Mas Miwa writes on Quora:
What the US did with Russia was an arms race that broke Russia’s economy. It’s possible that Trump etal would like to break China’s economy, but if so, he picked the wrong sector, or he got bad advice. The real reason has some connection to what your question states, it has to do with China’s technology ambitions. To break through the ‘middle-income trap’ and continue China’s economic rise, China saw what made the US great and decided to follow it. It decided that labor-intensive trade was not going to give them a future with rising incomes. Her per capita GDP is one-seventh that of the US. For China to rise, she needed to be stronger in technology. China created a technology plan to be reasonably self-sufficient in technology by 2025. During the first round of negotiations, China offered to buy $60 billion more in US products and energy, but when it came to discussing whether China would stop her technology drive, China refused. The US broke off talks and the tariff war started a week later.
The US knew it could out tariff China on a one to one basis because the US exported much less than she imported from China. With the tariffs on the next $200 billion, China could only muster a tariff list against $60 billion of US goods. Obviously, Trump et al thought they had the upper hand.
Today, China surprised the US by lowering her tariffs on 1500 items to every country except the US. China now awaits US retaliation to tariff the rest of the Chinese exports to the US. In parallel, China has been talking with many countries of the world and beefing up trade agreements. From the EU to South America, from Japan to Russia, China has increased trade agreements to replace the US in trade. China is in for the long haul. Trump’s plan to shock China and see concessions, has failed. As the trade war continues, some economists see as many as 11 million jobs lost. Whether this becomes reality or not depends on Trump. The Chinese are not saying ‘uncle.’ BTW, other collateral damages of economic inputs to the US are going to cause pain. FDI is falling, tourism is falling, and Chinese enrollment in US colleges is falling. A huge hit on US multinationals is beyond China’s government to control. These companies sell to China’s domestic market $600 billion in goods and services. If the Chinese consumer decides to boycott these goods and services, these US multinationals could take a hit.
“Foreign direct investment (FDI) in the United States plunged by a staggering 32 percent in 2017 year on year, the US Bureau of Economic Analysis reported.
Investment totaled $259.6 billion (€221.2 billion), with the figure representing the second year of decline after a peak in 2015 when foreign investors’ expenditure in the US hit $439.5 billion.”
Foreign investment in US down sharply | DW | 12.07.2018
“International tourism is growing at its fastest clip in seven years, but the U.S. is on pace for its sharpest drop in foreign travelers since the wake of the recession.”
International tourism is booming, but not to the US
“The US issued visas to less than 400,000 international students in the fiscal year 2017. That’s a 17% decline from 2016, and a 40% drop from 2015.”
Foreign students continue to turn away from US universities
“Our economic interests with China are significant and growing,” said Jacob Parker, vice president of the US-China Business Council, a trade group that represents US companies’ interests in China. “China is a $600 billion market for the American economy.”
How China gets what it wants from American companies
“A new survey has found that a majority of Chinese consumers are prepared to stop buying US products in response to the Trump administration placing tariffs on Chinese goods.
54% of respondents across 300 Chinese cities would “probably” or “definitely” shy away from US products, the study, conducted by FT Confidential Research, found. Only 13% of the 2,000 who responded said they would not boycott.”
Chinese consumers ready to boycott US goods, survey shows
And, last but not least, China announced that it will reduce tariffs on 1500 items imported from all countries except the US.
Doesn’t sound like China’s economy will collapse with this trade war with Trump. It appears his advisors gave him bum advice.
