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China's economy needs Western imports far, far more than the West needs Chinese imports, they're likely to break first. The short-term impact could be quite pai

China's economy needs Western imports far, far more than the West needs Chinese imports, they're likely to break first. The short-term impact could be quite painful on both sides, but things will turn out fine for the US if they stay the course. And someone needs to, China has played protectionist games unchecked for far too long.

chapium 8y ago
Based on what exactly? The US is not the only western nation china exports to.
- KaoruAoiShiho 8y ago
  He said import not export. All the vaunted progress on Chinese AI is based on nvidia gpus. They are irreplaceable.
  - crimsonalucard 8y ago
    Yeah once China runs out of nvidia GPU's the whole economy will crash. Meanwhile everything in the US is "made in china" and our entire manufacturing infrastructure and knowledge has deteriorated while China was slowly taking over... But everyone knows GPU's are the key to economic dominance.
    - KaoruAoiShiho 8y ago
      Well their AI progress will stall until they come up with an alternative to CUDA which, if you talk to futurists here, is almost just as bad. And this is just one example. Many industries are reliant on some special American component that they haven't figured out yet.
      - crimsonalucard 8y ago
        Relying on some special part is different from the entire US manufacturing sector being surpassed by China.
    - perl4ever 8y ago
      "everything in the US is "made in china"" I think people get a distorted picture of that as an artifact of labeling rules. The US exports a lot of industrial equipment, for instance. Most of the economy does not involve the final step of constructing consumer products that leads to the label "made in..." on the shelf of Wal-Mart.
s73v3r_ 8y ago
But China is only putting tariffs on US stuff, and only the US has tariffs on Chinese stuff.
martythemaniak 8y ago
China has no trade beef with "The West". The US is attacking both The West and China.
- mistermann 8y ago
  Well of course they don't, they still enjoy the benefits of developing nation status in the WTO despite moving from a poverty stricken 3rd world country 20 odd years ago to the 2nd largest economy in the world, as well as a leader in some hi-tech fields and ready to challenge in many more. In my estimation they seem a hell of a lot smarter than most other countries as well, I don't think they need or deserve help from third parties any longer.
- microdrum 8y ago
  Actually EU is negotiating 0-tarriff with the US and a great realignment is occurring against China.
  - d0lph 8y ago
    China is a human rights nightmare, they literally have concentration camps. I think ethically the US shouldn't even do trade with China.
    - TomMarius 8y ago
      But without the US trade, it'd be much worse because much more people would've starved to death. Don't forget that behind a government, there still are people.
    - gurkendoktor 8y ago
      Since the situation in Xinjiang has not hit mainstream media yet, these are the camps the parent poster refers to: https://www.independent.co.uk/news/world/asia/china-re-education-muslims-ramadan-xinjiang-eat-pork-alcohol-communist-xi-jinping-a8357966.html https://www.independent.co.uk/news/world/asia/china-re-educa... The estimated number of inmates keeps growing by the week. I think it's more accurate to call them re-education camps, but it's an issue that I wish more countries would push China on. I don't get why our (German) government spent so much time on negotiating the Liu Xiaobo issue instead.
foolfoolz 8y ago
china produces about half the worlds steel
Leary 8y ago
There is no western trade alliance because Trump is challenging the multi-lateral trade institutions such as the WTO which the US created. Given that the Tariffs that Trump is imposing will likely be illegal under WTO rules, Europe and Canada will not simply work with the US when their products are also at risk from Trump's tariffs. You may think that the west has a collective interest, but does Trump think so when he gets mad every time he sees a Mercedes car running down Fifth avenue? http://fortune.com/2018/05/31/trump-mercedes-benz-german-car-ban/ http://fortune.com/2018/05/31/trump-mercedes-benz-german-car... Also Canada is balking at how the US is abandoning NAFTA just so that it could use its larger size in trade negotiations.
- 394549 8y ago
  > There is no western trade alliance because Trump is challenging the multi-lateral trade institutions such as the WTO which the US created. The WTO is ineffective and broken. Based on prior precedent, if the US raised objections to the "China 2025" policy, the adjudication of the dispute will probably be finish sometime around 2030. In the past, the Chinese government has typically ignored adverse WTO rulings or dragged its feet until they were moot. IIRC, after all off that, only then will the WTO sanction tariffs. It's basically the definition of too little, too late. https://news.ycombinator.com/item?id=17403673#17408876 https://news.ycombinator.com/item?id=17403673#17408876
onion2k 8y ago
China's economy needs Western imports far, far more than the West needs Chinese imports, they're likely to break first. I don't think so. China has a huge amount of power over the US economy[1]. What Happens If China Called in Its Debt Holdings China would not call in its debt all at once. If it did, the demand for the dollar would plummet. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone else's. China could crash the American economy any time they want. It'd hurt them, but it'd hurt America a lot more. Especially because oil exporters would immediately switch to doing oil trade in Euros, which would make it exceptionally hard for the dollar to recover. [1] https://www.thebalance.com/u-s-debt-to-china-how-much-does-it-own-3306355 https://www.thebalance.com/u-s-debt-to-china-how-much-does-i...
- yesforwhat 8y ago
  "What Happens If China Called in Its Debt Holdings" China would be hurt gravely.
- Fins 8y ago
  What debt, exactly, can be "called" at China's choosing?
  - AnimalMuppet 8y ago
    Well, they can sell their holdings of US bonds on the market. That's a matter of indifference to the US government, because it doesn't affect the repayment schedule at all. It might affect the price of the next sale of Treasuries, but that's the limit of its impact.
    - Fins 8y ago
      Thaty's about it, and it might not even have too big an impact on the next sale, since those would have different maturity and won't be equivalent.
- 394549 8y ago
