Trade wars

[Mr._Graybeard]

I wonder if China will decide to put the hammer down on General Motors. The company makes far more money in China than it does in the US.

GM's business is booming in China - Business Insider

Oops, I meant Buick, not GM.

 

[HFWR]

Agree, the Chinese are pretty insular. Fortunately our folks have ongoing business in North and South America, Europe, and across Asia.

I’m fairly confident that China has global business interests...

In my utopian dream, humans will someday realize that there are eight billion (and counting) of us stuck on the third rock, and that cooperation is less damaging that conflict.

Naaaahhhh...

 

[Hamlet]

I wonder if China will decide to put the hammer down on General Motors. The company makes far more money in China than it does in the US.

GM's business is booming in China - Business Insider

Oops, I meant Buick, not GM.

I think a large portion of those cars are probably actually built in China.

I would expect that if this continues to escalate, the most effective way for China to hurt employment in the US would be to embargo a few key pieces of auto parts we import from them.

I could see a bunch of our domestic auto plants getting shut down temporarily because they are missing a few parts they need to complete vehicles we build here.

That's probably a few steps down the line of escalation, though. Once we actually implement the tariffs we've already announced and China responds with the tariffs they've laid out, I expect that the next $100 billion of tariffs that we've threatened will get defined. China will probably then respond with essentially across the board tariffs, since we probably only have about $100 billion more of exports to them.

That will probably lead to us threatening another $100 billion on tariffs (or $200 billion). Since China will be out of imports to add tariffs to, they will have to get creative at that point to respond. Embargoes will probably enter the conversation at that point.

This all assumes that reason doesn't prevail, of course.

 

[MuirWannabe]

Here's a good example of an innumerate journalist fear mongering on trade. https://www.cnbc.com/2018/04/06/bou...t-in-the-cross-hairs-of-trumps-trade-war.html



The article says that new Chinese tariffs on Bourbon are "bad news for distillers". Chinese imports of Bourbon last year were 9 MILLION DOLLARS! Um, that is 0.1% of Kentucky's production (also in the article at $8.5 billion, with b).



And it is probably mostly the good stuff going to Communist Party leaders - so maybe more Pappy for us!

When bourbon could be impacted my ears perk up. Of course, easier access to Pappy would be a fantastic outcome! I await my bottle. Meanwhile, I’ll be satisfied with Blanton’s.

 

[YVRRocketSurgery]

A couple of thoughts.

China holds a lot of US debt. Any concerns that they would consider flooding the market with US debt and cause an increase rates?

IMO, there's two aspects of the IP infringement. One is with regards to companies being forced in various means to give up IP when wanting to open up shop in China. These rules of doing business need to stop. I don't think the ship has sailed because I don't think China is set up to innovate as much as North America.
The second is plain IP protection/copyright infringement which needs to be enforced.

North American consumers love the cheap imports. The goal really is to open up China to more receive more US goods and services that they want versus limited the imports. For example, Germany of all developed countries runs a surplus with China.

Whether or not tariffs or a trade war resolves the above issue, I don't know. Sure, it kind of brings the issues to the forefront but there are some deeper issues at play.

 

[CardsFan]

A couple of thoughts.

For example, Germany of all developed countries runs a surplus with China.

Whether or not tariffs or a trade war resolves the above issue, I don't know. Sure, it kind of brings the issues to the forefront but there are some deeper issues at play.

Frankly, this does not surprise me. Years ago, before the EU, we were selling some large specialty equipment into Germany, or at least trying to. The answer was yes, we want to buy it, but you must build it in Germany. We said no, we have one approved fabricator in Europe, and they are in Spain. The answer was No. It MUST be made in Germany!

FWIW, this was NOT tariff or duty driven. Just the way to do business in Germany. Very nationalistic, at the time, and I think still, even with the EU.

In fairness, they also have some very special engineering and manufacturing expertise that, justifiably, commands a premium all over the world.

 

[Mr._Graybeard]

I think a large portion of those cars are probably actually built in China.

I would expect that if this continues to escalate, the most effective way for China to hurt employment in the US would be to embargo a few key pieces of auto parts we import from them.

I could see a bunch of our domestic auto plants getting shut down temporarily because they are missing a few parts they need to complete vehicles we build here.

Interesting opinion piece in the WaPost this morning: https://www.washingtonpost.com/opinions/global-opinions/american-companies-in-china-shouldnt-fear-tariffs-they-should-fear-a-boycott/2018/04/10/6ec85fe0-3c35-11e8-974f-aacd97698cef_story.html?utm_term=.e630f6a9d15b&wpisrc=nl_headlines&wpmm=1

 

[braumeister]

Interesting opinion piece in the WaPost this morning

Everyone appreciates it when you provide a bit of context and a short quote to describe a reference like this. Posting naked links is frowned upon.

 

[Mr._Graybeard]

Everyone appreciates it when you provide a bit of context and a short quote to describe a reference like this. Posting naked links is frowned upon.

Sorry. The point the author makes is that large American companies that do have a niche in the Chinese economy, such as Starbucks (and per a previous post General Motors) are vulnerable to mass boycott.

