Dear Professor Krugman,
If each of us, each in their own way, then, "At this rate, we may have to wait for a new president to clean up this mess, if she can." It can happen! I can accept Bernie but my meanger money & wishes are for Senator Warren.
labeling china as a currency manipulator is largely only symbolic. but it gives US an excuse / reason to implement policies should china perform currency / trade actions adverse to US. the trouble is this, china is not really a currency manipulator. but with china fast becoming the largest economy in the world by gdp and 1.3 billion people. its actions even if it is not intended to be currency manipulative can hurt US.
so i'd guess there is no choice about this
US Exports to China made up 1% of the US GDP in 2017. This is all about talking points and selling news coverage.
"Currency manipulation", according to all the commentators is the great Chinese sin. Not so?
"Things are never what they seem in China Town." Jack Nicholson.
1
Americans in general and Trump in particular have no concept of history.
The Chinese are the opposite. They take the long view.
And NOTHING was more humiliating to them as a proud nation with a 3,000 year history than what they call the 'unequal treaties' that were forced on them by Britain, France, and Germany in the 1800s and early 1900s.
And NOTHING was more violently resisted than the colonial economy that was forced on them by Japanin the 1930s, with the collaboration of weak Chinese leadership, both of the Fascists under Chiang Kai Shek, and the quisling regime ran out of Manchuria and featuring the last Chinese emperor as a Japanese puppet.
No Chinese leader can ever be seen to be bowing to foreign pressure to make concessions on the Chinese economy.
Though it is a one party state, popular boycotts and grass roots nationalist feeling would cut off all co operation with the US and undermine the entire Chinese government.
Trump is a fool if he thinks naked pressure of any kind, and especially this type or worse, gun boat diplomacy, would sway them. It will be met with equal and opposite force and subtlety like this currency move.
The Chinese Communist Party rose to power in the struggle against Japan and the colonialists, and it's very DNA is invested in this concept.
Every school child in China knows what the Brits, the French the Germans and the Japanese did to China, and all about the Chinese 'traitors' who let it happen.
China will not back down.
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The volatile occupant in the Oval Office may think he’s a big shot, when in actuality he is Tom Thumb in the hands of China’s Yeti, Xi.
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Thank you, Dr. Krugman, your column pulls us to look at the future during an incredibly sad week.
2
Love the closing Paul .... we should be so lucky to get one of the female Democratic candidates in office!
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@Greg
Mucho like! Elizabeth Regina!
3
You forgot to mention that China announced there will be no new agricultural goods purchased from the US. Farmers are rightly going bonkers
https://www.reuters.com/article/us-usa-trade-china-agriculture/u-s-farmers-suffer-body-blow-as-china-slams-door-on-farm-purchases-idUSKCN1UV0XJ
What is the added cost to the US economy? Will Trump just increase the farmer's bailout? Which was $16.5B before the latest shock
https://www.wsj.com/articles/usda-sets-plans-for-16-billion-in-new-aid-to-farmers-11564065120
(socialism by any other name)
7
“So how does this all end?”
Scenario 1:
The trade deficit with China is reduced. Despite the overall trade deficit remaining unchanged or even increasing, the administration declares success. We “won” the trade war with China.
Scenario 2:
The overall trade deficit remains stubbornly high. The reason given: “The rest of the world is manipulating their currencies and unfairly taking advantage of us.” The only solution: weakening the dollar. The Fed is forced to print dollars to sell them in the foreign exchange markets. The result: inflation (great for borrowers). Another result: capital flight. Yet another one: nominal interest rates rise, increasing the budget deficit.
“The long-run effect of the expansionary (monetary) policy consist solely of a rise in the price level and a domestic currency depreciation.” (Yarbrough & Yarbrough, p. 803)
Scenario 3:
The heretofore unthinkable happens...
Yarbrough, B. V., & Yarbrough, R. M. (1997). The World Economy - Trade and Finance - Fourth Edition. Orlando, FL: The Dryden Press.
If China lets the tariff war stalemate through the 2020 election, that could contribute well enough to mild recession risks such that Trump's economic credibility in Red states is completely destroyed (as if he really fooled anyone by taking credit for the wake of the Obama/Yellen successes). Let the soy bean farmers make hay of Trump's clueless blather.
1
@gary e. davis
"...take credit for the Obama/Yellen successes..."
Obama was able to force a large tax increase in 2013.
Here is the growth of total federal tax revenues by calendar year:
2013: 12%
2014: 8%
2015: 4%
2016: a negative 1%
Trump stopped a death spiral.
You can only make your statement because you have been brainwashed by Krugman into believing that taxation has no effect on economic growth.
Tell that to larger population, high tax Europe which grew $210 billion real in 2018 while we grew $680 billion real.
It's going to be one helluva morning after just like the last time a republican presidency ended. All the fat cats will have a hissy fit and stop trusting or lending to one another and rebelling about election legitimacy. Once again. Who will be capable of bailing out the system by the time this crackpot is done with it?
For most of us it will be like cleaning up after a party that we worked at but had no the time or money to enjoy.
5
Trump did Xi a big favor by playing Tariffman. Trump has united 1.6 billion Chinese behind President Xi, a feat unrivaled even by the CCP's best strategists.
By threatening new tariffs that extend his protectionist wall to all Chinese US exports, Trump poisoned the latest round of negotiations and locked Xi in a hardline position he can't and won't waver from.
Now it's not a trade issue but a losing face-to-losing face stand-off. Brilliant move by Trump who thinks chop suey is China's national dish.
China's original response to the trade imbalance was to buy more American stuff until the trade gap shrank. That meant a huge boost for US farms and commodities like silicon chips, wheat, rice, beef, poultry, soybeans, ore, lumber, etc. as China imports vast quantities of each.
But Trump demanded trade concessions written into Chinese law, which they see as a brazen violation their sovereignty, in effect a kowtow demanded by a Western tyrant as an act of humiliation.
For the Chinese it's now an existential line in the sand. There's no point to China's prosperity if it means kowtowing to Trump and American malevolence.
China knows that economies don't win when someone loses. Which unfortunately is how Trump views everything.
Trump wants a trophy for re-election that he's not going to get from China now that it's flying its Don't Tread on Me flag.
Trump validated all the Chinese hardliners who said dealing with America was folly.
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According to Krugman, USA's next president will be a woman, Warren ? I bet she can , its not so difficult to clean up this mess: root out all tax havens and all corporate tax schemes effecting a 5-10% corporation tax charge across the board.
Dont forget , the tariffs are charged on good manufactured in the PRC by american companies. Have companies like Apple have their profits made in China distributed to its HQ in USA and ur back on an even footing. Today these profits are are being channeled to tax havens in the Caribean and from there reinvested , not necessarily in the USA
5
Alternatively, consider China makes a deal with the US. What's to convince them that Trump wouldn't just tear it up when it suits him, as he's done with the Iran deal and NAFTA?
The rational move is to hold steady and stall. If the last several days are an indication, Trump is doing a great job ripping the country apart from the inside. China just has to wait till the US has spent itself.
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“…10 percent tariffs on $200 billion of Chinese exports, which is a tax hike of 0.1 percent of US GDP…”
Not really. Only “ceteris paribus.”
Actually, the $200 billion of Chinese exports to the US should come down drastically. So will the US/China trade deficit.
Rest-of-the-world exports to the US should increase by a similar amount. The US/ Rest-of-the-world trade deficit will increase.
The overall US trade deficit will not be reduced significantly.
China’s trade with the rest of the world should increase by a similar amount.
Hello. I am interested to know how the 10% tariff on $200 billion represents 0.10% tax hike on US GDP and 0.15% tax hike on Chinese GDP.
@Jonas
$20 billion divided by our GDP of $21.44 trillion would be 0.1%
$20 billion divided by China's GDP of $14.2 trillion would be 0.15%
But, things can get much worse:
Total imports from China in 2018 were $540 billion.
35 percent of that would be $189 billion.
Assuming China retaliates perfectly, that would be $378 billion.
I think China is going to negotiate.
1
I guess you don't know what "WINNING" looks like Paul. It looks like an economic decline led by a narcissist creep, & a rise in racist fueled mass murders.
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@Bob
You can be so disgusted only because you don't realize the size of the issue and the pent up rage in the populace over the enormous destruction of manufacturing jobs that has taken place in the last 60 years.
Compounded by the belief that these jobs were shipped overseas.
Trump is dealing with it. No one else did.
He brought NAFTA in nicely.
Now, he has hooked the great white whale.
We'll see who wins, him or the whale or if they both die.
1
"... if she can" Lizzie 2020 <3
5
What shock ?
"Global markets steadied amid signs China was not ready to weaponize the renminbi just yet."
NY Times, 1 hr ago
https://www.nytimes.com/2019/08/06/business/global-markets.html
Reminiscent of when Trump was elected ("we are very probably looking at a global recession, with no end in sight.") he spoke to soon
1
@Woof Or maybe you're speaking too soon.It would be interesting to know just what your predictions are for the economy and why.You may be surprised at the apparent Chinese retreat but I'm not at all.They know that if you just give Trump enough to say "I just made the greatest deal ever" then they will probably get what they want.And by the way ,I'm predicting that "we are very probably looking at a global recession"but...these things don't happen overnight or even by next week.It could take a couple of years...economic trends usually develop slowly.The last economic meltdown under Bush took 7 years to develop and it took Obama 4 years to begin a climb out of it.So...calm down, be patient.
7
Is it a coincidence that the picture accompanying this article includes a stuffed panda bear?
1
The last sentence says it all....
It probably will take a woman to clean up this mess.....and then some~
8
TIC-TAC tomorrow the world will be one day closer to 2020 election...
4
Paul, I submitted this comment to your column, but I don't think the "Times" has the time to post it yet?
This morning, at 7:15, CNBC flashed text on national TV in a bold faced lie, (which is as a market manipulator and propagandist the equal of Charles Mitchel’s illegal “flash”) that “Dow Futures Erase Early 600+ Point Deficit”. [The 600+ Point Collapse was not “erased”]
After the lying Charles (“Sunshine Charlie”) Mitchel (President of what is now CITI, pulled this deceptive market manipulation during what John K. Galbraith later wrote in “The Great Crash”) Mitchel was later arrested and prosecuted for market manipulation, but got off scot-free in 1933.
Source Wiki: Mitchell was elected president of National City Bank (now Citibank) in 1921 and, in 1929, was appointed chairman. Also in 1921, he was elected president of National City Company, which became the largest security-issuing entity in the world. Under his leadership, the bank expanded rapidly and, by 1930, had 100 branches in 23 countries outside the United States. His salesmen sold millions of shares in the bank totaling $650 million, much of which would be lost in the Crash of 1929. While the Federal Reserve Bank was attempting to curb speculation earlier in 1929, Mitchell flaunted a $25 million advance to traders.”
This is the kind of deceitful manipulation we’ve seen in the 2008 crash and from this Disguised Global Crony Capitalist EMPIRE — ever since.
DUMP
EMPEROR
TRUMP
“We can’t be an EMPIRE”
2
Trump could screw up a two-car funeral. It was just a matter of time before he got around to the economy. He thinks that his tariffs punish China when in fact they just jack up the prices paid by American consumers when China passes the cost of the tariffs along to the consumers.
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@Clark Landrum
"...jack up prices..."
Nope.
Inflation in 2018? 1.6%
Fed target for inflation? 2.0%
@John Huppenthal So you believe that if overall inflation is low then prices can't be going up on specific items?
Reminds me of when Ted Cruz was insisting inflation must be high since beef prices were going up. Because of bad weather in much of cattle country.
Cruz may well have known better, but he also knew there were folks like you around.
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@Jack Toner
No point in talking logic to a Trump supporter, Jack.
11
When are we going to get "woke" to the fact that Trump and the GOP are instruments of global plutocrats whose intent is to utterly destabilize the US? We don't need Sherlock Holmes for this. There is clear method behind this madness.
6
@Joseph
‘..destabilize the us”
Inflation. 1.6%
Gdp. 3.0%
Wages. 3.6%
"China was a major currency manipulator 7 or 8 years ago, but these days if anything it’s supporting its currency above the level it would be at if it were freely floating."
This is kind of a huge statement to just throw out as an ipse dixit assertion.
I'd be interested to know why Krugman thinks this is true, especially as China is still running a $600B+ trade surplus with the U.S.
There is no reason to credit anything else said in this column unless you are willing to believe Krugman's evaluation of China's currency on faith.
@Chorizo Picante I'll believe Krugman's evaluations on faith long before I'll believe a single word coming from Trump.
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@Chorizo Picante - C'mon, man! Ipse dixit is what the (naked) Emperor says ALL the time. Not Prof Krugman!
Anyways, I'm sure you know how forex reserves (and treasury operations) work with the Central banks in countries whose currencies are NOT fully and freely convertible (and tradeable in exchange markets). These are not countries which can (bully and) get their Central bank to print more foreign currency notes when the going gets tough. They have to budget and manage their holdings. That's just a fact of life. Is that currency manipulation? Yes, to an extent it is; but these banks also know how dangerous it would be for them to keep their currencies at artificial levels - so, to manage their reserves, they resort to rationing. Is that currency manipulation - possibly. But, none of this falsifies Prof Krugman's assertion.
2
@Chorizo Picante
China is a manufacturing economy. The U.S. is an intellectual property and services economy. Explain why China's trade surplus is a bad thing, what exactly we should do to bring it to balance (despite his myopic fixation on it, China's trade surplus has only increased under Trump) and what the American consumer would have to give up if we were to achieve balance.
Trump's just playing bait and switch (and, as I said, the con man's losing his own shell game) because our greater problem isn't a given year's trade balance, it's China (for that matter Germany) honoring intellectual property laws, and not forcing transfer of intellectual property when international companies do business there.
Yet we talk about that as if it's simple, without acknowledging this gets at the heart of the difference between capitalism and communism. Communists believe intellectual property should be commandeered by the state for the general welfare. Of course, capitalists believe this too at least when it comes to things like Iran's nuclear weapons or Hillary's emails.
Before Trump we were moving—glacially—in the proper direction with China. Now that glacier is receding rapidly, melting away the hard-won progress of five decades.
Trump knows he's not going to get a grand bargain with China. He knows they'll wait him out. That's built into his plan, which is to lie, grouse, try to leverage it to win reelection (perhaps more than once), and when all else fails blame his successor.
2
So tax cuts go hand in hand with terrorism? Hard for me to believe that President Kennedy was a White nationalist.
@Eric
Economic growth in 1965 after the Kennedy tax cut? 6.5%
Economic growth in 1966?
6.6%
Economic growth in 1970 after the Johnson 10% tax increase?
0%
@John Huppenthal
A mild recession started in 1969. Oh, and Nixon was elected in 1968. So…some of 1970 is on the guy inaugurated in January of the year prior, no?
Economic growth in 1982 after Reagan tax cuts?
-1.9%
Economic growth in 1994 after Clinton tax increase?
+4%
Economic growth in 2002 after Bush tax cuts?
+1.8%
(down from in +4.1% in 2000, up from 1.0% in 2001 or down from +2.55% 2-year avg)
Economic growth in 2010 after Obama tax cuts & increases?
+2.5%
(up from -0.3% in 2008, up from -2.8% in 2009 or -1.55% 2-year avg)
For that matter, Kennedy inherited a 2.6% GDP and had a robust +5.8 in 1964 the year before the 1965 Kennedy tax cut (which we could also call the Johnson tax cuts, as Kennedy was assassinated in 1963).
GDP in the Eisenhower years, when the top rate was astronomical and most Americans view as an economic boom time, wobbled drastically back and forth between -0.7% and +6.9%. The Truman years saw postwar GDP go from -11.6% to +8.7%.
Economic growth in 2018 after Trump tax cuts?
+2.9%
(up from 2.5% in 2017, and exactly the same as 2015, when Trump started running by trashing Obama's economy and promising his cuts and deregulation would be "rocket fuel" for the economy)
2
@J T
Here is a more complete list:
Trump reduced tax rates in 2017, in 2018 we had real economic growth of $680 billion, up from $290 billion in 2016 and by comparison with Europe at $210 billion.
Reagan reduced tax rates from 70% to 50% in 1983, economic growth was a stunning 7.3% in 1984. The highest growth in the last 65 years.
Reagan reduced tax rates from 50% to 28% in 1986, economic growth was 4.9% and 3.6% in 1987 and 1988.
Reagan tax cuts combined created the highest six year period of growth, 31% since the Kennedy tax cuts in the 1960s (37%).
Congress overrode Truman’s veto and cut taxes in 1948, we had six quarters of highest growth in the history of the U.S. 16.4%, 12.7%,16.3%, 8%, 5.6%, and 7.1%
Calvin Coolidge and Warren Harding reduced income tax rates from 75% to 25%, economic growth in the 1920's was 37% as compared to Obama at 13%.
Kennedy reduced tax rates from 91% to 70%, economic growth was 6.5% and 6.6% in 1965 and 1966.
Clinton reduced capital gains taxes by 29%, economic growth in 1998 and 1999 was 4.5% and 4.7%.
Bush2 reduced tax rates in 2001 and had economic growth of 18% compared to Obama’s 13%
England eliminated the personal income tax in 1815, averaging over 4% GDP growth over the next 35 years.
Vietnam? Just grew 6.5% and 9% after reducing their taxes below the U.S.
Poland with lower taxes than the U.S. grew 5% in 2018.
China is abusive and Krugman blames Trump.
Who is the puppet government now with Russia meddling in our elections and China too big and "Communist" to fail?
@Amy Sewell
"...meddling in our elections..."
Mueller's group specifically failed to provide any evidence that the Russian government meddled in our elections. No one has provided any proof of such meddling by their government.
Russia has a population of 108 million connected to the internet. The idea that any one of them posting on the NYtimes or WaPo is Russian meddling is ridiculous.
No proof, not an iota.
Pure mythology.
@John Huppenthal
"Mueller's group specifically failed to provide any evidence that the Russian government meddled in our elections. "
Apparently you didn't read Mueller's report.
@John Huppenthal You’re channeling A.G. Barr with your fanciful interpretation of the Mueller report: no definitive proof that the Trump campaign specifically conspired with Russian actors to manipulate the election, but overwhelming evidence of past and present Russian meddling.
Paul, do you really believe this trade war would be happening if past administrations had not "kicked this down the road"? You are an economist, correct? Had China not manipulated the WTO to their extreme advantage, would we be in this current trade quagmire? How about placing blame where it belongs? The WTO! Past administrations fecklessness!
How about you deal in facts. Look at how China has manipulated the WTO since it joined, rather than Trump's policy toward them. Your hatred for Trump is overwhelming you to the point where you really do not seem to care about long term trade issues. Rather your concern is your hatred of Trump.
I am not a fan myself. However, if as he is doing, we do not deal with issues now, it will be way too late.