  > China could crash the American economy any time they want. It'd hurt them, but it'd hurt America a lot more. Especially because oil exporters would immediately switch to doing oil trade in Euros, which would make it exceptionally hard for the dollar to recover. But their likely action, according to the article you linked, might actually help the US economy by making its exports more competitive: > China would not call in its debt all at once. If it did, the demand for the dollar would plummet. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone else's. > It's more likely that China would slowly begin selling off its Treasury holdings. Even when it just warns that it plans to do so, dollar demand starts to drop. That hurts China's competitiveness. As it raises its export prices, U.S. consumers would buy American products instead. China could only start this process if it further expands its exports to other Asian countries and increases domestic demand. China only amassed so much US debt because it sells RMB to buy dollars to keep the RMB down and fuel exports. Reversing that policy would make Chinese exports less competitive on the world market. Ultimately, that could thwart the CCP's ambitions to create "national champions" by limiting them to their domestic market.
thinkcontext 8y ago
China's economy is where a large part of the world's future growth will occur, in the longer term capital will reallocate itself around trade barriers to get access to it. In the short term, the US could potentially get some concessions that it wants. However, things have already gotten further than most predicted, lots of people expected China to give Trump a few crumbs that didn't really matter but allow him to declare victory. Trump seems to not want that, so it might be too late to avoid damage.
- sremani 8y ago
  You mean China's current aging population with a reverse pyramid demography due to one child policy is where global growth is at?
  - crimsonalucard 8y ago
    Yes. High populations don't correlate with GDP. In fact there's an inverse correlation. Look at India. edit: source for those who don't believe me: https://www.kaieteurnewsonline.com/2013/01/17/population-growth-is-generally-highest-in-the-poorest-countries-report/ https://www.kaieteurnewsonline.com/2013/01/17/population-gro...
  - thinkcontext 8y ago
    This is a good point. Personally, I think the inverted pyramid means that China won't achieve parity with US in per capita wealth. However, there's still a ton of growing that it can do. Think of all the millions of cars, washing machines, air conditioners, not to mention increased consumption of pharmaceuticals, personal care, apparel, meat, etc. Capital is not going to pass this growth up.
  - 394549 8y ago
    > You mean China's current aging population with a reverse pyramid demography due to one child policy is where global growth is at? Given we're talking about the CCP, I suppose they could right their reverse pyramid using the same brutal means they used to create it. Say, by heavily pushing euthanasia options onto retired folks who can't care for themselves, with financial sanctions for their families if they refuse to comply.
fisherjeff 8y ago
This may be the case as of this exact moment, but I see two things here that work in China's favor: 1) Given the current balance of trade between the US and China, each $1 of retaliatory Chinese tariffs has a larger impact as a percentage of trade flow than each $1 of US tariffs. 2) The Chinese economy is much more nimble and diverse than the US, and – especially with government intervention – may have an easier time developing domestic alternatives to US goods. On an unrelated note, it's interesting that they're implementing a tariff on recyclables. That could be a devastating blow to the already struggling US recycling market.
- friedman23 8y ago
  >1) Given the current balance of trade between the US and China, each $1 of retaliatory Chinese tariffs has a larger impact as a percentage of trade flow than each $1 of US tariffs. That doesn't benefit China. What you are saying is that China has less total trade that they can tariff than the US. >2) The Chinese economy is much more nimble and diverse than the US, and – especially with government intervention – may have an easier time developing domestic alternatives to US goods. Source? It's common knowledge that the US has the most largest and most diverse economy in the world. https://atlas.media.mit.edu/en/profile/country/usa/ https://atlas.media.mit.edu/en/profile/country/usa/ https://atlas.media.mit.edu/en/profile/country/chn/ https://atlas.media.mit.edu/en/profile/country/chn/
  - fisherjeff 8y ago
    On (1), I mean that $16B worth of goods is 12% of US->China exports, whereas it is only 3% of China->US exports, meaning that if this continues to escalate in this manner it will disproportionately affect US->China exporters. I will concede (2) was not well expressed. I just find it much much easier to imagine – due to differences in labor forces, natural resources, environmental regulations, etc. – a suddenly growing Chinese motorcycle industry than, say, a resurgent US steel industry.
crimsonalucard 8y ago
Are you joking? It's the other way around. Most of our manufacturing infrastructure and knowledge has deteriorated while China's knowledge has only risen. Manufacturing goods is the root of an economy. China is the root, the US is a leaf.
- onlyrealcuzzo 8y ago
  I don't think it's a joke. At least in the US, the free market values services a lot more than manufacturing. Services make up 79.6 of the U.S economy [1]. Granted, I don't have the stat for the entire world, so it might be bigger. Considering the US and EU are half of global GDP, I doubt it. 1) https://2016.trade.gov/publications/ita-newsletter/1010/services-sector-how-best-to-measure-it.asp https://2016.trade.gov/publications/ita-newsletter/1010/serv...
  - crimsonalucard 8y ago
    Trust me, a modern technological economy exists because human labor is augmented by physical machines. You take away the machines you'd have a service economy similar to services provided during a time when modern machinery was nonexistent (the stone age).
- friedman23 8y ago
  >Manufacturing goods is the root of an economy. China is the root, the US is a leaf. Let's put your statement to the test then Can China put tariffs on iPhones, Windows operating systems, Apple computers, Intel/AMD cpus, Nvidia GPUs?
  - crimsonalucard 8y ago
    Windows is pirated by everyone in China so a tarrif is useless. iPhones and apple computers are manufactured in China so YES they can put a tarriff on every freaking part of a mobile device/computer except for the GPUs and CPUs.
- AnimalMuppet 8y ago

