As mentioned in yesterday’s LinkSwarm, Trump has offered temporary tariff relief for everyone…except China. China got hit with even higher tariffs. Evidently the only “trade war” that is happening right now is with China…and China is losing.
Behind the global economic chaos provoked by president Trump’s tariff tsunami, there are growing indications of a strategic purpose. It is now conceivable that plunging into, and then retreating from, a generalised trade war was actually a deliberate means to a truly geostrategic end: to thwart China’s ambition to replace the US as the dominant world superpower.
While Trump’s public statements still chiefly concern the need to impose economic measures to correct decades of unfair foreign trade, senior US officials, including Pete Hegseth, defence secretary, and Scott Bessent, treasury secretary, are increasingly taking a more strategic geopolitical line.
In late January, Hegseth told the US armed forces that America would “work with allies and partners to deter aggression in the Indo-Pacific by communist China”. In Panama, he said that Beijing was investing in the region for military and economic advantages. “War with China is certainly not inevitable … But together we must [deter] China’s threats in this hemisphere.”
Bessent has linked recent US tariff tactics with a shared geostrategic pushback against China, stating that “we can probably reach a deal with our allies, and then we can approach China as a group”.
In this light, the suspension of tariff combat for 90 days with most countries, while doubling down on the levies imposed on China, leaves Beijing isolated and in the firing line.
So far, after reciprocal gestures and vowing to “fight to the end”, Beijing has focused mainly on rallying anti-US sentiment across the globe. But India and Australia declined to join forces with China. ASEAN remains caught between opposing powers. The EU, in a quandary over Russia and Ukraine, likewise continues to hedge.
China has long sought to frame the West as a feeble, fragmented anachronism. Is it conceivable that, by unleashing economic fire and fury on friends and then provisionally reining it in, Trump might succeed, where Western multilateral diplomacy failed, in forcibly forging a credible consensus of opposition to the threat of global Chinese hegemony?
One assumes that Washington understands that it cannot prevail over China alone and a substantive US pivot to the Asia Pacific to press home a contest with China is starting to emerge. Trump has already reached out to Japan and South Korea, and US officials have tackled Vietnam. The Philippines, in striking distance of any hostilities over Taiwan, support the US and talk about preparing for war.
Taiwan, South Korea, India, Japan, Vietnam, Philippines: It’s like a greatest hits of nations that have bad blood with China. It’s no wonder they’ve chosen to trade with the world’s biggest economy rather than a historical enemy with designs of territorial expansion.
The developing world now faces a binary choice, and ruthlessly exploited debt and resource dependencies are not a firm basis for loyalty. This remains the case despite decades of nugatory US investment and engagement.
Under Trump’s tariffs, it is too soon to know how far China will be able to maintain the global supply lines on which its aspirations to become the world leader of innovative consumer production depend. Nor will it be easy to develop export markets big enough to compensate for declining sales to the West and its allies. Beijing’s military influence has begun to expand, but remains localised.
Most importantly, the question of Taiwan is now implicit in US language about deterring Chinese aggression. How does Trump’s assault on China’s geostrategic ambitions affect the threat of an imminent blockade, or even a full-scale invasion? The widespread view that an invasion isn’t inevitable now gives little real assurance.
Indeed, with the US taking an active stance, the status quo based on “ambiguity” is gone. Preparations to besiege Taiwan, let alone to invade, would be spotted in time for pre-emptive action.
104% tariffs on China are not enough, I’m advocating 400%. I do business in China, they don’t play by the rules. They’ve been in the WTO for decades. They have never abided by any of the rules they agreed to when they came in for decades. They cheat, they steal, they steal IP, I can’t litigate in their courts. They take product, technology, they steal it, they manufacture it and sell it back here …
I want Xi on an airplane to Washington to level the playing field. This is not about tariffs anymore. Nobody has taken on China yet … As someone who actually does business there, I’ve had enough. I speak for millions of Americans who have IP that have been stolen by the Chinese … the government cheats and steals and FINALLY an administration … that puts up and says “enough!” …
Xi can only stay the supreme leader if people are employed … It’s time to squeeze Chinese heads into the wall NOW!
Or check out this video from Chris Chappell of China Uncensored.