The opinion writers of the NYT talk about climate change, and how Trump does nothing. I AGREE.
However, he is trying to do something about the trade imbalance with China, and all you do is berate him.
(I realize the NYT would not print this earlier this week, however, I am submitting it again.)
@bsb How did China (or any other country) manipulate the WTO? Just because US (i.e. business located in the US) imports more than it exports (and therefore there is a trade deficit), does not mean that Americans (i.e. people resident in the USwho have ownership and receive returns from businesses which may or may not be in the US) are losers! Global supply chains and globally operating businesses and globally sourced investments make a mockery of Trumpian logic of tariffs. Those who drink Trump's KoolAid need to take a chill pill and go back to school
7
To understand why Trump and his administration do what they do and say what they say, you have to get into the Trump twitter echo chamber to understand the "logic" behind their words and actions. These are all designed to make them "feel good" - aka make America great again. The inhabitants of that echo chamber had it great up until the 90s when Clinton became President - since then, it has been downhill - economically, socially, culturally, technical competence, in all aspects of life. The base has been "depressed" and the Great Savior has come to #maga. Anything that can be seen as a poke in the eye of the enemies is "good stuff" - makes em feel good. The world is too complicated for them or anyone else (even the Great Savior) to predict what these poke in the eye actions and works will actually result in. So, dont bother about the result - just focus on whether the words and actions make you feel good Having drunk that KoolAid, these people need stronger opioids to get off the #maga koolaid. The 2020 Dems do not have these opioids and will therefore never get their support
8
@anatlanta
Really useful perspective, thank you!!
I had a factory in Brazil when China really was manipulating their currency.
After Bush invaded Iraq, the US$ got weak all around the world. No idea it the two are related.
Before this, my product cost $60 Reais. The exchange rate was 3:1 and the product cost US$20.
The same Chinese product cost $170 Yuan. The exchange rate was 8.6:1 and their product cost US$20.
As the US$ got weak, the Brazil exchange rate went to 2:1 and my product cost US$30. Same product.
The Chinese held their exchange rate at 8.6:1 and their product continued to cost US$20.
Brazil lost a lot of export business in many markets. Same for other countries around the world.
Some years after China took over these markets, they let their exchange rate drop to around 5.7:1. They then got more US$ for their product.
3
@Independent
"...they let their exchange rate drop..."
These are markets. Our policy makers don't have a clue as to how to affect these markets.
You expect China to control them?
@John Huppenthal
It's not that hard. China has a lot of US$.
See this:
"Some countries may decide to use a pegged exchange rate that is set and maintained artificially by the government. This rate will not fluctuate intraday and may be reset on particular dates known as revaluation dates."
"To keep the pegged foreign exchange rate stable, the government of the country must hold large reserves of the currency to which its currency is pegged to control changes in supply and demand."
https://www.investopedia.com/ask/answers/forex/how-forex-exchange-rates-set.asp
1
@John Huppenthal
Are you John Huppenthal the Republican politician from Chandler?
1
Trump always caves in the end, even if it is long after an intelligent person would have abandoned the action.
Meanwhile Walmart shoppers will feel the pain but won't understand it is Trump-inflicted.
5
@Rheumy Plaice; I take (cold) comfort in the fact that because he has no compunction about lying, as you point out Tramp "always caves in the end", whereupon he declares victory, no matter how badly he's failed and no matter that everyone (with the possible exception of his base) realizes he's lost.
2
@John Huppenthal is that because the markets expect a recession soon? Probably, given the inverted yield curve which is pretty much 100% accurate give or take a year. Then the fact CPI is low won't help the Walmart shoppers when they have lost their jobs. Ergo, your post is not really the zinger you think it is (so stop repeating it ad nauseam).
3
@Fabio
Inverted curves are the interaction of two treasury yields.
Meaning is different when 30 yr bonds are 3% than when they are at 5%%. Also different when the market is at 33 trillion than when the market is at $6 trillion
Okay, Mr. Krugman, you have had my faithful attention until today. Today you disappoint. I'm in El Paso and one of thousands here grieving the massacre of innocent people because they were perceived by the shooter to be Hispanic. In the past few days I have been yelling at liberal pundits on MSNBC who intellectualize this tragedy and try to turn it into some grand theory of everything. Today it is your turn, apparently. I don't disagree with your theory of Trump as an empty, narcissistic vessel offering nothing but self-serving immorality to the world around him. But you have decided to reduce the racism behind the massacre of innocents to some grand theory, to the effect that the racism seems meaningless and beside the point. I'm sorry to say this, but shame on you. Come off of your intellectual mountain and feel the anger and grief of this community and these families here.
1
I think that Paul Krugman tipped his hand in the last paragraph for whom he will vote next year. His past columns have convinced me to vote for her, too.
6
How does this trade war end? I know when it ends...sometime in 2021 following the election.
8
@Michele Underhill
"I know when it will end..."
Maybe not.
Trump is going all in which means that we are going all in with him, like it or not. Either China will come to the table and negotiate or trade with China will come to an end. If that means tariffs of 100% on 100% of Chinese imports, I have no doubt he will do it.
That of course would have a very large impact on our economy. And, an even larger impact on China's economy.
That means that this trade war will end either early next year or on election day.
Today on CNBC Larry Kudlow had determined the trade war a success because it was hurting China much more than the US, and Larry Summers noted that the point of the economy is to help Americans, not hurt them or hurt them less than the Chinese.
And of course, Kudlow knows that.
In my opinion, we stopped having a trade war and are now in a national security action, where the US is trying to keep China down and behind the US as a global superpower. That's the only rationale for cheering actions that hurt the US because they hurt China more, because the point is to keep China a distant second, not enrich Americans.
That's why nothing is going to be solved soon. The supposed "trade war" is working as desired from the national security perspective of the dopes in the Administration.
8
@Yeah
The problem is that the entire 20th century has proven that the only way to avoid world wars and build the conditions for peace, is to make sure that we ALL thrive, and that ALL economies can be developed.
And if you know that the US is the wealthiest country on earth, it's even more absurd to want to tank the Chinese economy, just because you're too afraid of China.
10
@Ana Luisa
Trump doesn't want to tank the Chinese economy, he wants a deal with two parts.
China's agreement to open markets to competition.
China's agreement to intellectual property right protection.
Trump's a negotiator.
But, this will either end in an agreement or in a horrible mess, maybe even a war.
@John Huppenthal
I thought a president already taught us the definition of "is."
"Trump's" a negotiator only if his drastic measures get an enduring fix to intellectual property rights protection and open market competition, or else he's a conman, maybe even a warmonger.
We already know his promise that his tax cuts and deregulation would be "rocket fuel" to the economy and bring manufacturing jobs back to the rust belt by the tens of millions haven't yet proven out, 2018's GDP being 2.9%—exactly the same as 2015, the year Trump entered the race bashing President Obama's economy.
The unemployment rate is 1% below where it was when he took office 2 1/2 years ago, no worse but considered "full employment" despite not solving the problems he pledged only he could.
The wonderful health care we'd love that was "so easy"? Remind me Trump's role in that negotiation?
Passing Paul Ryan's tax cuts before he quit as House Speaker to spend more time away from Trump's family?
I guess he negotiated Powell into lowering interest rates, thing is Trump railed against low rates when Obama was POTUS and Bernanke Fed chair.
I guess he negotiated Obama into releasing his birth certificate. Why was that again? He's the least racist person we know, he keeps telling us.
Trump pledged to release his taxes after his election, then said you elected me without them so forget it.
Trump's negotiating skills have three speeds: Lucky Break, Gaslight, or Hit & Run and frame someone else.
3
Trump is now paying $14.5 Billion in corporate and individual welfare to farmers! He's a flat-out SOCIALIST! He loves tariffs, so he's also against free trade. And this is what Republicans are sacrificing their integrity to support?!
It's disappointing that Paul Krugman did not talk at all about the damage that is being done to America's economy and to individual farmers and business owners even with the current tariffs, much less those that are coming.
I believe that the Chinese, having found other markets, like Brazil, for their agricultural purchases will NEVER come back to US farmers. Those farmers, for example, who have lost their huge soybean market may never have that selling opportunity restored, even if Trump cuts a deal with China that requires them to do so. Disrupted markets would be difficult to restore even given the best of intentions, which I doubt we'll ever be able to expect from China, no matter what the future agreements may be.
Trump is now the biggest socialist ever in the White House -- he's paying $14.5 Billion to America's farmers for doing nothing. That's government welfare and that's socialism. Does he believe in free markets or not? Supposedly free markets is the reason he's putting tariffs on several countries in the first place, but now he's creating a socialist economy.
What a disaster this dangerous, unqualified, self-dealing, kleptocratic con artist really is!
21
@NY Times Fan: I don't believe anything the psychopaths say. There isn't a shred of integrity in the whole Trump entourage.
4
China is also considering a 100% block on ALL food imports from the US, full stop. This would obviously hurt farmers the most, but also some of the wealthy Trump supporters' pocketbooks. It will be interesting to see if either group will decide to change their votes in 2020 if this trade way continues thru next year.
8
@Steve Cochrane
The thing is, agricultural commodities are a fungible product sold in a single, global market.
If China buys its soybeans from Brazil, then those Brazilian soybeans are unavailable to be purchased by the rest of the world. So whoever was going to purchase those Brazilian soybeans before the Chinese bought them will now have to buy from the U.S.
So it's all the same, except the ships are moving around in a different pattern.
1
@Chorizo Picante . Except that no one is buying American soy beans. That is why Trump is giving away 14.5 Billion to US farmers. Trump is a socialist president.
4
@Chorizo Picante
C'mon, man, we tell ourselves we're going to wrest millions of jobs back from China to America by getting them to agree to this or that, it doesn't occur to you that Brazil will clearcut its forests and expand its soybean production to meet Chinese demand even if they have to sell at lower profit margins to gain market share and put some Americans out of the soybean business?
Brazil's unemployment rate is 12%. If Trump got elected on this job-stealing Mexicans narrative when we had 4.7% unemployment and he's willing to subsidize soybean farmers now when we're at 3.7% unemployment, you don't think Brazil will find a way to let this China situation create agriculture jobs there where they've got three times the unemployment rate we have, and that it won't come at the expense of Americans who are now, but in the coming Trump recession will no longer be, farmers?
2
The last sentence may be the most important for the Democrats - cleaning up the messes left behind by Republican governance will become the new President’s first big initiative and no one running can know what the exact state of play will be at that time. Clinton came into office with America wringing its hand over ballooning national debt, a point Perot hammered. Clinton’s term ended with balanced budgets. Obama took over an economy in global free fall and among other things saved the auto industry and passed the ACA with Pelosi’s essential assistance and a scant majority in the Senate. We need a President we can trust to handle the existential threats created by corruption, collusion with foreign interests and breathtaking incompetence. The current process of candidates promising things no American Congress will deliver while courting adoration of the 26% of the electorate identified as very liberal (that’d be me but for an overwhelming obsession with winning Congressional and Senate seats) misses the mark. The Democrats are America’s only hope for decency, responsible government and saving democracy itself - they might want to run on that. I think it worked for veterans and former intelligence officers and others who helped take the House. The GOP has soiled the patriotism branding it dishonestly monopolized for 40 years, the way they made a mockery of their so called fiscal responsibility branding - ironically by selling their souls to branding genius Trump.
25
Somehow the events of the past few days make me picture Trump at the top of the Empire Building. Our 21st century Kong, vainly swatting away. The chickens are finally coming home to roost.
9
@cuyahogacat.... LOL. And when someone yells "Jump!", he says "How high?". And then it all comes crashing down.
2
Trump will do more that anybody else to combat the climate change.. Yes, I am of course being sarcastic here but what else can I do. In any case slowed down economy should be good for the environbent. Today it was announced that Swedish economy is slowing down faster that expected. I guess that one will hear similar messages from other European countries. The reason is both the trade war and the Brexit circus. Big win for all..
3
President Xi can wait a long time. President Trum has 17 or 65 months depending on the next election. Expect a stalemate until November, 2020. After that the situation will change.
I just wonder if China's intelligence agencies are now working to counter Russia's.
9
One good think is emerging from this trade war- end of cheap Chinese products may not be that bad for those not-so-affluent American consumption who are known form conspicuous consumption. It's good for world environment too.
In reality, 1980s globalization seem to have benefited almost exclusively the big businesses & rich people. They exploited almost slave like labor, much cheaper raw materiel, almost no regard for any environment and other laws (human rights included) in those 3rd world countries- only to boost its profit. Most of the huge profit was/is not shared with the Govt or general people. Income inequality is growing even in most developing countries with growing number of billionaires in China, India, & Russia.
As economic prosperity in western countries deteriorated, we also became more dependent on cheaper Chinese products and also man power from such countries to work here- again mainly to boost corporate profit.
Even though India was poor, but its Gini coefficient was better than USA in 1980s. But now it's far worse with India becoming 2nd worst country in terms of income inequality. All of it has huge sociopolitical consequences and rise of a person like Trump is just one of it.
4
@John Huppenthal "As a result ...". No. Development in 3rd world countries is not as a result of our domestic public finance policies. In addition, if we wish to accurately understand the growing inequality of income & wealth in the USA (and in other countries), then we need to more finely fraction the 1% -- catchy political slogan as like 99% vs 1% shine only a limited light the dynamics.
3
@John Huppenthal.
Rich people always pay major share of tax in almost every country. Income of top 1% in USA exploded after 1980s globalization, also by massive corporate deregulation by Reagan. On the other hand, percentage of income tax by those people & also corporate tax decreased significantly- from as high as 91 % during Eisenhower to 21% now. Yet so many top American companies not only do not pay even that but also paid zero tax or got tax payers money in form of subsidy.
Rise of American middle class, mainly after WW2, was possible due to much higher percentage of tax on rich Americans and big corporations.
Consumption of goods must be at a fair price for the producers- i.e. farmers, laborers, general employees etc. Globally, including in USA, income of those working class people are decreasing, in percentage terms. Farmers' suicide is routine in America, France, India & most other developing countries too, because we (consumers)/"market" refuse to pay the right price while middlemen and big businesses enjoy huge profit from it.
Global commodity trade is dominated by just 4 companies controlling more than 70% of it.
Now, every $4 earned, $3 goes to top 1%. Only $1 left for social/national development. Massive technological development in last few decades making the rate of exploitation of global resources explode and that massively increased that $1 share. But the price for that to our own & future generations is huge, some are irreparable.
6
@Alex
"...we need to more finely fraction the 1%..."
maybe
But, maybe it would be better to just measure the outcomes for the poor and focus on improving them.
Things like SAT scores, household income, household assets.
Things like gini coefficients are just mental bation for the intelligentsia.
I volunteered at a school for the homeless for a year. We threw away five pounds of unopened food canisters a day.
These students, more than any other group of students I have encountered, came into school each day organized to take their teacher down. They derived great joy from the exercise, smiles as big as Texas when they were successful at shredding the classroom cultural fabric.
More than anything, they need success in education but instead of developing a education performance culture, they have developed an extreme anti-culture.
That's our challenge moving forward, not gini coefficient nonsense.
1
A bull in a china store.
You break it, you own it.
4
Bull in a China shock ?
1
Trump is taking a page from putin and every other autocrat's book: stir up division at home, find a paper foreign enemy. Make sure the politicians who support you never step out of line, never waver.
Trump will start a war before he'd give up power. Many of the conflicts occurring in the world right now are due to White House incompetence and neglect--chaos helps the autocrat (again, see putin). His next step, though he's been too cowardly so far to take it, is finding someone to have a war with. He'd be stupid to choose China, but a small, country with some difficulties in winning so it's not over too quickly--after all, the war needs to last at least 4 years.
On the other hand, he is stupid, so maybe it will be China. That would probably make Russia happy and we all know how much trump loves putin....
8
A war doesn't need to be 4 years. The next election is 15 months away. Trump year 3 - war, I said this two years ago. I would put my money on Iran - Isreal and Saudi Arbia would be happy; China, not so much.
Trump will do something that completely collapses the world's economy.
Watch.
Just to placate his ego, he will make a decisive, disastrous move.
5
Earth to media. Trump has no idea what he is doing.
And so much for the nonsense that trade wars
are so easy to win. China has let Trumo know
it will not be fullied.
This is Trump's mess and the Dems will have to clean
it up.
Trump owns this mess.
9
China can stand economic pain longer than we can.
9
@Tim Hathaway
Maybe not.
China's $540 billion in exports to the U.S.is 3% of their economy.
Our $120 billion in exports to China is 1/2 of 1% of our economy.
I know very little about economics, but based on Trump's arrogance, narcissism, and inability to admit mistakes and change course, unless someone smart steps in to guide him (and he allows him/her to do so), things don't look great down the road.
8
What should the U.S. do
(1) to obtain a fair open market in China, e.g., an end to requiring American companies to partner with Chinese state-controlled business, and
(2) to prevent a continuation of the horrendous amount of intellectual property theft?
ALSO: There's also obtaining from China, India & other countries effective assurances of the safe production of medicines and of other products. including computer hardware & shareware free of implants for spying.
1
For the first time in our history, very many Americans are rooting for the other side. This President is so reviled by the large mass of the populace he represents that deep down in our hearts we don't want to see China back down to his bullying.
11
...Trump's messes are layered, indeed.
And the road to the messes of Shambles Trump is so
traceable: The incompetent Trump's lawyer, Cohen, has the idea
of a run for president, as a publicity stunt; Trump wins
the nomination with support from GOP big money; James
Comey does a really dumb thing and his Clinton letter
nonsense causes Hillary to lose just enough electoral votes (not popular votes) to put Shambles in the White House.
And oh, yes: The press treats Shambles like he's a real
president and Shambles' base lets the hook sink deeper and deeper...
8
So, Dr. Krugman, since what Trump is doing has no rational basis (nothing new there), do you think it might boil down to a manhood issue?
2
@John Huppenthal: The agreement that Trump produced with Mexico and Canada is essentially the same agreement that he ostensibly replaced (NAFTA) - albeit with a new name. The agreement with North Korea is a figment of Trump's (limited) imagination. And if you believe that the Trump/Republican "Middle Class Tax Cut" was really for the middle class you are drowning in GOP Kool-Aid.
2
@John Huppenthal "Produced an agreement with North Korea." Hah! Read the news lately?
@john belniak
"...no rational basis..."
Produced an agreement with Mexico and Canada.
Produced an agreement with North Korea.
Produced a personal income tax cut reducing taxes for all families of four making $53,000 or less to zero, a 100% tax cut.
Maybe it will work with China, maybe it won't. But, it has a good track record.
Love the last sentence, Mr. Krugman. I know you are not predicting that our next president will be a woman, but it's great that your choice of personal pronouns acknowledges the possibility.
