Questions and thoughts on trade war

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#1
Hi buddies,

would like to hear your opinions on this. Let us assume Trump did impose another tariff on 200 billion of China goods. Assume China and US did not go beyond trade arena, e.g. China did not sell US treasury etc.

How bad is a trade war? Sometimes I wonder if the news is bordering "fear-mongering" or "Sensationalism" in news. 

What i understand from reading is there will be disruptions in global supply chain and resources might not be allocated in the most efficient way (I assume they mean cost efficient), however, after the initial disruption, wouldn't other suppliers be found? Wouldnt there be other winners? It might not longer be as cheap, but companies can either chose to pass the cost to consumers or reduce margins or a combination of both. In the transition period, maybe companies will be witholding their investments, and jobs might be otherwise created earlier, but wouldnt everyone, consumers, producers adjusted to a new norm eventually? Maybe it might shave off a point or 2 off global growth, but would it be as serious as tipping the world into another recession, (some say depression)

Of course, other claim the impact is on the rule-based trading system, but that seem more principles related than real economics, at least in the short to medium term, the world is hardly a rule-based system...
life goes in cycles, predictable yet uncontrollable; just like the markets, but markets give you a second chance
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#2
I think it is "unknowable" given how unpredictable this administration is, and how the global market will react/adapt. So better not waste too much time thinking about it.

That said, investors investing in industries that are directly impacted and particularly vulnerable (US and Chinese companies whose main business involves importing and exporting from one another?) may need to brace for short term impact.

Personally, I think the current Chinese government is quite pragmatic. It's more likely that they will attempt to reach a satisfactory concession than letting this "trade-war" drag on.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#3
In my view a trade war should be almost a non event for China.

Should be ... however, I am a bit disappointed about the Chinese markets in general, reacting on the trade war dispute again like a banana republic. No leadership, just follow and amplify foreign input.

There is no way the US can win that trade war, just read what Marc Faber has to say about it. Even JPM puts the impact on China only at around 0.1% of GDP (sentiment effect could be larger of course), hence I would expect the US to cave in with some face saving last minute solution.
http://www.aastocks.com/en/stocks/news/a...atest-news
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#4
(29-06-2018, 05:01 PM)bmann025 Wrote: In my view a trade war should be almost a non event for China.

Should be ... however, I am a bit disappointed about the Chinese markets in general, reacting on the trade war dispute again like a banana republic. No leadership, just follow and amplify foreign input.

There is no way the US can win that trade war, just read what Marc Faber has to say about it. Even JPM puts the impact on China only at around 0.1% of GDP (sentiment effect could be larger of course), hence I would expect the US to cave in with some face saving last minute solution.
http://www.aastocks.com/en/stocks/news/a...atest-news
nonsense. If its non event you wont see big funds pull out from China and EM and their stock market get such a big shock.

BTW your link doesnt work, its just a headline. And its a headline in error. impact on USA would be minimal as US export to China is not a big part of their economy. Whereas china export to USA IS A BIG PART of Chinese GDP.

Who do you think will win?  The answer is obvious.
https://www.bloomberg.com/news/articles/...-to-target
[Now that U.S. President Donald Trump has ordered a review of measures on $100 billion of additional Chinese goods, China will have to get creative to keep up the like-for-like rhetoric. There aren’t enough American goods imports to target]

This is a record of imports and exports from China to USA. It is very obvious who is the big exporter who will be most affected by tariffs on their cheap exports. Also it is very obvious who will run out of exports to tariff. Big Grin
https://www.census.gov/foreign-trade/balance/c5700.html

In fact, this trade war could further erode confidence in Yuan and trade with China, resulting in a big hit to their financial sector stability.
https://www.bloomberg.com/news/articles/...e-defaults
If anything I reckon next half of this year would be year of the USD and a successful trade war. Trumps timing is really spot on, given Chinese are tightening their banking regulations and credit.
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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#5
There are always 2nd order effects I suppose. But these secondary effects are pretty hard to ascertain in the first place, or even then when (the secondary effect) conceived, assign a probability that it may happen. Besides the first order effects (those companies in targeted industries) which is well known, what Wildreamz said might be applicable for mom-pop investors like us - probably too vague to take any action beyond avoiding the first order effects.

US-China trade war: who wins, who loses? Conventional wisdom suggests the US has the least to lose from a trade war. But, not so fast …
https://www.scmp.com/week-asia/business/...-who-loses

Talking tough for the coming mid term elections in Nov? Trump has bragging rights (since he won the election) and so all now he needs, is more bragging material.