“The CCP wants to defend global trade. But they’re the ones who destroyed it in the first place.”
“The Chinese Communist Party is freaking out about US tariffs. They’ve launched a full-on propaganda blitz, calling the tariffs abuse. And blackmail. And if anyone is an expert on abuse and blackmail, it’s the CCP. The CCP is also claiming to be the defender of global trade. Yes, China is going to safeguard multilateralism and the multilateral trading system. And they totally are! I’m not being sarcastic here. They really are.”
“The CCP is going to fight for the current global trading system. It’s not because they love international cooperation, which is just propaganda BS. It’s because the CCP has spent decades manipulating global trade to their advantage. So there’s no way they’re going to let all that lying and cheating go to waste. Plus, global trade is basically the only thing keeping China’s economy afloat.”
“China is an export economy. That means their economy relies on manufacturing stuff for the rest of the world to buy. Chinese manufacturing exploded after China joined the World Trade Organization in 2001. Because China was able to make stuff more cheaply than other countries, consumers around the world benefited from lower prices on Chinese imports. But countries also lost tons of manufacturing jobs to China. The US alone lost more than two million jobs between 1999 and 2011 as a result of Chinese imports.”
“Besides manufacturing, the other big driver of China’s recent economic growth was real estate investment. Which became a problem after China’s real estate market started to collapse in 2020. So, the CCP decided to double down on manufacturing. They pumped billions of dollars into building more factories and exporting more goods to keep China’s economy from crashing. Which did work, but now China is making way more stuff than the rest of the world can buy. That’s called overcapacity.”
“China is making way more batteries, solar panels, and electric vehicles than the rest of the world wants. And because China has so much overcapacity, it also doesn’t import much from other countries. Which means China now has a trade surplus of almost a trillion dollars. That’s more than any country’s trade surplus in the past century, even adjusted for inflation. And China doesn’t show signs of stopping. Its export volume is growing three times as fast as global trade. That’s insane.”
“So what happens when China exports more and more stuff? They have to cut prices to be able to sell it all. Which means other countries lose even more jobs to China. Entire industries shut down. There are now certain products you can only buy from China. And when those are critical things like medical supplies, that gives China massive political and economic leverage on other countries. Remember when China stopped exporting medical goods during the early days of Covid? Yeah, that, but on an even bigger scale.”
“So that’s why the Chinese Communist Party is fighting to maintain the global trading system. They dominate it. And without it, China’s economy would fail. And their political control would crumble.”
“But how did China get here? It’s not just about cheap labor. The CCP has built an entire economic system to dominate global trade. Back when China joined the World Trade Organization in 2001, they promised to follow rules to ensure fair trade practices. To be fair to the CCP, something I never thought I’d say, they did make a bunch of economic reforms in order to get into the WTO. But after they joined, they violated the WTO rules repeatedly. They’ve been cheating the system for decades. And largely getting away with it. You see, the WTO rules are set up to prevent government intervention that would artificially distort global trade. But in a communist system, it’s government intervention all the way down.”
He brings up the example of honey producers getting subsidies at every step of production.
“This industrial policy is incredibly effective for the CCP. It’s how the CCP jump-started its entire electric vehicle industry. And they’re now flooding the rest of the world with cheap EVs.”
“Yes, these are all things that other countries do, too. But no one does them on the same scale as the CCP. In 2019, the CCP spent almost $250 billion dollars on its industrial policy. That’s massive.”
“But it’s not just industrial policy. There are also ways China’s entire financial system distorts global trade. Like everything in China, the financial system is political. All banks in China are either state-owned or state-linked, so the CCP controls how they give out loans. Which means state-owned banks give lots of loans to state-owned enterprises, and to other companies the CCP wants to support. And if those companies can’t pay them back? The banks just keep extending the loans. Because it’s better to take the financial risk than to risk getting on the CCP’s bad side.”
“The CCP’s industrial policy and financial system is destroying the global trading system. More countries have stopped relying on the World Trade Organization to stop the CCP’s unfair trade practices. Instead, they’re putting their own tariffs on Chinese goods. Like Europe’s tariffs on China’s EVs. Or President Trump’s tariffs on China’s…everything.”