11
The US is looking at the current quarter. China is looking years ahead. Our panic and the idiocy in Washington will contribute to a future for China that will leave the US in the dust.
3
@John Huppenthal John, if you have the opportunity, you might find it illuminating to visit the major Chinese urban areas. But first, brush up on their history during the period 1875 - 2000 in order to understand how people there lived. Then judge how they perceive today/tomorrow vs. the lives their parents, grandparents, and great grandparents lived.
4
@Patriot
"...future for China that will leave the U.S. in the dust."
2018 GDP per capita increase in the U.S? $2,000
2018 GDP per capita increase in China? $500
GDP per capita in China? $8,000
GDP per capita in the U.S.? $62,400
They can't get there from here. They have to go someplace else first.
like your confidence about the 46 being a "she". Wishful thinking though it will take us time to catch with the likes of Israel, India, Sri Lanka, Bangladesh and of course England and Germany etc.
But whoever it might be will have lot more than financial mess to clean up, the social and moral fiber of the country has been torn apart. sometime more difficult to fix.
5
If Trump were truly even a moderately astute businessman he would know that it is extremely difficult to negotiate when your counterparty has shown themselves to be totally dishonest and completely untrustworthy. Trump has spent two and a half years as president and a lifetime as a conman proving himself exactly that. Absent his ability to bludgeon a much weaker party, Trump has no chance of achieving anything of any import internationally on any front. America, it should come as no surprise. No one trusts you any longer, on anything. You elected a pathological liar and conman and we, the rest of the world, know it.
18
Historically, the Chinese measure their patience over decades and centuries. The US patience, especially under the Rat, is measured in femtoseconds. Wonder who wins that battle??
5
“Russia, if you're listening, I hope you're able to see that Democrats won't engage in this type of trade war."
Say it, Marianne Williamson. Say it.
4
If this trade war and resulting stock market carnage yanks Trump out of office - I'm all for it.
4
If Trump is really working for Putin what better way than destroying the U. S. economy, as well as creating more division amonf us.
7
A wonderful article! By the way, who is she pls? Thanks.
2
The sum of Trump's whole game will be zero.
1
@John Huppenthal: All charged to the national credit card. You people are some hypocritical pieces of work. And all those weapons have done nothing for US infrastructure.
4
@Steve Bolger
You can't have a rational discussion with these people. He actually believes Trump has an agreement with North Korea and the $4 trillion tax cut benefited people making less than $50K.
Delusional thinking goes a long way in red America
1
@Steve Bolger
"...all charged to the national credit card..."
Nope.
Nominal GDP growth in 2016? $485 billion
Deficit in 2016? $580 billion
Net -$95 billion
GDP growth in 2018? $1,070
Deficit 780
Net $290 billion
Debt payments as a percent of disposable income? 1.6% a nothingburger, less than half of its peak in 1994.
As long as the deficit is less than nominal gdp growth, we are tall cotton.
Let's see here. Someone is bent on dismantling America's credibility and security in the world by undermining its economy and environment, and reneging on its promises. He constantly disgraces and demeans its highest office, while weakening every check and balance to his absolute power (Congress, the courts, the media). He abolishes accountability (press conferences) in favor of one-sided propaganda delivered directly to the masses. He panders to dictators while filling government posts with crooks and incompetents whose only qualification is loyalty to him. He encourages every kind of hatred and "patriotic" violence against one another, while claiming his blatant and self-serving lies are the only truth.
Gee: is this a Russian or Chinese agent? Because if an avowed enemy set out to destroy this country, he couldn't do a better job.
13
Mr. Krugman,
Love that last phrase, " If she Can".
4
There are those of us who think the world economy has been skating by on an even bigger bubble than the one that popped in 2007.
If this is the case, and the idiocies of trade war and Brexit combined prove sufficient to provide the inevitable pin prick this time, things could get interesting.
The world economy will then be at a historic crossroads: is it possible to resolve such crises easily with substantial global quantitative easing, or is this collapse actually going to solve the climate change problem, by dooming the world to a Depression the likes of which it’s never seen?
It may be there’d be no way of easing our way out this time; I’d appreciate Dr. Krugman’s scenario painting on this.
If the doomsday scenario proves the only alternative, that could easily lead to massive civil unrest, starvation, civil and international war, and worse.
Which would also solve the climate change problem, but at our species’ expense.
So, which is it to be?
1
I fervently hope to, once again, be proud of my president one day.
5
This disaster is why Putin got Trump elected.
3
IMO the stock market is frothy anyway, and people have made a lot of money in the last 10 years. Anything that looks like it might spark a downturn will be met by a selloff. As you have often pointed out, Prof. Krugman, this administration has a limited repertoire economically: tax cuts, tariffs, bully the Fed. I think people are worried that when the next recession hits, it will be back to Hooverville. Only I guess in Trumpville the cardboard shacks will be gold plated?
4
@Dave
"...it will be back to Hooverville..."
Maybe, maybe not.
On October 23rd 1929, 16 senators switched from the anti-tariff side and voted to increase tariffs. That afternoon, the stock market fell 5%. Then next day was Black Thursday. The following Monday, Hoover pledged his support for the 60% sales tax known as the Smoot Hawley tariff. The following day was Black Tuesday. In five days, the stock market lost 36% of its value.
The downturn known as the Great Depression began that month, guaranteeing that Roosevelt would be elected President and starting the rise of another politician in Germany. The 60 million deaths of World War II can be traced to that policy decision which in turn triggered other disastrous policy decisions.
That 60% tariff affected close to 100% of U.S. imports.
Trump's tariffs so far affect less than $400 billion in Chinese imports which is less than a fifth of our total imports. Which in turn are about a tenth of our economy.
In Russia, if your neighbor has a cow and you don't, you kill his cow. That is the only explanation for how Vladimir Putin is using his control of Donald Trump. With no means of developing a real economy in his own decaying corpse of a country, Putin is destroying the economies that are making him look bad. He is gaining control of the Middle East and the oil markets. We are handing over our NATO ally Turkey to his control. He has Syria in his portfolio and now even has Israel bowing and scraping to him. He controls Iran and by default, the vacuum of Iraq. He is inveigling his way into Venezuela in our absence. Meanwhile, he has attached Trump to necrotic North Korea and introduced a phony cassus belli between the U.S. and China. All of Trump's economic and political actions make perfect sense -- only if you realize who he's working for.
7
@Big Text
Wow, what an empire! Russia, Turkey, Iraq, Venezuela, Cuba. A combined economy smaller than California. All of them shrinking in size.
What did Trump say? You can have them? Something like that.
Feels like an August 1914 of Economics.
4
Failing Donald Trump has no idea what he is doing, even as he invites a race war in America. He really is pretty much terrible at his job.
8
Commenters seem stunned that 45 won the presidency. Look deeply at the manipulation of the U.S. population and who did the manipulating. There lies the answer.
6
"If she can." Yes, America, make it so.
4
"What the heck is going on"?
The whole world realises Trump got played by both China and N. Korea. By attacking and trying to isolate China the Unstable Narcissist made China redouble its efforts at political, economic and military independence:
-- Trading with everyone EXCEPT the U.S.
-- Monopolisation of rare earth metals and minerals
-- Establishment of an ocean-going navy
-- Island build-up in the South China Sea, including harassment of U.S. Navy planes
-- Massive state investments in IT and AI
-- Increasing links and cooperation with N. Korea, Iran, Venezuela, Russia and other U.S. 'adversaries' ... (4/5 of the world's population!) ...
-- Making strong moves to replace the Dollar
Meanwhile, the U.S. lowers taxes for the ultra wealthy, totally neglects infrastructure and sets off citizens against one another.
Who do you think is 'winning' (if not already won)?
7
guess the year of make America great again is 1929
2
@tom
The stock market lost 36% of its value in 1929.
Since Trump's election, it has gained $8 trillion, over 38%.
Wow, the first honest appraisal of failed American policy.
Being brave has it's rewards.
3
@Jamie Hill
"...honest appraisal..."
1 Economic growth in 2018 $630 billion versus $300 billion in 2016 versus Europe’s 210 billion
2 Full-time jobs up 3.1 million in 2018, 200% of the 1.56 million increase in 2016.
3 Manufacturing jobs up 500,000 under Trump. 2016? Down 7,000.
4 Total job openings 7.3 million up 25% from 2016’s peak 5.8 million jobs
5 Unemployed 6.0 million in 2018 versus 7.5 million in 2016
6 Stock market: $33 trillion, up $9 trillion since the 2016 election
7 Mortgage delinquency rate down 26% from 2016
8 Combined Black and Hispanic jobs set ten all-time records in 2018 at higher wages than in 2016
9 Consumer confidence highest in 20 years, up sharply from 2015 and 2016.
10 Unemployment 3.8% lowest since 1969.
11 Initial Public Offerings up 250% from 2016 to $46.8 billion in 2018
12 Real disposable personal income up $597 billion in 2018 versus $244 billion in 2016
13 Total wealth $108 trillion up $13 trillion since the 2016 election.
14 Business investment growth up $334 billion in 2018 versus $52 in 2016
15 Total federal revenues increased 3% from 2016 to 2018 after negative 1% in 2016
18 1.6% inflation in 2018
19 5.7 million have escaped food stamp welfare since December 2016
20 Murder down 6.3% since Dec 2016
21 Debt service on federal debt is 1.6%, less than half of peak
22 Households able to pay all bills 82% in 2018 up from 75.9% in 2016
2018 was a different universe from 2016
The US under Trump has one product that they are massively exporting, weapons. That's what our government under Trump is investing in. Not infrastructure, health care, education, weapons.
A cold war is a great way to export weapons around the globe. A hot war is good for weapons sales but it eliminates potential customers.
Look at our budget under Trump. Trump has gone to all our allies and tried to shake them down for more weapons purchases starting with NATO. He has sucked up to the murderer ABS for weapons sales. He has no concern about missile launches from North Korea because he wants to sell more weapons to both South Korea and Japan.
The USA under Trump is in the protection racket. That's where this is going.
4
@HL
Arms exports are less than 7% of our total exports and an insignificant portion of our economy.
But, yes, Trump is a military guy who went to military school where he was well regarded and respected.
So, he appears to be into weapons. Something you might want from a commander in chief.
Ought we be surprised by all this economic chaos, when we have an unhinged, irresponsible and unscrupulous brutus ignoramus in the Oval Office, one that pays lip service to the 'experts' around him, who are afraid to tell him how stupid his off the cuff remarks are?
6
@manfred marcus
"...economic chaos..."
Stock market is up $8 trillion.
Economy is up $2.3 trillion
Real Disposable personal income is up a staggering $2,579 per person.
Life is good, the chaos is entertaining. Lean back, pop the popcorn, watch the next show.
"... if she can." Hilarious. It's Elizabeth Warren, and "... yes, she can"!
2
"if she can" - nice !
3
Trump, Trump, Trump, Trump, Trump all the time for breakfast, lunch and dinner. It's no wonder he may be re-elected: that's all the US media and the NYT write and talk about!
3
Our global reputation is being ripped to shreds.
America is not a trust-worthy negotiator. They do not hold to the agreements they, themselves, sign. They waffle and change to suit their immediate needs. Who needs this?
So goes the thinking in the global community.
Meanwhile the native American Red Man sits there smug in his corner, and makes this remark:
"I've been saying this for the last 250 years. So forgive me for this but....I told you so."
So it goes.....
John~
American Net'Zen
3
"... Don't. Push. Me. 'Cause I'm close to the edge ... I'm trying not to lose my head ...
... It's like a jungle sometimes it makes me wonder how I keep from going under (keep from going under) ..."
People hates being bullied. Abolishing NAFTA makes our Canadians very angry with a replacement of nothing but a name changed. I hope our country can be stronger to strike back like China.......
1
@chu
Canda has other problems. An economy which has shrunk $60 billion in dollar terms for starters. A huge new electricity and gas tax (yes, call it a carbon tax but now we know) to bloat government.
This Apprentice President is the single greatest danger to the U.S.
6
Doctor Krugman, I am no economist, so I'll ask you, doesn't it seem like the winner of Trump's trade war with China is...
Russia! Perhaps because he so seems like a Putin-puppet and we know they helped elect him, I am growing paranoid but
it sure seems like Putin must be laughing into his vodka...
4
@cosmosis
GDP of Russia? $1.7 trillion
Sadly, Russia hasn't won anything in a long time and likely will never win anything again.
We should seriously consider a friendly merger with them. It would result in a huge expansion of both our GDP's.
Trump is a bull in the china store.
Let's think back when Bush invaded Iraq. People, knowingly and unknowingly, let him invade Iraq with the lie of fictitious the weapon of mass destruction . Many people,including Prof K yourself, his father, the 41st Pres, knew the consequence of the invasion. Now Iraq invasion became the spark that exploded whole Middle East. The refuge tsunami is destabilizing the whole Europe.
Now, considering this colossal aftermath, could or should we have stopped Bush's Iraq invasion?
I shudder at the thought of what Trump's mad romp will bring to the future generation of the world.
4
Are we winning yet?
3
@Jerry
Over 1,000 fewer murders in 2018 than in 2016.
100% more full-time jobs created in 2018 than in 2016.
26% fewer mortgage delinquencies in 2018 than in 2016.
You tell me.
The advisors behind Trump that he listens to scare me much more than Trump himself.
The level of incompetence and emotional instability on the White House staff is surreal.
Americans don’t seem to realize that we’re all living on the edge of disaster as long as Trump is in office.
5
Can't anybody see the next step? A military arms race with the flash points already set in the South China Sea.
Trump is an autocrat. Autocrats consolidate power by whipping nationalism through war . . . I can already hear the howls from his base for blood of the enemy.
6
😁'If She Can'😉 I love it!
3
She can.
4
I'm not sure Trump is a committed tariff man so much as he is a profiteer. Once markets are low enough for his orbit to buy low, he'll tweet something conciliatory, sending markets up, and his buddies (and probably him) cleaning up.
5
I have wondered when the latest talks failed, what would China do. They depreciated the currency which is was, or would have done by default when US slapped on more tariff.
A friend who works with two major US companies (ALLTECH is one of them) in China said, China is getting ready for the painful haul, they are not going to give in to US, dot. They're already looking to other markets. The sentiment is China is not anger or frustration, he said, there is simmering hate for USA at this point, and Trump is a buffoon (丑角) entertainer.
US is going to be in a bind when precious metal runs short (China is the major supplier) for its cell-phone products and gadgetry.
Trump bankrupted his own business, left contractors with no pay and ruined other ventures with fraud and corruption... the list is long.
Who thought he can handle this?
9
Let’s take a moment to appreciate that because there are no black or brown people in China, we can have a rational discussion about the actual issue rather than hysterically declaring that it’s all about Trump’s supposed racism.
I think the trump cabinet should form a circular firing squad, put a big stuffed panda in a chair in the middle of the circle and open fire on the poor stuffed panda.
That will show the chinese we really mean business
Vietnam Vet
5
excellent, as always.
2
China needs to keep their people employed or they will be dealing with twenty or more Hong Kongs on the mainland.
Where the heck are the U.S. economic advisers in all of this? They can't really be in favor or supportive of this bonehead plan can they? Can a U.S. president just willy nilly decide on his own to create havoc and disruption while being clueless during the entire debacle?
When the heck will Congress or some level of the Federal Government step in and put an end to this madness? At this rate and on this path, this reckless imbecile will bankrupt this country, if not much of the world economy.
6
Why worry? Trump is after all a "very stable genius".
4
Hunkering down on the trade war, Trump is. Like he will hunker down on white nationalism, regardless of what the teleprompter tells him to say. And let's not look to impeachment to get us out of this mess. I, for one, would rather see the Pence bath water thrown out with the baby.
4
This puts the GOP in a quandary because it hurts them in the only spot their blood still flows, the wallet. As you state in your El Paso column, for decades the Republicans have used race as distraction to keep the white rubes happy while they pass tax cuts and deregulate at the behest of their wealthy masters. The rubes are too dumb to notice they received nothing from the tax cut, and probably too obtuse to notice the higher prices they're paying as a result of the tariffs, but you can sure bet the GOP bankrollers are freaking out right now as the Dow plummets. Trump has become a liability, yet the flunkies they sponsor in Congress have become his zombie army. What's a plutocrat to do?
4
Warren could be Treasury Secretary and Harris AG in a Biden Administration. Vote to Win. Biden can win Florida and the rust belt states and WIN!!
2
@rk I really like that idea but I am not willing to give up any Democratic senators!
history has seen many mighty empires rise and fall. recent examples are the British and other colonial empires.any empire through its unbridled expansion creates its own periphery which ultimately overpowers its core or at least frees itself from it and develops.this is how civilization has expanded throughout. there is no reason to believe that it is not operative today. American supremacy may have its day sooner or later, unable to extricate itself from the web that is wound around itself. the fall of a ruler's supremacy does not however, mean the end of all good things achieved during its course. dinosaurs vanish but life continues to evolve for the better. how peacefully or with what painful hiccups the transition takes place depends on the strength of the public spirit and statesmanship demonstrated by various players involved.let us wait,see, and play our due role to avoid terrible hiccups! let us not loose HOPE!--s s sarma
Let’s have a trade and currency psychodrama with China so we can forget about Trump and GOP white domestic terrorism for awhile.
2
Lets hope and prey he doesn't land us in a depression or a dictatorship. Considerable damage is possible and I pray that we don't end up in economic collapse.
3
Thank you Paul Krugman. Once again you have provided a useful understandable explanation.
2
You won't see God trying to clean up this mess either. That's how bad it is. Just a bit of Christian Fundamentalism Conservative truth there.
3
The Chinese achieved the upper hand with one move totally unexpected. It is their game at this moment and my expectation are that our "leader" has any idea of what to do but bluster, sputter and go through his Mussolini poses for the photo ops. Can't believe a business failure who lived on his pop's money and blew it on bankrupt casinos would be outsmarted by foreigners. Never forget it was someone other than Jesus telling us "I am your only hope". Time to flush repeatedly and sanitize.
6
If she can?!?!? Nikki Haley isn't going to be ready until 2024. And I thought Krugman was smart.
"...So how does this all end...?" [op cit]
--
I have a few predictions.
[Disclosure: These amount to, "a conspiracy theory.”
--
1. The "Markets," will drop precipitously, all around the world, signaling a world-wide financial panic.
2 The US and other market economies will sink into what amounts to, "another Great Depression."
3. In the interim, sales of US Government Securities [T-bills] to offshore purchasers will, "dry-up," forcing the US Treasury to default on it's interest obligations. Government services in America will cease.
4. Our economy will experience, "massive shortages, due to a catastrophic breakdown of our once robust supply chains".
5. "Rightwing versus Leftwing," antipathy in America will greatly intensify—leading to, "widespread vigilante violence," on both sides. "Law and Order," will become a thing of the past.
