companies hope to survive in such an environment? Or take the Iran sanctions—we have brought even the largest private European companies to stop business with Iran, and if we can make them stop business with Iran we can make them stop business with anyone. China would welcome privatization but not at the risk of forcing all of its companies to become pawns of US foreign policy, just like how we are concerned about Chinese companies serving Chinese foreign policy instead of commercial gain.

I hope China does dismantle its SOEs because private enterprise is what creates prosperity, but the obstacle to doing so is squarely in Washington.

Chinese State-Owned Enterprises are not supposed to be "innovative", they are supposed to be opaque and controllable.

As an easy example, here's a way to prop up capital stocks: Have SOEs loan money to each other at very favorable terms. One issues bonds, and the other buys them, with bonds, and each puts them on their balance sheet. In a non-SOE company, particularly with mark-to-market rules, the bonds would be (de)valued based on the worth of the issuing company. But, I won't look at your bonds if you don't look at mine! Then multiply this by all the SOEs with interlocking networks. With the Chinese Communist Party coordinating the lot.

If one SOE was "dismantled", it would break this house of cards and trillions in valuation would disappear overnight.

So that is. Unconditional surrender to Red China.

Hello. I am Chinese citizen. I am wondering, can you tell me which Americans make best servants? I want to know who I should have rub my feet and pick up my cigarette butts after I choose Hollywood mansion to move into, since United States has unconditionally surrendered to us.

It is not what I am talking about. I am talking about America becoming a tributary state. America pays a heavy tribute in imports, jobs and lives (cf. opioids epidemics) to Red China. America`s elites sold their fellow citizens out (cf General Motors).

Yes, definitely this opioid war is clearly all the fault of the Chinese. They very much brought it on themselves. If only they believed in free trade we could have avoided all this unpleasantness.

My point is that, as future Brazil Foreign Affairs Minister, Mr. Araújo, pointed out, Red China is destroying the West.

But Red China pays for those imports, jobs, and lives with its young women, who are marrying professional-class American men at a rate of multiple thousands if not tens of thousands per year.

So that's it: all the country must pay for the elites' concumbines, none of them is the Queen of Sheba or Bathsheba!! Shame on America's leaders!!
"Woe unto thee, Washington! woe unto thee, Wall Street!"

You do realize this gives China even more leverage over Americans since they love to hold hostage family members. See the exit visa fiasco a couple weeks back.

The trade dispute with China is a dispute that will resolve itself. How so? China is moving into a new phase of economic development, one with more emphasis on living standards and consumption than saving and investment. This will include, at the national level, the adoption of social welfare programs such as health care and retirement, and at the individual level, and increase in current consumption of goods produced not only in China but in other places as well. It's the natural order of things. The challenge for America is to compete with China firms for the goods and services the Chinese will consume. As I have commented many times, in this new phase of development, China will be producing more goods for China firms to compete with goods produced by and for American firms including goods produced in China for American firms (such as the i-phone). Will the Chinese be willing to choose goods made by and for American firms over goods made by China firms? Americans choose i-phones made in China for Apple, so why wouldn't the Chinese do the same. It may take some time, but it's the natural order of things. On the other hand, all those threats and chest pumping by Trump may induce the Chinese to be more patriotic and choose goods made by China firms just to put the Americans in their place.

The photo of Trump glaring at Xi at the top of the digital edition of today's NYT has to be seen to be believed. It's as though Trump is trying to scare Xi into submission.

In the picture (enbiggened) you can clearly see that Trump is not looking towards Xi.

Two different photos. The first one Trump has a scowl on his face and is looking straight ahead (across the table at Xi), while in the larger one Trump is looking to his left with his mouth open in the Trump way.

China is moving into a new phase of economic development, one with more emphasis on living standards and consumption than saving and investment.
The chinaman-on-the-street does not see the future this way.

CNN - The romantic comedy was a breakout success in the United States for Warner Bros., but it flopped at the Chinese box office, taking in less than $1.2 million in its opening weekend, according to industry tracker Ent Group.
To put that in perspective, Sony's (SNE) superhero blockbuster "Venom" pulled in $111 million in its opening weekend in China early last month.

You are an optimist to believe this when disputes with Germany and Japan (possibly the closest, very distant analogies among democracies to the Chinese model) do not cease, despite them being actual friendly democracies and allies to the United States and essentially free societies.

It should be obvious to all now that the inevitable liberalization of China was a myth: Without that, it seems a dim prospect that China shift to the patterns of consumption that are the norm.

Trump may have been for a trade war with China for what seem like foolish reasons and simplistic zero sum perceptions on trade. That does not mean that the picture that has emerged China is going to remain a state outside the norms of liberal democracy and willing to manipulate international trade to facilitate its development and power (within China and internationally), is not also present and deeply worrying. If you still believe this is wrong, fine, but you should not double down on ideas predicated on Chinese liberalization and shift to consumption and imports, just because you perceive them to be against Trump.

