The US Is Losing The Trade War With China – CleanTechnica

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If you listen to mainstream media, America scored a major victory this week in trade talks with China. The so-called president was ebullient in his praise of himself, saying the result of the talks was a “12 on a scale of 1 to 10.”

China, for its part, agreed to resume buying soybeans from the US and to remove its restrictions on exports of the rare earth materials that are critical to the manufacture of just about all electronics, from cell phones to wind turbines. In return, the US agreed to lower certain tariffs on Chinese imports from 57% to 47%.

But step back from the hyperventilating for a minute and a somewhat different picture emerges. Paul Krugman said on Substack after the meeting,

“Absent another toddler tantrum, we may be reaching peak Trump tariffs. But don’t celebrate. Trump’s chaotic tariff policies inflicted three types of economic damage:

• higher prices for American producers and consumers
• economic uncertainty
• global loss of American credibility

“Even if the worst in terms of prices and uncertainty is over, it’s clear that Trump’s tariffs have inflicted lasting damage on the US economy as well as the global economic order.”

Krugman goes into extensive detail about the difference between announced tariffs and effective tariffs and how some foreign trading partners are gaming the system by transshipping their products through intermediaries or by outright lying on their customs declarations. But he saves his most scathing analysis for the impact the phony tariff war has had on America’s standing in the global community — something he predicts will damage US interests for years to come.

“Soon, I expect, Trump will be declaring victory after performing a climb-down on tariffs and touting make-believe investment numbers. He will proclaim that he won the trade war. Well, he didn’t.

“The main benefit from these deals (assuming they happen and last for a while), is that the United States will stop hitting itself in the face. U.S. consumers, producers and workers have been the main victims of Trump’s tariffs. We could have achieved victory by not hitting ourselves in the face in the first place.

“Furthermore, these deals cannot fix the more profound damage that six months of tariff madness has inflicted — the incalculable damage to U.S. credibility and, with it, to the global world economic order.

“First, everything — everything — Trump has done on trade has, in addition to its illegality, been a violation of past U.S. agreements with other countries. So we emerge from the trade war as a nation that can no longer be trusted to honor its promises.

“Second, if we look at the confrontation with China in particular, the end result looks like a demonstration of U.S. weakness and Chinese strength. China may offer some cosmetic concessions, promising to buy some soybeans or whatever. But the reality — which is obvious to everyone in the world except, possibly, some U.S. voters — is that Trump threatened extremely high tariffs on China but climbed down when China began curtailing exports of rare earths and other industrial inputs. China had the upper hand, and it played it.

“In fact, I’d argue that China is now clearly winning its geopolitical conflict with the United States. America used to be able to count on support from its democratic allies. Now it has alienated them, and established a reputation for arbitrarily reneging on agreements. America used to have unmatched economic leverage. Now the world knows that China has more.”

Krugman’s analysis suggests all the blather about tariffs obscures what is really happening behind the scenes. To score a few political points, the Fat Felon and his friends have blown up whatever moral high ground the US could still lay claim to prior to January of this year.

Patrick Wintour, diplomatic editor for The Guardian, wrote an analysis of the trade war between the US and China that is remarkably similar to Krugman’s.

“Over the past six months, both sides have learned about the other’s leverage and vulnerabilities, including which trade weapons work best.

“For the US, it will be disturbing the extent to which China was able to divert US-bound exports to other mainly Asian markets once the US tariffs struck. Those who predicted China would spill into a crisis will have been sobered by a stock market that has risen by 34% in dollar terms, double the rise for the S&P 500 index. China’s trade surplus is likely to be larger than last year’s. Meanwhile US inflation figures, driven by tariffs, crept up to a politically perilous 3%.”

He added, “In a laughably hypocritical bid to rally the world against this China ‘bullying,’ Jamieson Greer, America’s trade representative, on 15 October complained: ‘China’s announcement is nothing more than a global supply-chain power grab.’ America discovered that bullies could be bullied back, something it might have foreseen.”

“By one account, the treasury secretary, Scott Bessant, examining the imminence of the precipice, persuaded Trump that the price of confrontation was proving too high, leading the two sides to the mutual withdrawal this week.

“The truce is only for a year, but that may be to China’s advantage. It buys Xi time to push China further ahead in the technologies of the future, including green technology and manufacturing — the field it now dominates, and the centerpiece of the new five year economic plan.

“Equally importantly, China hopes it will be seen by other countries as the responsible and restrained global power not seeking confrontation, but strong enough to withstand US coercion. At a minimum, the clash in leadership cultures is total. Xi is an exponent of the war of position, and Trump the war of maneuver in which instinct triumphs over consistency or strategy. For the moment the positional warrior is winning, or at least not losing.”

Watching the video from South Korea, the phony president is gushing all over the Chinese president, who is holding himself in check and maintaining a nearly total poker face. It is fatuous beyond measure to think the former, who has never been known to read a book, to match wits with the leader of a country that invented the insanely complex game of Go more than a thousand years ago.

One is reminded of a piece of advice that many of us have heard before: “It is better to remain silent and be thought a fool than to speak and remove all doubt.” That is wisdom The Donald could certainly benefit from.