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The economic war between the United States and China really began on July 6th. This could imply, like tariffs, counter-values and lost production, something like a trillion dollars and lead to a serious global recession. What Trump wins and what America loses us.
The economic war between the United States and China, in the context of a larger trade offensive launched by Trump against almost the rest of the world, has really begun, July 6, despite the skepticism and the Disbelief of many.
Several thousand pages have been written on the subject and many things have been said. We will therefore try to focus our attention, for the most part, on some of the less explored topics in the media.
The motives of Trump
We have long wondered about the reasons for these initiatives. Trump.
The official explanation given by the president is that there are unacceptable imbalances in the country's trade balance with the Asian counterpart, while moreover Chinese companies are stealing American technologies with fraud or unfair contracts, while companies The United States are stuck in their attempts to enter the Chinese market and while China finally supports with a large state the development of new technologies by local companies.
But these reasons do not seem to take into account, inter alia, the fact that about 50% of Chinese exports to the United States are made by American companies and that, more generally, the chains of The value of individual products is today very complex and their production often affects 10 to 20 countries. On the other hand, and more generally, as Paul Krugman recalls (Krugman, 2018), Trump and his badociates make statements about the effects of their policies that have nothing to do with reality: Trump invents Healthy things and his advisers usually speak of imaginary economic triumphs.
In fact, beyond the official statements (some of which we will discuss later), at least two other strong motivations can be seen in Trump's behavior.
The first is that the United States, the power up to yesterday highly hegemonic, does not want to resign itself to the rise of an alternative power, China, which has already outgrown the size of the US GDP – at least using the parity criterion of purchasing power – as well as volumes of its foreign trade, while the country is moving fast in its pursuit of the United States in the field of advanced technologies, but still, in some areas, such as fleas and the production of civil aircraft, route to make appears long enough. But the country's growth seems to be unstoppable. From this point of view, the problem of the struggle not to lose world domination would inevitably manifest itself, perhaps in different forms, even with a Hillary Clinton presidency. No great power has ever peacefully accepted the loss of primacy except under exceptional circumstances, as was the case in the twentieth century for Britain, which had to cede power to the United States by force. major with the Second World War
. a crucial and delicate point in history, where one power is declining and another is plausibly taking its place, in a broader process of "orienting" the world. It is notably known that in 2017, emerging countries, still using the criterion of purchasing power parity, produced nearly 60% of global GDP, with a trend towards even faster growth in GDP. this value. .
But it seems that no one in the United States, at least until today, has managed to find an appropriate cure for this trend and maybe it's not possible. There is no cure.
Trump's second motivation, of a more cyclical nature, seems to be that, through even exaggerated patriotic tones, he tries to obtain a consensus in the electorate in view of the mid-term elections. November and the next presidential elections. This last motivation might perhaps help explain why, instead of taking it with China alone, the president is also attacking his most loyal allies, with similar threats in some way.
But who knows? We always try to find rational answers to what is happening, but sometimes the real ones are different.
The Chinese Reaction
We can finally estimate that the $ 50 billion bill that Trump wants to inflict on China by taxing its property for this value may well suffice for them easily saved.
In the context of a long-standing policy in the country, aimed at significantly reducing the weight of exports to the United States, China can face the problem in several ways: 1) devalue the currency, an action that already seems in place; 2) transfer factories and works in neighboring countries, a process in progress for many years (see what happens for example in the Feng Steel Sector, 2018); 3) to establish the true nationality of the products by pbading them through another country; 4) limit costs and profits; 5) push exports to other regions; 6) to focus more on the internal market, even with appropriate public incentives; 7) diversify production at the level of individual enterprises. And maybe we forgot something.
On the other hand, Americans threaten to tax Chinese goods up to $ 500 billion. Their reasoning seems to be in this regard that since US exports to China are only 130 billion, Asians will have a hard time responding to this demand. In addition to the fact that this type of badysis forgets services, a sector in which the United States exports $ 50 billion each year to China, Trump and his improbable advisers do not consider that China could progressively block activities. US companies in the country. hundreds of billions of dollars, to further contain current US exports by raising tariffs to even higher levels and possibly blocking products under a thousand technical pretexts; in addition, it can still block purchases of US government securities and the arrival of Chinese students and tourists in the country.