I agree with this, say 60 to 70%.

But just as it was wrong to treat previous liberalisation as destiny, I think so too recent regression.

It looks to me like China is on a two steps forward one step back road to modernization. There is obviously uncertainty in that, but I don't think we can deny the possibility of success, from our liberal Western perspective.

An ancient way to change a culture is to stay involved through trade. Exchanging university students is even better.

So I say the more involvement the better, andd make sure you issue lots of student visas.

My view about the path for China has nothing to do with Trump, other than the possibility that his bluster could postpone the path I believe China will follow. Of course, no path for any country is a straight line, and it won't be for China, Trump or no Trump. I've noticed that Cowen has been saying positive things about Trump, on his book tour (he praises Trump for bringing into focus the need to increase economic growth) and now about China and trade: "The reality is that hostility toward Chinese trade practices has been building for some time. . . . This is an issue that predates Trump, and he deserves some credit for doing something to help solve it". It's a smart move on Cowen's part: Trump's ego is so large that complimenting him is the better course, because criticism only exacerbates his penchant for destructive (ours as well as his) behavior. Michael Corleone would approve.

It is very odd timing on Tyler's part. The Mueller investigation has now uncovered very basic and important dishonesty in the Trump campaign. It could very easily go further than that.

But what, Thiel-libertarian axis is so anti-democratic that it just doesn't care, and feels that it is safe to be "contrarian" and pro-Trump now?

Very strange. If Tyler was a big thinker, I'd think he'd be positioning for the Post Trump World.

One would hope that would be a world of more honest and moral conservatism.

Silly comments. The Mueller investigation has shown how easy it is to fall into perjury traps when a prosecutor has few morals and is seeking punishment over justice. It demonstrates how the power of the state with unlimited budgets can destroy the average person. It shows how politicians can use the power of the intelligence agencies and corrupt law enforcement officials can create a pretense to dig into the life of political targets until they find a "crime" or even create a crime. The evil is the use of government agencies to destroy political opposition. Just as Obama spied on reporters, used the IRS, etc. But I guess if you hate Trump civil liberties don't matter.

Tyler is not pro-Trump. Trump was willing to take risks to challenge China. That kind of courage is rare. Trade with China has many problems that the Econ 101 textbooks ignore. The protection of property rights is vital to the US economy. Compared to the limp efforts of Obama to bore the Chinese or the Clinton efforts to enrich supporters, the Trump approach is better.

That lies and crimes are now "perjury traps" is surely an apotheosis of moral bankruptcy.

A perjury trap refers to an abuse of the legal process, whereby a prosecutor subpoenas a witness to testify not for a legitimate investigative purpose but to try to catch him in an inconsistency or falsehood — even a relatively minor one — that can then trigger a perjury charge.

Read the case of Scooter Libby.

Mueller is rummaging around looking for a "crime", often a minor falsehood, that he can then use as leverage. Yet Clinton staff people can walk up and claim I don't remember, I don't recall to virtually any question and walk away. Or they can lie. The Obama Justice Department can ignore lies to Congress as normal by Ms. Lerner, or Mr. Holder but forgetfulness or incomplete memories by Trump supporters are criminal.

Basic and important dishonesty in the Trump campaign? Like me not fully remembering a post from two years ago is now grounds for perjury? Could you pass that standard? How many people can?

By the way, that phrase was seldom used until Trump and his followers needed it.

Let me tell you about this works. A good friend of mine was a mid level accountant and was involved in an SEC investigation. The target was the CEO. The government attorney kept hammering on him about a scenario that was not true. He kept saying it was not true. Eventually the attorney did the following.

The government attorney reached down into his bag took out a jar of vaseline and a round stick slammed them down on the table said unless you give us what we want we are going after you personally and this is what is going to be use don you in prison.

Now tell me how brave you would be in telling the truth under thos circumstances.

Will Republicans really accept this as the Party position, that all investigations are corrupt?

Obviously not.

But the historical precedent of perjury traps by special counsels is Monica Lewinsky.

But maybe we’ll be 1/2 this time?

When may speak in the same language, but we don't hear in the same language. When Ronald Reagan criticized government as the problem, what the fine folks down here in the South heard was confirmation that racist views were not only acceptable but mainstream. Did Reagan intend that the words he spoke would be heard that way? Probably not. The difference between Reagan and Trump is that Trump does. And that's the path from Reagan to Trump. Would 41 have been as willing to use the Willie Horton ads absent Reagan? Probably not, for 41 promoted the ADA and long ago apologized for his opposition to the civil rights act and the voting rights act as necessary because of the (Southern) Congressional district he represented. Today, it isn't necessary to use coded language for it to be heard the way in which it is intended; indeed, clarity in communication has become the province of the right.

