Trade war with China

As of 6/2019, I predict the trade war would be ended soon while President Trump may want to postpone it to the election.  However, after two months, I suspect the trade war cannot be avoided as China published their paper of no compromise. Trump-made problem would be fixed and Trump would declare victory. Trump cares about his election in less than 2 years and Xi’s 10-year term has plenty of years left. A full-fledged trade war could not be good for both countries and the rest of the global economies.

I expect the forced transfer of technologies will be eliminated. It is an unfair bait for gaining the Chinese market. We have to blame the U.S. CEOs signing these agreements for their bonus consideration. So far, both sides have lost a combined total of 6 billion. Many long-term harms have been done to the U.S. Here is a summary of the actions and counter-actions from China.

	U.S.	China
Tariff	Will not gain a lot of jobs as other countries and robots would fill the gap.	Will pass tariffs to the consumers. Will have less profits. Will lose the market to some countries.
Barriers	Would open the market to more US products.	Patriotism would discourage citizens to buy US products.
Unfair rules	This is a bright spot for US.	Could have more impact 5 years ago.  China depends less on foreign technologies than before.
Internal market	Will be reduced.	Will be expanded.
Treasury	Interest rate will be higher.	Reduce owning US Treasury.
Depreciation of the Yuan	Harmful for export goods to China.	Make Chinese products more competitive.
Core technologies	Will lose these sectors to China eventually. Intel, Micron… have suffered already.	China will concentrate research on CPU and memory. China may limit rare earth export to US.
US allies	Eventually they will be sided with China due to economic reasons.	Eventually will gain more.
US Corporation	Many will suffer such as Apple.	Less FDI.
Soy	A direct blow.	Will switch to other countries at higher prices. Soy will be reduced in the mix for feed.
Education & tourism	Will be decreased from China.	More universities and more tourists to Europe.

 
U.S. wants China not to subsidize their industries. It is not valid as we do subsidize ourselves such as in agriculture. Many new companies are formed by former MIT students and professors in Boston area. Without the U.S. subsidies, there will be few of these companies.

The above are my opinions on the outcomes. However, it is good for China in the long run as the huge deficit will not be sustainable. I expect there are winners with the settlement.

·         Farmers will gain; the loser are the replaced countries such as Brazil.

·         Boeing will gain despite the recent problem of the 737 Max planes.

·         Some selected drug companies will gain. I am looking for the life-saving drugs that Chinese do not have.

·         Energy will gain such as LNG; the losers are countries being replaced such as Australia’ LNG.

S.E. Asia countries will be benefited as many Chinese factories will move there.

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The above is from my new book "Trade War with China". Click here.