They’ll end up with undesirable inflation.
LOL
Pretty sure it was the Japanese, based on the movie Pearl Harbor by Michael Bay.
In the short term China will be hit harder by a trade war but long term is a different story. Basically, every mature US company’s growth story is China so if that’s removed, or put on hold for a few years, a big fat void will be created for domestic Chinese companies to fill. Not a bad strategy if your president for life with a goal of making your country the prominent and most powerful country in the world.
The long term is worse for China too. $200 billion in tariffs would cut China’s GDP growth by say 0.5% a year. In the US, the effect would be smaller. I don’t know what you mean by the void for Chinese companies to fill. China has proposed tariffs on US agricultural products, which are likely not their industries of the future.
Yeah, the US is still by a mile the world’s largest demand engine and people seem largely unaware that China is tackling a financial load right now, it’s a primary stated party objective. Their total debt to GDP is already roughly equivalent to the US, but without the stability or economic maturity. A slowdown now could bring acute pain. Xi is not President for life, term limits were lifted but make no mistake if he promptly led his country into a crisis I doubt his position would be secure.
The void is market capture. China’s proposed agricultural tariffs are a short term hit to hurt the US politically, but the real harm they can inflict is disrupting business development by US companies. This may not be done through tariffs but through burdensome red tape. Like I said, China’s basically the long term growth story of many (most?) major US companies.
That’s not really accurate at all, maybe in 1995. Most companies have pulled back substantially, in no small part due to the business environment there. I can count on one hand the number of companies in my sectors trying to actively expand in China. China’s growth itself is slowing and again, evidenced by our trade deficit, companies just aren’t generating any significant portion of sales there. Any loooong term time frame where what you’re suggesting is accurate would be out around 2030 and beyond and by then this will have been ancient history long settled. Again to my point, if China fails to manage their systemic financial risks it’ll be a new apologetic regime in place by 2030. The BIS, IMF, S&P and Moody’s have all highlighted China is the leading global source of systemic financial risk within the past year.
What are you talking about? At some point, you have to read this and decide if you are just saying something to fill space.
(For Lbriscoe)
The business environment is difficult there because of protectionist policies. These policies have certainly hurt them over the years, but they’re okay with them because it’s allowed for development of their own industries. I’m just saying that they’re likely to continue to do the same if it came to that. As for Mr. Xi, I think he’ll be fine if a downturn resulting from a US led trade war.
Hard to say it better than that.
if we assume a full scale trade war (and that those customers just choose to forgo those items) this is what we get:
for us the effects is +400b. that’s 2.2% of the our gdp at 18 trillion. we are growing at 2% so thats roughly $360b/year. so we can now say we are growing 4%! Hooray!
for china the effect is -400b. that’s 3.6% of their 11 trillion gdp. they grow at 6% so that’s roughly 660b/year. so now they are growing at 2.5% as well! the slow down is real!
anyways after removing the one time trade war blip we revert back to original rates us at 2% vs china at 6%. so long term china’s move should be to protect its domestic industries from foreign countries trying to encroach on their higher upside!
“Trade Wars don’t wo…”
Germany seeks to scrap tariffs: WSJ
The European Union is willing to drop all import tariffs for cars between the U.S. and the bloc, according to The Wall Street Journal. Citing anonymous sources, the Journal said that the U.S. ambassador to Germany would present an offer to President Trump from the country’s biggest carmakers Wednesday. Trump has threatened to levy a 25% import tax on German cars, while Europe imposes duties of up to 12.5% on American cars.
I just got back from China. It was my first time in the mainland, I had only been to Taiwan and Hong Kong before. I’m not so sure China is a growth engine for American firms. And then my reading I’ve always seen the points raised by Ohai and Swan. The financial sector is shaky and it was interesting to see lots of skyscrapers that appeared empty. I’d guess India may be more important long term for growth than China. But China is definitely better run
You guys never learn. Remember the “OMG China!” thread? You were all wrong, as usual.
China’s response in the “tariff war” is not limited to tariffs. 
Correct. This is the century of Asia. America is optioning out of the future, by destroying all Asian relationships. Shrug that’s fine, the US will be geographically isolated, and can sit over there and pout.
isnt russia in asia?
Shanghai Composite index is down 40% from its peak, and over 1000 stocks were limit down yesterday. Meanwhile, SPX is near all time highs. You love China so much that you moved to North America. What a loser.
China is part of the global growth story. I own exposure to Chinese and other Asian stocks, like everyone. However, it’s just not smart to have such a one sided view and ignore limitations, like some people.
When valuations are based on close to 7% annualized growth, any kind of change, like trade, can cause major devaluations. Only an idiot can’t see how this has manifested in the past couple of days. Good thing no one here is an idiot. Oh wait.
All the dummies (the entire world) are jammed into the old trade.
We have already been over this—CN equities continue to generate massively higher returns over the long-term, with more volatility, and consistently lower valuations. Thead: Shanghai Returns (ITD)
The United States is part of the old global growth story. I own exposure to US and other North American stocks, like everyone. However, it’s just not smart to have such a one sided view and ignore limitations.
When valuations are based on 1.5% long-term growth forecast, and are massively inflated at 25x P/E, with a government default looming, and economic forces shifting East…any change, like trade, can cause major devaluations. Only an idiot can’t see how this can manifest without notice. Good thing there are not many idiots here.
Oh wait, see first line above. 
to be fair. us stock market is not tied to us gdp growth. we basically run shit worldwide cuz we own everything!
Yeah, no, this “deal” would require the US to drop its 25% import tariff on light trucks. This is something the Germany would be in favor of before Trump’s stupid tariff threat. Basically, Germany is throwing this out there in the hopes that the Trump administration bites so they can claim a win.