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China Threatens To Cut Sales of iPhones and US Cars if 'Naive' Trump Pursues Trade War (theguardian.com) 742

US president-elect Donald Trump would be a "naive" fool to launch an all-out trade war against China, a Communist party-controlled newspaper has claimed. From a report on The Guardian:During the acrimonious race for the White House Trump repeatedly lashed out at China, vowing to punish Beijing with "defensive" 45% tariffs on Chinese imports and to officially declare it a currency manipulator. "When they see that they will stop the cheating," the billionaire Republican, who has accused Beijing of "the greatest theft in the history of the world", told a rally in August. On Monday the state-run Global Times warned that such measures would be a grave mistake. "If Trump wrecks Sino-US trade, a number of US industries will be impaired. Finally the new president will be condemned for his recklessness, ignorance and incompetence," the newspaper said in an editorial. The Global Times claimed any new tariffs would trigger immediate "countermeasures" and "tit-for-tat approach" from Beijing.
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China Threatens To Cut Sales of iPhones and US Cars if 'Naive' Trump Pursues Trade War

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  • by Anonymous Coward on Monday November 14, 2016 @10:05AM (#53280515)

    Maybe then people will finally come to realize what the iPhone really costs.

    • by ShanghaiBill ( 739463 ) on Monday November 14, 2016 @02:51PM (#53283155)

      Maybe then people will finally come to realize what the iPhone really costs.

      The labor cost of an iPhone is small, and going down as automation gets better. Most estimates put the labor cost of assembling an iPhone at less than $10. American manufacturing labor is about 5 times as expensive, so Americans will earn $50 assembling them, right? Wrong. Americans are more productive, by at least a factor of 2, and there will be greater incentive for automation. So the cost may be about $20, for a marginal cost increase of $10. But that will still lower unemployment in America, right? Maybe. If Americans spend an extra $10 on an iPhone, they have $10 less to spend on other things, reducing demand and lowering employment. These lost jobs will be spread through the economy, so you can't point to one person and say "this guy lost his job to protectionism", but the job losses are still real.

      Then there is the issue of retaliation. If we put barriers on Chinese goods, they will put barriers on American goods. China is the world's biggest market for new aircraft, and a lot of Boeing jobs in Seattle will become Airbus jobs in Toulouse, and later Comac jobs in Shanghai.

      So we will have fewer $80k/yr jobs making carbon fiber composite aircraft wings, and more $15k/yr jobs making plastic toys for Walmart. The $80k jobs support a lot more service jobs, as that employee spends his money. As production jobs shift to lower productivity and lower pay, many service jobs will disappear.

      If a real trade war gets going, it is also possible that the US dollar will lose its status as the world's reserve currency, with big negative consequences for the American economy.

      Protectionism is not a "new idea". It has been tried many, many times throughout history. It has never worked out well, and it won't this time either.

  • Consumer prices (Score:5, Insightful)

    by bbasgen ( 165297 ) on Monday November 14, 2016 @10:05AM (#53280517) Homepage
    If a trade war occurs with China, consumer prices will significantly inflate. Tech company stocks will fall significantly, as a large amount of gear is sourced internationally. For those with an interest to keeping your 401(k) safe, I suspect the first thing is to consider which companies source to China, as opposed to countries that use Taiwan, Korea, Japan, etc. Hmm. I wonder if anyone has made just such a list; e.g. "How to prepare your 401(k) for a trade war with China"!
    • by Tablizer ( 95088 ) on Monday November 14, 2016 @12:58PM (#53282049) Journal

      If a trade war occurs with China, consumer prices will significantly inflate.

      China has much more to lose in a trade-war than the USA does. Their economy is tightly bound to exports. China knows this and is bluffing.

      I didn't vote for Trump, but I hope he pushes this issue, and encourages China to shift more to a consumer driven economy rather than an export economy. They won't do it without pressure, and Trump's bullheadedness may be just the recipe.

      China will make a lot of noise and initial threats, but after a while they'll have to change or risk an economic hit.

      Factory workers have protested and rioted in recent downturns. Thus, a downturn big enough could bring serious challenges to leadership. Tienanmen Square was merely a preview of what could happen.

      The leaders are worried they'll be overthrown, Kadafi-style, if the population gets angry enough. Thus, they don't really want an actual trade-war, and that's why they are using threats and bluffs early on to try to prevent one. They saw how Kadafi got Shish-kebabed by his countrymen and know they could be next.

      The thing is, they don't have to depend on exports. Grow a consumer base. It works. But exports have worked so well that Chinese leaders don't want to risk change. If Trump puts enough pressure on them, they may change to avert the even worse option: Shish-kebabing.

  • China fears Trump (Score:5, Insightful)

    by Anonymous Coward on Monday November 14, 2016 @10:10AM (#53280537)

    Because he will extract concessions. That's what you can do when you have a persistent trade deficit. The Chinese only understand force.