Then there’s China’s use of transshipping to other countries to get around tariffs and sanctions. “The US has had anti-dumping tariffs on Chinese honey since 2001. So Chinese exporters have tried to get around it with what’s called ‘honey laundering.'”
“So that’s how the CCP’s industrial policy, their financial system, and their export system are all designed to manipulate global trade. They’ve kept China’s economy going, while hurting other countries. Both advanced economies and developing economies are dealing with the fallout. But it’s gotten so bad, that the rest of the world has no choice but to fight back. Not just the US, but also Europe. And as a result, we may be watching the collapse of global free trade. And it’s the CCP’s fault.”
Also, Trump has the upper hand in the fight because China’s factories had already been closing left and right before he took office, due to rising labor costs and dwindling foreign customers. Here’s a China Observer video from 11 months ago speculating that 90% of Chinese factories might have to close.
And that was before Trump’s tariffs.
Trump is going to win his trade showdown with Xi because American has a much stronger economy than China, one that supports vastly higher domestic consumption, and because he holds all the cards.
Optimum Tariff Theory posits that countries set tariffs in response to their market power in international markets, rather than the elasticity of supply. All our trading partners know this, especially the Chinese. Why they are fighting tooth and claw. Why Wall Street is acting out.
We have played nice in trade wars not of our making and all we have to show for it is a rust belt and declining stature across all other forms of economic endeavor. We are being reduced to a Third World country.
President Trump is about to demonstrate Optimum Tariff Theory to the Chinese and our other trading partners. Just maybe we will be able to restore our military-industrial complex.
“It is now conceivable that plunging into, and then retreating from, a generalised trade war was actually a deliberate means to a truly geostrategic end:..”
It is equally conceivable that plunging a knife into the heart of the international trade market resulted in horror and shock registering in the world’s bourses, making Trump reconsider his ill- advised strategy. Accordingly, a fresh round of exemptions has been applied to laptop computers, servers and smart phones even though electronics is just one of many areas where Asians are beating our pants off.
Nothing discouraged, some few journalists will perpetrate the occult legend that The Donald is playing 4th dimensional chess. Whenever he confounds them, they re-emerge from their lairs to praise his profound strategic insight.
As Kent said of men like Oswald, the steward:
.Like weathervanes, they turn whichever way the wind is blowing, never taking a stand for anything true, and ignorantly following their masters like dogs.
“Optimum Tariff Theory posits that countries set tariffs in response to their market power in international markets, rather than the elasticity of supply.”
“Setting a tariff”, by whatever metric, is an attempt to set prices.
The imposition of a tariff results in the affected import being priced above the level that would otherwise exist in its absence.
What we know of prices is that they tend toward that level at which quantity supplied and quantity demanded are equal, This has often been referred to as the “shelf-clearing” price. Remember, this price is set neither by seller or buyer; it is the result of their mutually satisfactory interaction.
Tariffs upset this arrangement, denying to one or both market participants their mutually agreeable satisfaction. As such, tariffs are an antisocial response, imposed on an otherwise peaceful social environment.
That tariffs require “power” or “market power” (which presumably means power over market participants) is indisputable. Coercion is necessary when the free choice of parties to a transaction deviates from one desired by the agent of coercion.
So those who are fighting “tooth and claw” are not the buyers and sellers; they are antisocial elements who are attempting to coerce market participants.
Free trade is peaceful cooperation. Those who want to disrupt this arrangement are warlike predators.
“Just maybe we will be able to restore our military-industrial complex…” in time to use it against our own citizens. Hail Hydra!
““Setting a tariff”, by whatever metric, is an attempt to set prices.”
“The imposition of a tariff results in the affected import being priced above the level that would otherwise exist in its absence.”
No and no. It is far more complex than your two dimensional, black & white worldview. The economic literature has investigated the complexity since the end of WW II. Refer to “Tariffs, International Demand, and Domestic Prices”, a 1949 paper in The Journal of Political Economy by Lloyd A. Metzler. He was a University of Chicago buddy of Paul Samuelson and his work is still held in high regard by real economists today.
“”Just maybe we will be able to restore our military-industrial complex…” in time to use it against our own citizens. Hail Hydra!”