6. World leaders will be powerless to provide any remedies; nevertheless, President Trump will place the blame on, "all the others." His Republican base will swallow his words whole. Martial law will be declared. Donald Trump will become, “President for Life.”
7. The nations of the World will sink into a series of, "perpetual wars of attrition," with no end in sight. The world population will begin to *decrease*.
8. The World as we once knew it will have effectively, "ended.”
***
OK. This is extreme. But it has happened in the past, in one form or another. In any case, is this what we want?
—
…Better start thinking about it now…
4
"...if she can."
Indeed! The White House needs a man like a fish needs a bicycle.
3
I dearly hope that the last prepositional phrase in your column is accurate in its pronoun usage.
3
Everything dotard touches, dies. Not only is he scamming all of us, and profiting enormously from the office he stole with russian help, he also is bankrupting our nation and making ALL of us pay much more for everything FOR NO REASON. Thanks, putin.
4
Does trump really think that Xi is some NY real estate type....?
Does he really believe he can play 'chicken' with China?......He's
a loser in New York....and his name is being removed...letter by
letter here........and as his name comes down...so does the market......Live with that Wall St.
5
I don't want to believe there are so many pessimists and weak-kneed cowards amongst the readers, as reflected in the majority of these comments. OK, let's just give up and let the Chinese run the world.
Losers.
1
China's gonna be more in favor of a Democrat POTUS in 2020 than Russia had been for Trump in 2016. Like ordering from a Chinese menu: ONE from each column.
(And a pot of Vladi's famous green tea and fortune cookies for dessert.)
Our goal should be to develop new industries(alternative energy etc.)rather than revive the old ones. Free tuition at community colleges would certainly help develop the more skilled workforce we need.Blue collar workers have had to deal with displacement for years..it is nothing new.I lived in Buffalo in the 60's.The steel industry closed all of it's plants there and moved them closer to the source of iron ore.This was when China was still"Red China" and NAFTA wasn't even a dream in Newt Gingrich's eye(my how's he's changed).Most of the young people moved on to greener pastures and found work or went to public universities where tuition was something like $250/semester. Eventually the high tech industry was born.Both Steve Jobs and Larry Ellison were adopted by "blue collar" families.Look where they ended up.My point is that we moved on and developed new industries.
China is actually trying to do the same thing.They would much rather focus on developing computer systems,AI,robotic manufacturing and weapons and sell them to the rest of the world their own consumers . China does more trade with the EU and the 11 Asian countries surrounding it than with the US.They are in currently talking to Mexico.Wringing our hands over currency manipulation(which the FED is doing right now) is a waste of time.We have to look at what the real problems are and address them.Enacting tariffs,further subsidizing farmers and "clean coal" are certainly not the answer.In short..Trump as to go.
4
Marcel wrote: "What do you think are the even larger forces (historical and contemporary, as well as U.S. and international financial interests) that are pro-tariff at this point in history, and what could possibly be the goals of such forces?"
Since the legacy of corporate freedom of the last couple of decades has done them so well, it's hard to imagine why these "forces" would want to derail the gravy train. One thought that occurs to me is that it's time to once again strip out the value of middle class 401Ks, slam the stock markets and then come back in with all that disposable cash so many are sitting on and assemble even bigger portfolios at bargain basement prices. The last big "market adjustment" served as a major vehicle of wealth transfer from the middle class to the .1%ers that it's high time to do it again. Time to party!
2
Once again Paul, had previous administrations dealt with China and its view of worldwide domination, as well as its manipulating the WTO, perhaps we would not be dealing with it now. Why not, for a change, at least for you, deal with the fact that previous administrations have "passed the buck" and left us in this lurch?
It's unfortunate but in the long run China could win this trade
war.The majority of American consumers will take the hit for
high prices ( not the 3%'s) and i don't think we have the stamina for a fight like this. We have become to soft. The reality of the current political/capitalist system will result in a demand for a
administrative change and a return to our deference to China in regards to trade.
1
Professor Krugman I think that the Chinese own so much of your country´s debt and at the same time they are so many that if they wanted they could all jump at once and take planet Earth out of orbit and well into the Ice Age. I think that either option is a debacle and it is worst than slapping some tariffs on them. At least, your country has a leader, unlike your country under BHO or Bubba.
2
Well Trump's 19th century tariffs aren't working. I guess mercantilism will be his next move.After that feudalism where he really wants to go so the King owns the majority of the wealth. What a fool.
77
Whose morale is he trying to raise? What he has done is once again shown why he went bankrupt six times and why the world economy is running ragged trying to figure out what to do now that the US role as a stable economic actor has been blown up. Trump’s tweets and rants are horrific, but all too often they have succeeded in diverting attention from what he is doing to sensible regulation, economic principles, the sanctity of treaties among nations, and the distortion of American governance. I won’t even go into his racism and his destruction of basic norms of decency. I worry how much worse it will get before it gets anywhere close to better. We need a Democratic President and a Democratic Congress and a Democratic Party that agrees that there are a great many fundamentals to fix before it starts splintering. There are times that I wish I believed in the power of prayer.
301
China has a much higher tolerance for pain than their American counterparts.
Inverted yield curve, Brexit and Trade War, everything is announcing a recession where the Central Banks have already spent all their interest rate lowering firepower.
The only thing Trump supporters can point to is a 'strong economy".
The only reason Obama became President is because the Republicans and their 'free enterprise' philosophy crashed the economy.
Democrats tend to get in on the back of Republican disasters, not on their own terms.
A recession before the next election seems pretty much baked in already.
I'm basically rooting for a recession if it helps get rid of Trump. Yes it will cause pain. Cutting out a tumor does that but if it is caught early enough the patient ( country) can be saved. Waiting another 4 years generally kills the patient.
596
@JMC-Building on your comment, I'm wondering if Krugman thinks Trump pushed the Fed too early? If he'd waited a little longer, he could have timed it so that the recession hits right when a Democrat gains the Presidency This has been the traditional Republican strategy, to wreck the economy and then hand over the mess to Democrats all the while blaming them for it.
58
@JMC I'm doing more than just rooting for a recession next year. I'm postponing big purchases and urging my family to celebrate a "used and reused" Christmas. If lots of consumers were to spend less to defeat Trump, it might make a difference.
23
@JMC
"The only thing Trump supporters can point to is a 'strong economy".
No. They can point to his support of racists and racism, as well as appointing judges that will expand the GOP war on women, LGBTQ folks and minority rights.
The average GOP base voter has always voted on these issues, not on economic ones.
27
It seems to me too few people recognize a key difference between the US and China.
America's leaders face regular elections. Their people and their parties expect a decent economy. And politicians know they're likely to be punished electorally if they fail to deliver one. They think in the short term or die, politically.
China's leaders have no such concerns. They personally can easily ride out recessions and even sustained depressions -- think North Korea. And there's no mechanism for anyone to punish them. So they think in the long term and ... nothing bad happens to them.
This makes fighting a trade war an unequal battle. And anyone who thinks winning one against a totalitarian foe is going to be easy is in for a rude shock.
7
China is going to lose the trade war with the US for two simple reasons.
Our trade deficit with China means that they need trade with the US more than we need trade with China. With the exception of rare earth elements, for now, everything we buy from them we can build ourselves or buy from other countries.
Trump is right in using our economic power now to put a stop to China's theft of US IP, unfair trade practices, its imperialist foreign policy, and the expansion of its military.
@Stanz Please stop thinking that Trump has a plan or strategy behind his actions. The trade war with China is part of an astounding set of foreign policy failures. In addition to a very destructive trade war with China, we are; drifting war with Iran, the NATO alliance is at its weakest point in history, totalitarian regimes are emboldened by Trump's open support of them, Maduro is still firmly in power while the Venezuelan people suffer from our sanctions, North Korea is edging back to testing missiles with no deal in sight. All of Trump's foreign policy initiatives are failing and have severely weakened America's standing in the world. Thinking we can win a trade war with China is incredibly naive.
7
@Stanz
they need trade with the U.S. more than we need trade with china-I would question that since china owns over two million dollars of our debt.
yes, we can build stuff ourselves-when is that going to happen? chump promised that. And if someone slaps tariffs on anyone the currency will drop-that is economics. I don't hear anyone complaining that britians' currency has dropped as well. and once the no deal brexit happens Englands' economy will tank.
1
President Trump likes tariffs because they agree well with his policy-by-whim approach to complicated issues.
Presidentially ordered tariffs do not require detailed policy planning or background analysis. They do not require consultation with Treasury or Congress. Announcing tariffs gratifies President Trump's inclination to punish, quickly and immediately, someone who has irked him. Reducing tariffs, or exempting industries or nations from them, feeds on President Trump's belief that doling out gifts makes him more powerful, and inclines others to become loyal followers. Tariffs allow President Trump to indulge in his favorite pattern of negotiation: make an offer/threat; observe the response; change the offer/threat.
Finally, of course, whimsical application of tariffs leads to what President Trump likes very best of all: headlines with his name in them.
16
@Thoughtful in New York. Yup, your comment pretty well sums up all of Trump's policies--foreign, domestic, economic. Tariff's are something he has learned how to do as president, maybe the only thing, so he just keeps doing them. Sad.
5
"tomorrow's market action should be ... interesting."
Yes indeed! The Pollyannas on Wall Street once again put their trust in words from the Trump court over common sense.
3
China is taking the long view and extending its economic influence and infrastructure around the world (the Belt and Road Action Plan for instance). The United States, with our crumbling infrastructure and no nationally unifying economic projects, is more short-sighted with short-term administrations and ever changing policies.
10
Did we not learn any lessons from Vietnam? You can't assume everyone has the same ability to withstand pain. Heck, I think most Americans would find $4/gallon gas as painful as other people in the world might find having to live on 2 small meals/day. It didn't work very well in Vietnam and it won't work very well here either.
4
Americans do not learn lessons; Americans have beliefs, aka faith. faith requires no proof, no facts, no analysis, no imdependent thought or effort. you just agree to accept a story someone else tells you (without disclosing their motivations). this is why we have an electorate willing to support the likes of Trump, who has done every obvious thing to wreck the country and its economy and to drive wedges between Americans. and not only do they fall for it, none dare call it what it is: treason.
2
The most telling comment the author makes is that neither he nor anyone else knows what are to be likely outcomes of this set of self destructive actions. Our economic system has become the pillar it is based largely on stability and predictability. If Trump wanted to actively destabilize the US and the world, he could hardly do a better job than playing a known failing hand (tariffs) and alienating a huge trading partner while befriending historical adversaries even as he alienates our economic and strategic allies. If any set of actions could be scripted to destroy our hard won dominance and opportunity to better the world, I can't imagine them.
It all appears to be suicidal. Of course during all this he's showing how democracy is a failing option.
15
but Trump is no asset of Putin, oh, no. heaven forfend.
1
Dr. Krugman,
It would be valuable to expand your analysis beyond Pres. Trump and non-specific concepts such as "The Trump Administration." What do you think are the even larger forces (historical and contemporary, as well as U.S. and international financial interests) that are pro-tariff at this point in history, and what could possibly be the goals of such forces? Lightly discussing this issue leads laymen and women to simply blame Pres. Trump for being a "bad guy" without helping us to understand what greater forces are at work. We cannot form accurate opinions without a greater expansion of this discussion. Please advise accordingly.
1
@Marcel
Why provide a sophisticated answer to a problem created by simplistic bullies whose fundamental strategy is the use of brute force to redistribute worldwide wealth (ironically) -- well beyond the value of any good or service we produce?
There it is--you have all you need to know.
1
Unfortunately, I think Dr. Krugman is absolutely right to make the last part of his column about the personal feelings of Donald Trump and Xi Jinping. That's what's driving the current confrontation. As Dr. Krugman says, we need a new president to fix things from this end, and let's hope she won't face too much obstruction. But who (and I mean the word collectively, because it won't be just one person) will act in China to make policy there more rational?
3
How many jobs have been created in the U.S. due to Trump tariffs? At best a handful, but it is costing every American consumer over $800 per year. Where are the Chinese jobs going? Vietnam, India, Malaysia, all countries with even cheaper labor than China. Foxconn built a huge factory at the expense of the WI taxpayers, yet no Chinese production has shifted to WI.
This entire exercise is a reality show to please "Dear Leader's" cult following.
16
reports for at least the past several years had a lot of manufacturing already leaving China for greener (cheaper, even less regulated) pastures.
Please remember that while some people voted for Trump, the majority did not.
Hmm, then why is Trump President, you might ask.
Can anyone provide a reasonable explanation?
5
@Jim Anderson
The President is elected by the electoral college, not by popular vote. That is part of our Constitution.
I'm assuming you have no idea of the process which has to be undertaken to change our constitution, but it would take years of effort.
If you think we should abolish the 12th amendment without going through that process, then you are advocating the termination of the rule of law and the dissolution of this nation.
3
I think @Jim Anderson is being sarcastic. He’s from Bethesda so he surely knows what the Constitution says....
1
@Suzanne
Maybe he is being sarcastic, but you don't really think that proximity to D.C. means one is more likely to know the Constitution!
Us poor devils in Montana are so unenlightened.
Tariffs will not make these manufacturing jobs ever come back. If Apple cant make their Iphone in China for 6 cents anymore, itll move manufacturing to Vietnam, or Indonesia etc. There is no shortage of cheap labor in Asia and American companies care only about the bottom line. There is no way to win this. We were sold out a long time ago. All that's going to happen at this rate is the Chinese will replace US imports wherever they can. they'll hurt the economy and wait until a new President takes office. Its all about the economy. Trump should have known better than to pick a fight with the country that can hurt the economy
13
@DannyC
So, you think the solution is to give up?
1
@Raz
No, the solution is to vote Trump out.
1
In this game it is worth to consider who can withstand more economic damage, Trump or Xi? If Trump wrecks the U.S. economy, he definitely goes down, baring some extreme and extremely unlikely circumstances. Xi on the other hand...what could happen...perhaps the people in Hong Kong will take to the streets! Oh, yeah, that has already happened for completely different reasons. Xi does not seem too vulnerable to bad sentiments in his populous, and can't be counted on to crumble under any kind of pressure.
13
A county with history that spans thousands of years is not likely to flinch when the President levees tariffs which are paid by Americans.
Since living in China for many years, my experience tells me that they will save face and not capitulate to any Trump demands and will wait out whatever economic turmoil may ensure until a new administration enters office. I certainly don't blame them - he has been a cultural wrecking ball when it comes to our international trading partners - especially the ones whom we do not share a common European heritage.
Sure, China may accept the short term pain for the longer term view - they can wait as they have a cogent strategy - American does not - we flail and attempt bluster to get short-term transactions results; while this is happening, they will advance a chess piece or two and outmaneuvering us for our longer term prospects.
24
Declaring China a currency manipulator is only 3 decades too late. Look the history of China's devaluation policy and the shift of many US businesses to China, beginning in the 90's.
The Bretton Woods Conference (1944) failed to address currency manipulation, but even it had done so, China is a totalitarian state - it does not play by the rules of Bretton Woods, IMF, WTO, etc.
2
Thank you again Paul;
But, still unanswered, is whether T sees the China tariff as a simple means of refilling a Treasury left empty by his bizarre tax policy - a national sales tax hurting the poor severely...
Or whether he sees instant factories sprouting up overnight to build TVs in the US, without an immigrant work force at a time of effectively no unemployment - at salaries far below “decent”.
I believe he doesn’t understand a) the lead time between manufacturing plant plans and facilities, or b) the need for employees to build and staff the same.
We are in the hands of a madman - who gets votes from folks who still maintain that the answer to dealing with 400 or so Iranian embassy employees held hostage was to write off their lives and bomb the country into glass because ‘merics’s “manhood was threatened for the first time ever, lead’n to terrism[sic] and 9/11”.
13
Wow...
If the old currency carry trade and AI-created third-generation derivatives had a love-child, it might look like this...
Insiders can signal and collude via what’s two places to the right of the decimal point...
Far fewer fingerprints than with LIBOR manipulation...
Reminds me of the old numbers racket – when the last three digits in the attendance at Yankee Stadium told it all...
That was the old Stadium, of course...
1
The world is coalescing into trading blocks; military blocks will follow. Trump is blowing America’s transition to a multi polar world. Back to the future, what’s next? Runaway inflation? Deflation?
4
@KxS: Historically, monetizing debt during recessions causes inflation in subsequent recoveries. Monetizing debt with quantitative easing is one of the few options available to central banks when further cuts to interest rates would drive them negative.
The Celestial Empire has a long memory. From invasions from the North to the British Opium War to Nanjing, being forced to bow before bandits was humiliating.
No more. China will strongly resist any actions seen as bullying. Trump has only one tactic as Paul says: "his plan is to continue the beatings until morale improves." This will not work with Xi, who has now placed himself second only to Mao Zedong.
This shows Trump to be an utter incompetent concerning 'reading your opponent'. I would suspend my love of LIverpool FC for a year to get him across a poker table with table stakes only. One buy in, no recourse to more cash!
10
@P.C.Chapman: China exports fentanyl to reciprocate the Opium Wars.
1
@Steve Bolger..
"China' is the location of production. The distribution is black market and is sustained by American dealers making a buck in the pill mills.
And US is 'exporting' Czech arms to every despot with a Swiss account.
1
"At this rate, we may have to wait for a new president to clean up this mess, if she can."
She will.
10
@Jessie love it :)...
"At this rate, we may have to wait for a new president to clean up this mess, if she can."
Nice touch, Paul.
You are sounding more and more like an academic.
4
How on earth does this constant manipulation make any sense?
Trump is shorting the stock market.
8
Paul,
Could you compile a list of countries that believe that DT is a reliable negotiation partner. Thank you.
3
This is a brilliant strategic play by China. Weaken the Yuan knowing precisely that this will enrage Trump beyond all reason and goad him into labeling China a currency manipulator. He falls into the plan just as planned.
This accusation, being patently and provably false, ends up destroying even further any credibility the US has with IMF or other nations. US prestige is wrecked further, and China is seen as the new bedrock of international finance. And if the US cries wolf about currency manipulation later, no one will listen or care.
Sun Tzu indeed.
5
What is going on ?
The Chinese are going to pay Trumps tarries !
Econ 101
A cheaper yuan make Chinese products sold in US cheaper thus off setting the Trump tariffs.
GOOD news for US consumers.
Who pays ?
The Chinese, in form of higher cost of what they need to import to keep their economy running: Oil from the MidEast, coal and iron ore from China, Japanese cell phone cameras, IC processors....
In the long run, though, this will not help China, as US suppliers are shifting their supply lines to Vietnam, something that has gone on for some time (as wages are 1/2 of Chinese wages).
