China imports billion of dollars of digital goods from USA. I believe the below estimate is too low. Should be of the order of hundred of billion dollars, might even be more than the trade deficits that Trump claims. If Trump continues his over-played hand, China would attack the digital good imports. And start dumping Treasuries aggressively, forcing yield to shoot up, increasing the cost of borrowing for USG, exactly opposite to what Trump wants.
Total imports from China less those by American owned factories = 439 - 265 = $174B.
Total exports (including software) to China = 144 + 30 (underestimated) = $174B.
Total (physical + software) goods trade balance = 0, in fact, is surplus vs China.
Take note: For imports that are by American owned factories, tariffs have to be borne by either American firms or American consumers.
Above is for trade vs China. Should be true for trade vs nations such as Vietnam. Vietnam didn’t earn enough hard forex to pay for imports demanded by Trump since the “deficits” are earned by American firms, and not Vietnam firms. So Trump demand can’t be fulfilled at all.
The system is I like/need your goods, I buy. I don’t like/need your goods, I don’t buy.
For US, want to buy foreign goods, just print USD. For other nations, need to earn USD before they can buy.
Pretty sure China would immediately respond with additional 50% tariff once Trump implements his threat. At this point of time, these tariff threats are worthless, might as well raise to 1000% or just ban trading.
Puru,
Those on the list below will be paying for any tariffs raised by WH.
10 year yield drop to 3.9% for two days but now back up above 4.1%. Did Trump refi the debt during those two days? So many MAGA people said tariff is the genius move to refi debt at lower rate.
Literally both can’t be true at the same time. What with open borders?
Tom Lee worried about “core covenant of capitalism” or what not. Problem is actually much simpler. We have low IQ morons at the top who don’t give a fuck. That’s it. That’s the problem.
Conspiracy theory from China’s point of view. I think Chinese leadership actually thinks along this line. They think Trump is dividing the world into two sides, the US and China, and sort countries into these two bins.
I don’t think Trump has that kind of IQ to think that deep. But it doesn’t really matter whether it’s Trump’s plan or not (more likely IMO). What matters is China interprets it that way. These kinds of missteps and misunderstandings lead to war. Wouldn’t be totally surprising if we see China invading Taiwan and WW3 as the end result of all these.
China has abandoned the middle approach of strategic balance, cooperation and competition and chosen to fight to the end. This is a historic decision that will affect its destiny for at least the next thirty years.
This decision was not made overnight, but has a profound basis in public opinion. Hatred and anti-Americanism have become China’s mainstream ideology, and people’s confidence in China’s national strength has reached a new peak. Chinese people generally believe that they are fully capable of confronting the United States, and that the United States has even fallen behind China.
Trump’s tariffs are essentially bargaining chips. The first purpose is to get other countries in the world to lower their tariffs on the United States and purchase American goods. The second purpose is to exclude China from the US supply chain.
The way it was implemented is quite drastic, similar to the “fall enough at one time” operation method in company financial reports. The bad news is released all at once, and then all the good news follows. The United States will continue to reach agreements with other countries in the world.
Trump does not want to reach an agreement with China at all, and China’s strong countermeasures are in line with his intention. China will fight the United States to the end, and China-US trade will be completely decoupled. Most other countries must choose sides, either impose tariffs on China in exchange for the right to continue trading with the United States, or join the Chinese economic cycle.
I wonder how anyone with disability ever fed themselves in the days before the welfare state.
Futures are up a thousand. Foreign markets are way up too. Interest rates show panic has subsided. 70% of the economy is services. Only a portion of the remaining 30% is import/export dependent. People will buy less foreign stuff and substitute US stuff. Lots of crazy panic over very little.
BTW I talked to a financial advisor on Friday before doing my taxes. They manage a small portion of my net worth due to a complicated tax situation arising from in inherited trust. I meet with them annually in April mainly to get an idea of earnings directions and dividends so I know how much estimated tax to withhold. The expectation is for dividends to rise slightly this year even with a short economic slowdown. Good time to put excess cash to work.
For sure, China won’t want to make a deal since tariff hurt American businesses and consumers more than hurting China. Is a lose-lose game that Trump has started.
将计就计
Turn initiator’s stratagem against them
For example, Apple and/or the American consumers have to pay for tariff since Foxconn makes only a few dollars so is not possible for Foxconn to absorb the tariff. Ditto for other American importers.
