In an escalating staring contest between the world’s two largest economies, China just blinked.
In a rare showing of Chinese weakness, the communist country’s government-controlled media has urged its nearly 1.4 billion population to remain calm as President Donald Trump punishes Turkey for imprisoning an American pastor and impales the Chinese economy with tariffs.
After Pres. Trump leveled economic sanctions against Turkey’s Erdogan regime, the country’s currency went into a free fall. The Trump Administration has successfully ramped up ferocious economic pressure on other rogue regimes such as communist North Korea and Iran. North Korea wisely came to the negotiating table. Iran and Turkey are suffering economic collapses as China teeters.
And Then China Blinked
While so-called experts claim that no one wins in a trade war, indications are that the United States holds the high ground. As reports of Turkey’s currency crisis flooded the news, China’s Global Times editorial trembled.
“The Chinese people must be prepared for hardship and crisis, but they must not underestimate their capabilities and scare themselves,” the state-run Global Times stated.
The majority of the editorial went on to prop up Chinese confidence by explaining the communists’ options in the trade war.
“It must be noted that there are more differences than similarities in the Chinese and Turkish economies. Both countries are latecomers to emerging markets and both have experienced an overheated economy,” the Global Times states.
“But there’s no comparison of their economic scale. China is the world’s second largest economy, the largest manufacturing nation and the largest trading nation. It takes much more to carry out an effective assault against China than bring Turkey to its knees.”
The posturing by the Chinese propaganda outlet shows an underlying fear of going toe-to-toe with the Trump Administration.
“In a bid to cement the US’ comparative advantage, Washington is unwilling to see smooth development of emerging countries and takes some actions, intentionally or not, to foster the crises that confront the latter. All developing countries have to stay alert to Washington’s role,” the editorial states.
Significant divisions among highest-ranking Chinese leadership have surfaced about confronting the United States. At least two factions have emerged.
Some leaders pushed to cut a deal with Pres. Trump early on and avoid an imminent and unwinnable trade war. Others pressed to test American will and level reciprocal tariffs. White House economic advisor Larry Kudlow points to indicators that America is already winning.
“Their economy is just heading south. Business investment is just collapsing,” Kudlow reportedly said. “People are selling their currency. Investors are moving out of China because they don’t like the economy, and they’re coming to the USA because they like our economy.”
Kudlow reportedly pointed to a 9-percent drop in the value of China’s currency since the international spat began.
China’s Losing, Big League
The idea that America could not win a trade war with China is being roundly proven false. Whether that reflects a changing global economy or simply anti-Trump rhetoric from the left remains to be seen. However, market indicators do not lie.
According to global market researcher Alec Young at New York’s FTSE Russell, the U.S. stock market has steadily outpaced its Chinese counterpart.
“There’s a lot of ways to judge this, and I expect a lot of twists and turns, but if we just look through the lens of the market, we’ve seen a much stronger U.S. stock performance,” Young reportedly said.
As of late-July, the Standard & Poor’s 500 rose 6.1 percent while the Shanghai composite fell nearly 13 points. The S&P 500 draws upwards of 43 percent of its revenue from foreign sales. Japan’s equivalent dipped less than 1 percent and Europe gained a meager 0.3 percent. Clearly, China is taking an economic beating in big corporation revenue.
In terms of actual money for everyday people. An American 401(k) investor in the United States saw a gain of about $6,100. A Chinese counterpart lost upwards of $13,000 during the same period.
China Fears an Ongoing Trade War
Even critics of trade wars recognize that President Trump kept his powder dry until he could negotiate from an absolute position of strength.
The Tax Cuts and Jobs Act, coupled with massive business deregulation, led to a booming economy. With more employment opportunities than qualified people to fill them in the United States, President Trump has mostly insulated Americans and companies from any downturn due to reciprocal tariffs. In fact, the tariffs are resulting in swelling tax revenue that can be applied to bailing out farmers that suffer even minor shortfalls.
According to financial investment strategists, corporate profits are on track to grow upwards of 20 percent and the country just posted GDP growth over 4 percent. In contrast, China faces a daunting economic slowdown.
Perhaps equity strategist Barry Bannister at Stifel Financial Corp. reportedly said it best about the tariff strain. “The U.S. does not need China as much as China needs the U.S.”
~ Freedom News Report