China Will Be No Trade Pushover

Written by Jim Welsh

The consensus story line is that the U.S. has more leverage on China since they exported $505 billion of goods into the U.S. in 2017, while the U.S. only shipped $130 billion of stuff to China. The target is much bigger on China’s back than on the U.S., since the U.S. can slap tariffs on more goods than China can. Chalk one up for the U.S!

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China’s stock market as measured by the Shanghai Composite is down -17.1% through August 3, while the S&P 500 is up 6.0%. For the vast majority of investors who actually believe that markets discount the future, the only conclusion one can draw from this performance disparity is that China is losing and the U.S. will win. Chalk up another one for the U.S!

In the second quarter GDP grew 4.1% in the U.S., while economic statistics in China are showing a slowdown as the recent figures for China’s manufacturing and non-manufacturing illustrate. With the U.S. economy on the rise this is the perfect time for the U.S. to be pressing China, as opposed to a period when the U.S. isn’t as strong. The fact that China’s economy is weakening makes this advantage an even a bigger point of leverage. Chalk up another win for the U.S.!

China has been ripping off the Intellectual Property of U.S. companies for too long, costing millions of middle class Americans their livelihood as factories closed, and stealing hundreds of billions of dollars from the U.S. each year through the trade deficit. Clearly the U.S. is justified in demanding free and fair trade. The U.S. is standing on the righteous moral ground in this dispute, which China will recognize and accept and thus seek to avoid a trade war. Another point for the U.S., which makes the trade negotiation tally 4 for the U.S. and 0 for China. We’re shutting China out!

4 for the U.S. and 0 for China. We’re shutting China out!