I have never understood the insistence on never taking any sort of retaliation in trade matters.

Even if we grant that Chinese protectionism is good for American consumers and the American government, letting China flout norms in one area, like trade, would most likely encourage it to flout them in others, like the South China Sea.

At some point, international relations have elements of an iterated prisoner's dilemma and if one side never defects you get a pretty ugly equilibrium. Accepting net losses merely to punish the "misbehaving" side is pretty much the only way to defect as retaliation. There is never a good time to take a loss to ensure the other guy cooperates ... but honestly in the middle of an economic upswing with unified political control is likely as good as it gets.

My second link was actually a funny goof.

There are always a few pundits who hold out that any sort of retaliation is wrong headed. Normally some of that spills over into the party out of power in DC. Sometimes it is necessary to take short term losses in order to change long term patterns. Free trade is best when all parties actually practice it, refusing to use all reasonable options, and maybe a few unreasonable ones, to level the trade field is terribly short sighted.

The Chinese use their enpixelated trade surplus to finance the profligacy of the US government through the purchase of US debt and holds over 7% of the total US debt obligation. Discouraging a Chinese trade "surplus" will create bigger problems for the US but maybe that's what some influentials want.

"holds over 7% of the total US debt obligation"

Big deal, the Fed holds 17%

Yeah, $1.18 trillion, change you might find in the couch cushions.

I totally disagree with the message of this column.
The true face of american "Libertarians".

This column is pure nonsense. Are you serious?

He doesn't deserve any credit for making absurd, impossible demands though. He may have desires but when he knows nothing about how to achieve them, it is all pointless.

Oh please, nobody cares what the initial demands are, particularly for a guy like Trump who admits to using outlandish demands as anchoring points in negotiation.

I mean making such demands was part and parcel of Nixon's Madman Theory. It is also part of plenty of good cop/bad cop routines throughout the years.

Now sure, I don't think Trumps antics actually accomplish a lot, but the Chinese are not stupid enough to fail to see that congress has been and most likely will continue to let these actions stand. Worse for China, strong blocs of Americans in swing states, like WI, back Trump's tariffs. At some level they have to be worried about what happens if you get a more popular president who also wants to put in tariffs.

After all, the major losers to Chinese IP theft and forced knowledge transfer are the Democratic leaning tech and media sectors. Do you really think a President Harris would leave a bunch of Midwestern voters out in the cold while helping her donor base recoup money?

This is, frankly, the best it will ever get for China's negotiating position. Their foil is clearly despised by many around the globe and has very hostile relations with the other political party, the media, and at least a third of voters.

If anything, I suspect that China may not want to endlessly kick the can down the road. Trump makes it easier for them to look rational and compromising. Divided government makes it harder for any agreement to be strictly partisan and harder for maximalist demands to be pursued by the administration.

Trump is so good at supporting policies favorable to China, there is no reason for them to make any deal. They will just let the US trade deficit continue to expand, and Trump has no need for deal since he can use them to assert strength even as it goes the other way.

We should just stop trade with China altogether. We have plenty of national security and human rights reasons.

It would be a minor annoyance to us, they produce nothing that other countries can't produce just as cheaply after a year or two.

Oh should "we"? What a collectivist you are. Forget individuals and businesses wanting to engage in commerce, Bob wants THE STATE to tell us what to do.

The whirlwind of the parties switching positions in the last two years....

Score one for Hanson.

Yep. The whirligig of partisan hypocrisy seems to have leveled up in the last 10 years or so.

"The whirlwind of the parties switching positions in the last two years...."

Its a national security issue. I have been a hawk my whole life. No switching.

The late president bush's second biggest error was not pushing the reds when they were tottering in 1989.

China is an enemy state. It aims to replace us.

We normalized relations as a counterweight to the USSR. The USSR is dead. we don't need cheap toys.

Strike now economically so we don't have to strike later militarily.

Both Trump and Xi will play this as having stood up to the other side. Now they have a common interest in slowly unwinding the trade war since they've extracted the maximum political points as possible.

Bold prediction: China gives up nothing. Says they’ll buy soybeans. America caves, since China holds all the cards.

Trump says he won, best deal ever etc. We go back to the status quo.

It is not just the USA that has, or should have, significant grievances with China. China made a number of commitments to join the WTO that it has not respected. When China was accepted into the WTO the expectation of everyone was that China would open a market economy. China has made fools of the rest of the world. The WTO's tolerance for China's continuing flagrant violation of these commitments shows exactly what a corrupt and worthless arrangement the WTO. Until China is expelled, the WTO and its member nations are nothing but corrupt losers who deserve nothing but the utmost contempt.

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