I'm confused about the trade war

Chase / Eng ghosted!
May 25 57 Comments

One of the biggest drivers of the US starting a trade war with China is to 'correct the trade imbalance', that is to say: the US is not happy that China is selling more to the US than it is buying from the US.

This is where my confusion comes in: in an open market, isn't buying and selling voluntary actions? A "consumer" (eg China or US) will buy and sell from each other as each wishes. China is buying the amount and types of products it's buying from US based on what it thinks is appropriate for its economy, and vice versa. It's not like anyone puts a gun to anyone's head and says "here, you must buy these from me!"

If the US thinks China is selling too much and not buying enough, shouldn't it just reduce the purchase of certain goods from China, and in turn, make its own products more attractive to the Chinese so they'll buy more? Isn't that the right way to correct the trade imbalance?

How can one side 'complain' that the other is not buying enough and selling too much?

(Heck, if the US thinks China is selling too much cheap goods, then just don't buy them? Just say "hey, you know what, this quarter, we'll buy 20 billion dollars of this good instead of 200 billion, all right?" )

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TOP 57 Comments
  • Cisco FXzH34
    It is very hard for western companies to establish business in China due to many reasons + currency control (lowering) + many other reasons. World is very much open for Chinese companies and goods, but it is not the same way in China
    May 25 15
    • Goldman Sachs fake engineer
      There's no currency devaluing for the last few years, China has spent lots of foreign reserves defending the currency...

      China also does comply with WTO rulings, the contention is around the developing nation status that lets them adopt more protectionist measures. It doesn't matter if you're from China and you think China hasn't met it's WTO obligations, the facts speak differently.

      It is true that there are barriers to entry for foreign companies and it is true the government tries to engineer surpluses, and perhaps something could be done about it to bring jobs back to the USA. I personally have accepted that cost of living is going to go up if we are going to have to do something about blue collar unemployment, and if it has to be protectionism so be it, but I'll just say I think the execution of these trade wars leaves much to be desired...
      May 25
    • Google
      EIon Musk

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      You’re saying China is not a developing country? I don’t hear this very often. Judge from per capital GDP, it’s just Mexico level.

      AFAIK central bank’s balance sheet is what determines M0, which has been raising for China. The biggest portion of assets is foreign currency. If you’re spending your assets then I assume your M0 should drop? And no, I don’t believe surplus from trade is the answer, since the original argument is that currency manipulation caused trade deficits. Now this became a chicken and egg scenario. I don’t see these two forming a feedback loop.

      Also, why trade deficit is even a thing that even needs attention compared to say this historical government deficit. (A tax cut for the corporate and the rich certainly doesn’t help. What’s government’s end game here?) I have no idea.
      May 25
    • Google
      EIon Musk

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      Wait a second, am I being tricked here? If you earn foreign currency, and you spent that foreign currency... then you didn’t earn that foreign currency.
      May 25
    • Goldman Sachs fake engineer
      China is definitely developing, but people are unhappy about what that lets them do under the WTO.
      May 25
    • Facebook Pbuj80
      US is in such economic panic for a developing country. Well done people
      May 25
  • Boeing ySWB75
    Trade imbalance is not so much of an issue IMO. It’s the way Chinese government treats US companies who want to do business in China that is the big imbalance.

    I’m no Trump fan (far from it) but I’m glad to see Huawei being targeted the way they are. Give them a doze of their own medicine.
    May 25 8
    • Boeing ySWB75
      Why is it so important to maintain “deniable plausibility of playing fair”? It only makes us weak and for countries like China to take advantage of us.

      If we are hit, hit them back twice as hard. I don’t buy the “turn the other cheek”.
      May 25
    • Goldman Sachs fake engineer
      Because people in other countries that we also trade with are getting worried? You work at Boeing, I think you should be aware of what reputational risk is.

