The trade war waged by the United States against China is getting nastier by the day. While both pursue the same weapon of imposing internecine tariffs, the question is for how long both can sustain the war when other countries are willing to offer their exports at comparatively the same and even lower prices unhampered by political conditions.
When China retaliated by imposing tariffs on US agricultural products, it sent a signal it would hurt the US economy most. Notably, its agricultural exports enjoyed unfair advantages because of subsidies in violation of the WTO. But in the wake of the trade war, this has become a liability. The retaliatory tariffs imposed on soya beans would surely suffer huge losses that it now raises doubt on its viability with the prospects of losing altogether the $20 billion soya bean export industry.
The US cannot, for long, subsidize its soya bean farmers. Already, the Commodity Futures saw soya bean exports drop by 2.3 percent, the lowest this year as US farmers prepare the $12 billion worth of soya bean shipment to China. Corn and wheat futures each fell less than 0.5 percent. To a lesser degree, US export of cherries and apples would be experiencing the same debilitating effect.
Once China manages to secure alternative markets and institutionalize its imports on the affected products, there is the greater risk the US will completely lose its exports even after the trade war has ended. Significantly, that would naturally dismantle the subsidy on US agricultural exports, vis-à-vis providing incentive to countries to increase their share in the world market.
Setting aside the charge that China is allegedly violating intellectual property rights, forcing US businessmen to give away their trade secrets in exchange for being allowed to do business there, or that US products are far more superior, the US failed to reckon that ultimately, it is the buyer that will have the final say on what the consumers can afford to satisfy their needs.
In fact, China is the one doing US consumers the great favor of offering products they can afford. The US enjoys an even greater advantage because US importers of Chinese goods are the same people doing the business of exporting US products to China. Rather, US trade representatives focus on the trade deficit which, sad to say, is merely influenced by the unjust valuation of its currency. Walmart and Costco are two giant US companies doing the importation and exportation of US and Chinese goods, and are retailing them.
Notably, the decoupling of the US dollar from the gold standard saw the soaring of its value against other currencies. It was initially good for the US because it was able to import more for less dollars. To the underdeveloped countries, it was a backbreaking job for exporters of raw materials, mineral ore, fuels and agricultural products that resulted in their perennial trade deficit. Yet, for decades when the US economy enjoyed trade surpluses and the high value of the dollar was anchored in its export of manufactured goods, the US never complained.
That arrangement worked well, for it was then the leading manufacturing state producing nearly 50 percent of the world’s manufactured goods. Today, the US barely represents 1/6 of the world’s total manufacturing output. This has greatly diminished its ability to enforce trade sanctions or impose tariff hikes without inviting retaliation. The core of the US industrial might is gone. US citizens feel that enforcing tariffs would have little impact on China and to other countries unjustly slapped by tariff barriers.
US citizens argue that a trade war would only compel China to scout for alternative markets. In this era of multilateralism and globalism, trade sanctions have become less and less effective. It is more in filling up what is left by others unless it resorts to imposing economic blockades which means war. US trade representatives can not even sense that US traders doing business in China are the ones complaining.
The increase in the value of the dollar ended in that country trapped in the devil’s cage. The release of the dollar from the gold standard brought more devastation to the US economy than anticipated. It correspondingly increased the cost of wages and services in the US, and so with the overall cost of living. This marked a shift in the US economy from one of exporter to one saddled with trade deficit.
The US consignment of jobs offshore did not resolve the increasing trade deficit principally because US workers object to giving any preferential treatment in excise tax on US brands made in China. They argue they already lost their job, and cannot now be accorded the privilege of reduced tariffs. This exposed the fallacy of consigning production abroad because the disparity in the value of the dollar against the yuan and with other currencies could likely debone the US economy of all their factories which is of their own making.
They myopically focused their opportunity for cheap labor without them realizing that the increased cost of labor in the US was merely reacting to the high value of the dollar which keeps on increasing because inflation was purposely injected into the economy to attract interest rate viz. investment, as substitute to their receding manufacturing industry. The US has to sustain the upward spiral value of its currency by heavily engaging in foreign borrowings to keep afloat an economy based alone on its GDP.
This debilitating paradox that saw the US economy trapped in a cycle of inflation to keep interest alive and attract speculative investment, resulted instead in an unprecedented trade deficit that irretrievably mired the US economy in external debt with a fast deindustrializing manufacturing sector.