We must not forget that today China is generally much less dependent than a single time exports: only 2% of national income.
The Economist & # 39; s Analysis
Let us now examine, on the one hand, the protests of American companies who believe they are discriminated against by the Asian country, on the other hand we we remember the history taught about technology theft.
The Weekly The Economist in a recent issue (Schumpeter, 2018), examined the extent of US government and corporate complaints about China's alleged unfair treatment of its companies.
Meanwhile, Chinese companies sell almost exclusively to the United States through exports, which amounted to $ 506 billion in 2017. It is true that US companies were exporting only $ 130 billion to China the same year, but … points out the economist – if we add the sales made by the same companies through their subsidiaries, we get a figure of about 450-500 billion dollars. In contrast, the combined market share of US companies in China is 6%, about double that of Chinese companies in the United States.
If we then consider the balance of services, there is a specific imbalance in favor of the United States. As I have already mentioned, it is about 50 billion dollars a year.
At another level, for US companies, sales in China increased by 12% per year from 2012, those of local businesses by 9% and those of European companies by 5%. These figures show that it is not true that US companies are getting worse results than local companies and other multinationals.
Regarding the fact that US companies (from Alphabet to Facebook, to Netflix) are excluded in China from certain sectors, this seems undoubtedly a real fact, but the same can be said for Chinese companies in the USA.
The Economist's considerations could be added to the point that if you compare the level of US direct investment in China with that of Chinese investment in the United States, there would be a clear difference in the amounts in favor of the United States. -United.
History
Trump insists that the Chinese copy, with sometimes only formally legal and sometimes clearly fraudulent means, of Western technologies. And there is certainly some truth in that, but we can remember that it is a common practice throughout the history of the economy and that attempts to hinder it do not generally get good results.
Florence in the Middle Ages strictly controlled the silk processing technologies, over which the city had a monopoly and threatened the death penalty for those who tried to export them to other shores. This did not prevent some well paid Florentine craftsmen from migrating to France and setting up their work. Something similar happens in several ways in Venice a few centuries later for the treatment of large mirrors, even more complex technology, that the French managed to steal by buying the services of an Italian craftsman.
After the British Industrial Revolution, the United States managed to pull out its industrial sector mainly through the initiative of FC Lowell, who started in Boston the first large textile factory on the Atlantic, took over the relative know-how during a trip to Britain in 1813 and illegally stole the steamship project. But Trump, as his own confession, our Under-Secretary of Culture League, does not read many books.
More recently, the phenomenon has spread and even Italian industrial development, especially after the Second World War, will attract one of the problems of the United States appears while the Chinese, who are can -be the greatest inventors of technology in the history of humanity, are not limited to the question of foreign technologies. copying the westerners, but they have their own production in a growing number of sectors and that is perhaps that which especially fear the United States and that they are looking (we think totally unsuccessfully) to block.
Conclusions
Also considering the ongoing dispute with the European Union, the NAFTA (zone in which US trade is more important than those with China) and d & # 39; Other developed countries, we are potentially referring to at least $ 1,000 to $ 1,500 billion of trade today under discussion. Many think and hope that Trump will not dare to go further on this terrain, which would have serious consequences for his country and for the global economy, with the threat, among others, of a serious global recession; but it is not said.
Many remember in this regard that America is not designed for autarky, it is not equipped to produce the goods that it consumes at home. The adaptation to this new framework would be very long and full of hardship and suffering, while the consumer would suffer a lot
In any case it is a battle that the United States can not win. Surely, they can eventually lose us all. There may be no winners, but if it comes out, it could be China that could prove, after the crisis, the new economic leader of the world.
Texts cited in the article [19659003] -Feng E., Chinese steelmakers focus on Southeast Asia, www.ft.com 24 June 2018
-Krugman P., World Trade in tilt also for false news of Trump, Il Sole 24 Ore 7 July 2018
-Schumpeter, Rage against Beijing, The Economist June 30, 2018
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