      Like I said, what is wrong with just slapping tariffs? That's how China limits imports. IP transfer restrictions are already being loosened in China (yes in the past it caused a lot of problems but what can you do about it now). How are tariffs turning the other cheek?
      May 25
    • Boeing ySWB75
      Other countries have nothing to worry about if they are playing fair. We are only talking about those who don’t.

      We are also talking about countries as a whole. Not an individual company. Yes, reputation is important. But so is not being portrayed as weak.
      May 25
    • Goldman Sachs fake engineer
      Maybe you're right, or maybe that's not how other countries see it. Either way, no way of knowing right now, and nothing you or I can do about it.
      May 25
    • Boeing ySWB75
      That’s a very noble way of ending our discussion. Let’s agree we disagree.

      Thanks for a stellar discussion without getting personal and only stating our point of views. Wish all disagreements could be like this.

      Have a great long weekend.
      May 25
  • Microsoft theBoz
    Trump is a moron. And he thinks China is paying the tariffs.

    The reason why there is a trade imbalance is way too complex for a Blind post.
    May 25 1
    • Intel Act2016
      As exemplified by your opening line
      May 25
  • VMware fndndjjxd
    United States / England have been putting guns on pretty much every countries heads and forcing them to buy from them. For example many countries have been forced to not buy oil from countries US doesn’t like.
    May 25 2
    • Microsoft flyhi
      That's called sanction
      May 25
    • VMware fndndjjxd
      Thanks for put a label but fancy euphemism doesn’t change the reality.
      May 25
  • Apple ijyA68
    What you described is not how China works at all. Nothing free market about a Communist dictatorship.
    May 25 5
    • VMware fndndjjxd
      True. And there is nothing free about a plutocracy either. Isn’t it ? There is no free market. It’s just a jungle.
      May 25
    • Apple ijyA68
      Well a plutocracy tends to lead towards anti-free-market institutions like the Federal Reserve, so I guess you could make that argument in one sense.
      May 25
    • Google
      EIon Musk

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      There’s no pure “free market“ today. More and more government regulations are in place ever since the Great Depression, for the better obviously.

      However there’s no way a an old school soviet-style planned economy can succeed and become worlds’ biggest exporter and second biggest economy. China is very much a market economy, but with more government regulations.
      May 25
    • Apple ijyA68
      I would not say the government regulation since the depression (created by government regulation) has “obviously” been for the better. The current central bank run scheme inflates bubbles over and over by holding interest rates too low for too long.
      May 25
    • Google
      EIon Musk

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      Ok this QE thing post-2008 is probably complicated. But didn’t that prevent a full scale meltdown in 2008 and absorbed the impact afterwards. (At the expense of letting greedy investments banks who engineered last bubble walk out of jail free and letting taxpayers pay the price. But maybe even that is still for the greater good...?) Now the Fed just need to trim down the balance sheet, increase interest rate and hopefully nothing too wrong is going to happen. That’s still better that not engaging at all isn’t it?
      May 25
  • LinkedIn stuffy🐷
    US pays China a lot of USD and US goes into debt. China with those USD is building influence regionally and globally.

    What US wants is to get those USD back so China has no money and US has no debt. So US wants to force China to buy some US products to get those money back. If this does not happen naturally US has to use gunboat diplomacy to open up Chinese market to sell products into China. And that’s what is happening now.
    May 25 4
    • VMware fndndjjxd
      Right . But forcing doesn’t sound like free market and capitalism that United States had been yelling about at the top of their voice until now when the same free market and capitalism is not in their favour and is benifiting other countries more.
      May 25
    • Apple ijyA68
      China doesn’t have USD. They have promises to receive USD in the future.
      May 25
    • LinkedIn stuffy🐷
      @VMware US and other developed countries overall have much freer markets than China.