Trump’s trade war on China: phoney or real, world will be the loser:  If Trump sticks to his guns, his trade war could usher in a worldwide depression. Even if he’s just showboating (remember North Korea, anyone?), much of the damage has already been done
https://www.scmp.com/week-asia/opinion/a...l-be-loser
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#6
China says will hit back after U.S. proposes fresh tariffs on $200 billion in goods

Tony Munroe, Eric Beech
JULY 11, 2018 / 10:46 AM / UPDATED 16 MINUTES AGO

BEIJING/WASHINGTON (Reuters) - China accused the United States of bullying and warned it would hit back after the Trump administration raised the stakes in their trade dispute, threatening 10 percent tariffs on $200 billion of Chinese goods.

China’s commerce ministry said on Wednesday it was “shocked” and would complain to the World Trade Organisation, but did not immediately say how it would retaliate. In a statement, it called the U.S. actions “completely unacceptable”.

The foreign ministry described Washington’s threats as “typical bullying” and said China needed to counter-attack to protect its interests.

“This is a fight between unilateralism and multilateralism, protectionism and free trade, might and rules,” foreign ministry spokeswoman Hua Chunying told a regular briefing on Wednesday.

Beijing has said it would hit back against Washington’s escalating tariff measures, including through “qualitative measures,” a threat that U.S. businesses in China fear could mean anything from stepped-up inspections to delays in investment approvals and even consumer boycotts.

China could also limit visits to the United States by Chinese tourists, a business state media said is worth $115 billion, or shed some of its U.S. Treasury holdings, Iris Pang, Greater China economist at ING in Hong Kong, wrote in a note.

The $200 billion far exceeds the total value of goods China imports from the United States, which means Beijing may need to think of creative ways to respond to such U.S. measures.

More details in https://www.reuters.com/article/us-usa-t...K1074?il=0
Specuvestor: Asset - Business - Structure.
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#7
US on course to lose trade war with China – economist Stephen Roach
“The US is hugely dependent on China as a source for low-cost goods to make ends meet for American consumers."
https://www.rt.com/business/432846-china-us-trade-war/

Identical views from Mark Faber
https://www.youtube.com/watch?v=fMFWFN_EkDM

So the US is not only profiting from its exports to China, but also, perhaps even more, from the very same imports they are complaining about.

Products produced by very hard working Chinese are essential for US companies building upon them, and they are also a significant source of prosperity for US consumers. Many things in evfery day live would be much more expensive and unaffordable without Chinese imports. Hard working China increased wealth around the globe.
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#8
Quote:China’s commerce ministry said on Wednesday it was “shocked” and would complain to the World Trade Organisation, but did not immediately say how it would retaliate. In a statement, it called the U.S. actions “completely unacceptable”.

The foreign ministry described Washington’s threats as “typical bullying” and said China needed to counter-attack to protect its interests.

They did not blink when the South China Sea hague ruling was finalized. And even after that, they went further by putting more weapons and armed forces on the islands.
I suppose many countries are laughing secretly.
The bully is being bullied. Tongue
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#9
(13-07-2018, 04:26 AM)bmann025 Wrote: US on course to lose trade war with China – economist Stephen Roach
“The US is hugely dependent on China as a source for low-cost goods to make ends meet for American consumers."
https://www.rt.com/business/432846-china-us-trade-war/

Identical views from Mark Faber
https://www.youtube.com/watch?v=fMFWFN_EkDM

So the US is not only profiting from its exports to China, but also, perhaps even more, from the very same imports they are complaining about.

Products produced by very hard working Chinese are essential for US companies building upon them, and they are also a significant source of prosperity for US consumers. Many things in evfery day live would be much more expensive and unaffordable without Chinese imports. Hard working China increased wealth around the globe.

Short term wise market is saying US is more resilient because it is knowledge based economy. Goods flow doesn't impact it as much as China

But end of day protectionism doesnt work over long term. The higher input cost will have implication to inflation and interest rate as efficiency goes down and friction increases

North Korea used to have higher GDP than South Korea. Myanmar was the richest SEA country post WW2. China had the largest economy in the world until they concluded theres nothing outside to see after Cheng Ho. China economy skyrocketed partially because of Deng opening and plugging into WTO

Open trade is not a theory it is reality. But it has to be measured and applicable to different stages of economic life of a country because it affects lives. You cant expect total free trade for a 3rd world country vs 1st cause the latter will crush the former simply from efficiency and capital. That's why it's "unfair" to some. But it's never meant to be fair. It should be equitable. Fair is simplistic understanding that my son has one ice cream and I have one though I weigh twice as much. It's heuristic easy but makes no sense
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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#10
this trade war is more about addressing outright intellectual property theft and getting protectionist China to open up to foreign investment.

China has been playing dirty for far too long. About time they learned some manners and not spit on other people...
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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