I have stated in previous posts that I believe China will not back down from Trump in this stupid trade war and America will ultimately be the loser with everyday Americans picking up the tab and feeling the most pain. This morning China announced tariffs on American goods coming into China will rise to 125% in response to Trump jacking up tariffs on China to 145% recently. These tariffs are bound to hit the agricultural heartland, Trump country, very hard. How much pain are the American people willing to endure?
The simple fact is, China is already an authoritarian country. President Xi is president for life if he chooses to stay in power which he surely will. He does not have to answer to anyone so if these tariffs cause significant hardship on the Chinese people, President Xi does not have to worry about upcoming elections. He can power through the pain. The United States is not yet an authoritarian regime and we still have a Congress (however ineffective they have been of late), elections and many billionaires who are being hurt by these ridiculous economic machinations. (I hesitate to use the word ‘policies.’) Trump’s approval rating continues to fall as prices rise and balances in 401K’s plummet.
China has the second largest economy in the world and a population that is three times the size of the United States. They have the second or third largest navy in the world and it is rapidly expanding. They have significantly increased their influence and investment around the world with the Belt and Road initiative which aims to invest in 150 countries. There are already rail lines in place that run from China to several major cities in Europe. China is also a large holder of U.S. mortgage back securities which could allow them to adversely affect the U.S. housing market. In short, China in many ways is in a much better position to weather this trade war than the United States.
The United States, on the other hand, has slashed foreign aid. Trump has offended and economically attacked even our closest allies with unwarranted tariffs calculated using middle school math rather than any sound economic principles and long-term strategy. The robust economy Trump inherited when he took office in January, just three months ago, is now in shambles and he is surrounded by a whole cabinet full of self-interested billionaires and/or incompetent sycophants who are not qualified for the jobs they hold.
Trump would do well to heed the words of Sun Tzu, “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained, you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” I think Trump has failed miserably to know his enemy, China, in this trade battle. He is grossly underestimating their resolve. They will not lose face or compromise their position of rising world influence by appearing to cower to Trump’s demands.
The rest of the world, including America’s closest allies have realized the United States is no longer a trusted partner. China will take advantage of this and, in my opinion, will emerge from this trade war even stronger and more influential around the world than before Trump started this unprecedented trade war. Sooner or later, every bully gets a bloody nose, and I think Trump is about to get his. Unfortunately, all of us will pay the price for his egomaniacally driven and capricious foreign policy debacles.
No one should forget this is the same man who has left a trail of failed businesses behind him and filed bankruptcy six times. Anyone who thinks he is some kind of financial genius has not been paying attention. The devastation of the United States economy is now just another notch in his belt of failures. This was all avoidable. The stature of the United States around the world is falling. The global influence of China is rising. Trump’s misguided policies are just a catalyst to make this happen faster.
