Financial Times: China is stronger; Trump is crazy. Why Xi holds a stronger hand than Trump. The White House has miscalculated the balance of power in its tariff war with China 金融時報：中國更強大；川普瘋了。為什麼習近平比川普更有實力？白宮錯誤估計了與中國關稅戰中的權力平衡.
To my feverish mind, it looks like Trump has a much weaker hand than he thought in the game of tariff poker that he is playing with China. The longer it takes for Trump to accept this definitively — the more he and the US stand to lose.
The starting assumption of Trump and his trade warriors is that China is automatically at a disadvantage in a conflict over tariffs. Scott Bessent, the US Treasury secretary, argued that China is “playing with a pair of twos . . . We export one-fifth to them of what they export to us, so that is a losing hand for them.”
The flaws in Trump and Bessent’s logic are lucidly explained in a recent article by Adam Posen in Foreign Affairs. As Posen points out, the fact that China exports far more to the US than the other way around is actually a source of leverage for them — not a weakness.
Phones and computer equipment are the most obvious candidates for a climbdown. They are not isolated examples. Trump will have to hope that it is not a hot summer because about 80 per cent of the world’s air conditioners are made in China; along with three quarters of the electric fans America imports. The White House will certainly want the trade war to be over by Christmas because 75 per cent of the dolls and bicycles that the US imports are also made in China.
Trump hates bad headlines and will want them to go away. So rather than endure the pain of shortages and inflation, he is likely to add more and more items to the list of goods that are exempt from tariffs.
Under these circumstances, China can afford to play a waiting game. But if Beijing decides to get nasty then it has some really powerful tools that it can deploy. China makes almost 50 per cent of the ingredients that go into the antibiotics that Americans depend on. The F35, the backbone of the US Air Force, requires rare-earth components sourced from China. The Chinese are also the second-largest foreign owners of US Treasury bonds — which could matter at a time when the market is under strain.
The American market represents only about 14 per cent of Chinese exports. Joerg Wuttke, the former head of the European Chamber of Commerce in Beijing, argues that American tariffs are “inconvenient, but it’s not going to be a threat to the economy . . . It’s a $14tn-$15tn economy and the exports to the US are $550bn.”
An authoritarian system — tightly controlled by the Chinese Communist party — is also probably better prepared to absorb a period of political and economic pain than the US, where economic turmoil swiftly translates into political pressure.
Trade, tech and Treasuries: China holds cards in US tariff stand-off
Planning, diversified markets and control of strategic materials potentially give Beijing leverage — if it can bear the pain
But international economists said this overlooks one crucial fact: China can replace its imports from the US more easily than the other way around.
US goods exports to China are heavily focused on agriculture — such as soyabeans, cotton, beef and poultry — and so are low value-added. Many US imports from China — electronics, machinery and some processed minerals — are the opposite.
Marta Bengoa, professor of international economics at City University of New York, said that while the US and China remained heavily interdependent in trade, this meant the ultimate balance of risk was on the US side.
“US dependence on China is higher, because China can source agricultural products from elsewhere more easily than the US can replace electronics and machinery,” she said. “Beijing is already buying up soyabeans from Brazil, for example, so in the end China has a bit more leverage”.
Goldman Sachs analysts estimated that 10mn-20mn workers in China may be exposed to US-bound exports. “The combination of extremely high US tariffs, sharply declining exports to the US and a slowing global economy is expected to generate substantial pressures on the Chinese economy and labour market,” they wrote last week.
Just from the market reaction, I’d say the US at the moment [is hurting more],” added Julian Evans-Pritchard, chief China economist at Capital Economics. “The US is under more pressure to try to come to the table and negotiate.”
“I haven’t met a single person, even manufacturers directly impacted by the tariff, who blames Beijing,” said one foreign manufacturer based in Guangdong province. “The mood that I’ve seen is a kind of defiance. I think the way the government is playing it is about national pride now.”
Martin Wolf: The economic consequences of a mad king
Trump’s delight in doing whatever he wishes in the moment is incompatible with stability and sustained dynamism
https://archive.ph/vqgee#selection-5445.0-5453.310
Now the US is supposed to reach trade deals with more than 180 countries in some 84 days. That is ridiculous. Even if “deals” are reached, will they last? One must doubt it. Can business plan long-term investment amid the chaos it is seeing? Business, after all, must think in years, not days. With its party bureaucracy, Xi Jinping’s China now provides more predictability for business than the US. That is shocking. It is also scandalous. People who supported Trump should have known that, fully liberated, he was bound to sow chaos.
The cult of the “strongman” is a perennial folly. We know that nobody can be trusted with absolute power, least of all the demagogues who seek it. The one good thing Trump’s trade policies are achieving is to demonstrate this yet again. They are harbingers of chaos. The world’s challenge is to survive the folly. The US’s is to end it.
Trump trade war could challenge US credibility, says Jamie Dimon
https://archive.ph/vSsf8#selection-1583.0-1586.0
Donald Trump’s trade war risks eroding the US’s credibility, Jamie Dimon warned, as the JPMorgan Chase chief executive urged Washington to “engage” with Beijing.
Dimon said that the US remained “a haven” because of its prosperity, rule of law, and economic and military strength, but that America’s economic pre-eminence could come under threat from the president’s attempt to reshape global trade.
“A lot of this uncertainty is challenging that a little bit. So you’re going to be reading about this nonstop until hopefully these tariffs and trade wars settle down and go away so people can say, I can rely on America,” Dimon said in an interview with the Financial Times.
He urged the US and China to engage with each other: “I don’t think there’s any engagement right now . . . it doesn’t have to wait a year. It could start tomorrow.”
Dimon’s comments come after Trump’s April 2 “liberation day” announcement of steep “reciprocal” tariffs on many countries sparked a new trade war and triggered wild swings on Wall Street.
Investors last week rushed away from US government debt, sending 10-year yields surging the most in decades, as Trump’s swerves on trade policy and attacks on independent regulators prompted some investors to question America’s long-standing role as the world’s leading market.
“We should be careful. I don’t think anyone should assume they have a divine right to success and therefore don’t worry about it,” Dimon said.
The JPMorgan chief said the market ructions following “liberation day” were “disorderly to the extent that it was a rapid move”, but that “most of the markets were fine”. He added: “The markets are very volatile, it scares people.”
Dimon, who has run the largest US bank for almost two decades, is one of the most influential voices on Wall Street. Trump cited Dimon’s warning last week that tariffs could tip the economy into recession when he moved to pause most “reciprocal” tariffs — something that helped ease market jitters.
“When they announced the liberation day tariffs, they were dramatically different than people expected. Way off the table than what people expected. And that was shocking to the system. The global system, not just in the United States,” Dimon said.
Business Blog 