Trump's tariffs merely accelerated what was already under way
Last year, the Vietnamese economy grew by 8%
Useful references, this year
https://www.scmp.com/week-asia/opinion/article/3017498/one-country-winning-trade-war-its-not-us-and-its-not-china
SCMP => South China Morning Post
And from last year
https://www.reuters.com/article/us-foxconn-iphone-vietnam/apple-assembler-foxconn-considering-iphone-factory-in-vietnam-state-media-idUSKBN1O3128
1
How does it end, or almost end? With saber-rattling in the South China Sea, initiated by Trump? Then what?
3
Trump will talk tough and then cave. It's what he always does. The Chinese know this.
That's why this "easy to win" trade war Trump started will end with the Chinese on top.
And, of course, Trump will claim he won then say something outrageous to change the media narrative. The media, of course, will comply.
7
Funny. This back and forth between Trump and Xi is setting world markets on fire. Whoops! We didn’t mean to damage all of the new Chinese trade partners....maybe the Chinese will cover the loss of devaluing their currency by handing out a Trillion dollars? Maybe that will set off a global currency war? Sure, if Trump devalues the dollar and the Japanese and the EU follow suit what could go wrong?
Funny. Didn’t anyone notice that the 2008 financial collapse was solved by Obama magically producing hundreds of trillions of dollars, to provide enough liquidity to unwind the quantum gambling phantasm that threatened the global economy. (No one talks about this ever....it’s a real magic trick to everyone...except those who understand what currency really is....)
Given the distrust and antagonism that Trump has spawned around the world, and his history of bankruptcy and swindling partners it’s unlikely that he or Mnuchin could rescue the global economy. So maybe this is the time to have Trump retire, for degenerative neurological disease. His Toledo moment, mistaking it for the Dayton massacre, shouldn’t trigger a concerned response that removes him from office via the 25th Amendment. Clearly, he suffers from diminished capacity. All it will take is the oligarchs and major bankers forcing the Cabinet to send him packing silenced by his morbidity.
3
As a proud and patriotic American I am 100% behind.............China! There. I said it. I wouldn't trust Trump with my sons piggy bank account much less the world's economy given Trump lost more money then ANY other American in our history. A cool billion. Now Trump has his sites set on bankrupting the world. Save us China!
17
When do you think Trump will decide that to ‘level the playing fields’, you Americans should also have a President for life? And generously offers to take on the burden?
He’s publicly fantasised about that before, you know.
7
One of the players in this economic war has studied and memorized “The Art of War” and the other has not. Three guesses as to whom knows what they’re doing.
12
Trump’s only method of negotiating is the game of Chicken. Time after time. But the U.S. government shutdown showed that when his bluff is called, he folds. There is no good news in this however. A lot of rubber will be burnt getting out of this one.
7
The answer to this issue is China has decided it's best option is to defeat Trump at the ballot box. They have reduced their exports prices and made America's more expensive and they will buy little from the farm states. Xi does not face an election in 2020. Trump has the weaker position. He and we will pay the price till the polls require compromise. Unilateral trade and tariff policies are dumb ideas in a world economy. But we knew that already.
5
My eyes widened yesterday evening when I saw the currency manipulator declaration, but as of 10:36 AM EDT that market action is not "… interesting" as Dr. Krugman anticipated.
Xi will outlast trump by a decade or two. China knows how to play the long game, and a recession and higher prices for consumer goods will freak Americans out quickly. So many big employers cutting jobs, huge tax cuts for the wealthiest and corporations, farmers' crops rotting in fields, white nationalists gunning people down, children permanently separated from their families. How trump could get even one vote in 2020 is beyond comprehension
10
China has said it will no longer buy American agricultural products. Russia has stepped in to help fill the void. Putin's puppet destroys American agriculture. And it looks like Trump is working on destroying the rest of the economy too. Meanwhile, Trump has encouraged white nationalists with guns, and Mitch McConnell is hiding out in Kentucky with a sore shoulder. So much winning.
7
He's carrying out Russia's wishes. How is it not obvious to everyone?
6
If Trump isn't able to use overt racism to rally his base, he will turn to his gambit of name-calling foreign competitors. And he'll want to show his base that he's tougher than the Chinese. They love his tweaking the noses of elites and calling out (supposed) bullies.
As the election nears, watch his wild rhetoric fly & fly & fly . . .
3
Trump isn't "Tariff Man", he's a real estate shyster with no understanding of manufacturing and trade. But, he is listening to Peter Navarro and Robert Lighthizer, two tariff hawks (when it comes to China).
And Navarro and Lighthizer have incompetently managed the negotiations with China. Like all of Trump's various "policy sector hawks", they operate thinking that the US always has the upper hand in every bilateral negotiation.
It's not only the knowable pieces on the board, the hard facts that matter. Sometimes there are agendas and histories that span time and ideology and operate behind the scenes. Xi has many such, Trump (i.e., Navarro and Lighthizer) have none. They are fighting a China they don't understand.
9
@Fred, sorry I meant Mr Krugman.
I admire Chinese culture, but culture doesn’t necessarily equate with governments.
China trading policy: a currency manipulator, intellectual property thief, and serious violator of human/ workers rights that allows their economy to stomp on more democratic global commerce. It’s the foundation of how they have dominated in GDP — its ultimately how they survive. Remember “China 2025”?
It’s not just The US, many other countries are fed up. Granted, trade wars are ultimately damaging, but the tactic has achieved where others have failed: it reveals to average people how insidiously centrist and globally damaging Chinas trade policy has been.....Chinas way of doing business is now front and center and it’s not ok to xcuse it all for the low cost item at Walmart.
And yet........our thought leaders still want to parse intellectual arguments regarding whether or not “its really currency manipulation” or how our president is a fool.
I’d say wake up folks. We need to reset, and hopefully without too much damage to either side.
An interesting question is whether a new president will act any differently. Presidents don't start fresh, and they don't act in a vacuum. They inherit the same world that their predecessor had to deal with. Will there be a groundswell for the next president to embrace free trade? I don't see that as a popular political issue, in either party. Don't forget; Hilary promised to dump TPP as well. Trump is a bull in a china shop, causing excessive damage, but the direction of US policy was pointing this way no matter who won.
Trade wars for Trump are a winning strategy to bamboozling workers into thinking he has their back at the cost of long-term stability. Its proof he will sink the national and indeed international economy if necessary to win an election while blaming the negative outcome of his policies on Democrats and even Obama. His manipulation of the Federal Reserve won’t stave off the crash and subsequent recession/depression either if the Chinese have decided to play hard ball .... and he has alienated any allies that might have partnered with us to handle the Chinese. Ultimately, we are seeing the 1920s play out all over again here. I only hope we wise up in 2020 before we get to the wartime reset button that was the ultimate outcome of the last time Trumpism fascist/Protectionist policies were tried.
4
Perhaps China will solve the problem by hacking our 2020 elections in favor of Democrats since absolutely nothing has been done to protect our election security.
2
Waiting for a new President..., ah the dreams. The Dems have many many ways of losing, unfortunately. And the president after trump wins a second term will be Ivanka. Here’s how: trump wins term 2. He puts her into the VP slot in two years. He resigns. She pardons him. And she serves for up to 10 years. American democracy: RIP. What’s that do to China issues?
The Captialists who finance the industrial and service sectors rather deploy capital in China/Russia/india rather than the United States. They most likely read the WSJ.
The technocrats rather build colonies in space while busily replacing taxi drivers, retail workers, radiologists, paralegals, with artificial intelligence and robots. They most likely read this great newspaper.
There is no plan by the President, or his opposition, to make the lives of millions of Americans (many of who have not seen a raise in years) better in the face of all of this.
All these Op-Eds don't address this elephant (sic.) on the table: Who is looking out for the America that is losing its bearing? To the point that the 75% assigns blame to the motley of non-white citizens and succumb to MAGA nostalgia fanned by Fox News?
2
It amuses me to see even Krugman treat Trump as a if he is a rational being.
1
What the heck is going on?
Dr. Krugmam's tariff theory and tough-guy posturing may be correct. But when it comes to Trump, I think the Ockham's razor principle may apply.
Trump ratcheted up his rhetoric to distract from the shootings. He is getting pilloried in the media. His words are being matched to the rhetoric of the "screed". We have all seen the "Panhandle rally" and how he smirked in the face of someone making a violent suggestion on how to rid the nation of undocumented immigrants.
So by escalating the fight with China, he hoped the trade war news and stock market fluctuations would be at the forefront of the news cycle. Moreover, he thought he could resume his most natural role of being a bully and a brawler. He may have even thought that he found a suitable scapegoat that he could villify without risk of national condemnation.
For him, rattling the stock market might be worthwhile if it means he once again can control the narrative and go on the attack.
4
Is it really likely that Trump is the problem here? He just does what he’s told. Maybe by Fox, maybe by the Mercers or Murdochs or Kochs?
The guy probably wears slip-ons because he never mastered the bow knot, He can’t remember what he said two sentences earlier, He can’t read, can’t count, and can’t tell if he’s standing in the rain.
And all he is interested in is the adulation of chanting mobs st his rallies.
3
Trumps one and only negotiating strategy is the game of Chicken. But the USA government shutdown showed that when his bluff is called, he folds. This is not good news however. A lot of rubber is gonna be burned getting out of this one.
1
Paul, once again, I will ask you to please write a column about how you would handle China. To date, you have made a strong case against Trump's approach. What is yours? To do nothing, while it exploits the US economy with its trade theft and mercantilism? Surely you would have a better plan in mind.
Bad Deals is what Trump is selling us. Odorous oozing deals. Farmers who elected him know that smell all too well. They will ultimately pay the price more than the rest of America, for economic reckoning is on its way...it will be a sad ending of this presidency.
12
Krugman’s final statement that maybe the next president can clean things up. . . “if SHE can.” Are priceless!! Well said! Let’s hope so! :-)
11
If "she can" indeed. If there's anything remaining before this chest thumping president has to face the prospect of prosecution, she'll have her hands full attempting to bring a sense of order and common decency to warring tribes, our government agencies, and our allies. Serious damage has been done to our nation, both through hateful words, and by deranged carriers of military-style weapons of destruction, bent on creating their own battlefield of blood-soaked soil. The individual, be it "he" or "her", is going to need all the help a nation, drained by current events, and an out-of-control leader, can summon up.
11
basically trump doesn't have the cards and china is calling his bluff. we always knew that he would have a hard time dealing with someone with real power. someone he could not bury in legal fees and lawsuits. however he will stick us with the bill.
12
Professor, thank you for the last line of your column. It brightened my day.
Who said hope is not a plan?
8
I sure wish the Democrats would start focusing on how this president and his myrmidons are wrecking the place. That there is even a remote chance this person could be re-elected is frightening and depressing. His removal and the retaking of Congress and state houses should be our number one priority. What good is Medicare For All if there's no government left to run it?
10
@Bruce Gunia
So what do you want them to do, except for proposing fact-based policies that a clear majority of the American people want?
We will only have a government for the people if it's a government by the people.
Sooner or later "we the people" will have to do our part too, and start MASSIVELY voting.
If not, corrupt politicians like Trump will keep winning elections, of course, because that's precisely how a democracy is supposed to work.
5
@Ana Luisa I want them to start winning elections because they can't do anything until they do. I agree people have to turn out to vote but the American voter should not be so ill informed as to have fallen for a con man like our president in the first place or so apathetic they stay home. Fact based policies might have won elections once but if they still did we wouldn't be in this mess. Our democracy is in peril and we're fighting about policies that haven't a snowball's chance until Democrats start winning elections. Personally, I want them to quit worrying about what's politically expedient and defend the Constitution by calling out and fighting the extremism and cruelty of the entire Republican party. If they do that and still lose then Americans deserve what happens next.
1
How does a country devalue its currency?
1
"Second, China is clearly signaling that it’s not Canada or Mexico: it’s too big and too proud to submit to what it considers bullying."
Wrong. They blinked on the Yuan.
What drives a modern economy are ideas, the education level of the workforce and a culture that can put it all to work. Charging ourselves 10% more for toasters isn't going to help. There is only one way out for Trump's disaffected rural millions. They must get a quality education and they must move to where the jobs are. That was true five years ago, and it will be true fiver years hence. Tariffs, racial hatred, repealed environmental laws, charter school money siphons that teach Noah's Ark ... all of it leads to more poverty. The only way out is the hard way. Get educated and relocate.
8
@George Campbell yes George the disaffected rural voters will have to move when a 1980's style farm collapse occurs this fall. They will lose their farms to own the libs because eventually the sweet sweet socialist dollars they have been receiving in the forms of bailouts will end and they will realize that Trump has ruined the markets that guys like Max Baucus had worked for years to set up are gone. Then the big AG producers will move in and simply gobble up the family farm. I guess farmers who voted for trump will feel good though because it sure made liberals cry when he was elected...too bad I guess.
@George Campbell
Ok, I agree about the education, but the U.S. doesn't make it easy on kids trying to get an education, does it?
But relocate? You mean relocate to one of the cities this paper keeps running stories about where the housing is massively overpriced or simply unavailable? Where the public transportation is crumbling? Where day care is expensive or unavailable? You have to have a pretty good crystal ball to unroot yourself from a low-cost area where you have family support, and take your family into the great unknown.
I remain convinced that if we had leaders who had a brain and gave a damn, businesses could be convinced to locate in regions other than the east or west coast. But yes, they will require educated employees.
We have GOT to demand that our government, AND business community, start addressing: 1. Bringing down the cost of higher education, and getting rid of usurious student loans 2. Bringing jobs TO the people.
1
I don't know where it will end either but it's a case that cries out to be settled.
Ah, I forgot to mention in my earlier comment...
GOP is forever throwing US economy into depression and then Democrats come back to restore it.
Look at Clinton, look at Obama.
Keep going back, the list is full.
So, what's new?
I wish we had a more educated electorate who can see a pattern, notice the precedent and maybe... just maybe learn, that GOP means "economic disaster."
But, then this is wishful thinking on my part.
We will shoot ourselves in the foot, and Republicans will strut around like banty roosters and throw around nationalistic fervor rhetoric and not talk about anything worthwhile.
So, again what's new?
PS; That man holding his head in the picture, is very much what we expect to see the next democratic president doing when she/he enters the Oval office.
8
@Ash.
Maybe that's the pattern, maybe not.
The traders on Wall Street make their billions by more accurately predicting the economic future a nanosecond before their competitors.
In 2008, Wall Street traders predicted that Obama would:
1) become president;
2) enact a huge tax increase on small business by forcing the Bush2 tax cuts to expire;
3) socialize medicine, increasing its cost by $1 trillion;
4) increase federal regulation to over 190,000 pages.
Easy predictions to make, Obama was promising to do these things starting in 2007 when he declared for president.
When Obama’s probability of becoming president went to 50% (Iowa Political Markets), the stock market crashed $2.5 trillion. As it went to 100%, traders crashed the market by $8.2 trillion.
Those predictions? All correct.
Obama's policies resulted in only 13% growth. The lowest growth of any two term president in U.S. history.
There will always be shocks like the housing market - a $6.2 trillion shock. In 1987, Black Monday hit Reagan with a 22% hit to the stock market, the modern day equivalent of a $7 trillion shock.
Impact on Reagan's economy? GDP growth in 1987? 4.2% GDP growth in 1988? 3.6% Reagan's economy took the shock in stride.
Obama's economy? GDP growth in 2009? -2% First president not to have a 3% growth year since Hoover.
Growth in Reagan's last year in office? 3.6% Growth in Obama's last year in office? 1.6%
The objective is good but the method has failed.
@ndbza
Except that there are NO studies proving that the objective was good, and tons of them proving that it was wrong. Trade deficits are NOT a problem. Federal budget deficits are.But than the GOP doubled those already ... so they really need you to imagine that there are other deficits which should be lowered to, and then hope that you'll get distracted once you start believing them.
1
@Ana Luisa
"Federal budget deficits are...the problem."
Not necessarily as long as:
1) the deficit is less than gdp growth
or
2) the deficit is invested in something like a tax cut or roads that will actually yield a return.
In 2018, total debt service on the federal debt was 1.6%, a nothingburger, less than half the peak set in the 90s.
In 2016, the nominal gdp growth was $480 billion while the deficit was $580 billion. Big problem
In 2018, the nominal gdp growth was $1,070 billion while the deficit was $780 billion. Not a problem
At this rate, we may have to wait for a new president to clean up this mess, if she can.
Interesting choice of words, SHE.
5
Here is a contrast between two ideologies: American capitalistic universal suffrage democracy vs Socialism with Chinese characteristics. Dueling two-party partisan system vs one-party government.
Everyone tries to forecast which will be the loser in this trade-war, started unilaterally by Trump & Navarro. So far I have not read one that predict USA as the winner. But Trump still have a shot for 4 more years in the White House.
Further, Tariff Man is acting completely illegally.
Tariffs and trade are the purview of congress, not the executive.
The POTUS declared a fake national emergency and then seized the power to himself.
Yet another assault on the rule of law let go.
The damage this man has wrought is monumental.
More to come.
He's not going to go quietly.
12
Mr. Trump 's base doesn't care about the economy. He is packing the courts with judges and justices who will reverse liberal policies and overturn Roe v Wade. In their view he is winning.
5
"At this rate, we may have to wait for a new president to clean up this mess, if she can." No doubt, it will be a Democrat that will inherit another GOP mess. The backward thinking and inaction of the GOP on virtually everything these days, from gun control to energy, surely is a sign that this party is dying. Good commentary Dr Krugman.
7
"If she can", It appears as if George Will is hoping we elect a female president or he is convinced it will happen. Very interesting.
Pretty sad when one gets a break from reading about gun violence by reading about Trump’s failed trade policies! But thanks for trying to explain it.
3
Taiwan, South China Sea, Hong Kong are a few other issues with China. There is more than just trade going on. Sitting back allowing China to continue dominating with unfair trade practices allows them to spend more on military force which they are rapidly expanding..with stolen technology. Repressed Chinese as the Fulon Gong, Christian's and other minorities likely appreciate Trump calling out the communist police state masters.
@Lane, Trump has zero interest in China's police state and political repression, except as a model of absolute power that he wishes he had for himself. He's not calling out the Chinese except as unfair traders. He has no interest in human rights. He just wants to win the unwinnable trade war that he started and continues to wage, with no long-term strategy and no end in site.
4
A recession looks more and more likely with each misstep Trump and his rodeo clown of a cabinet make. Ironically Trump may be the one to save us. Not because he is motivated by doing the right thing for the American people, but because he is the consummate opportunist and will change course on a dime if it benefits him in any way. Once Trump realizes that a slowing economy is going to hurt his reelection campaign, those tariffs will come down and Trump will take credit for solving the problem he created.
1
We don’t really need to understand why Trump is doing what he is doing at this point. What we need to understand is that he is a man completely unfitted to be president by either temperament, character, or ability. It is not unreasonable to ask if he is a “mentally ill monster” in the early stages of dementia.