No. Texas Congressman Pat Fallon just posted an article on RealClearWire titled “Restoring American Industrial Might to Counter China”. It focuses on the deindustrialization of our shipbuilding industries, but the same issues exist across our entire military-industrial complex. The Ukraine war has left other sectors of our military-industrial complex in far worse condition than the Navy.
The Chinese will not humor your brain dead libertarianism, so you might want to prepare for 2027 and ease up on the kitsch.
“Refer to “Tariffs, International Demand, and Domestic Prices”, a 1949 paper in The Journal of Political Economy by Lloyd A. Metzler. He was a University of Chicago buddy of Paul Samuelson and his work is still held in high regard by real economists today.”
Is the the famous Paul Samuelson whose Keynesian theories left him unable to predict or analyze stagflation because according to Keynes the phenomenon ought never to exist?
You seem to have a predilection for embracing discredited authority figures, Vladimir Putin being foremost among them.
“Is the the famous Paul Samuelson whose Keynesian theories left him unable to predict or analyze stagflation because according to Keynes the phenomenon ought never to exist?
You seem to have a predilection for embracing discredited authority figures, Vladimir Putin being foremost among them.”
The tariff study recommended is by Lloyd A. Metzler, not Paul Samuelson. They were contemporaries at the University of Chicago, before the monetarists. Metzler was also a Keynesian, but fiscal policy and monetary policy are mostly independent of trade policy, except as they influence FX rates.
Samuelson actually coined the term “stagflation” and correctly diagnosed its cause in the 1970’s as excessive economic stimulation in the face of supply shocks. Stagflation repudiated Bill Phillips’ Curve, but this curve was not a creation of Samuelson. Samuelson was very clear when he endorsed the Phillips Curve that it was only valid over short time frames. He said the Phillips Curve was broken by the various supply shocks in the 1970’s.
“Stagflation repudiated Bill Phillips’ Curve, but this curve was not a creation of Samuelson. Samuelson was very clear when he endorsed the Phillips Curve that it was only valid over short time frames. He said the Phillips Curve was broken by the various supply shocks in the 1970’s.”
I.e., Special Pleading. If economics is a science, it’s laws are universally applicable. But now comes Paul Samuelson to propose his version of an epicycle.
Keynesian economics is bunk. Is replacement with supply-side economics is what enabled Reagan’s economic advisors to escape Carter’s stagflationary economy.
Here is a little homework assignment for you. The St. Louis Fed maintains the FRED canned data graphing facility which can resolve lots of issues like this one.
“Compare the graphs to each other and then consider Milton Freidman’s famous aphorism: “Inflation is always and everywhere a monetary phenomenon”.
Did Milton Friedman claim that expanding the money supply would result in rising prices for the country that issued the fiduciary media? If the newly-issued currency is useful as a means to settle international accounts, is it just possible that the inflation got exported to the global market.
Milton was right; Maynard was wrong. Deal with it.
You are dissembling. Tell us how a goniometric function can be derived from an exponential function.
It can’t.
Stagflation in the 1970’s was not a result of money supply perturbations. Friedman was discredited by simple mathematical proofs. Stagflation was the result of supply shocks. Read the economics literature.
“Tell us how a goniometric function can be derived from an exponential function.”
Instead, tell us how cardinal numbers, as utilized by Keynesian economists to codify economic activity, is preferable to cardinal numbers as a means of describing choice at the margin. Are two utils of x exchangeable for two utils of y?!
Or are economic decisions based on a ranking of desire fulfillment, which is unable to be measured mathematically? There is preferred choice #1 and alternate choice #2. The second choice is not worth 1/2 the first choice and the first choice is not worth 2x the second choice. Their comparative worth is incommensurable.
Your pocket protector and slide rule does not qualify you to be an economist. Shut up and sit down.
Cardinal numbers in economics are just a fancy name for the highest number counted in sets. The number of people in a group, the number of gadgets sold, etc. All economists use them to make their arguments, not just Keynesians.
Utils are really a psychological artifice which almost always lead to disputes. One cup of coffee or one cup of tea? Which provides more satisfaction, hence more utils? A psychological judgement call.
