China and the US have fixed their rudders on a ramming course. The only remaining question will be over whose hull is stronger.
The “yuge” US trade deficit with China is purported to be $375B USD. Bloomberg was sure to point out that the figure is inflated, some way or another. Xinhua news reports that a more accurate figure is a mere $298B USD deficit. Trump sent a “Section 301” notice of unfair trade tactics to China along with $50–60B USD in tariffs, depending on which news source you read. Trump also asked China to reduce the deficit by a whopping $100B USD and China says that the US is being unfair, placing tariffs on US food.
Asian markets are up, but a Caixin market index—something like a DOW Jones average in China—isn’t up as much as hoped. Everyone has an opinion on what all that means.
Companies in America believe that tariffs harm the consumer. Some voices argue that the US has a “service” trade surplus with China, but still a deficit overall. Trump argues that trade deficits harm the worker and the overall economy. Basic macro-economic theory would say that workers would afford higher prices with much higher pay.
Trade deficits initiated the Opium Wars with China when China welcomed a one-way flow of silver from Britain for tea, but would not allow the eager Chinese population to import British goods. The Opium Wars ended with surrender of several lands to Britain, including Hong Kong. China’s current and main land dispute is over Taiwan. The stage is set for history to repeat and so far it has.
Taiwan is certainly chumming up to the US as China attempts to endear the Taiwanese. Most recently, Taiwan is buying more advanced missiles from the US while two Senators advocate selling F-35s to Taiwan—a sale more likely since Taiwan’s current administration is unlikely to set up secret talks with China as the rival party attempted nearly four years ago. China banned Taiwanese movies casting a purportedly pro-independence Taiwanese actor, Lawrence Ko.