He needs to be removed from official as quickly as possible.
Ditto for the GOP, and for much the same reasons.
5
She can. She has a plan for that.
6
Trump is not just Tariff Man. He is Chaos Man. He runs the country like he ran his business and personal life—high risk gambits with many of them failing (loan defaults, bankruptcies, lawsuits, affairs, questionable friends). Not only has he destabilized our country since he took over, but also the rest of the world.
Yes, we have the China trade dispute and that is bad.
But he also blew up the Iran treaty and tightened sanctions without any plan, so now Iran is lashing out, to John Bolton’s glee.
He looked the other way as the Saudi prince ordered the murder of a prominent journalist, emboldening not only the Saudis but every other autocratic regime.
He’s coddled Putin despite Russian interference in our elections and blew up our Russian nuclear treaty, again apparently without a plan.
He blew up the Paris Accord and the TPP, in each case with no plan.
His gambits with North Korea have destabilized all of Asia.
He torched our relationship with Canada and Mexico over NAFTA and immigration, respectively.
He’s torched our EU relationships and questioned whether NATO should even exist anymore, to Russia’s glee.
He undercut Theresa May, praised the boob Boris Johnson and cheered on Brexit, a Trump-like gambit with, again, no plan for what comes next.
I could go on and on, but my 1500 characters is up.
There are 7.7 billion people in the world. He has made the world less stable, less secure and more dangerous for the vast majority of them.
6
Trump assumes that the Chinese government can afford to concede to a serial hostage-taker, despite every item of evidence suggesting that any concession will simply lead to more demands – and also assumes that the Chinese won’t retaliate. His entire strategy vis-à-vis everyone is driven by brinksmanship and recklessness (‘ack of regard for the danger or consequences of one's actions; rashness), combined with a belief that others, like the Chinese, are fundamentally pusillanimous and lack agency and politics of their own (you can see the same amongst Brexiteers) and assuming that victories are easy. In many respects Trump’s behaviour is reminiscent of Wilhelm I (and others have made the same observation):
“superficial, hasty, restless, unable to relax, without any deeper level of seriousness, without any desire for hard work or drive to see things through to the end...balance and boundaries ... reality ...uncontrollable and scarcely capable of learning from experience, desperate for applause and success .”
Wilhelm, embraced a foreign policy built around brinksmanship. A key aspect was projecting onto the counterparty – France, the UK, etc. a presumed pusillanimity – that all one has to do is threaten and they will collapse into a ball of terror and concede your every demand. The parallels include, like Wilhelm, a history of bellicose challenges, followed by backing-down, until the officials he’d installed made backing down impossible in 1914.
3
Far from 'Making America Great Again' your President is pushing you and the rest of the world into a precipitate decline. Of course, we in the UK are in the grip of our own version of self-destructive, delusional grandeur. Unfortunately it looks like it is going to have to get a lot worse, for you and for us, before we pull back. It is not surprising that troubles are springing up around the world when the former peacekeeper for the world (for better or for worse) has gone AWOL. Maybe our only hope is that Fox News can persuade your President that he has done enough wonderful work that he can now retire in the glory of his triumphs to spend all his time searching for the mis-hit golf ball at a distant golf course
3
@Douglas Downie MMmmmmm, yes.
And, preferably, that great golf course in a distant sky.
Pluto comes to mind.
As usual, the economic mess the Republicans and their ilk in the private monopolistic sector have put us in will need to be cleaned up by a Democrat. I hope you are right, Paul, that it will be a "she." Indeed, she could not possibly do any worse than him.
1
No blue skies coming if a democrat does get elected. Republicans will be screaming about the national debt and calling for austerity. Democrats will cower about raising taxes needed to meet the great challenges of climate change and other urgent crises.
The tails of our national dysfunctions will whip us unmercifully. No ponies to un-bury beneath the long half-life of Trump.
2
@vole
Oh my god, yes. If the Democrats take over government, the Republicans will get out their crying towels about the deficit. The Deficit will be the greatest crime to humanity that ever existed, so don't dare pass any legislation. Meanwhile, they completely ignore it under a Republican; it can increase ten-fold and who cares.
2
“We May have to wait for a new president to
Clean up this mess,if SHE can”
Wonderful, Mr.K.
1
This won't end well for anyone. The problem is that this trade war is being driven by clueless Donald Trump who governs by Whims and tantrums while he is surrounded by incompetent advisors like Kudlow, Navarro and Ross. Mnuchin is not incompetent but I can't figure out what his game is.
Now China is starting to push back and that upsets Trump who is used to dealing with the low-life of the New York real estate swamp who he could stiff, lie to and still win. He's in the major leagues now but he is still the two-bit player he always has been. He can't win, but America is so powerful that he will inflict a lot of pain to China and the rest of the world. But in the end, we'll all lose.
And he'll probably blame Obama and the media...
4
@William Dufort
Mnuchin's game is to get richer than he already is. That's the same game as everyone in Washington.
@Madeline Conant
Thanks, I should have known...
I know what "giving in" is going to look like: Trump's going to become the ex-President, and the new President will have to clean up the mess. And Xi will rock on as President of China until he dies.
I've always had the suspicion that Trump has a SECOND Twitter account, named #BeaBillionaireLikeMe or some such-- and for only $500,000.00 a quarter, you can get the inside scoop on what he'll do next on his main Twitter, but THIRTY MINUTES AHEAD OF TIME. And then YOU TOO can scoop the market.
3
What's going to happen...? China owns this next election.
Trump has played the tariff war too long. He is out of time relative to the election. Either he concedes to China's demands and negotiates a soft "Sino-Naftalike" deal to present to his constituents, broadcasting his brilliant negotiating skills which they should want in play for another 4 years, enabling China to remain the same dominant force or even greater by beating the US.
Or China decides to get rid of Trump and holds tight by dismissing negotiating anymore to end this bully's economy destroying tariff war--especially if more tariffs are placed upon them to punish China further (really themselves). That dog don't hunt, tactically.
China can wait out this administration and more. China can and would wait to manipulate Trump's very unhappy, suffering voting constituents with their bankruptcies and losses arising from his failing easy-to-win tariff war. Antagonizing voters even more by waiting is a perfect objective for China to manipulate the election--forget the dollar. Yesterday's renminbi flux was only a mild threat. China's real power is over these financially hurting voters. To get rid of Trump, China doesn't let up.
Ironically, Trump is empowering China to bring serious foreign interference in the 2020 election, power brought on by his own negotiating skills. China can wait to negotiate and can wait for a new manageable President in 2020 especially if this one is voted out. China has the power.
15
@Eli Kohlenberg
If China begins dumping US bonds, the US will have to offer higher yields, and that will be a drag on the economy.
Clear?
No mention of the fact that China alone holds 27% of US treasury debt.
What happens when they decide they want their money back?
10
@DaveInNewYork True, and that's because US Bonds are the safest refuge for surplus wealth on the planet; which means they are unlikely to jeopardize their savings.
2
@Dwight
Except that republican party has twice brought the US to verge of defaulting on that debt. Not so safe after all.
China can start that snowball rolling down the hill. Then it's just a matter of time before republicans call for raiding the social security fund to pay the day-to-day.
4
@DaveInNewYork
"What happens when they decide they want their money back?"
Nothing, because that's not how debt works? China can no more ask for "its money back" ahead of the maturation of those bonds than the bank can ask you to pay off your mortgage ahead of schedule.
I am not an economist, but as far as I can tell, the Chinese holdings of U.S. sovereign debt most closely resemble the situation described by J. Paul Getty: "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem."
2
China has been around for thousands of years and they have a long term perspective.
As far as I understand it, they still deeply resent the humiliation they were subjected to by the West in the not so distant past.
They will never give in to a bully type of approach and will only agree to a solution which they believe to be honorable from their perspective.
If the above is correct, this conflict will not get resolved until the US changes it approach, which may very well mean its president.
We in Canada do not have the same amount of economic or military muscle, and we still got what we wanted. The fact that it made sense helped...
16
Where does it end?
Lots more unemployment, I think. Robotics, cheap Asian labor, worldwide access to technology and low cost shipping means traditional jobs walk out of high cost developed nations. We can delay the day of reckoning but we cannot fight the tides of change.
Central banks are pumping trillions of dollars, euros, yen and pounds to reflate domestic economies in Europe, Japan and now here. So far its been a massive failure. Asia rising means Europe fades and Japan is struggling to find a role in the new economic order. We have the technological innovation machine powered by university research and brilliant immigrants. Trump is doing his best to kill science, research and immigration (and immigrants too).
11
All the American China bashing can be related to the remarkable growth in her economy, standard of living and education of her people. China is investing heavily in her infrastructure, is graduating more engineers and has the largest workforce in the world. In fifty years she may surpass the United States. What will the America First movement have to shout about? "We are Number Two."
The United States had it American Century. It may be time for another country to assume the mantle. That might not be so bad. We can then reduce our spending in national defense and concentrate more on the people's health, education and welfare, our crumbling infrastructure and combating the causes of climate change that our current National Administration says is a hoax.
15
It’s not about number one or two, it’s about government behavior that has manipulated policies and exploited people’s to get to number one. It’s easy to be an apologist for a culture that is so beautiful in so many ways, I get it. But beauty can often hide ugliness that more often emerges to dominate if not understood.
2
@Someone "it's about government behavior that has manipulated policies and exploited people's to get to number one."
But enough about the illegitimate Trump administration . . .
2
@Someone
Which country are you talking about?
It should NOT be a surprise that we are in such a mess under Donald, NY developer turned "reality show host", it is similar to him running a Starbucks and you will get bitter & undrinkable coffee. He got the job because of the help from Russia and from voters who watched commercials about MAGA.
Trade war is not about changing the trade balance (which is created by one country consumes too much of another country's export), but about creating jobs for your own people by adjusting your domestic production and cost.
Since the problem of China-U.S. trade (as well as with Canada and Mexico) is due mainly to much higher cost of U.S. production (from labor, heath care cost, environmental protection, and currency), it is the adjustment of domestic policies, rather than tariff, that would be effective.
of course, Donald does not care nor does he know, and Republicans are so focus on cutting taxes for the rich and corporations, they are not interested in reducing the burden on working people. And worst of all, they impose tariffs which will be paid mostly by working people.
May God helps us all, but probably the best thing we can do now is to impeach Donald and to vote those Republicans out.
23
@paul
"Since the problem of China-U.S. trade (as well as with Canada and Mexico) is due mainly to much higher cost of U.S. production (from labor, heath care cost, environmental protection, and currency), it is the adjustment of domestic policies, rather than tariff, that would be effective."
Our labor costs and environmental protection laws are less than Germany and other nations in the EU - yet they are a global manufacturing powerhouse.
Depreciation of our currency will not fix the problem. That can cause a variety of other issues as discussed in other NYT columns.
Health care costs are a major source of our lack of greater global manufacturing competitiveness.
The other factor is that America does not have strong educational programs to train people in manufacturing jobs.
2
@Brad
the manufacturing jobs disappearance have long been documented and have more to do with automation. The low cost competitors from China, Mexico and etc. produce low price goods that U.S. could never compete anyway, like shoes cost for $5 a pair, not only because the labor cost is low but also it provides no healthcare/retirement benefits to the workers and polluting to the environment. None of which is acceptable in U.S.
Germany's competitiveness has a lot to do with automation too (check out the videos on Mercedes plants).
"So how does this all end? I have no idea."
I hope it ends with balanced trade with China, and an uptick in Made in America goods.
I know, hope is not a strategy, and I'm skeptical about the current strategy, but this fight has been a long time coming.
Yesterday, China fired one of their best weapons by lowering their currency. Our armor is dented but intact; the stock market is recovering instead of continuing to sink. If we can get intelligent, linear leadership in time, we just might pull this one off.
"... it’s hard to see what would make either side give in..."
It doesn't have to be a win/lose scenario. There are plenty of willing workers in other countries, and the world still needs soybeans and other American agricultural products. The supply chains might need to be reconfigured, but it shouldn't be the end of the world.
Maybe we can just get an amicable divorce.
2
@mlbex Though I agree with your sentiment, I know those "jobs" are not ever coming back. I once made steel in a plant that at its height employed more than 30,000 people. It's mostly brownfields now. Can we expect that mill to erupt from beneath the weeds and start making steel again if we just redo a few treaties, rejigger the exchange rate? No, those days are gone forever. We need to focus on the future, after we take a clear-headed look at where we are now.
18
@mlbex
The market isn’t recovering; it’s still horrifically down.
This president ruins everything he touches including my investments.
2
@Charles Tiege:
How does "plenty of willing workers in other countries" translate to steel mills rising from the weeds?
Apparently people like your glib pessimism, but it will consign us to the third world if it turns out to be true.
We'll have to create something to sell if we want to remain solvent.
"his plan is to continue the beatings until morale improves."
Sadly, you made me laugh out loud.
11
The West divided.
The US divided
Economies in chaos.
Treaties abandoned.
International agreements worthless.
It's all going according to plan. Putin pulls Trump's strings.
56
@Greg
What does Putin have to do with it? Trump is doing what Trump always did, the same way he runs his businesses and even took gambling casinos down into bankruptcy.
2
@Greg Indeed.
The Republicans have surrendered in the War on Deficits in order to get Tax Cuts for the Wealthy.
So, now they have the War on Trade Deficits.
Both great but empty political slogans.
China does seem to have gotten what they want from this country over the past 40 years since Nixon went to China. They have our technology. They have built up their middle class (and future market for their goods.
The trade war is forcing China to develop other markets and other suppliers. And forcing us to pay farmers billions for the loss of Chines business. I’m not sure who comes out on top in the short run. But China has a huge population, lots of territory and is busy making friends with our former friends. Looks like it wins in the long run.
26
@Rita not sure this trade war is forcing China to find other markets and suppliers....they have been doing this for 10 years, like going into Africa, stepping up trade with Australia, etc. They think ahead and saw this day coming.
5
Are Ivanka's goods still exempt from tariffs?
31
After decades of exporting jobs to China, we have a work force that is underpaid, with less benefits and security, without bargaining power, and replaceable by US-based robots. While employment is at a record high, the middle class goes deeper in debt each year to maintain a middle-class lifestyle.
The trade war is a not-so-subtle signal to other countries that the US is ready to restructure the world economy so that low-cost US workers or their US robot replacements may once again make goods here.
So there are three questions.
Whether lost manufacturing jobs will return to the US or just relocate to countries less threatening to your leaders?
Whether US workers will have enough income to purchase all those made in the USA goods in the post-Trump economy?
Whether other countries will want to purchase all those made in the USA goods after the reckless behavior of our leaders?
14
@Mr. Anderson a few companies have announced they are going to find ways to remove China from its supply chains. But most will relocate to Mexico or other places with low wages, not bring the jobs here. Get over it. Manufacturing in America as we knew it is dead. We need to find new industries for our workers, or, as proposed by candidate Yang, provide income supports for workers permanently displaced by robotics, which in fact, is the bigger job killer here and around the world.
2
@Mr. Anderson
It's absurd to imagine that in capitalist economies, the most horrible jobs will stay in the wealthiest countries with fully developed economies.
They won't. Only people who have no choice between those jobs or dying, are willing to do them. And those are people living in poor and developing countries. In developed economies, citizens already know that a better life is possible, so why would they accept to go for less?
What's even more, that better life comes with jobs that are not only more motivating to do, but even with much higher salaries, whereas outsourcing manufacturing to poor countries means that on top of that, we get access to cheap products, AND poor countries now finally have jobs.
So no, the utopia you're describing here is simply inconceivable.
And if we want to start manufacturing at home again, ALL WHILE respecting a Western standard of living, then our products will be SO expensive that no other country will have a reason to buy them from us rather than from China in the first place.
Conclusion: this is nothing more than fake news. A myth that Trump has been spreading for decades already, and based on a deep ignorance of both global and local economies. And of course also a deep desire to lie and cheat to become wealthier himself ...
2
By and large the Chinese don't need us, it can still sell and buy around the world without us.
Trump's tariff war will be one giant talking point for Democrats, come November, 2020.
20
If Trump wants to help the economy, he can resign. Tariffs were an annual regressive tax of $400 per family before the latest move, $800 if fully implemented. Deficits are up 40% vs. Obama baseline for 2018 to 2027. About 2 million more are without health insurance. Inflation and mortgage rates are higher than the last two years of Obama. As of end of July, stock market was up more under Obama at this point in his Presidency vs. Trump, about 43% to 32%. And job creation faster in Obama’s last 30 months vs Trumps first 30.
So much winning!
66
A 3 percent drop in my retirement accounts IS a big deal.
Don't forget about those of us.
39
@Panthiest
If a 3% drop in one's retirement account is a big deal then it's not a plan, but a "hope and dream".
2
@tew
54% of working Americans invest in the stock market, and much of that is intended to support them in retirement.
Yes, it is a plan but this fraud in the white house is making it a "hope and dream."
2
@tew
How nice to be in your boat. For a significant portion of elders in America, a drop of $100 a month would be a serious blow.
1
I hope that Donald Backslide will soon come to his senses and, as he did with our other trade agreements, reverse his course 180 degrees. Apparently nobody told him that his deal-making power only applies to the immediate vicinity around the Trump Tower in NYC. The only thing he has to lose is his already meager reputation as negotiator and the respect of most of the American people.
23
@Wally
Three words that do not belong in the same sentence: Hope, Donald, and Senses.
@Wally He will after his agents have bought up stock he drove down with his policy and then "walk it back"
1
In 2017, imports of goods and services to the US were
15.0 % of GDP and exports were 12.1%.
You can see the trade imbalance here, but Americans should realize that your economy, the leading state in globalizing Western capitalism since WW2, is more self-sufficient in goods and services and less dependent on trade than any of the advanced capitalist Western states.
Canada imports 33.4%, exports, 31.9%;
UK, imports 31.3%, exports 30.1%;
France, imports 31.9 exports 30.8.
Germany imports, 39.5, exports 47%.
Japan is the 2nd lowest at imports 16.8, exports 17.8.
Data from World Bank database.
17
I have a solution. Naive as it will seem. Trump, if I am correct, is unilaterally (without Congressional approval) imposing tariffs on China and other countries and/or threatening to do so, and he is relying on "national emergency" powers to claim his authority. There is no national emergency in these matters. He is misusing, or to be more clear, abusing this authority. Congress, if it had the guts, would advise Trump that he is overstepping his authority on tariffs, and demand that he first seek Congressional authority to impose tariffs. If he does not abide by this message, he should be impeached on the grounds of Abuse of Power. PS: I don't see any other argument other than national emergency, or perhaps "national security" (remember the feeble excuse for threatening tariffs on Canadian and European aluminum and steel?), that can justify his tariff actions. This is not imposing countervailing duties on countries accused of dumping, or other measures permitted under WTO rules. So, what is it? It's abuse of power.
