Why China Will Have to Cave to Trump on Tariffs and Trade - Granite Grok

Why China Will Have to Cave to Trump on Tariffs and Trade

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China has again said it’s ready to come to the trade table. That sounds good but we can’t know what that means until it happens. And no one goes in giving in, you always ask for more than you think you might get. But what does China have that Trump wants?

Very little.

As I noted here,

We’ve outlined the Trump Doctrine when it comes to trade with China. He’s playing a short game and a long game because he knows something lefties don’t. First, target tariffs so they hurt companies in China more than the American consumer. Second, Global high-tech needs the US Market.

If the cost advantage of building in China goes away (thanks to tariffs), everything else about China becomes a liability. Spying, intellectual property theft, and oh, by the way, it’s a communist country.

The Trump administration is leveraging tariffs to drive tech-companies out of China by making those negatives too big to ignore when it is no longer cost-effective to stay there.

CNBC teases it then finally gets around to the motivation we reported back in early July.

New formal talks between the U.S. and China have been announced for next month, and there are even high-level Chinese sources suggesting a breakthrough could occur at those meetings.

It doesn’t appear there’s anything the Trump administration has done to improve this sentiment. Right now, it’s the more encouraging news and messaging from China that’s the cause of that optimism.

Trump didn’t have to do anything new. He’d already done it when the Trade War began.

The decoupling push is quite different than any U.S. efforts to get China to open up more of its economy to American companies. Instead, it focuses on reducing America’s extremely heavy reliance on China for so much of its manufacturing needs.

If you know nothing about business, and few scions on the left have ever done anything but “be politicians,” the idea of the cost of goods sold means nothing. Acquiring raw material is a cost. The cost of labor to add value is a cost (a very low one in China). But then you need to get that product out the door to the market. 

Government cost increases are a priority to the left because they don’t pay them, and it grows their business. They profit from ineffective complexity and the relationships created to help others find a way through them.

China is an ineffective complexity and at some point, the labor savings are not enough for big business.

Trump’s tariffs and tactics have driven the debate past that point. If it goes on long enough China risks a catastrophic cascade of departures. A decoupling of industry from its shores.

China cannot afford that. So, it is in a position where it must make some sort of deal. Soon. And is lacking in leverage. They need us more than we need them.

President Trump always knew that. And the President can walk away and he still wins. We knew it. Dopey liberals either love China more or didn’t know.

We’ll let you decide which.

| Instapundit