Todd Bishop
The China-US economic and trade consultation team talked on August 13th in Beijing time, and then the United States announced that it would postpone a part of the tariffs originally imposed on China’s exports to the United States on September 1.
When people speculated on how the trend of the China-US trade war would develop next, US President Donald Trump couldn’t help but speak. On August 14, Trump published five tweets on China and trade wars on Twitter, and also forwarded one of his eldest son, Donald Trump Jr., to praise his father for bravely facing his life. The tweet of the “China Challenge” once again targeted the social network’s gunpoints to China.
The outside world has become accustomed to his mouth, but since the White House has made it clear that the president’s Twitter is also a “official statement” of the White House, among these tweets, the China-US trade war, the China-US economy, and China and the United States The remarks of the consultations are still worth asking.
First, Trump said, “We (the United States) are winning, we are triumphing over China. Enterprises and jobs are rapidly withdrawing.” “Millions of jobs are being lost, and China has moved to other countries that have not been taxed by the United States. Thousands of companies are leaving, and China certainly wants to reach an agreement.”
This has the first question, where is the US “win”?
At the beginning of the trade war, the United States aimed to reduce the trade deficit, and the US trade deficit hit a 10-year high in 2018, which has obviously failed.
As for the suppression of the Chinese economy, the United States is not considered “successful.” It is undeniable that some labor-intensive industries have been moving from China to other regions with lower labor costs in recent years, but this process is not all thanks to the trade war, but the inevitable result of China’s industrial restructuring. Industrial transfer is an inevitable trend after the economic development of various countries has reached a certain stage. The center of the manufacturing industry has emerged in the 18th century in the United Kingdom, in the post-World War II United States, and later in Japan.
The United States was once the center of the world’s manufacturing industry after the Second World War. In the early 1950s, the value added of the US manufacturing industry accounted for about 40% of the world’s total, and the products made with “Made in the United States” occupied the global market. In 1975, the share of the US manufacturing industry had fallen to 22.3% of the world total. But in the process, the United States stood upstream of the global industrial chain and is still at the cutting edge of global technology.
Taking the reality of the Apple mobile phone, although the world’s largest assembly plant is located in China, the US Apple still monopolizes 58.5% of the profits. This transfer of the industrial chain is not a frustration.
The problem of “loss of foreign capital” is also inconsistent with the facts. Since the outbreak of the trade war, the overall trend of cross-border investment has been decreasing due to the expected decline in the global economy, while the actual use of foreign capital in China has grown against the trend. According to the latest data from the Ministry of Commerce of the People’s Republic of China, in the first seven months of this year, there were more than 24,000 foreign-invested enterprises in China, and the actual use of foreign investment increased by 7.3% year-on-year. Among them, Germany, South Korea, Japan, and the Netherlands increased their investment in China by 72.4%. 69.7%, 12.6% and 14.3%, the actual amount of foreign investment in the EU increased by 18.3% year-on-year, and the growth rate did not decrease.
In this way, the attractiveness of the Chinese market to capital is not decreasing, and this aspect shows the confidence of the outside world in the Chinese market. The trade war will have a negative impact on the Chinese economy, but it is said that the United States has already “winned” and is far-fetched.
The second question is that the US issue is on the Fed.
Trump said, “Our problem is not China.” This is hard to refute. However, he then pushed all the responsibility for the US stock market crash to the Fed. As the 2-year US Treasury yields were higher than the benchmark 10-year US Treasury yield, US stocks plummeted on August 14, and the Dow Jones index fell more than 800 points.
Trump said, “Our problem lies with the Fed.” In his view, the Fed’s interest rate hike in the previous year was “too fast”, but the current interest rate cut was “too slow” and directly approved Fed Chairman Jay Powell. no idea”.
However, his “crazy rate of return curve” is really “the Fed dragged his legs”? To know the so-called yield curve reversal, the yield of long-term bonds is already lower than that of short-term bonds. Why is the yield of long-term bonds falling? This is because investors believe that it is best to hold long-term investments, waiting for the storm of recession to be more sensible, which leads to lower yields.
At the same time, in the recession, the demand for short-term bonds will also be suppressed. In order to attract investors, these bonds must also have higher yields. In this way, form an upside down. This is the investor’s judgment on the “recession”. Why do you have such a judgment, you have to find the problem at all. Of course, the stimulus of monetary policy will have an impact on the market, and the rate of return will also change. But this is equivalent to a stimulant. Is it effective in a short period of time, has it really changed the body function?
The effect of interest rate cuts on the market has been declining. After the Federal Reserve announced a 25 basis point rate cut at the end of July, the state of the US stock market is in a downturn, and it is difficult to make investors feel excited. The way to cut interest rates and “do not cure the symptoms” is not desirable in the context of the US economy’s moderate growth.
