Trump Promotes Decoupling From China With No Clue as to How It Can Work

Mish

Trump proposes to stop trading with China. What would happen?

Decouple From China? 

Please consider Trump Again Raises Idea of Decoupling Economy from China.

“So when you mention the word decouple, it’s an interesting word,” Trump told a Labor Day news conference at the White House in which he vowed to bring jobs back to America from China.

“We lose billions of dollars and if we didn’t do business with them we wouldn’t lose billions of dollars. It’s called decoupling, so you’ll start thinking about it,” Trump said.

“If Biden wins, China wins, because China will own this country,” he said.

“We will make America into the manufacturing superpower of the world and will end our reliance on China once and for all.Whether it’s decoupling, or putting in massive tariffs like I’ve been doing already, we will end our reliance in China, because we can’t rely on China,” Trump said.

How?

  1. Consider US cars made in Mexico. What happens to the parts that come from China? 
  2. What about the steel that comes from China? 
  3. What about the Boeing planes that are assembled in China? 

Questions of this nature are endless. 

Nonetheless, let's snap our fingers and assume Trump pulls it off.

What Would it Mean?

iPhone sales in China would go to zero. So would Soybean exports. So would Boeing sales to China. In fact, all trade with China would stop by definition.

The Boeing aircraft would all be 100% made and 100% assembled in the USA, with 100% US-made aluminum.

Hooray?

Not quite. Labor costs in the US would soar. We would make planes for ourselves but Airbus would own the rest of the world.

The same holds true for cars and everything else partially made in the US.

What About the US Dollar? 

Inflation would rise due to rising prices. If the Fed hiked rates, and it would be forced to, the dollar would strengthen making US exports even more uncompetitive.

Manufacturing Superpower? 

Trump and all the economic illiterates who support him would turn the US into a manufacturing dunce. 

In 2016 Trump Accused China of Theft: What Did He Do About It?

US Goods and Services Trade Balance  July 2020

Despite tariffs, and despite a severe recession, the US trade deficit and deficit with China is going the wrong way.

In recessions, trade deficits normally shrink.

In 2016 Trump Accused China of Theft: What Did He Do About It?

Other than look outright foolish in Tweets and actual results, the answer is nothing. 

Trade Wars Easy to Win

Trump's blustering today is more of the same "Trade Wars are Good and Easy to Win" fantasies. 

"Don’t trade anymore-we win big. It’s easy!"

Trump is totally and completely out of touch with reality.

He has no idea how international trade even works. 

Trump has been touting "It's Easy" even before he was in office. 

If it's so easy, why didn't he do it?

Mish

Comments (81)
No. 1-19
Soft_coding
Soft_coding

You don’t have to be right, you just need to get the votes.

Sechel
Sechel

Forget Trump. Focus on that schlock economist Navarro

Zardoz
Zardoz

There would be a sudden end to “Everyday low prices”

Anna 7
Anna 7

Dear friends,

I expected the “pivot to asia” (announced under Obama — but, courtesy of those emails from a banker picking his cabinet, everyone should’ve learned by now that the figurehead is not nearly as important as we are led to believe) to morph into exactly what we are witnessing now. Worse, I fear where this British-American empire is taking us. And it won’t matter which figurehead “you” elect come November.

Because empires create their own fake news and history and immerse their subjects (us) in it daily (what hunter s thompson was referring to when he said “all the hired bullshit”) learning the truth about them is just as if not more difficult than understanding financial markets and their corruption.

To aid in your understanding, I respectfully suggest you add to your weekly reading diet the following:
www.moonofalabama.org
caitlinjohnstone.com
www.corbettreport.com

lol
lol

China will be the guinea pig for trump to try and write off a chunk of the dept. First thing DT will do if reelected is to use the Covid scam as cover to announce the US will default on the trillions owed to Beijing as reparations for "unleashing" this Covid nonsense! Chicoms gonna be pissed gettin stiffed outta of trillion$$ LOL!

ColoradoAccountant
ColoradoAccountant

It is all arbitrage. CEOs arbitrage labor by building in China and Mexico with cheap labor. They arbitrage pollution controls by building in China and Mexico with low standards. This works as long as long distance transportation costs are lower than the amount they save via arbitrage. Since the US has oceans close by and a decent rail system it works.

Webej
Webej

Mish, arguing with a Wharton alum?
I would have thought this dog whistle to the TDS2-ers would unleash a storm in the comments but I guess a lot of people are into labor day.

Dodge Demon
Dodge Demon

Mish, are you old enough to remember when you could walk through a hardware store and every single item was made in the U.S.?

PecuniaNonOlet
PecuniaNonOlet

And no one here points out the obvious if trump somehow managed to move all manufacturing back to US: black market imports that are cheaper than American made goods. The US cant stop hundreds of tons of cocaine, humans, or knock off goods crossing the border each day what makes anyone think there wont be knockoff versions of every hammer, brake pad, pharmaceutical or hand bag?

And what is happening now is another obvious problem, block imports from China and manufacturing moves to Vietnam or some other country. Block ALL imports and there wont be anywhere for Americans to sell goods overseas - a market of 6.7 billion people.

Realist
Realist

This is just Trump saying crap to try to get votes. He will say anything to get re-elected. Today he called all the generals and top staff that HE appointed to the Pentagon, war mongers who are drumming up business for the military industrial complex. I guess that is his way of trying to deflect from calling dead US soldiers suckers and losers. Which is pretty funny since he has been bragging for 3 years about how much money he has given to the military.

He even referred today to his sophisticated friends who told him that he is the most innocent person to ever hold this office. Lol.

Worst president ever.

Runner Dan
Runner Dan

What is Biden's (or rather, Kamala Harris') position on international trade?

Augustthegreat
Augustthegreat

tRump lacks basic understanding of international trade 101. He sees every trade as win-lose. He cannot understand Win-Win. In every deal, he wants the other party to be a loser, even if that may result in his losing too. Indeed maybe the Greatest President ever.

Tony Bennett
Tony Bennett

"Trump is totally and completely out of touch with reality."

...

Two months before election ... that is all you need to know.

Just add this to his many other ideas ... that, uh, did not pan out.

Captain Ahab
Captain Ahab

The basis of Free Trade is found in Adam Smith's The Wealth of Nations, wherein he argued that free trade eventually makes all actors better off. To the extent, 'actors' can buy more for less, he's correct: global competition lowers the cost of production, and the price to buyers.

What Smith missed is that every dollar of trade deficit is ultimately a dollar of wealth transferred. Rich nations eventually become poorer. Producer/exporter nations become richer. This is why the US grew in wealth and power from the late 19thC to the 1970s. It is why Japan grew, and now China; however China is not Japan.
As we rush to support anyone-but-Trump:
We have now replaced wealth with debt, on a downhill ride that we know will not end well. Trump is the first politician to try to slow it down.

TCW
TCW

More important than bringing the jobs back to America is moving them out of China and distributing them among many small countries. We've turned China into a superpower. There are plenty of third world countries that could benefit and would not threaten us militarily.

Sechel
Sechel

we can't decouple but Trump can create headaches and headlines by targeting individual high profile tech companies

Canuckistan
Canuckistan

"Fair Trade" Mish are u supporting the forced labour and environmental damage being done by China?

Swetakumari
Swetakumari

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Sweta

MasterMASKTdealer
MasterMASKTdealer

There are other countries that the US can trade with, other than China. Bringing the labor back to US soil feels like a step back. Are US manufacturers are so banal that they can’t find other solutions? Seem counterproductive to me.


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