      China controls its economy to serve its own political purpose. It gets huge trade surpluses at the expense of its own people. US cannot and should not do the same. Tariffs are one thing that China uses to control its economy at the expense of its own people. My prediction is that Americans can’t tolerate significant tariffs that Trump plans to impose.
      May 25
    • VMware fndndjjxd
      I agree with your prediction. Moving manufacturing to China has certainly made things affordable here. Tariffs will certainly increase the prices unless other countries like India, Indonesia etc does those manufacturing.

      It will not benefit US at all. Everything’s is so expensive here that local manufacturing doesn’t make sense. A lot of companies have already started moving their plants to other emerging markets like India and Indonesia.

      China can also sell their products indirectly like selling to Indonesia and then Indonesia selling them to USA. Countries are so much connected and interdependent that the only way out for USA will be to completely shut off trade with any other nation and then USA and England can have fun among themselves.

      The fact is pendulum is swinging back to previous centers of power and trade. It will swing back to west again.
      May 25
  • Facebook Paillier
    How do you get the US to buys less Chinese goods?
    Tariffs.

    Not saying whether the trade war is good or not, but it's trying to do exactly what you mentioned - get US consumers to buy less Chinese goods by increasing prices.
    May 25 0
  • VMware fndndjjxd
    Your logic holds absolutely correct in an open market , however, this world is not an open market. It’s a jungle. And in the jungle the powerful wins.

    If open market benefits a country , they will push for open market. If it doesn’t they will start a trade war.
    May 25 0
  • Microsoft peaBrain
    This is one of Trumps biggest achomlishments
    May 25 3
  • Goldman Sachs / IT OWWG73
    One of the main issues is that in order to do business in China, you have to give up all your IP's which they refuse to compromise on. So companies like Google/Uber for example starts in China and all of a sudden there's a Chinese copycat firm and the original company is no longer needed or kicked out. Not to mention many of the non Chinese companies are profit capped by the government there.

    The US can't win here, China takes image very seriously and will be willing to cut off its own leg before admitting defeat. The US doesn't control any important resources where as China controls rare earths that's required for many electronics. If China shuts down the rare earth market, then we might be going to actual war since US can't survive without computers. However China will likey wait till elections next year before going there.
    May 25 2
    • Cisco FXzH34
      Rare earths are available from other countries at somewhat higher price.
      May 25
    • Tesla / Ops
      Bigballer

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      Bigballermore
      The US is one of the largest producers of oil and natural gas, and we also export food globally. I would say these resources are more important than rare earth metals.
      May 25
  • Roku
    pipe

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    pipemore
    It’s the republican things, didn’t get it? To be dumb and talk the dumb language(religion) to < 100 IQ people.
    May 25 0
  • LinkedIn stuffy🐷
    I see lots of Americans complain about a 1% increase in sales tax.

    That 25% tariff on everything made in China is going wreak havoc and make Trump very unpopular.
    May 25 1
    • Goldman Sachs fake engineer
      You sure about that? California seems to vote for sales tax increases every single time lol. Income tax too actually...
      May 25
  • This comment was deleted by original commenter.

    • VMware fndndjjxd
      And why is their growing fast bad and needs to be stopped? Nobody stopped the growth of England / USA in the past.
      May 25
  • Google / Eng
    Really?🤨

    Google Eng

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    I’ve worked at both startups and big companies.
    Really?🤨more
    I have yet to see one strategic thought on here about how to deal with China. Either here or by this administration. Can’t wait to put the big boys in charge again.
    May 25 0
  • New / Mgmt
    WntrIsCmng

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    WntrIsCmngmore
    It will be interesting to see the fight among two titans. Bring it on 😀
    May 25 0
  • New / Mgmt
    WntrIsCmng

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    WntrIsCmngmore
    The market is open yes and no. It’s open coz everyone can do trade with any country barring a few. It’s not open coz there is a tariff importing country can charge on the goods imported. If that tariff is high or imbalanced, it’s not really open. How much should the tariff be for each of millions of goods ? It’s subjective and trump thinks it’s not in favor of US. I believe that given I know how MF Chinese are
    May 25 0