75
@C.L.S., it's abuse of power which he will continue as long as we have a GOP run senate, which will shield him from impeachment.
@C.L.S. and to make his "national security" ruse to impose tariffs on Canadian aluminium more obnoxious, they lifted sanctions on Russian oligarch and aluminium "magnate" Derapaskal (I am butchering the spelling of his last name I think) to allow him to back an aluminium plant in the US. So much for our friends and allies.
@C.L.S.
With this Republican Senate, you expect them to call out abuse of power? They can't even recognize blatant racism when they hear it.
I remember a time, most of my 73 years on the planet, when there was little differance between a Rebulican and Democrat. Both parties slowly creeped to the middle. During that time period the only major differance was how best to handle our economy to meet the objective of "one nation with liberty and justice for all".
Today it seems the parties, and therefore the nation" are in a civil war without the use of gun powder. Both parties ard at fault, but my former party. Republicans, seem to be the principle culprit. I believe its caused by paranoia.
Both parties recognize other nations are finally catching up with us after the results of WWII and races, other than white, are also gaining more infuence and power. Many caucasians don't like the heat.
Meanwhile China has been slowly implementing a 50 year plan created after World War II to become a major player on the world stage and longterm thinking has paid off for them. Since the middle of the last century China has been pretty much an autocratic country, but I have faith that over time this will evolve where it becomes more democratic. It is bound to happen because the ordinary citizen is who propelled their country into the 21st century.
Meanwhile, this country, due to paranoia, is going in the other direction. To correct our course we must remove Trump.
65
@sbanicki
Historically, you are very wrong. For almost your entire life the republican party has been under the sway and influence of Richard Nixon, both when he was alive and in the republicans who followed him.
For all that time the party has been trying to undo the economic socialism ushered in by FDR during the worst of times.
The two parties could not be more different since the end of WWII.
3
@sbanicki I'm sure the are very fine people in the republican party
@DaveInNewYork Democrats and Republicans "could not [have been] more different" in the last 70 years? Are you kidding? Sure, they've always been distinguishable, but you have only to look at other countries which have *actual* socialist and *actual* fascist parties to see that the epithets we have hurled between us have only been so many words.
@sbanicki is correct. For a long time, Republican & Democratic parties have been distinguishable, but as purple and magenta, not the stark red versus blue contrasts we imagine. The Venn diagram of R's and D's often overlapped. Nixon is credited with protecting the environment. Clinton, with free trade.
However, I will give you that the current Republican party — the party of Trump, not Lincoln — is a strikingly different beast that holds little in common with the Democratic party. But then again, Trump Republicans have little in common with traditional (pre-Obama) Republicans.
1
Actually, reading the comments below, I'm starting to become convinced that there's only one reason why Trump is doing this.
He absolutely wanted a huge tax cut for millionaires like himself, but the GOP has been vocally opposing (at least under Democratic administrations) federal budget deficits.
THE perfect way to combine both, is simply to start constantly talking about a totally different and not harmful (on the contrary) deficit at all: international trade deficits.
GOP voters will spontaneously believe their politicians when they start claiming that those deficits are bad too, and then look, all you have to do as president is to once in a while, and with a lot of "pump and circumstances", single-handedly sign an executive order that slaps some tariffs on foreign countries, and GOP voters will be happy and imagine that he's "fighting against the deficit" so MUST be doing something good.
16
The best outcome is that the manufacturing start move out of China and our trade deficit with China will get distributed over several countries. No need for either Trump or Xi give in. Just sit tight time will resolve.
3
@Kodali wow. what you propose will take a decade maybe more. the economic carnage will be widespread and needless. people already just hanging on will go under others like the farmers will go broke. the collateral damage from this will move in unpredictable ways. sit tight? you must be wealthy or have a government job.
Paul,
How does this impact our debt that China holds and purchases?
12
@Barbara
Nothing happens. If they want their debt paid up, we just print and give it to them. Dollar value goes down and China’s wealth tanks.
Just what will it take for farmers (particularly soybean farmers) and other people running small businesses in Red States to finally say enough is enough with Trump?
31
@ALB,
That's a pretty big ask, as they would have to say, "Enough is enough," with the Republican Party, their evangelical churches, and most of their conservative traditions.
As I said, a pretty big ask.
35
@ALB: Well, once they go bankrupt and lose their farms, they’ll have to move. At that point, they’ll experience first-hand all those barriers to voter registration passed by their Republican state legislatures. Perhaps enough of them will be unable to re-register to vote to remove the ultra-thin margin of victory Trump is counting upon.
9
@ALB
Trump's $16 billion in additional farm subsidies should help them, even while Navarro, Mnuchin and Mulvaney continue to parrot Trump's lie that tariffs don't hurt consumers.
8
The cluelessness of the Trump Administration and the GOP is simply mindboggling. While the new tariffs are not a massive tax, China declared that it will take absolutely no American grain. Great work GOP.
44
Once China has secured other markets for its products, and once it has secured other suppliers for the things it must buy, can't help but wonder how much longer it will hold US debt. Just think what a spike in interest rates about now might do. But I'm sure the very stable genius has already considered all that. All this winning... Time for a rally.
50
Waiting for a new president to clean up this mess. See the companion essay on Democratic candidates’ views on North Korea. Bland, noncommittal....negotiations.
Trump’s impatience ...and threats...seemed to have moved China and North Korea to actually take de-nuclearization seriously. But no, we backed off. Initial trade sanctions, which should have been tied to continuous enabling of NK, allowing shipping (violating NK sanctions) to slip through....we caved. So now, its all about trade.
China has problems with Hong Kong. With Taiwan. Now tariffs, currency. Maybe we need to reconsider nonproliferation. Give South Korea nuclear weapons technology, materials. Give Saudi Arabia the same. As we so often say, we can’t police the world. So....have at it, world. Japan, join in- Vietnam, have a reactor...or two.
China wants to be a major world power? Step up to some, responsibility. As in other areas, we’re....tired.
@Jo Williams
The more irresponsible leaders who have nuclear weapons is a good thing? Who knew?
Oddly, maybe if South Korea had nuclear abilities, the North might develop some common sense. MAD has that effect.
The Chinese own over a trillion dollars of US Treasuries. (So the devaluation is hedged) The trade imbalance is about 5:1 and growing. If you exclude products they don’t make very well (like airplanes), the discretionary portion of the purchases they make is a minuscule portion of our economy. If you think labor is at a disadvantage in the USA, read up on coercion in the Chinese labor market. Environmentally, the country is a giant Superfund site. I won’t even get in to human rights. I support free, fair trade and I am against tariffs but let’s face it, if you are going to pick a side in this conflict; it’s pretty hard to root against the home team.
7
@John Cunnane doesn’t this analysis ignore the costs to Americans, who must pay them, of the tariffs being imposed? Chinese imports are a much larger part of the US economy. And of government handouts to farmers for their lost sales. Many of which may never come back.
14
I'm guessing the recent history starting with the military slogan presented by Obama; "Pivot to Asia" as the South Asian wars wound down, to the Naval challenges in the South China Sea, to the military puppet Trump starting the Tariffs and Trade War with China is all about China holding our debt. Care to elaborate further Dr. Krugman?
2
Unfortunately, it seems "hanging tough" is the only trick in the book - at least our book. It's pretty clear that the only way it ends is some form of, maybe extended, economic turmoil then political change - all in a time climate upheaval. Golley, we're so smart, so perspicacious.
6
To secure another term, Trump needs to rally his base. So he prods the Dragon, knowing that it will never back down. Knowing that it will rear up and spew fire. Fear and the hate that comes from it, that is what he needs to win. That is what will fire up his base. But the Dragon is big. It is proud and it remembers how it was bullied when it was smaller and weaker. It will not suffer humiliation. It will not submit even if it means utter defeat. Even if it means death. A Dragon that will not be broken is fearsome indeed. If we win this one, it is likely to be a Pyrrhic victory.
24
@The F.A.D.
The Chinese know pain. And Xi Jinping is president for life, so he can impose on his people whatever burden he needs to beat Trump. And the Chinese play a long game. Their belt-and-road program is a century-long project. In contrast, the United States is about imposing pain on other nations, eg, Viet Nam, Iraq, Afghanistan . . . and about instant gratification and short term thinking. Advantage China. This century will belong to them.
1
I'm still amazed push back from the right is essentially non-existent. Republicans are allowing the show to go on without even a whimper. Even if you agree China needs to be addressed, tariffs and trade wars aren't the way to do it. We should be begging our way back into the TPP right now. The Trump administration has set us back years if not decades in the Asian-Pacific region. That realization is apparently finally settling home amidst the optimists on Wall Street.
45
Gold will become the basis of a new standard of currency. At least many countries including China and India are buying lots of gold in recent years.
James Rickards already said in his book, "Currency Wars," that a studied, expertly implemented return to the gold standard offers the best chance of stability but commands so little academic respect .....
Trump and Xi will reach trade agreement in 2020 before the election. By that time, Trump & Xi will already learn the strength and weakness of individual economy, respectively. They complement each other. If work together, both win. If they fight each other, both lose. It is that simple.
2
@Usok You're making the assumption that the game you see on the table is the actual game being played. I seriously doubt that it is.
What looks like Trump and Xi "fighting" is a carefully built construct. They're ALREADY both playing to win.
And "resolving" the trade conflict has no more meaning than Trump saying "I fixed North Korea".
It's all reality TV.
11
Trump has demonstrated that he is happiest when there is conflict and chaos. So it follows that trade "wars" (conflict) would be a desirable way for him to obtain the results he wants. His foreign "diplomacy" with our traditional allies has created chaos and alarm. His attraction to despots and dictators is predictable since that is their way of functioning.
Insanity has been defined as doing the same failing thing over and over and expect a different result. So expecting that Trump is going to do the positive action at this point in his direction would fit that insanity description.
27
@Janet Exactly. Short the markets and make a fortune!
5
Wonder if Trump will go so low as to induce the Chinese to stop allowing rare earths from leaving their country - and only allow them to go to trading partners it feels are to its advantage. That's one way for them to own a big part of the higher electronics markets. Brazil's vanishing rain forest turning into grasslands - meaning grain production - means China can replace its grain purchases from US farmers. China can work more closely with Russia - a vast country with huge natural resources the Chinese need - and if their 2 military's then work together against the US - maybe Russia does dominate the Arctic and China the islands now tentatively claimed by Japan, Vietnam, the Philippines etc. China now annually produces more engineers than the US - and I think they also speak English. China has a lot of momentum in winning this trade war.
20
China has done a calculation that Trump won't win the next election. They can hold out until a rational actor (or actress) enters.
Wasn't the abacus invented in China?
21
Not just the abacus, but gunpowder, ice cream and pasta :).
7
@cjg China invented paper currency.
Facts don't matter to this Administration. Neither does logic or experience in economic policy. Trump is a con man unfit to be in any public office, a money launderer and intimate of mafiosi for decades, helped to the White House by Putin, on whom he fawns. America, and the world as a whole, will pay for the country's experiment in putting an ignorant, lying, incapable and plausibly demented sociopath in the presidency. Surely, the recession which is coming will be even more severe than it need be with these know-nothings in political office? And meanwhile, Trump's enraged supporters will keep on slaughtering other Americans, incited by his demagoguery at rallies and painting Hispanic/Mexican immigrants as criminals and murderers over-running the country.
270
@Hari Prasad And when a severe recession comes what will be the response by this bumbling administration other than continuing displays of total incompetence, compounding the problem?
4
"What the heck is going on?"
IMHO what is going on is that the US has a chronic imbalance in its international trade, and that needs to be corrected. The answer is not tariffs or demonizing of other nations that sell their goods and services here in exchange for US dollars that they simply hoard or use as an international unit to arrange trade between themselves.
The answer is intelligent foreign purchase budgeting by the US. Grant US exporters $ trade credits that US importers must buy on a regulated exchange before releasing $ to pay for imports. In short, let's be sensible and spend no more than we earn.
3
@Penseur
Not so fast ... can you please first explain why TRDE DEFICITS would be BAD things in the first place?
Because there's NO macroeconomy study that shows that they are. Not one.
Before wanting to solve a problem, you better first check whether there IS one, no?
And no, buying more from others than they do from us, is NOT a sign that there's something wrong. It's simply a privilege that comes with being the wealthiest nation on earth.
Saying that this should be "corrected" is like saying that when a millionaire buys much more shoes from a middle class shoemaker than what that shoemaker would ever be able to by from that millionaire, then that shoemaker must be "ripping off" the millionaire, and should be forced into buying as much as the millionaire can buy.
It just doesn't make any sense, you see?
The only thing that will make other nations buy more from us, is to make sure that their economies start thriving too, so that they too start to have the money to buy more - which, accidentally, is also how you build the conditions for world peace, as a small "bonus" ... as world history has shown over and over again.
A FEDERAL BUDGET DEFICIT, however, is something totally different, and defined by "spending more than we earn". When the GOP passed its tax cuts bill for the wealthiest, for instance, it didn't pay for it. So it doubled the federal deficit, and THAT is bad, very bad.
Of course, Trump hopes that you'll confound trade and federal deficit ...
32
@Ana Luisa:The US dollar, based on a system that made sense back in the late 1940s, is used as the international medium of exchange in inter-country trade. For that reason, and that reason alone, we are able chronically to spend more dollars in imports than we earn in exports. Those surplus dollars (based on expanding US federal debt) get soaked up as foreign currency reserves elsewhere. That system is long overdue for change, and it will eventually be replaced with an international unit based on a "basket or currencies." At that point our dependency on imbalanced trade will come home to roost -- and most Americans will be facing rapidly rising prices with stagnant incomes. It is just a matter of time. Your next door neighbor, Germany, plans differently and will do just fine. They have and follow a policy of export-import balance or surplus. They think ahead.
4
@Penseur
With all respect, that's absurd.
The US buys very cheap things, transforms them into expensive things, and then sells those to other countries, EARNING money in the process.
That's how trade works, remember?
It's also how it became the wealthiest country on earth.
The mistake you're making is to imagine that we only "earn" money by selling stuff to OTHER countries. We don't. Our economy makes money by producing things and then selling them BOTH at home and abroad, and in such a way that corporations make (huge) profits. THAT is where our SURPLUS money comes from, you see?
Apart from that, we have a FEDERAL deficit, where we borrow money to pay for government programs and tax cuts (including borrowing money from the Chinese), but again, that as NOTHING to do with a TRADE deficit.
2
I'm not much of an economist but, having some investments, I do watch the stock market. Maybe I'm spoiled but one thing I notice about the stock market: in the end, it goes up (would that be due to our ever-increasing population ?). In other words, I have discovered the genius of investing: patience.
5
@eclectico Sir, Your observation is generally correct, that on average equities tend to rise over time. That has been the historical norm...but it is by no means a guarantee. Further, while your conclusion, "just wait out any down turn, it'll be fine in the long run" is in general correct, the practicality of that strategy depends on your time horizon. As John Maynard Keynes said "in the long run, we are all be dead".
9
@eclectico while my retirement relies entirely on the principle you enunciate, it should be noted that Japan has not yet recovered from its market swoon in the 1980s when it was the darling of business and Americans were rushing to copy its systems.
4
@Gregg
The stock market has twice gone for over a decade without hitting a new high. 17 years in one case.
Our political system lurches us forward to ever higher levels of prosperity but sometimes the lurch has a giant backstep.
What is sad about this is that the large minority who favor Trump live in a bubble where the news is tweaked to keep them believing that Trump is still winning victories for them. I listened to a clip of a campaign speech by a Republican senator who spoke to a cheering crowd of how they ended the disaster (paraphrase) that was Obama's presidency and now ... well the cheering continued.
15
@Terry McKenna
Victories for us:
1 Economic growth in 2018 $630 billion versus $488 billion in 2016 versus Europe’s 210 billion
2 Full-time jobs up 3.1 million in 2018, 200% of the 1.56 million increase in 2016.
3 Manufacturing jobs up 500,000 under Trump. 2016? Down 7,000.
4 Total job openings 7.3 million up 25% from 2016’s peak 5.8 million jobs
5 Unemployed 6.0 million in 2018 versus 7.5 million in 2016
6 Stock market: $33 trillion, up $9 trillion since the 2016 election
7 Mortgage delinquency rate down 26% from 2016
8 Combined Black and Hispanic jobs set ten all-time records in 2018 at higher wages than in 2016
9 Consumer confidence highest in 20 years, up sharply from 2015 and 2016.
10 Unemployment 3.8% lowest since 1969.
11 Initial Public Offerings up 250% from 2016 to $46.8 billion in 2018
12 Real disposable personal income up $597 billion in 2018 versus $244 billion in 2016
13 Total wealth $108 trillion up $13 trillion since the 2016 election.
14 Business investment growth up $334 billion in 2018 versus $52 in 2016
16 Adults with $400 to cover an emergency: 2016? 137 million. 2017? 147 million, 7% increase.
18 1.6% inflation in 2018
19 5.7 million have escaped food stamp welfare since December 2016
20 Murder down 6.3% since Dec 2016
21 Debt service on federal debt is 1.6%, less than half of peak
22 Households able to pay all bills 82% in 2018 up from 75.9% in 2016
Who is in a bubble? Us or you?
Looking at history, the Chinese do not cave. They play the long game. They are more likely to endure suffering for national honor and long term gain. I'm already ticked off that my tax dollars are used to compensate farmers for making bad business decisions to supply food to a foreign country that is not our friend.
28
@Moderate
So true. Americans think that a 5 year plan is a long game. The Chinese can and will wait us out.
1
China is playing this perfectly. They know that Trump needs a good economy to be reelected. They also know that Trump considers the stock market to be yugely important. He brags incessantly when it goes up, so he's bound to get some blowback when it drops.
How does it end? Next summer, with the election fast approaching, Trump will cut a deal. It won't be better than what we have now, but it will contain one small concession from China. Trump will declare victory. Conservative news outlets will explain why it's soooo much better than the old deal. Trump's supporters will cheer "He did it!"
47
Until now, no president has stood up to China. Most economists agree that we have to and, albeit reluctantly, most support the Trump administration's action. The tariffs are hurting China. The government thinks they can wait it out until our 2020 election. They're wrong. Trump will win not, as you presume, will "she".
3
@MCH are the tariffs hurting China more than the Americans who pay them? And why exactly do you want all the stuff at Walmart to cost 30% more?
3
@Stephen Fisher I don't shop at Walmarts. Too Chinese-y for me.
1
Let's be clear. This isn't Trump's plan but Peter Novarro's plan that Trump likes. Novarro was on CNN trying to use his Jedi-mind powers (only works on the weak minded) to show that the trade war that was started was good for everyone and that it wouldn't become the Trump Tax on consumers. China knows there is an election next year and since this could become an election issue, they know that they can wait it out to some extent.