Rod P. Kapunan is a Manila-based columnist and political analysts. He is also the author of several books among which is Labor-only Contracting in a ‘Cabo’ Economy. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Rod P. Kapunan
The trade war waged by the United States against China is getting nastier by the day. While both pursue the same weapon of imposing internecine tariffs, the question is for how long both can sustain the war when other countries are willing to offer their exports at comparatively the same and even lower prices unhampered by political conditions.
When China retaliated by imposing tariffs on US agricultural products, it sent a signal it would hurt the US economy most. Notably, its agricultural exports enjoyed unfair advantages because of subsidies in violation of the WTO. But in the wake of the trade war, this has become a liability. The retaliatory tariffs imposed on soya beans would surely suffer huge losses that it now raises doubt on its viability with the prospects of losing altogether the $20 billion soya bean export industry.
The US cannot, for long, subsidize its soya bean farmers. Already, the Commodity Futures saw soya bean exports drop by 2.3 percent, the lowest this year as US farmers prepare the $12 billion worth of soya bean shipment to China. Corn and wheat futures each fell less than 0.5 percent. To a lesser degree, US export of cherries and apples would be experiencing the same debilitating effect.
Once China manages to secure alternative markets and institutionalize its imports on the affected products, there is the greater risk the US will completely lose its exports even after the trade war has ended. Significantly, that would naturally dismantle the subsidy on US agricultural exports, vis-à-vis providing incentive to countries to increase their share in the world market.
Setting aside the charge that China is allegedly violating intellectual property rights, forcing US businessmen to give away their trade secrets in exchange for being allowed to do business there, or that US products are far more superior, the US failed to reckon that ultimately, it is the buyer that will have the final say on what the consumers can afford to satisfy their needs.
In fact, China is the one doing US consumers the great favor of offering products they can afford. The US enjoys an even greater advantage because US importers of Chinese goods are the same people doing the business of exporting US products to China. Rather, US trade representatives focus on the trade deficit which, sad to say, is merely influenced by the unjust valuation of its currency. Walmart and Costco are two giant US companies doing the importation and exportation of US and Chinese goods, and are retailing them.
Notably, the decoupling of the US dollar from the gold standard saw the soaring of its value against other currencies. It was initially good for the US because it was able to import more for less dollars. To the underdeveloped countries, it was a backbreaking job for exporters of raw materials, mineral ore, fuels and agricultural products that resulted in their perennial trade deficit. Yet, for decades when the US economy enjoyed trade surpluses and the high value of the dollar was anchored in its export of manufactured goods, the US never complained.
That arrangement worked well, for it was then the leading manufacturing state producing nearly 50 percent of the world’s manufactured goods. Today, the US barely represents 1/6 of the world’s total manufacturing output. This has greatly diminished its ability to enforce trade sanctions or impose tariff hikes without inviting retaliation. The core of the US industrial might is gone. US citizens feel that enforcing tariffs would have little impact on China and to other countries unjustly slapped by tariff barriers.
US citizens argue that a trade war would only compel China to scout for alternative markets. In this era of multilateralism and globalism, trade sanctions have become less and less effective. It is more in filling up what is left by others unless it resorts to imposing economic blockades which means war. US trade representatives can not even sense that US traders doing business in China are the ones complaining.
The increase in the value of the dollar ended in that country trapped in the devil’s cage. The release of the dollar from the gold standard brought more devastation to the US economy than anticipated. It correspondingly increased the cost of wages and services in the US, and so with the overall cost of living. This marked a shift in the US economy from one of exporter to one saddled with trade deficit.
The US consignment of jobs offshore did not resolve the increasing trade deficit principally because US workers object to giving any preferential treatment in excise tax on US brands made in China. They argue they already lost their job, and cannot now be accorded the privilege of reduced tariffs. This exposed the fallacy of consigning production abroad because the disparity in the value of the dollar against the yuan and with other currencies could likely debone the US economy of all their factories which is of their own making.
They myopically focused their opportunity for cheap labor without them realizing that the increased cost of labor in the US was merely reacting to the high value of the dollar which keeps on increasing because inflation was purposely injected into the economy to attract interest rate viz. investment, as substitute to their receding manufacturing industry. The US has to sustain the upward spiral value of its currency by heavily engaging in foreign borrowings to keep afloat an economy based alone on its GDP.
This debilitating paradox that saw the US economy trapped in a cycle of inflation to keep interest alive and attract speculative investment, resulted instead in an unprecedented trade deficit that irretrievably mired the US economy in external debt with a fast deindustrializing manufacturing sector.
Rod P. Kapunan is a Manila-based columnist and political analysts. He is also the author of several books among which is Labor-only Contracting in a ‘Cabo’ Economy. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
