Trump Tariffs On China Working

Trump's tariffs on China are working. Chinese exports yoy fell almost 21%. China introduced more stimulus of tax cuts, issuing bonds, and reducing the VAT. Meanwhile US employment is at a 50 year low. It all increases pressure on China to agree to a favorable trade deal because the last thing China wants is millions of unemployed angry proletariat.

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It is easy to compare the larger damage to the Hang Seng Index to the Dow, S&P, etc. You are correct. We are doing fine. They are hurting by comparison. We should keep up the pressure from now on. Our problem is our crony capitalists who only care about making money in China. Many are diversifying their investments to other countries. China is no longer the low cost option anyway. We could invest in America or many other countries. We should not invest in our primary world adversaries. 

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40 minutes ago, ronwagn said:

Our problem is our crony capitalists who only care about making money in China. Many are diversifying their investments to other countries. China is no longer the low cost option anyway.

Bingo. China doesn't have the low cost labor advantage anymore but some American companies still push that narrative so they can kiss up to China for money.

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Have you noticed that the trade deficit is worse than ever? And the forecast is it's getting worse. You can't isolate to a country. And yes, we absolutely need to address China's harvesting of our technology. But moving the trade from China, to Vietnam. Sorry, that is not a win for American manufacturing.

https://tradingeconomics.com/united-states/balance-of-trade

 

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On 3/9/2019 at 5:48 PM, John Foote said:

Have you noticed that the trade deficit is worse than ever? And the forecast is it's getting worse. You can't isolate to a country. And yes, we absolutely need to address China's harvesting of our technology. But moving the trade from China, to Vietnam. Sorry, that is not a win for American manufacturing.

Which is directly a result of one way free trade agreements. Our government wants cable suppliers that connect to servers to move out of China for fear of Chinese spying. It wants to ban Huawei. So yes moving that trade out of China is a necessity. You're shooting yourself in the foot twice by making them rich selling cheap stuff now and enabling their cyber espionage which is used to steal trade secrets and undermine our companies in the future. Your view is short-sighted and naive to the threat.

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On 3/12/2019 at 12:51 PM, shadowkin said:

Your view is short-sighted and naive to the threat.

My point isn't to not be tough on China, it's don't be tough on China by yourself. It has to be coordinated with other countries, allies, or the workarounds defeat much of the objective. So much Asia wants anything but China, and we need to align them. Individually, these countries have little influence against China, though they loath them. No country enjoys being a vassal state. I don't really see how moving iPhone production from China to India is a win. The IP issue is a bigger deal to me than the low cost labor thing. But it has to be other advanced countries also working to prevent the IP transfers. 

And I've already witnessed made in China labeled as something else. Takes a detour through another country. It takes a far more concerted effort than I see happening to make better progress. 

Also, China suffers from heavily managed economy syndrome as well. They have plenty of challenges. We can out react, and out innovate them. If we can't beat them, then maybe our model isn't so special. 

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I agree with much of what you're saying except

On 3/18/2019 at 12:15 PM, John Foote said:

I don't really see how moving iPhone production from China to India is a win. The IP issue is a bigger deal to me than the low cost labor thing. But it has to be other advanced countries also working to prevent the IP transfers. 

China will require you to hand over this IP if you want to build a factory there using low wages, little environmental regulations, no unions, etc. as well as sell in their market.

Making things like iPhones or other high tech things there is a mistake because Chinese who work there will steal trade secrets and give these to local competitors to build up their industries. This is why Google 'quit' China, among other reasons. China had stolen some source code and was hacking into their system. They didn't leave because of moral objections. They can also learn the manufacturing processes which is almost as important as the product itself. 

They will then kick you out of their market and compete with you. Outsourcing to China has been a huge strategic mistake. 

At the low end it's just not credible to believe you can make shoes cheaper in China than Guatemala factoring in transportation costs. In the 70s yes but not now. Chinese has a growing middle class who demand higher wages and CCP can't be oblivious to that.

On 3/18/2019 at 12:15 PM, John Foote said:

We can out react, and out innovate them.

Agree. They'll always be one step behind if they have to rely on us to innovate.

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7 hours ago, shadowkin said:

I China will require you to hand over this IP if you want to build a factory there using low wages, little environmental regulations, no unions, etc. as well as sell in their market.

Making things like iPhones or other high tech things there is a mistake because Chinese who work there will steal trade secrets and give these to local competitors to build up their industries.

Actually I agree with you, only going in India means an even more difficult environment, and your things aren't secured. Corruption is higher in India, and infrastructure, what a mess. The Indian government isn't as controlling and directing of this, but the secret source will get out.

The contract manufacturing model embraced by so many Western companies, the companies know darn well they are conceding technologies, and gambling on innovation continuing enough to keep an edge. 

The other reason to do the deal with the devil, it does grant you access to a very large market. A lot of iPhones were sold in China (and even more counter-fit ones).

Clearly I am against it, but international, public companies, will do that deal more often than not. And there are some effective technological blocks in place the general public doesn't know about. Right now I am personally in a pickle, struggling to import ceramic bearings to China, from Japan. It's a silly, leftover from the 80s thing. But there are high end industrial tools not allowed into China, and that is a good thing. Remember Toshiba in the 80s selling high end 5-axis machine tools to USSR, which enabled them to machine better prop screws for harder to detect submarines. Nasty of Toshiba, but the fundamental nasty was the Walker family selling the US out. The Soviets didn't know we could track them except for blatant selling of secrets. The advanced machine shops in China, it's all imported stuff, still. The Soviets learned, and no doubt the Chinese too, not to appeal to politics in the West. Flash a few greenbacks and someone will sell out. So yes, I am all for making that hard to do, and be draconian on those that do.

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11 hours ago, John Foote said:

...The advanced machine shops in China, it's all imported stuff, still...

Can you clarify?

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18 hours ago, John Foote said:

Actually I agree with you, only going in India means an even more difficult environment, and your things aren't secured. Corruption is higher in India, and infrastructure, what a mess. The Indian government isn't as controlling and directing of this, but the secret source will get out.

To be clear I'm not advocating any particular nation or singling out any product like the iphone. I'm just using them as examples. India would not be at the top of the list for the reasons you stated and the fact I don't think they're as efficient as the Chinese. There have been companies in recent years moving factories to Vietnam and Thailand, for example, so business is definitely aware the low wage advantage is gone. They're on to the next countries to exploit.

Back to the iphone I see no reason why it can't be manufactured almost exclusively by automation in the US or some other Western country. I think the real reason they build these factories over there is as we've said access to the market and the HW suppliers are mostly there. Same reason Silicon Valley is kissing Chinese butt.
 

18 hours ago, John Foote said:

Clearly I am against it, but international, public companies, will do that deal more often than not. And there are some effective technological blocks in place the general public doesn't know about.

Hehe I've no doubt we've planted SW bombs in code the Chinese have been allowed to steal. It should definitely make them think twice about mindlessly copying something. 

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