China overplayed its hand with U.S. President Trump on trade, and it could cost them dearly

“China and the United States were moving towards an agreement to end a months-long trade war when, suddenly, it all fell apart this week,” James Griffiths writes for CNN. “Over the weekend, US President Donald Trump promised to raise tariffs on $200 billion of Chinese goods, sending markets plummeting and wrong-footing Beijing, which did not issue an immediate response and muzzled state media from reporting on the threat.”

“On Twitter, Trump accused Beijing of attempting to run out the clock on his administration in the assumption it will be dealing with a Democratic administration after 2020. Speaking at a rally in Florida later Wednesday, Trump said the new tariffs were because China ‘broke the deal,’” Griffiths writes. “‘The vice premier is flying in tomorrow, good man, but they broke the deal. They can’t do that,’ he added. ‘If we don’t make the deal, nothing wrong with taking in over 100 billion a year. We never did that before.’”

“In launching his trade war, Trump hoped to force China to further open its market to US exports, stop the forced sharing of intellectual property with China, and rewrite trade deals he said have unfairly benefited Beijing. To do so, he has launched an all out assault against the Chinese economy, massively ramping up tariffs on a large variety of goods and industries,” Griffiths writes. “Trump’s strategy is based on the fact that, as the US is the net buyer and China is the net seller in their trade relationship, Beijing will blink before Washington. The Chinese economy is also fundamentally more vulnerable than that of the US, and Chinese President Xi Jinping faces a host of political pressures that make a prolonged trade war difficult.”

“Trump has a habit of making policy on Twitter, but his pronouncements on Sunday did not come from nowhere. US officials told CNN that at the most recent round of trade talks in Beijing, their Chinese counterparts sought to renegotiate significant aspects of a prospective deal that the Americans felt were already wrapped up,” Griffiths writes. “It appears to be based on a misreading of statements and actions by Trump that he was concerned about the state of the US economy and would be willing to make concessions.”

“The assumption that this position of renewed strength would be enough to make Trump blink seems wildly miscalculated, however. Not only is the US economy not nearly as weak as some in Beijing appear to believe, this type of last minute renegotiation seems almost specifically designed to infuriate Trump,” Griffiths writes. “The US President has already shown himself willing to walk away from deals when they don’t go his direction…”

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MacDailyNews Take: No pain, no gain.

The darkest hour of the night comes just before the dawn. — Thomas Fuller

Hopefully, this is the impetus that drives both sides to a comprehensive U.S.-China trade deal that works for both countries.

I’m cognizant that in both the U.S. and China, there have been cases where everyone hasn’t benefited, where the benefit hasn’t been balanced. My belief is that one plus one equals three. The pie gets larger, working together. — Apple CEO Tim Cook, March 24, 2018

At least half of the popular fallacies about economics come from assuming that economic activity is a zero-sum game, in which what is gained by someone is lost by someone else. But transactions would not continue unless both sides gained, whether in international trade, employment, or renting an apartment. — Thomas Sowell, June 14, 2006

Apple CEO Tim Cook optimistic about U.S.-China trade talks – February 12, 2019
President Trump says U.S. doing well in trade negotiations with China – January 23, 2019
China’s 2018 growth slows to 28-year low, more stimulus seen – January 22, 2019
Apple CEO Tim Cook: I’m very optimistic about U.S.-China trade talks – January 8, 2019
Advisor to President Trump: Apple’s sales should pick up when U.S.-China strike trade deal – January 3, 2019

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