chapium 8y ago

Based on what exactly? The US is not the only western nation china exports to.

KaoruAoiShiho 8y ago
He said import not export. All the vaunted progress on Chinese AI is based on nvidia gpus. They are irreplaceable.
- crimsonalucard 8y ago
  Yeah once China runs out of nvidia GPU's the whole economy will crash. Meanwhile everything in the US is "made in china" and our entire manufacturing infrastructure and knowledge has deteriorated while China was slowly taking over... But everyone knows GPU's are the key to economic dominance.
  - KaoruAoiShiho 8y ago
    Well their AI progress will stall until they come up with an alternative to CUDA which, if you talk to futurists here, is almost just as bad. And this is just one example. Many industries are reliant on some special American component that they haven't figured out yet.
    - crimsonalucard 8y ago
      Relying on some special part is different from the entire US manufacturing sector being surpassed by China.
  - perl4ever 8y ago
    "everything in the US is "made in china"" I think people get a distorted picture of that as an artifact of labeling rules. The US exports a lot of industrial equipment, for instance. Most of the economy does not involve the final step of constructing consumer products that leads to the label "made in..." on the shelf of Wal-Mart.

s73v3r_ 8y ago

But China is only putting tariffs on US stuff, and only the US has tariffs on Chinese stuff.

martythemaniak 8y ago

China has no trade beef with "The West". The US is attacking both The West and China.

