China’s sudden gigantic trade surplus has surprised everyone. The surprise apparently includes surprising China. US anti-trade tariffs have driven the big reset in trade, and they’ve been a disaster.
They have backfired spectacularly regarding China. They can’t even pretend to have dented Chinese trade in real terms. A bit of adjustment is now edging the US out of global trade in too many ways.
Now, the problem is China? Not really. The US has mired itself in the antiquated protectionism of 100 years ago, and it’s not working. Disconnecting the world’s biggest consumer market is simply absurd.
If you read the very mixed and skeptical messages about tariffs as revenue, nothing makes sense. There are a lot of contradictions in the numbers and big holes in the interpretations.
The tariffs are bringing in less than expected. The tariff revenue numbers are minuscule compared to US revenue. Bear in mind that these tariffs have had this extremely negative effect in less than 12 months. Worse, they’re cutting directly and deeply into US trade. A few more years of this aren’t likely to be pretty.
The rest of the world, meanwhile, is focusing on the Chinese trade surplus, not America’s obsession with totally obsolete, discredited trade policies. Tariffs were abolished for a reason. Free trade took over and promoted trade growth two generations ago.
Now, China is the problem? Are you sure?
The EU seems merely reactive, muttering about “offensive trade measures” to manage the problem. OK, the balance of trade is that lopsided. On the other hand, nobody’s buying a trillion dollars’ worth of Chinese goods for no reason. You don’t import things you can’t sell, do you?
The capital is there; the market is there. If EU products aren’t competing, China definitely isn’t the whole problem in purely commercial terms. High-end EU products and mid-market Chinese products aren’t the same thing and can’t be compared on the same basis.
Excuse a bit of honesty, or not. At a time of severe global economic strain, why wouldn’t people go for better deals? EU products are typically at the expensive end of the market in many fields.
Margins matter. If a supplier delivers low margins, what are you going to do? Join a monastery? You might as well, if your margins evaporate your liquidity.
America’s sudden, irrational, and imbecilic hostility to Europe is another problem. This insanity is now typical of an America that has completely lost the plot . The immediate future requires planning, not knee-jerk reactions.
In context with the Chinese trade surplus, it’s not an enviable situation for Europe. Europe needs to spread its risks and evolve its market reach two ways.
It’s not exactly hard to source imports from elsewhere. The rest of the world, notably Canada, Australia, India, and anywhere else where the wheel has been invented, could smooth out and broaden EU trade considerably. These countries are also adjusting to a deranged US.
This is NOT a matter of “penalizing” China. It’s a realistic reflection of a situation where trade is seriously and unproductively unbalanced.
In my opinion, Europe could easily have seen this mess coming. Admittedly, the sheer scope and scale of the US trade lunacy is more than a bit over the top. Even so, how surprised can you possibly be by your own imports?
China, meanwhile, has won the jackpot lottery. That trillion dollars could soothe some sore points in the domestic market. Extremely high profitability can’t be all bad, surely?
Let’s kill off a few myths getting around:
“Over capacity” is a strange description of a situation where the global market has reduced itself by inflicting constant cost increases on itself.
Is there some law against lower, saner. prices?
You can either manage inevitable deflation, or it will manage you.
China isn’t the problem. The problem is a mindset that refuses to see the obvious.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