The structural problems of the US economy are the ills that have been urgently needed to change over the years. Bank of America Merrill Lynch’s latest August survey said that Wall Street’s fund managers are increasingly worried that the US economy will fall into recession next year, and concerns about the recession have been the highest in eight years.
Trump approved the Fed’s “derailed”, did he not figure out the situation, or was he habitually shirking responsibility?
The third question is: Does the tariff have no effect on American consumers?
On August 13, the US Trade Representative Office issued a statement saying that due to health, safety and national security considerations, certain commodities will be removed from the US $300 billion tariff list, some of which will be postponed until December 15. The day was imposed on customs duties, including mobile phones, laptops, video game consoles, some toys, computer display screens, some clothes and shoes.
Since then, Trump himself has said that this is due to concerns that tariffs affect the shopping of Christmas in the United States, so postponed. In addition, US Secretary of Commerce Wilbur Ross also said that this is to protect American consumers. Even Trump’s adviser to the Chinese hawks, Peter Navarro, said, “If we simply start taxing on September 1, it will hurt us more than they (China). ) This is stupid.”
Perhaps because of the US move, the outside world’s discussion about “whether the United States makes concessions to Beijing” has annoyed Trump in the elliptical office, so this time he turned his head and said, “Whether or not there is a date in September, American consumers are Acceptable… In fact, this (deferred) will help China more than it does to the United States, but the United States will make it equal.”
This inconsistency of tweets is very confusing. If US consumers can accept tariffs, why are the goods that have been deferred taxed the most popular consumer goods on Christmas Black Friday? If the extension is more helpful to China, isn’t the US doing this just to help China? If China and the United States can reciprocate their returns on postponing tariffs, why should they help China more?
Trump does not want his tariff policy to affect American consumers, and he does not want to be seen as “not strong enough” for China. However, in the current situation, this interpretation seems to be “strong.”
The fourth question is that it is difficult to reach China-US negotiations and what is Hong Kong?
Trump is particularly concerned about the Hong Kong issue on Twitter. He said that although China is very keen to reach an agreement, “first let them (China) solve the Hong Kong problem humanely!” The implication is that the situation in Hong Kong has hindered Beijing’s footsteps. After expressing his confidence in China’s settlement of the Hong Kong issue, he even invited the Chinese President Xi Jinping to “not want one-on-one talks”.
Earlier, Trump also suddenly issued a special notice that the US intelligence agencies showed that the People’s Liberation Army was gathering at the border of the port, which also caused public opinion shocks. Although Trump insisted that the Hong Kong issue is China’s internal affairs, his speech on the 14th has linked the Hong Kong issue to the China-US trade agreement in disguise.
On the one hand, if Trump really cares about whether the Hong Kong issue can be resolved “humanely”, then he should not confuse trade negotiations with Hong Kong issues. On the other hand, Beijing’s bottom line for China-US negotiations is quite clear, and it has been trying to separate other affairs and trade wars. The logic of “resolving Hong Kong issues and then talking about trade” does not exist.
Furthermore, if Trump really respects the “China’s internal affairs” issue, then it is doubtful that he cares about Hong Kong at this time. After two large-scale shootings in a week, another shooting incident occurred in Philadelphia on August 14 in the United States, and six police officers were shot and injured. Trump’s Twitter has no words for this, but he has spoken on the Hong Kong issue. Why is this?
Finally, Trump, who may have confidence in the US economy, should also have a reminder that everything is not as optimistic.
Trump has issued five tweets, mostly because of the spur of the US stock market crash. Since taking office, Trump has been extremely sensitive to the stock market, as if this is his greatest achievement. However, although the stock market can reflect people’s expectations of the economy to a certain extent, it does not mean whether the economy is stable.
US manufacturing activity deteriorated to its lowest level in three years in July. Due to the slowdown in production and the instability of the export market, the Institute of Supply Management’s manufacturing index fell to 51.2 in July from 51.7 in June.
The financial industry is also surging. Affected by interest rate cuts, low trading volume and automation, many investment banks around the world recently announced layoffs, with nearly 30,000 layoffs. Investment banks, including HSBC, Barclays, Societe Generale, Citigroup and Deutsche Bank, all announced layoffs, with Deutsche Bank’s total layoffs accounting for the majority.
According to data from the New York Department of Labor, in New York City, jobs in the commodities and securities trading sectors fell 2% year-on-year in June, which is a reduction of about 2,800 jobs. Goldman Sachs has submitted five workers’ adjustment and retraining notices (WARN) to the New York State Department of Labor this year, which said it would lay off nearly 100 people in April. The layoffs on Wall Street seem to be brewing.
The stock market is worthy of attention, but for the US president in the Oval Office, more global awareness and political sensitivity may be needed. After all, the 2020 presidential ballot cannot come from only one group. American farmers may be able to wait for Trump’s promise. Rust belt workers may continue to like his character, but when Wall Street is also affected by the economic downturn, it’s definitely worth it.
