August 7, 2019

DECOUPLING: Trump Doubles Down On The China Trade War.

This is from Salvatore Babones at The National Interest:

Trump’s aggressive push on tariffs has thrown the country’s expert class into a tizzy, with pundits predicting a severe shock to the American economy, blaming the trade war for every blip in stock prices, and warning of the potential for runaway inflation as consumers pay the price for Trump’s tariffs.

Meanwhile the economy is employing record numbers of people, inflation is running well below the Fed’s target rate, and stock markets are slightly up since the beginning of the “trade war” in April. The data simply refuses to satisfy the pundits’ appetite for economic carnage.

With the economy refusing to cooperate with their “gloom and doom” narrative, America’s pundits are now arguing that economic pressure is no way to get a trade deal from China. When a Chinese Communist Party newspaper tells them that “China will never give in to pressure,” they believe it.

And who knows? Maybe they’re right. But if China doesn’t give in to pressure, then its manufacturing base will continue moving to Vietnam and India. Less labor-intensive assembly work will move to Mexico, which has now displaced China as America’s top trade partner. China will lose its unique position at the center of global production networks, and with it much of its leverage over global politics.

All of these trends are in America’s national interest. And Trump’s trade war benefits America’s allies, too. In fact, the only country in the world with an interest in China holding all the strings of global value chains is China. If the Chinese don’t realize that, then they’re in for some real surprises as the trade war drags on.

Read the whole thing.

I’d just add that while China does have the ability to hurt us back, the US still holds most of the trump cards, so to speak. And it’s time to stop, if you’ll allow me to paraphrase Lenin, paying China to make the rope they’ll hang us with.

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