In a move that mirrored the recent Kings Landing massacre in Game of Thrones, the U.S. and China trade war just went scorched earth. The Dow Jones plummeted upwards of 700 points on news that both countries would inflict another round of damaging tariffs. Unless some accord is reached, the tit-for-tat bloodletting could result in high casualties.
“U.S. equity markets are taking a battering as China has responded in kind to U.S. tariffs,” economic analyst Neil Wilson of Markets.com reportedly said. “Make no mistake, this is a serious escalation, and we have a trade war on our hands again.”
The two economic world superpowers have been fighting a protracted trade war since January 2018, that has been underscored by negotiations. The U.S. continues to suffer a trade deficit that crossed the $400 billion threshold in 2018 and threatens to unseat America permanently. Since scrolling back business-killing regulations from the previous administration, President Donald Trump elevated the U.S. back to the top economy in the world.
After more than a year of fruitful talks, China reportedly reneged on its promises to balance the playing field and stop stealing American innovation and intellectual property. According to estimates, China’s intellectual property theft may be as high as $600 billion annually.
“We had a deal with China, it was 95 percent of the way there,” President Trump said. “And then, my representatives, they went to China, and they were told things (that were fully agreed upon), were not gonna get anymore, they’re gonna unagree to them. We’re not gonna get anymore. And I said ‘good, that’s fine, put on the tariffs.’”
China has held the trade high ground for decades. By ignoring patent rights and strategically subsidizing specific markets, the Asian giant has been unscrupulously tipping trade power in its favor. Previous administrations including both Bush presidents, Bill Clinton, and Barack Obama failed to stem the communist’s unethical and illegal actions. Many believe the U.S. lost the trade war years ago, and President Trump’s struggle may be in vain.
It’s difficult to imagine that the U.S. looks more like a Game of Thrones Winterfell mob when compared to China’s Golden Company and Red Keep. However, China’s economy has grown dependent on the massive exports it sends to the U.S. and other aspects of American success.
Prior to the Trump Administration, presidents and Congress were fearful that trading fire with China would upend the U.S. due to foreign-held debt. China reportedly holds $1.13 trillion in U.S. Treasuries. But that’s now only about 17 percent of the untenable $22 trillion national debt. And, China’s return on investment relies on American success.
“It’s a self-destructive nuclear option,” global bonds expert Robert Tipp reportedly said. “Maybe it helps (China) as a bargaining chip, but it’s endangering the value of something they’re deeply involved in.”
“China will continue to use this is as a threat, perhaps, but in reality, I think it hurts them more than it might hurt us,” Kim Rupert of Action Economics reportedly said. “It hurts their portfolio. Whether they are willing to endure the pain. I think they might, but not to a great extent. I think it will be more a threat than an actual tool or strategy.”
President Trump has viewed China holding U.S. Treasuries as part of his leverage and some experts now agree tariffs hurt China.
“I love the position we’re in,” Trump said. “There can be some retaliation, but it can’t be very substantial by comparison. We’re taking in tens of billions of dollars.”
In his most recent move, President Trump instructed U.S. Trade Representative Robert Lighthizer to ready the next wave of tariffs against Chinese imports. According to reports, the U.S. now has the right to impose another $325 billion at 25 percent in additional tariffs.
“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” the president tweeted. “There is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today. This has been proven recently when only 4 points were paid by the U.S., 21 points by China because China subsidizes product to such a large degree.”
Casualties appear to be mounting on both sides of this epic economic showdown, but it seems President Trump has a dragon on his side. America’s GDP rose to 3.2 in the first quarter of 2019 while China’s has slowed to its lowest rate in three decades.
~ Conservative Zone