Thinking of dumping most of my ADRs.

[dcarrigg]

Re: Thinking of dumping most of my ADRs.

Can China "win" a trade war with the US? What can Xi do that doesn't risk hurting his own economy worse?

Economists platitudes about positive sum games aside, relative power is really important in the end of the day. As in, it might well be worth taking a hit in economic growth if it causes your competitor to take a bigger hit. Believe it or not, this is the basic logic behind trade sanctions, right? Well, if you stop thinking of it as a "trade war" and start thinking of it more like a series of strategic trade sanctions, then I think the jockeying for position becomes clearer. I find the American press is terrible about this stuff. They couch everything in weird terms and euphemisms and rarely just cut to the point of what's going on. The thing is, the trade balance between US and China is so lopsided that tit-for-tat retaliatory measures won't cost Washington as much as Beijing. So Xi is going to have to start thinking outside the box (travel bans, increased regulatory and bureaucratic hurdles for American companies, etc).

[jk]

Re: Thinking of dumping most of my ADRs.

Can China "win" a trade war with the US? What can Xi do that doesn't risk hurting his own economy worse?

how about saying that boeing airplanes aren't allowed to land in china? how about tripling the current tariffs on gm cars? how about upping "regulatory supervision" of all u.s. companies operating in china? how about not rolling over maturing treasuries that they hold [just like the fed]? [they stopped adding to their treasuries years ago] how about stopping the use within china of u.s. services?

[thriftyandboringinohio]

Re: Thinking of dumping most of my ADRs.

how about saying that boeing airplanes aren't allowed to land in china? how about tripling the current tariffs on gm cars? how about upping "regulatory supervision" of all u.s. companies operating in china? how about not rolling over maturing treasuries that they hold [just like the fed]? [they stopped adding to their treasuries years ago] how about stopping the use within china of u.s. services?

China has other measures if it becomes enraged and wants a real fight. It's a fully formed dictatorship under central control, so the pain of the average Chinese citizen is pretty easy to overcome. If China wanted to they could decide to openly and explicitly steal US intellectual property and disregard all patents and copyrights. Start cloning iPhones and openly copying Microsoft Windows and sell them for pennies on the dollar. They could suddenly deny the U.S. rare earth elements, stainless steel, and all manner of critical materials now only available from China. They could nationalize factories built as joint ventures with U.S. companies, parading the U.S. staff through the streets in handcuffs for deportation.

I hope cooler heads prevail.

[GRG55]

Re: Thinking of dumping most of my ADRs.

At the moment, everyone is starting to say that because the DJ is holding up better than the SSE, America is winning the trade war. If I were Xi, I would think I'll need to do something that will make the DJ fall. What do you guys think?

Who are "everyone"? This is the first time I've heard this is some sort of indicator of anything.

[GRG55]

Re: Thinking of dumping most of my ADRs.

Once again, the Chinese economy needs the USA more than the USA economy needs China.

There is is very little along the lines suggested that China can do without also alienating other trade partners, some of whom are also the subject of US trade sanctions. It is the USA that is moving awAy from multilateral organizations such as the WTO. If China is foolish enough to behave the same way it will find itself offside with its most valuable allies in dealing with the fallout of US actions.

[touchring]

Re: Thinking of dumping most of my ADRs.

China has other measures if it becomes enraged and wants a real fight. It's a fully formed dictatorship under central control, so the pain of the average Chinese citizen is pretty easy to overcome. If China wanted to they could decide to openly and explicitly steal US intellectual property and disregard all patents and copyrights. Start cloning iPhones and openly copying Microsoft Windows and sell them for pennies on the dollar.

If you're not aware, this is already being done. You can buy PC with cloned windows on Aliexpress. They even make it clear it's cloned. Ebay also sells a lot of cloned stuff.

However, that being said, Trump is not interested in tech toys like iPhones or Windows (or any consumer stuff). He is targetting at infrastructure and security stuff like electron microscopes, industrial lasers, nuclear power plants, telco infrastructure, etc.

Trump is trying to enrage China, because you make mistakes if you become angry.

If Xi gives what Trump wants, the trade war will not escalate, and China will actually be in a better positon as GRG55 has said.

[thriftyandboringinohio]

Re: Thinking of dumping most of my ADRs.

Once again, the Chinese economy needs the USA more than the USA economy needs China.

There is is very little along the lines suggested that China can do without also alienating other trade partners, some of whom are also the subject of US trade sanctions. It is the USA that is moving awAy from multilateral organizations such as the WTO. If China is foolish enough to behave the same way it will find itself offside with its most valuable allies in dealing with the fallout of US actions.

