Trump's hidden motive and grand strategy against China

1. Damian Paletta is White House economic policy reporter for The Washington Post. Before joining The Post, he covered the White House for the Wall Street Journal.

David J. Lynch joined The Washington Post in November 2017 from the Financial Times, where he covered white-collar crime. He was previously the cybersecurity editor at Politico and a senior writer with Bloomberg News, focusing on the intersection of politics and economics. Earlier, he followed the global economy for USA Today, where he was the founding bureau chief in both London and Beijing.

The following are excerpts from an article by Damian Paletta and David J. Lynch dated September 13, 2018 under the headline "Trump confirms new talks in U.S.-China trade war, but makes new threat against Beijing".

(Begin excerpts)
President Trump on Thursday cast doubt on the possibility of a breakthrough in trade talks with China, saying he was prepared to hammer China’s economy with tough new economic penalties if Beijing doesn’t offer concessions.

“We are under no pressure to make a deal with China,” Trump wrote on Twitter, trying to dispute reports that he was seeking to cut a deal. “They are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking Billions in Tariffs & making products at home. If we meet, we meet?”

The Twitter post came after White House officials confirmed that Treasury Secretary Steven Mnuchin had offered a formal invitation to Chinese leaders to restart trade talks, aimed at de-escalating the trade battle between the world’s largest economies.

Trump’s Twitter post is consistent with his recent bravado toward China, but it could make Chinese leaders dubious that Trump will be willing to negotiate a deal. Talks between both countries have already broken down several times, at least once because Trump balked at a deal at the last moment.

On Wednesday, White House officials had seemed optimistic at the potential for new talks.

“Well, it’s just an invitation, as far as I know,” White House National Economic Council Director Larry Kudlow said on Fox Business Network. “There’s some discussions and information that we received that the Chinese Government — the top of the Chinese Government wished to pursue talks.”....

Any talks would resume amid doubts over prospects for a diplomatic settlement. The administration remains split between trade hard-liners and officials who are more sensitive to corporations’ fears of lost sales and disrupted supply chains.

“The question is whether anything has changed,” said Jeff Moon, a former U.S. trade negotiator in the Obama administration. “Who’s in charge on the American side and what do they want?”

Robert Holleyman, former deputy U.S. trade representative, said U.S. demands for fundamental changes in China’s state-directed economy would make for difficult talks.

“We are a long way from finding a solution,” said Holleyman, a partner at Crowell & Moring. “And a solution will require some tough choices, especially on the part of China.”...

The White House is under enormous pressure from U.S. companies to resolve its differences with China swiftly before either country imposes more tariffs or restrictions that these firms argue could hurt growth and lead to lost American jobs....

Separate rounds of talks between the White House and Chinese leaders have already faltered. Commerce Secretary Wilbur Ross tried to cut a deal with Chinese leaders last year, but it was rejected by Trump at the last moment, leading to the escalation this year..... (End excerpts)

2. Let us examine some interesting points in Trump's tweet.

(a) Our markets are surging, theirs are collapsing.

Once again, Trump is trying to portray China as an adversary on the ropes, with a falling stock market, sliding currency and slowing economy.

Trump is using his favourite psychological tactics against his adversary by overstating the apparent good performance of the US stock markets and exaggerating the adverse performance of their Chinese counterparts.

It is generally known that a stock market is an ecosystem where big fish eat small fish. Stock markets have become casinos as their revenues largely depend on the speculation of traders. Trump should know the performance of a stock market does not reflect the true economic situation of a country.

(b) We are under no pressure to make a deal with China, they are under pressure to make a deal with us.

What trump implies in the above point is:

We are under pressure? What a joke! It’s China which should come to announce its surrender at the negotiation table. How can anyone ever hope to beat the Almighty Trump?

(c) We will soon be taking in Billions in Tariffs & making products at home.

After casting doubt on the possibility of a breakthrough in trade talks with China, Trump is making new threat, saying he was prepared to hammer China’s economy with tough new economic penalties if Beijing doesn’t offer concessions. As usual, prior to any negotiation, he issues a lot of threats and intimidations in the hope that his opponent will be frightened into submission.

Even though the failed businessman-turned-political leader had bankrupted four of his own companies, he always portrays himself as invincible and infallible as a demigod. Like the legendary King Midas who famously wished that everything he touched would turn to gold, Trump always credits himself for all his successes but blames others for all his failures. He has taken much pain to create the myth that he is as almighty as God in winning victory after victory for his supporters and followers.

