Tuesday, February 16, 2016

Trump Versus China

Trump has been consistent on a particular issue for a very long time.

When he talks about this stuff now, he talks a lot about China, but China views American foreign policy as imperial, designed to take profits from the rest of the world and bring them to the U.S. to be enjoyed. So, assuming a President Trump, what starts happening when he starts talking tough? Trade war? China has the manufacturing facilities; we don't. Of course, despite a large population, China won't be too happy excluded from the American market.

It seems to me something of an impasse, a potentially dangerous one at that. I suppose America can- and probably should- gear up to manufacture. In this case, as in so very many, the primary issue is various costs imposed by government. It is currently cheaper to do things globally rather than locally, and that is not a 'free market' effect, but a government effect. We must always remember that economies of scale factor in government costs, which means the incredibly large multinationals got that large because of government. When activists protest against Walmart, they don't seem to realize Walmart can easily absorb the costs of whatever it is they advocate across billions of transactions, while the small businesses get put out of business because they simply can't absorb the costs.

I haven't hear Trump talk much on the dollar as the international currency, but naturally most governments chafing under current conditions will continue to try and change it. I am not sure what Trump will do, which makes sense, because the guy actually knows how to negotiate and isn't going to lay things out for the Chinese to analyze for the next few months. But the implications are they probably end up paying tariffs. I would say they'd have to grant some unprecedented access to their markets in order to avoid tariffs, but what do we really have to sell?

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