mistermann 8y ago
Well of course they don't, they still enjoy the benefits of developing nation status in the WTO despite moving from a poverty stricken 3rd world country 20 odd years ago to the 2nd largest economy in the world, as well as a leader in some hi-tech fields and ready to challenge in many more. In my estimation they seem a hell of a lot smarter than most other countries as well, I don't think they need or deserve help from third parties any longer.
microdrum 8y ago
Actually EU is negotiating 0-tarriff with the US and a great realignment is occurring against China.
- d0lph 8y ago
  China is a human rights nightmare, they literally have concentration camps. I think ethically the US shouldn't even do trade with China.
  - TomMarius 8y ago
    But without the US trade, it'd be much worse because much more people would've starved to death. Don't forget that behind a government, there still are people.
  - gurkendoktor 8y ago
    Since the situation in Xinjiang has not hit mainstream media yet, these are the camps the parent poster refers to: https://www.independent.co.uk/news/world/asia/china-re-education-muslims-ramadan-xinjiang-eat-pork-alcohol-communist-xi-jinping-a8357966.html https://www.independent.co.uk/news/world/asia/china-re-educa... The estimated number of inmates keeps growing by the week. I think it's more accurate to call them re-education camps, but it's an issue that I wish more countries would push China on. I don't get why our (German) government spent so much time on negotiating the Liu Xiaobo issue instead.

foolfoolz 8y ago

china produces about half the worlds steel

Leary 8y ago

There is no western trade alliance because Trump is challenging the multi-lateral trade institutions such as the WTO which the US created. Given that the Tariffs that Trump is imposing will likely be illegal under WTO rules, Europe and Canada will not simply work with the US when their products are also at risk from Trump's tariffs. You may think that the west has a collective interest, but does Trump think so when he gets mad every time he sees a Mercedes car running down Fifth avenue? http://fortune.com/2018/05/31/trump-mercedes-benz-german-car-ban/ http://fortune.com/2018/05/31/trump-mercedes-benz-german-car... Also Canada is balking at how the US is abandoning NAFTA just so that it could use its larger size in trade negotiations.

394549 8y ago
> There is no western trade alliance because Trump is challenging the multi-lateral trade institutions such as the WTO which the US created. The WTO is ineffective and broken. Based on prior precedent, if the US raised objections to the "China 2025" policy, the adjudication of the dispute will probably be finish sometime around 2030. In the past, the Chinese government has typically ignored adverse WTO rulings or dragged its feet until they were moot. IIRC, after all off that, only then will the WTO sanction tariffs. It's basically the definition of too little, too late. https://news.ycombinator.com/item?id=17403673#17408876 https://news.ycombinator.com/item?id=17403673#17408876

onion2k 8y ago

China's economy needs Western imports far, far more than the West needs Chinese imports, they're likely to break first. I don't think so. China has a huge amount of power over the US economy[1]. What Happens If China Called in Its Debt Holdings China would not call in its debt all at once. If it did, the demand for the dollar would plummet. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone else's. China could crash the American economy any time they want. It'd hurt them, but it'd hurt America a lot more. Especially because oil exporters would immediately switch to doing oil trade in Euros, which would make it exceptionally hard for the dollar to recover. [1] https://www.thebalance.com/u-s-debt-to-china-how-much-does-it-own-3306355 https://www.thebalance.com/u-s-debt-to-china-how-much-does-i...

yesforwhat 8y ago
"What Happens If China Called in Its Debt Holdings" China would be hurt gravely.
Fins 8y ago
What debt, exactly, can be "called" at China's choosing?
- AnimalMuppet 8y ago
  Well, they can sell their holdings of US bonds on the market. That's a matter of indifference to the US government, because it doesn't affect the repayment schedule at all. It might affect the price of the next sale of Treasuries, but that's the limit of its impact.
  - Fins 8y ago
    Thaty's about it, and it might not even have too big an impact on the next sale, since those would have different maturity and won't be equivalent.
394549 8y ago
> China could crash the American economy any time they want. It'd hurt them, but it'd hurt America a lot more. Especially because oil exporters would immediately switch to doing oil trade in Euros, which would make it exceptionally hard for the dollar to recover. But their likely action, according to the article you linked, might actually help the US economy by making its exports more competitive: > China would not call in its debt all at once. If it did, the demand for the dollar would plummet. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone else's. > It's more likely that China would slowly begin selling off its Treasury holdings. Even when it just warns that it plans to do so, dollar demand starts to drop. That hurts China's competitiveness. As it raises its export prices, U.S. consumers would buy American products instead. China could only start this process if it further expands its exports to other Asian countries and increases domestic demand. China only amassed so much US debt because it sells RMB to buy dollars to keep the RMB down and fuel exports. Reversing that policy would make Chinese exports less competitive on the world market. Ultimately, that could thwart the CCP's ambitions to create "national champions" by limiting them to their domestic market.

thinkcontext 8y ago

China's economy is where a large part of the world's future growth will occur, in the longer term capital will reallocate itself around trade barriers to get access to it. In the short term, the US could potentially get some concessions that it wants. However, things have already gotten further than most predicted, lots of people expected China to give Trump a few crumbs that didn't really matter but allow him to declare victory. Trump seems to not want that, so it might be too late to avoid damage.