Source: https://www.washingtonpost.com/busi...daaa5b2a57f_story.html?utm_term=.f39c624e407f

2. The following are excerpts from an article by Martha C. White and Lucy Bayly dated September 18, 2018 under the headline "Trump just slapped new tariffs on $200B of Chinese imports — and these ones will impact your wallet" and subheading " 'The trade war is not going to help Trump in the election — it can only cause worse things,' warned one economist".

(Begin excerpts)
President Donald Trump announced a new round of tariffs late on Monday, slapping a 10 percent tax on a $200 billion list of Chinese imports ranging from consumer goods to manufacturing materials. The new tariffs, effective September 24, will rise to 25 percent by January 1....

"If China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports," the president warned in a statement released on Monday evening.

Almost half of all Chinese imports into the U.S. are now subject to a tariff, for a total of $250 billion. China has already retaliated with tit-for-tat tariffs on billions of dollars of imported U.S.-made goods, noting earlier this month that trade officials there would not be swayed by Trump's tactics....

“We remain concerned with the continued escalation of tariffs against China [and] the impact of the wide swath of consumer goods — everything from baby products to furniture to lighting was on that list,” said Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation. “Tariffs are not the right approach,” he said, pointing out that even if costs aren’t passed along to customers, absorbing those expenses will hamper companies’ ability to invest in equipment, technology or its workers.

These concerns about the broader impact of tariffs on corporate America, along with weakness in key tech stocks partially attributed to worry about higher production costs, weighed on the market Monday.

“I think if the tariffs are actually imposed, investors will pay some attention,” said Kate Warne, principal and investment strategist at Edward Jones. “It will tend to slow economic growth in the U.S. as well as raise prices… and lead to a more sustained pullback, at least short-term,” she predicted.

Trade experts say the upcoming midterm elections — already expected to be contentious — create an additional challenge for a frequently divided administration to navigate.

“What I’m seeing is a cloud hanging over the Mnuchin dialogue with Chinese leadership,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

“My view has been that Trump does not want to fully engage in a trade war prior to the November election,” Hufbauer said, predicting that tariffs might be announced, but with a delayed time to implementation that would buy negotiators some time — possibly bringing the threat back after the midterms.

“The trade war is not going to help him in the election — it can only cause worse things,” Hufbauer said.

“I would be very surprised to see a resolution of the tensions in the foreseeable future,” said Michael O. Moore, an economics professor at George Washington University. “Unfortunately, I think both sides may need to feel a lot of pain before there is pressure to come from some sort of a deal… Many businesses are quite afraid about where this is all going.”

Although China has less clout to impose tariffs because of the significant trade deficit between the two nations, experts say the Chinese have other tools at their disposal to impose pain on American companies doing business in or with China, such as slowing down the movement of goods at customs, restricting American investment and disrupting the Chinese operations of U.S. companies with onerous new restrictions or inspections.

The prospect that increasingly belligerent trade talk — or tweets — could cast a chill over the markets more broadly is a major risk Trump takes with this kind of brinkmanship, experts said.

“The biggest economic risk is that the tension spirals out of control,” Hufbauer said. Another financial shock such as a crisis with Italian debt or big slowdown in emerging economies could act as a multiplier for the trade war effect, while a low-rate environment plus the massive and deficit-expanding tax cut package has left policymakers with few tools to address a downturn.

“The Fed and the Treasury are now quite constrained on their responses. And people will realize this, which means a smaller shock could have bigger impact,” Hufbauer warned.

“They’re playing chicken and so far, I don’t see anybody blinking,” Moore said. (End excerpts)

Source: https://www.nbcnews.com/business/bu...riffs-would-likely-lead-higher-prices-n910361

3(a) The following are excerpts from an AFP report dated September 18, 2018 under the headline "Trump accuses China of election meddling in trade war".

(Begin excerpts)
WASHINGTON: US President Donald Trump on Tuesday accused China of seeking to influence knife-edge midterm congressional elections, by taking aim at his political support base in the economic giants’ rapidly escalating trade war.

The allegation added an explosive new element to the dispute after Trump pulled the trigger late Monday on 10% tariffs against another US$200 billion in Chinese goods from next week, with a threat of more tariffs on another US$267 billion....

In a combative series of tweets Trump, whose Republicans fear losing control of both houses of Congress in November, accused China of trying to broaden its retaliation into the electoral arena....

“China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me,” Trump wrote.

“China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it,” he added.

“There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!”

It was not clear what open statements by China – if any – Trump was referring to....

While officials said the impact on the US economy has been minimal, firms across the country have reported lost business, layoffs and possible bankruptcies as input costs rise....