 

[Hamlet]

Sorry. The point the author makes is that large American companies that do have a niche in the Chinese economy, such as Starbucks (and per a previous post General Motors) are vulnerable to mass boycott.

Yes, that is another path that could cause pain to US interests. The article mentions something interesting that I hadn't thought about regarding a boycott. It isn't necessarily something the Chinese government can control 100%, like most of their other options. They could try to start a boycott and fail, or they could also try to prevent or end a boycott and fail.

That is really what this situation needed -- more potential chaos.

 

[harley]

Everyone appreciates it when you provide a bit of context and a short quote to describe a reference like this. Posting naked links is frowned upon.

Especially to paywall sites like WaPo. I use up my free views by the second day of each month.

 

[YVRRocketSurgery]

Hey, remember the Trans-Pacific Partnership trade pact that Trump said was a horrible deal and was one of the earliest promises he kept by pulling out of it in the early days of his office?

Well, it sounds like it might be up for consideration again under the guise of being able to get better terms now. Politics.

I'm not an expert on the TPP by any means but one of the key benefits I read about it was to help counter the trade influence China had in Asia. Both Clinton and Trump seemed to try to score political points by distancing themselves from the TPP since it seemed unpopular. But as seen with the trade irritants with China, there are a lot of pieces to the jigsaw puzzle.

 

[Just_Steve]

Well, it sounds like it might be up for consideration again under the guise of being able to get better terms now. Politics.

But is that not the "Art of the deal" ?
Contract negations 101, complain how bad the deal is get a few changes to your benefit and it becomes the greatest thing since sliced bread. Nothing new.

 

[Hamlet]

Especially to paywall sites like WaPo. I use up my free views by the second day of each month.

I have to admit that I have an extra browser installed just so that I can clear the cookies over and over so that I can read everything I want to at WaPo.

I keep meaning to subscribe, but I haven't yet.

 

[Mr._Graybeard]

I have to admit that I have an extra browser installed just so that I can clear the cookies over and over so that I can read everything I want to at WaPo.

I keep meaning to subscribe, but I haven't yet.

My local newspaper subscription includes a digital subscription to the Post.

 

[HFWR]

Some media reports that the Trans-Pacific Partnership (TPP) is back in play.

 

[Hamlet]

The market seems to have forgotten about the possibility of a trade war with China. It doesn't look to me like things are actually looking better--

https://www.reuters.com/article/us-...urns-at-sea-after-china-tariffs-idUSKBN1HR03Z

 

[mamadogmamacat]

agree, the topic is not getting as much press as it once did. however, not all news is dire as see this:

https://www.washingtontimes.com/news/2018/apr/19/editorial-china-blinks-in-the-tempest-over-tariffs/

Perhaps I should consider investments in automotive stocks (do not have any now among my individual stock holdings)

 

[Iowaboy1]

You don't build aircraft carriers or fighter jets without steel or aluminum.

Instead, you either produce the necessary materials yourself, or you purchase them from a trusted ally that has a price-production advantage. Perhaps an ally that has a cheaper source of electricity needed to make those products (such as hydroelectric power).

Off the top of my head here (just spitballin') ... an ally like Canada.

That way, you get the aircraft carriers and fighter jets you need, and save the taxpayers money.

Not sure if there is a huge correlation here but how significant could our trade deficit with Canada be? Metro New York Cities economy is bigger ($1.7 trillion) than ALL of Canada’s economy.

 

[YVRRocketSurgery]

A couple of points to note:
Trade between the US and Canada is already fairly balanced. US data show a slight trade surplus with Canada. Canadian data show a slight trade surplus with the US. It comes down to methodology to calculate the goods AND services being traded like how do you count goods imported from China to Canada and then forwarded on into the US. But in terms of the huge amount of trade between the US and Canada, it's already a fairly balanced score so there shouldn't need to be significant changes to re-level the playing field. Any changes to say NAFTA should be done to modernize it. Eg It was originally introduced in the early 90's when the Internet was in its infancy.

Dairy is protected in Canada and I agree it's a valid trade complaint. We have a supply management system where farmers are given quotas in return for price certainty. Consumers pay more but ensures the dairy industry stays on solid footing. NAFTA allowed for countries to take certain items off the table, like dairy or conversely like softwood lumber which the US has significant duties/tariffs on.
However, note that dairy is a small component of the overall trade between the US and Canada and that the US still exports more dairy to Canada than Canada to the US. I suspect more dairy access will eventually be allowed as part of the negotiations.

The path the trade war is going down isn't going to stop trade with the US but basically force countries to start building closer trade ties to China. By closing off trade, the US is basically allowing its influence to diminish. China is already starting to develop equivalent international organizations like the IMF.
IMO, the US and the western world have overall, greatly benefited with the current structure with constantly improving living standards. The problem is that segments of the economy have been impacted by evolving technology (automation, AI, etc) and changing standards (eg. Moving away from fossil fuels) and not enough of the benefits have been directed to support the folks in the impacted industries/towns.

 

[MichaelB]

Thanks for the discussion but the thread has moved so far into partisan politics that we have decided to remove some offending posts and close the thread"