sremani 8y ago
You mean China's current aging population with a reverse pyramid demography due to one child policy is where global growth is at?
- crimsonalucard 8y ago
  Yes. High populations don't correlate with GDP. In fact there's an inverse correlation. Look at India. edit: source for those who don't believe me: https://www.kaieteurnewsonline.com/2013/01/17/population-growth-is-generally-highest-in-the-poorest-countries-report/ https://www.kaieteurnewsonline.com/2013/01/17/population-gro...
- thinkcontext 8y ago
  This is a good point. Personally, I think the inverted pyramid means that China won't achieve parity with US in per capita wealth. However, there's still a ton of growing that it can do. Think of all the millions of cars, washing machines, air conditioners, not to mention increased consumption of pharmaceuticals, personal care, apparel, meat, etc. Capital is not going to pass this growth up.
- 394549 8y ago
  > You mean China's current aging population with a reverse pyramid demography due to one child policy is where global growth is at? Given we're talking about the CCP, I suppose they could right their reverse pyramid using the same brutal means they used to create it. Say, by heavily pushing euthanasia options onto retired folks who can't care for themselves, with financial sanctions for their families if they refuse to comply.

fisherjeff 8y ago

This may be the case as of this exact moment, but I see two things here that work in China's favor: 1) Given the current balance of trade between the US and China, each $1 of retaliatory Chinese tariffs has a larger impact as a percentage of trade flow than each $1 of US tariffs. 2) The Chinese economy is much more nimble and diverse than the US, and – especially with government intervention – may have an easier time developing domestic alternatives to US goods. On an unrelated note, it's interesting that they're implementing a tariff on recyclables. That could be a devastating blow to the already struggling US recycling market.

friedman23 8y ago
>1) Given the current balance of trade between the US and China, each $1 of retaliatory Chinese tariffs has a larger impact as a percentage of trade flow than each $1 of US tariffs. That doesn't benefit China. What you are saying is that China has less total trade that they can tariff than the US. >2) The Chinese economy is much more nimble and diverse than the US, and – especially with government intervention – may have an easier time developing domestic alternatives to US goods. Source? It's common knowledge that the US has the most largest and most diverse economy in the world. https://atlas.media.mit.edu/en/profile/country/usa/ https://atlas.media.mit.edu/en/profile/country/usa/ https://atlas.media.mit.edu/en/profile/country/chn/ https://atlas.media.mit.edu/en/profile/country/chn/
- fisherjeff 8y ago
  On (1), I mean that $16B worth of goods is 12% of US->China exports, whereas it is only 3% of China->US exports, meaning that if this continues to escalate in this manner it will disproportionately affect US->China exporters. I will concede (2) was not well expressed. I just find it much much easier to imagine – due to differences in labor forces, natural resources, environmental regulations, etc. – a suddenly growing Chinese motorcycle industry than, say, a resurgent US steel industry.

crimsonalucard 8y ago

Are you joking? It's the other way around. Most of our manufacturing infrastructure and knowledge has deteriorated while China's knowledge has only risen. Manufacturing goods is the root of an economy. China is the root, the US is a leaf.

onlyrealcuzzo 8y ago
I don't think it's a joke. At least in the US, the free market values services a lot more than manufacturing. Services make up 79.6 of the U.S economy [1]. Granted, I don't have the stat for the entire world, so it might be bigger. Considering the US and EU are half of global GDP, I doubt it. 1) https://2016.trade.gov/publications/ita-newsletter/1010/services-sector-how-best-to-measure-it.asp https://2016.trade.gov/publications/ita-newsletter/1010/serv...
- crimsonalucard 8y ago
  Trust me, a modern technological economy exists because human labor is augmented by physical machines. You take away the machines you'd have a service economy similar to services provided during a time when modern machinery was nonexistent (the stone age).
friedman23 8y ago
>Manufacturing goods is the root of an economy. China is the root, the US is a leaf. Let's put your statement to the test then Can China put tariffs on iPhones, Windows operating systems, Apple computers, Intel/AMD cpus, Nvidia GPUs?
- crimsonalucard 8y ago
  Windows is pirated by everyone in China so a tarrif is useless. iPhones and apple computers are manufactured in China so YES they can put a tarriff on every freaking part of a mobile device/computer except for the GPUs and CPUs.
AnimalMuppet 8y ago