None of this has even a remote relationship to monetarists and supply siders claiming stagflation was a function of money supply in the 1970’s. If you were able to read the FRED graphs, you would immediately realize that actual, measured M2 money supply in the United States was extremely well behaved during the 1970’s, while inflation and unemployment were not.
Ipso facto, stagflation could not have been a consequence of money supply as you, the monetarists, and the supply siders allege.
Optimum Tariff Theory posits that countries set tariffs in response to their market power in international markets, rather than the elasticity of supply. All our trading partners know this, especially the Chinese. Why they are fighting tooth and claw. Why Wall Street is acting out.
We have played nice in trade wars not of our making and all we have to show for it is a rust belt and declining stature across all other forms of economic endeavor. We are being reduced to a Third World country.
President Trump is about to demonstrate Optimum Tariff Theory to the Chinese and our other trading partners. Just maybe we will be able to restore our military-industrial complex.
“It is now conceivable that plunging into, and then retreating from, a generalised trade war was actually a deliberate means to a truly geostrategic end:..”
It is equally conceivable that plunging a knife into the heart of the international trade market resulted in horror and shock registering in the world’s bourses, making Trump reconsider his ill- advised strategy. Accordingly, a fresh round of exemptions has been applied to laptop computers, servers and smart phones even though electronics is just one of many areas where Asians are beating our pants off.
Nothing discouraged, some few journalists will perpetrate the occult legend that The Donald is playing 4th dimensional chess. Whenever he confounds them, they re-emerge from their lairs to praise his profound strategic insight.
As Kent said of men like Oswald, the steward:
.Like weathervanes, they turn whichever way the wind is blowing, never taking a stand for anything true, and ignorantly following their masters like dogs.
“Optimum Tariff Theory posits that countries set tariffs in response to their market power in international markets, rather than the elasticity of supply.”
“Setting a tariff”, by whatever metric, is an attempt to set prices.
The imposition of a tariff results in the affected import being priced above the level that would otherwise exist in its absence.
What we know of prices is that they tend toward that level at which quantity supplied and quantity demanded are equal, This has often been referred to as the “shelf-clearing” price. Remember, this price is set neither by seller or buyer; it is the result of their mutually satisfactory interaction.
Tariffs upset this arrangement, denying to one or both market participants their mutually agreeable satisfaction. As such, tariffs are an antisocial response, imposed on an otherwise peaceful social environment.
That tariffs require “power” or “market power” (which presumably means power over market participants) is indisputable. Coercion is necessary when the free choice of parties to a transaction deviates from one desired by the agent of coercion.
So those who are fighting “tooth and claw” are not the buyers and sellers; they are antisocial elements who are attempting to coerce market participants.
Free trade is peaceful cooperation. Those who want to disrupt this arrangement are warlike predators.
“Just maybe we will be able to restore our military-industrial complex…” in time to use it against our own citizens. Hail Hydra!
““Setting a tariff”, by whatever metric, is an attempt to set prices.”
“The imposition of a tariff results in the affected import being priced above the level that would otherwise exist in its absence.”
No and no. It is far more complex than your two dimensional, black & white worldview. The economic literature has investigated the complexity since the end of WW II. Refer to “Tariffs, International Demand, and Domestic Prices”, a 1949 paper in The Journal of Political Economy by Lloyd A. Metzler. He was a University of Chicago buddy of Paul Samuelson and his work is still held in high regard by real economists today.
“”Just maybe we will be able to restore our military-industrial complex…” in time to use it against our own citizens. Hail Hydra!”
No. Texas Congressman Pat Fallon just posted an article on RealClearWire titled “Restoring American Industrial Might to Counter China”. It focuses on the deindustrialization of our shipbuilding industries, but the same issues exist across our entire military-industrial complex. The Ukraine war has left other sectors of our military-industrial complex in far worse condition than the Navy.
The Chinese will not humor your brain dead libertarianism, so you might want to prepare for 2027 and ease up on the kitsch.
“Refer to “Tariffs, International Demand, and Domestic Prices”, a 1949 paper in The Journal of Political Economy by Lloyd A. Metzler. He was a University of Chicago buddy of Paul Samuelson and his work is still held in high regard by real economists today.”
