Revenge Strategy: wasting the power of your hate on the guiltless (XLIX): Closing the US-China Trade War.
Summary and Conclusions US-China Trade War: Wrap-up edition.
- Seventeen months have passed since the beginning of the US-Chinese Trade War. I never shared the US-China Trade war chronology of events or timeline on purpose. I wished you to perceive and learn about both countries first. Once we understand who is who behind the timeline actions, we began to contemplate these type of issues with other lenses. If we genuinely understand who are the people of Xi and who are the people of Trump, what do they do for a living, how do they handle their quotidian life, which are the main interests from both goliaths beyond the indicators provided, our hearts melt because we do not read any economic indicator at the first sight. There are almost 325 million Americans who voted to make America Great Again. On the other side, there are almost 1.4 billion Chinese who want to develop themselves so strongly, all together with their neighbors. China is tangled with many Asian countries through its manufacturing model of global value chains. And the US is also involved in it since they are one segment of the Chinese value chain international paradigm.
- Find the chronology of events during the last 2 years between China and the USA. I found this lovely infographic from Andrea Durkin, taken from the TradeVistas-Hinrich Foundation. Now it is the time to consult what has happened since Trump, as the owner of the POTUS title, landed at the White House.
- Any trade war starts slowly. Initially, the effects have no direct or little impact on these two titans economies. The two countries possess a strong diversified economy and a diversified domestic production matrix. Both giants have a diverse global marketplace; which means why both countries could have resisted for a couple of years more with this tit for tat strategy. Nevertheless, some of China´s neighbors are codependent on China’s value chain manufacturing. These tiny economies wouldn´t have been able to resist. Diminutive economies that depend on exports solely from one of these two giants, and are linked through value chains with China or the US would have been harmed.
- I usually believe that countries with strong financial sectors are capable to resist if they are able to be clever enough to pull and push monetary measures through their respective Central banks. Once their own capital markets are kept smooth and sweet as attainable, the financial sector helps them as a shock absorber. But an export-import trade conflict can trigger an economic crisis if the financial markets (stock exchanges and debt markets) are not protected graciously through a series of wise pertinent measures. Even between countries with the most diversified domestic economies, these may be influenced in the heart of the financial chaos if the geopolitics go sour, particularly on the long term basis. A lesson to learn: The more diversified are the economies, the better for them to resist the fluctuations of future crises. That is why I am against the desire of China to automate itself into a robotics artificial intelligence era. Any nation that is out of balance will collide eventually if they lose their diversified sources of prosperity.
- If the trade-wars develop themselves over time to become sort of a “cold war” of years and years with no end, evidence has shown us that unless the countries involved in the tariff-conflict; substitute their respective and reciprocate markets with other alternate nations, the result may be serious for the rest of the participants in the global value chain of the giants. As usual, the losers are the little ones who depend on the bigger ones.
- I tried to provide a tale disposition that could bring us this far to today´s post. I assayed to avoid pure economic buzzwords because there are other guru experts who can show you those details with their own jargon. Eleonora Escalante Strategy is here to simplify the whole story and make it accessible for you. Sometimes we need to understand the philosophical core of the issue, and substantially I hope I was able to show you all the premises of the US-China Trade War. In the end, I would be extremely satisfied if Mr. Xi and Mr. Donald will stop to hurt their economies, not because the impact will be hard on their own territories, but because their global value chains are affecting their tiny neighbors which are intertwined with them. 200 billion dollars are probably not going to change the life of China or the US, but any little export country with GDPs of fewer than 30 billion dollars will evidently be affected when their exports are the inputs for the production in China which later is bought by the US.
- Always look at the big picture in the case of trade wars. The economic prototype of China justifies the end of the trade war as quickly as possible. The economic model of the United States of America advocates for the solution of the trade war too. What needs to be solved as quickly as possible are the unfair monopolist mechanisms of the global value chains. The US-China trade war shakes the fundamentals of the global value chain model which requires to be fixed, otherwise, vulnerability to poverty won´t be overcome, even if both nations continue to grow at a 6% GDP year over year or more.
I will stop here. Don´t despair. We are almost fulfilled with the saga “Revenge Strategy: Wasting the power of your hate on the guiltless”. Next week, before Christmas, expect the last wrap-up publication of our 60 episodes saga.
Have a stunning weekend. We have reached a community of more than 6,500 readers during the year 2019. And it is growing. Thanks for your patience and attention to my articles. Hugs and thank you for reading to me.
Sources of reference utilized to write this theme:
Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY. Nevertheless, the majority of the pictures, images or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated.
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