Of course you are correct, GRG55. I try to avoid wild and fantastic speculations about worst-case scenarios, but sometimes I slip and indulge a poor impulse.
Your observations are less theatrical than mine but far more likely. If the U.S continues to disregard global institutions and ignore long standing trade agreements and dispute resolution methods, other nations will patiently and methodically cut the U.S out of influencing those institutions and bring those rules to bear against the US.

[jk]

Re: Thinking of dumping most of my ADRs.

trump cannot expect public conciliation by xi. even if xi wanted to give trump everything he wants [which xi does not] he could not afford to give in publicly.

[DSpencer]

Re: Thinking of dumping most of my ADRs.

Economists platitudes about positive sum games aside, relative power is really important in the end of the day. As in, it might well be worth taking a hit in economic growth if it causes your competitor to take a bigger hit. Believe it or not, this is the basic logic behind trade sanctions, right? Well, if you stop thinking of it as a "trade war" and start thinking of it more like a series of strategic trade sanctions, then I think the jockeying for position becomes clearer. I find the American press is terrible about this stuff. They couch everything in weird terms and euphemisms and rarely just cut to the point of what's going on. The thing is, the trade balance between US and China is so lopsided that tit-for-tat retaliatory measures won't cost Washington as much as Beijing. So Xi is going to have to start thinking outside the box (travel bans, increased regulatory and bureaucratic hurdles for American companies, etc).

Right. If you accept the DJ vs SSE as the scoreboard there are lots of things that Xi can do that would hurt the DJ. But what can he do that won't result in a retaliation that hurts the SSE worse?

What's an extreme example? China bans US imports. The US bans Chinese imports. Who gets hurt worse? It's probably not as simple as saying the trade balance is all that matters. After all, what happens to US manufacturers who use Chinese components or materials. Or companies like Apple that use Chinese manufacturing? But it's probably still the main factor by far. Apple can find another country (or even the US) to manufacture phones. Can Foxconn find another customer like Apple?

I would rather my company lose a large share of its suppliers than a large share of its customers. I think the same applies on a countrywide basis.

[DSpencer]

Re: Thinking of dumping most of my ADRs.

how about saying that boeing airplanes aren't allowed to land in china? how about tripling the current tariffs on gm cars? how about upping "regulatory supervision" of all u.s. companies operating in china? how about not rolling over maturing treasuries that they hold [just like the fed]? [they stopped adding to their treasuries years ago] how about stopping the use within china of u.s. services?

And Trump will simply accept these blows and not retaliate? Honestly, I think Trump might be giddy with excitement if China tried that. It would give him that justification to do what he already wants to do. How about a 50% tariff on electronics?

Also, just like a regular war, trade wars are destructive to the global economy even if some participants might benefit at the expense of others. How would other countries feel about China upping the ante to such a dramatic degree? How would the CEOs of Asian & European airlines who own Boeings feel?

There's no doubt China has the power to hurt the US badly. I just don't see how they do it without hurting themselves worse.

[dcarrigg]

Re: Thinking of dumping most of my ADRs.

Perhaps surprisingly, I agree with you here. US is in the stronger position. I just think the trade balance tells the same story you spell out. But I go one small step further and imagine that because of that (as I said, retaliatory measures won't cost Washington as much as Beijing), I suspect that Xi will feel pressured to respond with a few non-tariff headaches to try to even the score.

[jk]

Re: Thinking of dumping most of my ADRs.

it's asymmetric trade warfare.

[DSpencer]

Re: Thinking of dumping most of my ADRs.

Perhaps surprisingly, I agree with you here. US is in the stronger position. I just think the trade balance tells the same story you spell out. But I go one small step further and imagine that because of that (as I said, retaliatory measures won't cost Washington as much as Beijing), I suspect that Xi will feel pressured to respond with a few non-tariff headaches to try to even the score.

Oh I agree that the trade balance does ultimately tell the story. I was just pointing out that the situation is complex and having a trade deficit doesn't make you immune to the effects of a trade war. Even in a simplified hypothetical where one country is exclusively a buyer and the other is exclusively a seller the buyer will pay some price.

[dcarrigg]

Re: Thinking of dumping most of my ADRs.

No doubt. Same is true of sanctions. Both sides pay a price. Gets even more complicated at the individual level. Gains and pains are not uniform, but usually fairly concentrated.

[touchring]

Re: Thinking of dumping most of my ADRs.

trump cannot expect public conciliation by xi. even if xi wanted to give trump everything he wants [which xi does not] he could not afford to give in publicly.

Why not? If Trump can do that with little rocket man after all the insults both sides traded.

The only problem is whether Xi has the power to give what Trump wants.