In Brussels, EU Trade Commissioner Cecilia Malmstrom described the new US tariffs as “very regrettable” and added that Europeans were “at odds with Washington’s methods.”... (End excerpts)

Source: https://www.freemalaysiatoday.com/c...uses-china-of-election-meddling-in-trade-war/

3(b) The following are excerpts from an AFP report dated September 18, 2018 under the headline "Trump accuses China of trying to ‘impact’ US election with trade war".

(Begin excerpts)
Washington (AFP) – President Donald Trump on Tuesday accused China of seeking to influence upcoming US elections by taking aim at his political support base in the countries’ escalating trade war...

As Trump has pursued his confrontation trade policy, China, Canada, Mexico and the European Union have all fought back, and have targeted goods seen as hitting areas loyal to Trump, including soybeans, bourbon, and blue jeans... (End excerpts)

Source: https://www.breitbart.com/news/trump-accuses-china-of-trying-to-impact-us-election-with-trade-war/

3(c) Let look at the initial "timeline of the US and China trade war at https://www.digitalcommerce360.com/2018/07/06/timeline-of-the-trump-china-trade-war/

January 22, 2018: US imposed safeguard tariffs on washing machine and solar cell imports. While much of these imports didn’t come from China, the statement made clear that Chinese dominance of the global supply chain was a concern.

March 9, 2018: Trump signed tariffs on imported steel and aluminum from all nations, including China.

April 2, 2018: China said it would start levying tariffs on $3 billion of U.S. imports including fresh fruits, nuts, wine and pork. Early April, Liu told other officials that trade talks between the two parties broke down after the U.S. demanded that China curtail support for high-technology industries. Beijing had offered to cut the bilateral trade deficit by $50 billion.

(i) Despite the Republicans' opposition, Trump pressed ahead with his trade war. As usual, when something goes wrong, Trump the "blame king" would look for a scapegoat.
Given that he is the one to impose the tariffs first, it is laughable for him to accuse China of starting the trade war in order to meddle with the US November election.

(ii) Trump has never made efforts to prove his accusation against his adversary. Hence it is not surprising he could not prove any open statements by China that "they are actively trying to impact and change US election by attacking its farmers, ranchers, and industrial workers because of their loyalty to him".

According to Tony Schwartz who regretted ghostwriting for Donald Trump, "Lying is second nature to him. More than anyone else I have ever met, Trump has the ability to convince himself that whatever he is saying at any given moment is true, or sort of true, or at least ought to be true.”

(iii) One can only wonder why he did not make the same accusation when China targeted the US farm economy in the first round of trade war with the US on April 4 this year.

(iv) One may wonder why Trump only singled out China as the scapegoat for his fresh accusation when other countries like Canada, Mexico and the European Union are also targeting the US farm economy in their trade wars with the US.

Earlier in the week, Trump seemed to be very optimistic, even boasting: "It will be a lot of money coming into the coffers of the United States." Suddenly his mood seemed to change from optimism to pessimism, even desperation. One can only wonder he has discovered to his horror that his latest round of trade war against China is beginning to impact the wallets of more Americans, even those living far beyond the borders of the agricultural states.

In conclusion, Trump should realise that the US farming economy is his Achilles heel in the trade war. To avoid meeting his Waterloo, he should reverse course at once back to the pre-trade war situation.

Ralph47 said:

The BOTTOM LINE is the good ole USA is the most powerful (by far) nation on Earth (both militarily & economically). We HOLD ALL THE CARDS!!!

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Ralph47 said:

The bottom line: The USA will WIN the trade war against China, and Americans will be better off for it.

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My great friend, you have gone for a face transplant again and again -- twice within a short period. First you got yourself a cartoon face, but that did not make a guy like you anymore funny. That's why you rushed for another face transplant -- this time changing it to that of your idol. But beware ! If your idol loses the trade war, your fellow countrymen will throw rotten eggs at you as they may mistake you for that "moron". (Tillerson was reported to have said that.)

Unfortunately you have chosen the wrong guy to illustrate US power. You should have chosen Superman or Captain America instead.

That "powerful" guy was supposed to have learned Chinese kungfu under a Shaolin master. A master generally keeps at least one secret from his disciple in case the latter rebels against him. You can expect the outcome of a duel between a master and his disciple. The master will crush his disciple like a “grasshopper”.

Similarly, China knows how to apply Sunzi’s “Art of War” in the ongoing trade war. That's why you find signs of desperation in your idol’s recent outburst against China.

P.S. It is laughable that you even recruit a terrorist for the fight. How pathetic !