Is the the famous Paul Samuelson whose Keynesian theories left him unable to predict or analyze stagflation because according to Keynes the phenomenon ought never to exist?
You seem to have a predilection for embracing discredited authority figures, Vladimir Putin being foremost among them.
“Is the the famous Paul Samuelson whose Keynesian theories left him unable to predict or analyze stagflation because according to Keynes the phenomenon ought never to exist?
You seem to have a predilection for embracing discredited authority figures, Vladimir Putin being foremost among them.”
The tariff study recommended is by Lloyd A. Metzler, not Paul Samuelson. They were contemporaries at the University of Chicago, before the monetarists. Metzler was also a Keynesian, but fiscal policy and monetary policy are mostly independent of trade policy, except as they influence FX rates.
Samuelson actually coined the term “stagflation” and correctly diagnosed its cause in the 1970’s as excessive economic stimulation in the face of supply shocks. Stagflation repudiated Bill Phillips’ Curve, but this curve was not a creation of Samuelson. Samuelson was very clear when he endorsed the Phillips Curve that it was only valid over short time frames. He said the Phillips Curve was broken by the various supply shocks in the 1970’s.
“Stagflation repudiated Bill Phillips’ Curve, but this curve was not a creation of Samuelson. Samuelson was very clear when he endorsed the Phillips Curve that it was only valid over short time frames. He said the Phillips Curve was broken by the various supply shocks in the 1970’s.”
I.e., Special Pleading. If economics is a science, it’s laws are universally applicable. But now comes Paul Samuelson to propose his version of an epicycle.
Keynesian economics is bunk. Is replacement with supply-side economics is what enabled Reagan’s economic advisors to escape Carter’s stagflationary economy.
Here is a little homework assignment for you. The St. Louis Fed maintains the FRED canned data graphing facility which can resolve lots of issues like this one.
Go to FRED and pull up two series:
CPI Inflation – FPCPITOTLZGUSA
M2 Money Supply – MYAGM2USM052S
Date range the graphs from January 1, 1970 to January 1, 1983.
Compare the graphs to each other and then consider Milton Freidman’s famous aphorism: “Inflation is always and everywhere a monetary phenomenon”.
Then get back to us with your evidence that Samuelson was wrong.
“Compare the graphs to each other and then consider Milton Freidman’s famous aphorism: “Inflation is always and everywhere a monetary phenomenon”.
Did Milton Friedman claim that expanding the money supply would result in rising prices for the country that issued the fiduciary media? If the newly-issued currency is useful as a means to settle international accounts, is it just possible that the inflation got exported to the global market.
Milton was right; Maynard was wrong. Deal with it.
You are dissembling. Tell us how a goniometric function can be derived from an exponential function.
It can’t.
Stagflation in the 1970’s was not a result of money supply perturbations. Friedman was discredited by simple mathematical proofs. Stagflation was the result of supply shocks. Read the economics literature.
“Tell us how a goniometric function can be derived from an exponential function.”
Instead, tell us how cardinal numbers, as utilized by Keynesian economists to codify economic activity, is preferable to cardinal numbers as a means of describing choice at the margin. Are two utils of x exchangeable for two utils of y?!
Or are economic decisions based on a ranking of desire fulfillment, which is unable to be measured mathematically? There is preferred choice #1 and alternate choice #2. The second choice is not worth 1/2 the first choice and the first choice is not worth 2x the second choice. Their comparative worth is incommensurable.
Your pocket protector and slide rule does not qualify you to be an economist. Shut up and sit down.
You are dissembling again.
Cardinal numbers in economics are just a fancy name for the highest number counted in sets. The number of people in a group, the number of gadgets sold, etc. All economists use them to make their arguments, not just Keynesians.
Utils are really a psychological artifice which almost always lead to disputes. One cup of coffee or one cup of tea? Which provides more satisfaction, hence more utils? A psychological judgement call.
None of this has even a remote relationship to monetarists and supply siders claiming stagflation was a function of money supply in the 1970’s. If you were able to read the FRED graphs, you would immediately realize that actual, measured M2 money supply in the United States was extremely well behaved during the 1970’s, while inflation and unemployment were not.
Ipso facto, stagflation could not have been a consequence of money supply as you, the monetarists, and the supply siders allege.