As China Settles In For A Long Trade War, Economic Pressure On Trump Continues To Grow
As China Settles In For A Long Trade War, Economic Pressure On Trump Continues To Grow by Michael Snyder for The Economic Collapse Blog
The trade war between the United States and China is increasingly weighing on the global economy, but unfortunately it does not appear that it will end any time soon. Many pundits in the U.S. originally believed that the trade war would be short because the economic pain would be too much for the Chinese to handle. But the truth is that the Chinese are not nearly as motivated by short-term concerns as we are. They have always been long-term planners, and they are not afraid to set goals that may take multiple generations to achieve. So they are not going to allow an angry American president that may be voted out of office by the end of next year to greatly alter their long-term economic strategies.
If an acceptable agreement could have been reached with Trump, the Chinese would have jumped at that opportunity. But right now the two sides are so far apart that they are basically not even on the same playing field, and any additional “negotiations” are not going to change that. However, the Chinese are likely to try to keep talks with the Trump administration alive in an attempt to prevent the trade war from escalating even more. In essence, the Chinese are trying to minimize the damage while running out the clock on the Trump presidency.
So for China, this trade war has become an exercise in endurance, and this is something that a Fox Business article recently discussed…
Researchers from Deutsche Bank wrote a note over the weekend, explaining how they believe China appears to have shifted its strategy from a focus on “resolution to one of endurance.”
“We think China is neither aiming to quickly reach a trade deal, nor trying to hit back at the U.S. as hard as it can,” Deutsche Bank China Economist Yi Xiong wrote in a report. “Rather, China seems to have internalized the trade war as a given fact, and is trying to preserve China’s economic resilience under rising tariffs.”
Here in the U.S., we have become quite accustomed to sacrificing our long-term prosperity in order to avoid short-term pain, but the Chinese are simply not going to do that in this case.
Instead, they are going to work extremely hard to do what they can to bolster the Chinese economy internally while they wait for a more “reasonable” U.S. president to get elected. The following comes from the South China Morning Post…
China will “enhance countercyclical measures in macroeconomic policies … to ensure sufficient liquidity and reasonable growth in credit,” according to a statement by the government’s Financial Stability and Development Commission on Sunday. The wording marked a subtle change from previous policy statements that called only for “appropriate” fine-tuning of monetary policy.
The statement did not mention the trade war with the US, but included specific guidelines on what China should do to manage its economy in the coming months. It urged financial institutions to help sell local government special bonds, with proceeds to be used for government-backed investment projects, while it also told local authorities to “fully tap investment potential”.
Unlike Chinese officials, President Trump has an upcoming election that he must deal with, and the longer this trade war persists the worse his re-election chances are going to become.