  • So scared (Score:5, Insightful)

    by MikeRT ( 947531 ) on Monday November 14, 2016 @10:15AM (#53280575)

    China has absolutely no appreciation for how much of the Republican base and the blue dog democrats are at a total ZFG attitude toward free trade now. What are you going to do, China? Make my LG G5 that was made in South Korea more expensive? Make it harder for Hyundai, Kia, Honda and Toyota to produce their parts in South Korea and Japan and then assemble them in the American South for millions of Americans? Ford management is probably saying "yes, more please" as this will primarily hurt GM and Chrysler since Ford mainly outsources to developed countries and Mexico.

    Our trade partners are probably splitting their sides over this. South Korea's response will simply be "we see China is acting like a crybully bitch. You want to trade with someone who ain't a bitch?"

    • Re: (Score:2, Interesting)

      by Kartu ( 1490911 )

      Trump is saying China is manipulating it's currency rate, keeping is low (like 4 times lower than "real") hence being much more attractive for investors (low costs).

      As South Korea is not accused of anything like that, it shouldn't affect it, at least not directly.

    • Ummmm, okay..... This Sounds GREAT to me.
    • Cars and cellphones are fun to imagine here, but the reality is that China's manufacturing might has little to do with those industries. Every big box store in your city is filled with all kinds of random crap from napkin holders, BBQ grills, decorative Santa statues, and so on.

      A toy manufacturer wanted to return their processes back to the US to avoid all of the liability of undetected chemical substitution. They found out there was no manufacturing capability in US for the fancy cardboard boxes which show

  • However, experts say officials in Beijing are still battling to untangle what a Trump presidency means...

    Yeah, well that's pretty much everyone who wants more detail than "make America great again".

  • From the aritlce:

    "A batch of Boeing orders will be replaced by Airbus. US auto and iPhone sales in China will suffer a setback, and US soybean and maize imports will be halted. China can also limit the number of Chinese students studying in the US."

    If limiting the number of students studying in the US is on their threat list then the list must represent the entirety of their leverage against the USA because that's a pretty insignificant threat to include.
  • by bazorg ( 911295 ) on Monday November 14, 2016 @10:55AM (#53280881) Homepage

    This vote and the calls for protectionism in the USA and UK strike me as odd. Back in my day... it was the Conservatives and Republicans and similar parties defending trickle-down, supply-side, trade leads to growth, which leads to prosperity for everyone.

    Now there's support for reducing freedom of movement in the UK (and other places in Europe), and for the USA to erect trade barriers. All this time, the official explanation was that international trade was not a zero-sum game, that if there's more trade, everyone eventually gains and that protectionism was BAD. I can't remember if state investment on infrastructure was even worse than protectionism, but in any case it was something that Chicago school/Republican politicians just would not have.

    Sounds like now In Republican America, state interventions Trump China?

    • by Kohath ( 38547 )

      Now there's support for reducing freedom of movement in the UK (and other places in Europe), and for the USA to erect trade barriers.

      Maybe it's just support for regulating those things. People keep telling me that regulating stuff is good because it prevents abuses. Now they're whining because regulations affect things important to them.

    • by Zontar_Thing_From_Ve ( 949321 ) on Monday November 14, 2016 @04:01PM (#53283825)

      This vote and the calls for protectionism in the USA and UK strike me as odd. Back in my day... it was the Conservatives and Republicans and similar parties defending trickle-down, supply-side, trade leads to growth, which leads to prosperity for everyone.

      You remember correctly. But that was in the 1980s and things have changed. The Republicans began strongly embracing what I call "stupid people" in the past decade. I blame Karl Rove for this. I think it started roughly around 2004. You know how people too stupid to vote correctly in Florida all voted for Al Gore in 2000? They got flipped to the Republican side. This culminated in the queen of anti-intellectualism, Sarah Palin, running for vice-president in 2008.

      Now there's support for reducing freedom of movement in the UK (and other places in Europe), and for the USA to erect trade barriers. All this time, the official explanation was that international trade was not a zero-sum game, that if there's more trade, everyone eventually gains and that protectionism was BAD. I can't remember if state investment on infrastructure was even worse than protectionism, but in any case it was something that Chicago school/Republican politicians just would not have.

      I don't live in the UK so I'll let others comment on that, but as people without college degrees (not necessarily stupid though) and stupid people began to embrace the Republican Party, Sarah Palin pushed an anti-intellectual agenda that resonated big time with small town, non-college educated America. Palin has said multiple times that the only "real" America is the small town one, which just happens to be where a lot of people didn't go to college. If you can see a map of how the vote was broken out by county in the recent presidential election, you'll see that at least 90% of the US is red with the only blue areas being in bigger cities. As small town people have embraced the Republican Party, they've continued to lose jobs in manufacturing and the small towns where they live don't offer adequate replacement jobs. So this has led to a somewhat large group of people in small town America who see themselves and their small town life under siege. They're very receptive to being told that they are victims of forces beyond their control and only the Republicans can bring back those small town jobs that went away. They also tend to be very religious which brings them into conflict with societal changes like gay marriage where they see these changes as coming out of big cities and being pushed by Democratic Party elites who actively wish to bring harm to them.

