If my memory didn’t fail me, I recall during Xi visit to USA, he told USA not to fall into the Thucydides trap. Guess USA is too paranoid of losing its sole superpower status, and as the global technology leader.
I think the trade war will be brief and a non-event. The aluminium and steel tariff already has exceptions to it for countries that agreed to reduce/eliminate tariffs on US goods. That’ll be the end game for tariffs against China too.
It seems likely that such a tariff would burden American consumers while doing little to create jobs for them. Gary Clyde Hufbauer and Sean Lowry at the Peterson Institute for International Economics, studying the impact of a 35 percent tariff imposed on Chinese tire imports by Washington in 2009, found that American consumers had to spend an extra $1.1 billion on tires,
while the tariff protected no more than 1,200 jobs. About $900,000 for every job saved, in other words.
China’s ambassador to the U.S. warned Donald Trump the Asian nation would return fire on tariffs the U.S. president announced, saying the American middle class would pay the price.
“We don’t want a trade war,” Chinese ambassador Cui Tiankai said in a video posted to the embassy’s Facebook page. “But we are not afraid of it.”
Cui said accusations of intellectual property violations are “groundless” and his country “will certainly fight back and retaliate. If people want to play tough, we will play tough with them and see who will last longer. ”
That’s not the goal or plan. It’s interesting, because it reminds me of negotiations with suppliers. The more ridiculous the initial demands are the more it appears you compromise to reach agreement. That way both sides feel they “won” by getting the other side to move a long distance.
Sometimes all it takes it getting samples from one of your supplier’s competitors. Employees move back and forth between companies within a given commodity like displays. The word will get out that you’re testing a competitor’s display and thinking of sourcing it. It’s instant leverage in negotiations. My old boss went as far as to fly engineers to Japan to meet with a competing supplier while he was negotiating in China. Of course the China supplier found out, and they made a deal before the engineers arrived in Japan.
You can see it in the steel and aluminum tariffs. There was major uproar and threats, but the most of our trading partners agreed to concessions to be excluded from the tariffs.
China is threatening farmers with soybean tariffs. Personally, I’d use the media to play up that threat and make China the enemy that wants to hurt American farmers. Then when a deal is struck to avoid the tariffs, I’d create a media campaign around how I saved the Americans farmers from tariffs by China.
It’s all about perception and controlling the narrative.
Apple is importer as of last year, hoarding 200B cash abroad whatever imported profits. But now, everything is changing to take the benefit of Trump tax cut. They will be winding down imports gradually. Not only Apple, many companies are doing the same.
Everybody knows the negotiation techniques. Trump himself ghost wrote a book on that topic, remember? At the end of the day it boils down to whose position is stronger.
China is more dependent on trade and poorer than the US. So advantage USA. But US is more divided and China can play one state against another. So advantage China there.
Might not be good for many Apple component suppliers. Apple may try to do more in-house or acquire component supplier e.g. MU Is impossible for Apple to do manufacturing efficiently in USA unless most of the components can be sourced in USA.
It’s about $60B worth of imports. That is ~15% of the imports from China. It’s 0.3% of US GDP and 0.5% of China GDP. Even a 20% tariff, would amount to $12B which is rounding error for both economies.
A spark can destroy the forest. Is not the current situation that worry the market. Market is worried that it would escalate into a full scale trade war.