RE: OAG data7 Aug 2019 13:06
Let me pick up on the 2 points you raised and give my views.
"1. The USA trade deficit with China was unsustainable, the US had to do something about it sooner or later, it was only going to get worse."
This is good old capitalism that America espoused all this time. Parking the question of sustainability for a minute, the trade deficit is what it is because China could produce the goods the US consumers wanted at a much lower price than the US manufacturers could and this led to manufacturing in large parts being moved out of the US. The US was importing a lot of it from China and China in turn was funding a good lot of US deficits via buying US T-bills. The US consumers and companies were getting what they wanted. Is it feasible to bring back commoditised manufacturing back to the US, resulting in large increases in prices to consumers - I'd say that US consumers will not want to do that.
Are trade deficits sustainable and what is it makes them unsustainable, as you suggest? Every country has either a trade surplus or deficit that eventually nets to zero globally. If a country can't make a product economically, then they import from another, creating a surplus for them and deficit for the importing country. The consumers are happy as they have a product they need at a lower cost - that is consumerism and nothing about that trade is unsustainable as long as that's being funded. Whether we like it or not, economies are now very interconnected and decoupling isn't an easy task.
"2. The Chinese don't operate with a level playing field and are not as transparent as the West, everything is state controlled one way or another. It's well known they have been dumping products, especially steel, they sanction bust, they don't keep to agreements, don't respect international law, (like the Ruskies). China bullying in the Pacific and Taiwan, Russia in various frozen conflicts, Ukraine, Moldova, Gergia (the US is not blameless on that point either) etc, etc."
I'm not condoning the Chinese trade and IP practices at all. Everyone acknowledges that they need to change, and their markets need to be opened more and get them to a level playing field that the western economies provide to them. State support for industries is a big issue too. It's how you go about it is what I'm questioning. Tariffs have never solved economic issues. History is rife with the ill effects of such protectionist instincts - refer back to the Smoot Hawley act of the 30s and how that resulting in a deepening of the great depression, resulting in nationalism/populism coming to the fore and the rise of a certain Hitler. Trump is going down the same route with not just China, but also putting up tariffs on allies/friendly countries (Canada/Japan/EU/Mexico). This is exactly the coalition that he needs to fight China economically, rather than plunge the world into economic uncertainty, which is where we'll be nearly at now if these tariffs go ahead. That's the danger!
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