  • by DarkOx ( 621550 ) on Monday November 14, 2016 @11:39AM (#53281185) Journal

    At its core the reason Trump is going to be #45 is that most of this countries liberals and bunch of people who normally consider themselves conservatives consider the wealth distribution to be a problem.

    I suspect its an optimization problem. Globalism and free-trade policy optimize for maximum economic output but not necessarily for equitable distribution. So they leave you with two options heavy handed policy of direct redistribution, which America has never been about or potentially looking at a return to some form of mercantilism abroad.

      The reality is Apple isn't going to get out of the iPhone business if they can't make them in China they will either find somewhere else like Vietnam to do (depending on how the trade policies get implemented) it or they will make them here. The cost of a iPhone (or any smart phone) probably goes up, and therefore the median standard of living probably declines somewhat. On the other hand some jobs come back to the states and the mean distribution of income levels out a little.

    The truth is China isn't actually in all that great a position when it comes to trade war. We can tariff imports but not exports (Constitutionally) an import tariff on our side had a similar economic impact as an export tariff on theirs it makes their goods more expensive for the American consumer, and in theory American goods or American alternatives more competitive at the margin. The only difference is to which government the tax revenue flows. We have a trade deficit with China today, yes they can negatively impact some American industries and favor some of their domestic industry but not as broadly as we can that in reverse.

    China does not currently have the domestic sink for their economic outputs we have either, that is changing but its not there today. My guess is if we really shut down the China trade today it would trigger a recession here and depression deflation driven death spiral there. The reality is China will quickly learn they have to keep the doors open to sell into the American market as much as possible or they are really screwed.

  • Reality check (Score:5, Insightful)

    by pchasco ( 651819 ) on Monday November 14, 2016 @11:51AM (#53281303)
    Donald is about to learn that running the USA is much more difficult than pretending to be a successful businessman on reality TV.
  • by mveloso ( 325617 ) on Monday November 14, 2016 @01:41PM (#53282451)

    Stop sales of cars and iPhones? The aftermath: tens of millions of Chinese are suddenly out of work, in big cities where they can cause trouble. Chinese currency flatlines. Financial panic, uprisings, revolution.

    Go ahead, China.

  • by ErichTheRed ( 39327 ) on Monday November 14, 2016 @01:42PM (#53282465)

    Magically re-creating the entire lost supply chain for every single good China produces would probably be similar to what would happen if we were actually involved in a World War III style scenario with them. If the country had to, immediately and overnight, consider China a dead country in terms of production capacity, some pretty serious interventions on our side would have to happen. During World War II, the military basically requisitioned the entire production capacity of the country because they couldn't build equipment and supplies fast enough. Good luck getting a divided country to get behind government intervention and possible rationing of goods. You couldn't buy a car during most of the war years, let alone fill it up with gas on your schedule...all of GM, Ford and Chrysler's production was redirected to making tanks and Jeeps. Food, rubber and other products were also rationed because there was just no way to satisfy the war demand and it wasn't safe to ship things across the ocean.

    Remember, we have almost no native capability to manufacture small, cheap items anymore...that went away ages ago. We make lots of cars and airplanes, but not too many (if any) consumer electronics or appliances. I would imagine it would take a lot of intervention and incentives to get rare earth metal mines reopened, steel mills reactivated, and goods manufacturing basically force-restarted. It would be a very interesting experiment if it worked, but I highly doubt everyone would sign on unless there was a direct threat to our existence. It would be very strange -- iPhones for America and all that, complete with the patriotic posters.

  • by sciengin ( 4278027 ) on Monday November 14, 2016 @02:34PM (#53282959)

    Looks like the communist came up with a new weapon: A rapid-fire footgun.

    Lets compare both countries and the effect this trade war may have:

    At stake for the USA: the low prices of electronic gadgets. Yeah Im sure there will be gallons of hipster tears if the Macs get higher prices
    At stake for China: Absolutely everything! No more sales to the US (you dont actually believe that the US will not retaliate if the communists try something funny?), means that suddenly they have millions and millions of unemployed people. People who tend to riot. In fact with anything less than a double-digit growth per year China is already struggling to place all the university graduates into the workforce, not to mention the uneducated country side population migrating after the simple manufacturing jobs. Right now this growth is at 6.5%. And their idea of replacing US made goods with European ones is just brilliant. As if most of the NATO states would not follow the same sanctions the US imposes... Just like theiy did with Iran.

    So now we have China in deep shit, and the US or rather the US companies have every reason to get back manufacturing to the US, probably helped by subsidisies from senators beating each other up to get the factories built in their state to claim the job growth for their reelection.
    Now some may believe that the USA has no manufacturing capacities anymore, this is plain and simple wrong. It is still number 3 worldwide in gross manufacturing capacity. Even if the specific plants to build electronic gadgets may not exist anymore, they can be quickly rebuilt or refurbished.

    I bet that in 3 years tops, assuming the right conditions, 80% of the manufactuing jobs are back in the USA and probably permanently too.
    This is a situation that would fuck China harder than if the Opium wars were fought by imperial Japanese soldiers.

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