TRUMP’S TRADE WAR STRATEGY AGAINST CHINA ISN’T WORKING – IT’S GETTING WORSE!

Donald Trump is perhaps the best U.S. president Americans have ever voted for who wanted to “Make America Great Again”. One of his projects is to fix the U.S. trade deficit with China. Americans have every reason to be angry with the Chinese. They have stolen U.S. technology and secrets, even robbed millions of American jobs over the past decades.

While the Trump administration has compiled a list of bad things that the Chinese have done, along with actions to be taken to teach Beijing a lesson, the strategy adopted to achieve the goals is screwed up. Trump, a man as ego and arrogant as Kim Jong-un, has chosen to aggressively attack China with everything he got in his arsenal.

Trump believed China was an easy meat and had no chance against the superpower United States. His belief was that a trade war to cripple China’s economy would be an easy win. Despite his rhetoric speech, President Trump has no respect whatsoever for President Xi Jinping, let alone the Middle Kingdom. He was absolutely confident of bringing the Chinese to their knees.

President Donald Trump and President Xi Jinping - Laughing

Not only the White House started a full-blown trade war with China, the administration had also attacked the Chinese from all angles – support Taiwan, dis-invited China from international military exercise, and sending warships to South China Sea and even demanded the Chinese to tell its buddy North Korea to surrender its nuclear programme and start negotiating.

The strategy was to squeeze China’s economy so hard that it finally decides to play by the rules – set by the U.S., of course. If possible, Trump would like to destroy China’s ruling Communist Party too, as if the country was like Syria, where a dozen of Tomahawk cruise missiles were enough to destroy the Arab state. The president doesn’t care how China is being destroyed, as long as it gets destroyed.

Last year, U.S. exports to China were only US$130 billion while imports from China were US$505.5 billion, hence the US$375 billion deficit. In other words, Trump’s threat of US$200 billion tariffs in September, let alone the additional US$267 billion, cannot be matched by Beijing. At most, China can only threaten to slap tariffs on US$130 billion worth of American goods.

US-China Trade War - Clashes

Trump’s biggest goal of engaging the trade-war was, therefore, to reduce the U.S. trade deficit with China. How hard could it be? The U.S. just needs to pressure China to import more US-made products than Chinese companies export their products to America. He can then brag to Americans – “See, it’s so easy to win a trade war”. But so far it looks like that plan isn’t working.

The most recent trade report is out. The United States’ trade deficit with China once again hit a record for the month of October – a whopping US$55.5 billion. The trade deficit has now widened for a five straight months. Prior to that, the September’s trade deficit of US$34.1 billion was a new high, after a deficit of US$31 billion a month earlier in August.

Essentially the U.S. trade deficit jumped to a 10-year high in October as soybean exports continued to fall and imports of consumer goods rose to a record high. This string of record-high deficits seem to contradict Trump’s trumpeted mission of bringing China to its knees when he slapped the tariffs on roughly US$250 billion worth of Chinese goods.

United States Soybean - US Dollar

The tariffs on Chinese goods make their products more expensive, so Americans don’t buy them, well, at least that was the idea. But Beijing refused to surrender without a fight and has responded to the tariffs in kind, making it much harder for U.S. companies to sell in the Chinese market. China has purposely increased its exports to the U.S., but at the same time, stopped buying as much from U.S. manufacturers.

Adding salt to the injury, the U.S. appetite for Chinese goods has actually grown due to strong American economy. It also didn’t help that U.S. companies purchased more than usual in anticipation of more tariffs. Yes, Trump’s staggered tariffs have actually made things worse in combating the U.S. trade deficit with China.

American farmers were not alone in being hit hard by the trade war with China. Ford, America’s second-largest car company, said in September that it lost US$1 billion due to Trump’s tariffs and now expects massive layoffs. That’s politically troublesome for the president, since he has boasted – repeatedly – that his priority is to grow manufacturing jobs.

US-China Trade War - President Donald Trump Worry

Goldman Sachs says its President Trump’s fault that the trade deficit is getting worse – “The trade deficit with China stands at an all-time high. Exports declined sharply on a seasonally adjusted basis, extending their decline since retaliatory tariffs started to take effect in July, and imports continued to rise further. Unsurprisingly, we find that recently imposed tariffs have played a role in these changes.”

– Finance Twitter

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