16
How does this end? Trump isn't actually known for hanging tough. When the going gets tough, he declares victory and turns tail and runs --- calling it a victory lap.
52
@SAO
There is no reason not to think that he will do that, since he has always done it before.
1
I wish Trump would tell me before he texted so that I could short a few stocks and make big money. I'm sure he is calling his wealthy buds to let them know.
85
@Rick
If trump had the requisite understanding of stock and currency markets, and of the predictable market effects of his trade shenanigans, he'd only 'pre-tell' don, jr. -- and if don, jr., 'pre-possessed' of information about coming shenanigans, understood the effects those shenanigans would have, all the 'returns' to be taken on the shorting of stocks would be 'saved only' for trump/trump. org 'pickins.'
But does trump know these things? Would little don?
P.S. It is obvious (made the most so by his repetitious reference to unidentified and unidentifiable "friends") that trump has no friends ... and, surely, no "buds" --just accomplices.
2
@RickI think there is more to your claim than meets the eye. I would love to see the trading going on in one of Trumps affialitaed accounts
1
@Rick
Why do you think the owners of the Republican party haven't yanked his leash yet?
Shorting trump is a safe bet, as long as you are on the inside and know when he will be triggered.
Google "Pavlov's dog".
1
Living in China, I'm pretty certain most of the populace would not want to cave in to bullying, no matter what the consequences. Not to Trump. They don't want the trade war, certainly, but they can accept it. There are people here still alive who have endured far worse than this.
It's important to note that the long term harm to the American economy is this: many American products, like iphones (there is an Apple store right near my apartment) and Chevrolets, are still popular in China. They won't be if this is prolonged - that's a growing market of 1.2 billion people lost to American companies. This trade war is bad news for everyone.
132
@David
This! Just take a look at all of the fashion companies in recent times who have been profusely apologising to China re: references to HK & Taiwan being separate countries from China.
China is a huge (and growing) market for many US companies... But that could change very quickly if & when Xi decides to stir up the population to boycott US made goods.
Underneath the economics, is Trump's way, threatening so severely that his opponent caves. It's always about keeping himself on top especially where power and money is concerned. This is his way it's his "diplomacy" as president. By and large he has failed. But he doubles down, might after awhile move on of necessity while maybe backtracking but claiming victory, lies, rationalizes. Is this the power of positive thinking?
17
“So how does this all end?”
On the one hand you have China, the quintessential immovable object, led by a president elected for life, infused by a culture with the patience of Job.
On the other you have Donald Trump, whose self image is so bound up in projecting irresistible force he cannot back down, infused by the admiration of a core base who would be disaffected if he did and who, as one commenter noted, will “stand in soup lines for him” so long as he defends their white privilege.
The wild cards are the American farmers who lose big if China finds an alternate source of food security and who cannot be propped up ad infinitum on subsidies, those independents who find Trump’s rhetoric of white privilege no solace for the economic hit they take from higher prices in consumer goods, and all those independents and Republicans who take a real hit in their 401Ks and their overall net worth from the stock market decline.
I just hope and pray there are more than 70,000 on them—in all the right states.
111
@Steel Magnolia And that what Trump's "irresistible force" is, a projection of his own deluded imagination.
1
@Steel Magnolia
"...their white privilege..."
That's humorous given the stress of red America.
My perception is that the only people in the U.S. who have "...white privilege..." are university professor who work 9 months out the year and government workers who are perpetuating a climate hoax in hopes of adding $800 billion in carbon taxes (known as gasoline taxes and electricity taxes to us yokels who will have to pay them) to the loot pile that already gives them a 60% higher compensation level that us serfs.
@John Huppenthalp
If that’s your perception of who has white privilege in the US, then I suspect you are not a person of color.
2
Look at the two combatants in the trade war. On one side is the Chinese technocratic government. They have a master plan developed over years by economists with the goal of raising China to the dominant economic power. They are investing in renewable energy, the newest technology, and infrastructure. The other side has Donald Trump with his ego. His goal is to win the next election. His plan is the plan he always follows. Threaten friends and enemies, don’t back down, double down, then double down again. If the plan fails, declare bankruptcy.
90
The Chinese government can weaken its currency without the pushback that would come if they were a Democracy instead of an oligarchy of Communist party elites. Over time their currency should be appreciating significantly per PPP models, look at the Yen from 1960 to 2000 as reference to rapid export-led industrialization. The Chinese do not let their currency float and have manipulated it through overt mechanisms such as capital controls and central bank interventions. Resetting the rules of trade with China naturally leads to tensions, criticizing Trump for finally confronting them is a pity. The easiest thing for Trump to do is status quo with China and its trade policy, intellectual property theft encouraged by state security services, and championing of state industries designed to undermine US economic leadership. This reset would have been so much easier 20 years ago, but it will be impossible if we wait any longer. So, if we want change in trade, expect turbulence because the Chinese will not change the rules of their rigged game without a fight.
6
My guess,
Trump is not sure if he can be re-elected or not, now it's a good time for him to make some money, by initiating a second trade war with China, directly he is pushing the bitcoin to top the ceiling and will profit from it. Good move...
8
Trump still strikes me as "government by publicity stunt." He is about marketing himself. It is hard to know if there is a real policy here apart from theatrical gestures that make America seem like it is fighting an enemy, which conveniently is Asian and hence reliably foreign in the eyes of the supporters who embrace his fantasy world. I am still waiting for someone to clarify what the policy is -- i.e. if this, then that. What defines winning? A change in the trade deficit? By how much? Recovery of American manufacturing? What and where? Are we going to hear more about fictitious steel plant openings or maybe even real ones?
And then there is the reliability factor. The Chinese, among other things, have accused Trump of reneging on his agreement of June. If Trump is an unreliable negotiator and can't be trusted, what does any agreement mean as long as he is president? And how can any company make large investments that may take years to bear fruit in an atmosphere that is guided by so much impulsive behavior and outright lying?
These actions make headlines and make Trump look like he is defending his "base" in a bulletless war. But is there an actual policy beyond making headlines or is government by publicity stunt the only real policy?
64
@ACA
"...what is winning..."
Republican primary voters are beside themselves over the loss of manufacturing jobs over the last forty years. They perceive those jobs as having moved overseas. But, worldwide manufacturing's share of the economy has also shrunk. Manufacturing has become incredibly more efficient.
Winning will be a deal that includes some protections for intellectual property and greater access to Chinese markets.
Paul,
"At this rate, we may have to wait for a new president to clean up this mess, if she can."
Remember, Trump has, on more than one occasion, referred to his Presidency as "President for Life".
He has declared his desire for this at many different venues most recently declining to endorse Pence for President in 2024 because, in his words, his base many not "allow" him (Trump) to not be President.
So, don't get too excited about a President any time soon.
Trump plans to die in the White House.
16
The sooner the better . But I'd rather he leave peacefully in January 2021 .
@Michael There is only one country on earth where Trump is supremely popular (hint: it's not Russia!), and people in that country will work very hard to maintain their benefactor in the White House, because it's truly in their interest, not in the interest of the US or Americans.
@Michael Die in the White House? Fine, but could you schedule it for before Nov next year?
It is amusing to suggest that thought in any way is the impetus to a Trump policy. Clearly Dr. Krugman has given up trying to find the method in Trump’s madness and, like the rest of us, is buckling down for the ride.
30
I know the economy is still creating jobs - still a continuation of Obama's economy but what kind of jobs are these? Are these 10 dollar an hour dishwashers in chain restaurants, 15 dollar an hour customer service reps? What will the out of work auto workers who were making 50-60 an hour including excellent benefits now do? First they are geographically in the wrong place and they are not going to become dishwashers. Trump and his crowd have no clue what they are doing with the economy or China. But I love Krugman's assumption not only of a new president, but that the president will be a woman. Kudos to you Mr. Krugman!
43
@Meighan Corbett
"...still a continuation of Obama's economy..."
Nope.
For 2013, Obama forced a huge increase in taxation, here are the following years federal total revenue growth by calendar year:
2013: 12%
2014: 8%
2015: 4%
2016: negative 1%
Trump stopped a death spiral.
You can only say this with such confidence because Krugman has brainwashed you into believing that taxation has no impact on economic growth.
Note that Krugman is very careful not to compare taxation across countries.
Nobel Prize winner Edward Prescott found that the higher taxes of Europe caused them to start work later in life, retire earlier, take more sick leave, take more vacation time, work less ambitiously, work less intensively, grow less intelligent, chose the second job in the household less ambitiously with a lower ratio of second job earnings to first job earnings, to work less effectively in teams, and create companies worth less.
That's why the countries of the European Union had an economy much larger than ours in 1980 but now have an economy much smaller.
That's why the stock markets of the European Union were larger than ours in 1980 but now are worth less than $10 trillion while ours is at $32 trillion.
That's why the median household income of the European Union is less than $40,000 while ours is $62,400.
I think we are all witnessing how Trump drove his casinos into bankruptcy.
And there's a good chance America will be his next one.
Or at least the retirement funds of countless Americans.
But hey, it will be one of the largest numbers anyone has ever seen.
Trump will claim victory. All the headlines will mention him.
So it's a win-win, right?
89
The thin-skinned, narcissist with a self-image as a tough deal-maker comes up against a culture where honor and saving face are of primary importance. Great. The only bright spot is that Trump's need to keep doubling down may indeed weaken the economy helping usher him back to NYC in Jan 2021. While I certainly do not want the economy weakened, better now than after he is re-elected (God help us all).
77
@Anne-Marie Hislop I agree. Having just retired I am still willing to take the hit on my retirement fund to get Trump out of office. Time for a little recession about Sept. of next year if not sooner.
11
Trump thinks that bullying China now will pay dividends next year at election time. A recession is more likely during the next 9 months and he will be assigned blame for a sluggish economy.
He doesn’t understand that China can play the long game and Dr. Krugman is right, China is not Mexico or Canada in negotiations. They will withstand whatever Trump throws at them until he is removed from office just a short time from now.
41
@JT FLORIDA
China is more sophisticated than you are. You have to explore the future one step further forward.
The TransPacificPartnership was dead on arrival in the Senate.
Same for any trade deal negotiated by a Democrat President.
Trump may not be able to get a trade deal through Congress but he will be able to settle the issue.
The Chinese are never going to make concessions for a trade deal as long as Trump is negotiating. He has lost credibility as a leader and the Chinese really don’t care if he slaps a 10% or 40% tariff on their goods. Chinese leadership has told their countrymen to “prepare for hardship”. They are not going to give Trump a political victory to claim going into his re-election campaign. They are perplexed by his leadership style and he exhibits the appearance of a 5-year old in Baskin Robbins who decides on one flavor of ice cream and changes to another flavor and then wants all 32 flavors.
58
Of course if Krugman et. al. are surprised then maybe it follows that the reasons for the stock market swing are not macro-economically oriented. The causes, I suggest, are political instability: Hong Kong and Walmart are in the news for shopper beware reasons.
Nothing hurts the economy of countries like broken glass, tear gas in the streets (of Hong Kong) and shot up people in stores (of Walmarts and Dayton bars).
The really effective counter to Trump and Xi is the economics of profits. Instability and mayhem while shopping forces the equation: get more freedom (Hong Kong) and gun control and tolerance (US) or watch profits retreat with shoppers.
8
I was excited to hear awhile ago that Apple is coming out with a new model iPad in the fall. Since mine is very old I was looking forward to buying a new one. Not now. Our family will not be making any major purchase until after the next election. We are not paying the Trump tax and not boosting the Trump economy. We can wait for the Democratic cleanup.
67
China plays a long game. In two years or six years Trump will be gone and Xi will move forward, the victor by default.
Or, does Trump have some morennefarious purpose in mind that would secretly benefit him? If only we had his tax returns.
28
@Emile deVere
NYT's cult is consumed with jealous rage. Who cares? I imagine he has lost hundreds of millions since becoming president.
I could care less. He now has a track record to gauge him on. He turned the economy around on a dime.
Can he keep it moving forward?
We shall see.
If WWI and WWII have taught us anything, it's that intensifying trade relationships between countries, and in such a way that BOTH countries benefit, is THE best way to avoid the risk of a WWIII and to build real, lasting peace.
Now that the Trump administration has proven to be totally incompetent when it comes to denuclearizing the world (as its nuclear policy towards Russia, Iran and North Korea have shown by now), actively focusing on building the conditions for world peace is more important than ever.
Unfortunately, the GOP today lacks any clear concept of peace.
Natalie Goldberg defines it as follows:
"the harmonious interaction between human beings, their environment, and the working out of conflict in a way that is not harmful, that always has the sights on fellowship, care, the cessation of hostility."
The reason why there is no REAL leadership in the GOP today, is because Republicans have forgotten what peace is, and most of all, because they have given up believing that it is even possible at all.
Their worldview is focused on hostility alone. Everything that is different is reinterpreted as potentially hostile and as a consequence, to be contained, or even better, to be "deterred" as much as possible, in an entirely "offensive" way.
As such, under the GOP the US is becoming the world's most hostile country.
Doing so will NEVER create the conditions of peace, as history has shown over and over again.
The GOP urgently needs to get its moral compass back.
79
@Ana Luisa: Mutually beneficial exchanges are made possible by relative differences of values.
1
@Ana Luisa
>The GOP urgently needs to get its moral compass back.
"Back"?
2
I see the stock markets as a crude human attempt to predict the future, so basically the markets are saying the futures not so bright and shinny as Trump and his supporters think it is.
I have already battened down the hatches financially months ago. I work in world trade so I’ve personally seen the writing on the wall.
My decreased spending will effect those who I no longer support with that spending. This is how a recession starts in a consumer based economy.
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@Chris
"...the future's not so bright and shiny..."
Our stock market is worth $32 trillion as of a few seconds ago.
Much larger population EU is worth less than $10 trillion.
EU's problem? They listen to the economists and culture of the New York Times.
After papa, Trump has always depended on the kindness of powerful strangers to bail him out of his conflict-escalating bullying episodes. The legal system, the electorate, the Senate, the AG, the Fed, the Cabinet, the Supreme Court, the military. This strategy seems to have played itself out with China.
It’s up to the American People to do what papa should have done years ago. Say No! to Baby Trump. And send him home for a good cry.
72
It seems obvious to me that Trump is going to relent on his tariffs at a propitious time during the upcoming presidential election to give the economy a boost and improve his electoral prospects. How is it that no one else sees this?
33
@Ryan H
Trump has a negotiating technique and poltics doesn't play a role.
Unfortunately, he is a formidable force but up against a potentially immovable object.
He may not be able to get them to move and the situation may take him down.
I really liked the ending of this article "-if she can." I really hope next year it becomes a reality.
48
@Augusto
Me too! :-) (That is too say, I really liked that line; I also like Biden though)
It's such a wonderful way of triggering a "silent revolution" to start writing "normal" texts and then all of a sudden change the standard "he", when referring to no matter what human being, into "she".
Kudos Dr. Krugman!
As someone with now and even more modest retirement sum in the stock market, I'm kind of hoping that China prevails if it serves to bring some sense back into the negotiations. Trump's behavior reinforces that he and the U.S. team can't be trusted. And will continue to make a mess of things. Fortunately, there's little by way of Chinese goods I need to buy but the coming recession may be harder to ride.
20
I don’t think Trump folds. Isolationism is his big vision. Like all good monopolists he wants to lock up the US markets so only US Job Creators have access to it. Tariffs are the means to that goal.
2
@EW
Uh ... what does that even mean, "to lock up US markets"?
You seem to ignore that a 21st century capitalist economy needs TONS of products that it cannot possibly make itself?
And if it's a Western, fully developed capitalist economy, it needs tons of CHEAP products that it couldn't possibly make itself because cost of living is so high that you cannot possibly keep salaries so low as to obtain such cheap products in the first place.
A capitalist economy, by definition, vitally needs a "hinterland".
In the US, for instance, most job creators are small businesses. If anything, higher tariffs reduces their profits and makes them FIRE employees, certainly not hire more of them.
As to big corporations: they are almost all global corporations already, so to imagine that to build a tariff wall around the US would somehow benefit them, and as a consequence local hiring, is absurd.
And then we're not even talking about the fact that thanks to Obama, unemployment is at a record low, so WHO are those people that our "Job Creators" would hire, more precisely - especially if at the same time you claim to want to reduce immigration (which of course the GOP doesn't REALLY want, as it's their only way to obtain cheap labor, which is why it's Obama who got a bipartisan comprehensive immigration reform bill through the Senate, whereas Trump and his GOP Congress didn't even seriously TRY to do so ...).
And then Trump claimed his goal of tariffs was to INCREASE free trade, remember?
63
I don’t claim it’s going to work.
"At this rate, we may have to wait for a new president to clean up this mess, if she can."
I think the Chinese are biding their time...waiting for the Trump insanity to fade into history. So am I.
115
Because the US elected Trump in 2016, and he promptly tore up as many treaties as he could to spite Obama’s legacy, we are stuck with an accurate perception for the foreseeable future that any deal on any subject can only be guaranteed until the next election. Any longer and our treaty partners will realize we may elect another no nothing demagogue who will walk away.
Before you say that’s unAmerican, think of all the treaties we made and broke with the native Americans as we slaughtered our way across the country. There’s a reason Trump likes Andrew Jackson (and why Mnuchin scuttled replacing Jackson with Harriet Tubman on the $20 bill). As a side note, that was the time in American history in which immigrants were “invaders”.
As Dr. Krugman and others have noted, Xi has any tool he wants at his disposal and can wait out term-limited presidents. Thus, we are witnessing the self inflicted destruction of the American hegemony by a president who would be a dunce king and the party that supports him.
90
Overlooking the fact that this quite useless situation was created out of thin air - What seems to be the usual Manifest Destiny approach to geopolitical strategy is at its usual lack of a clue stage, it seems.
The real situation and real tensions with China on a vast range of issues have not budged an inch. Cyberwars, espionage, etc. are all still happily rattling along. It's an industry sector, and it's not likely to be affected by tariffs.
The impression that the US is yet again trying to "contain" China is hard to miss. Meanwhile - What is actually being achieved and what can be achieved? Not a lot, it seems.
23
China can easily outlast Trump. All the have to do is start selling the US treasury notes they own forcing US interest rates to rise and the US economy will be in a complete tailspin.
Add the USA to Trump's accomplishments along with Trump Casino and Trump university.
48
@Joseph B It would have close to no effect. US treasuries already pay more interest than any other major country, with a startling number currently paying negative rates. The trend will only continue downwards as the economy weakens.
2
@Joseph B As Krugman and many others have noted before, selling U.S. treasuries would raise the value of China's currency, devastating their export industries and strengthening those of the U.S. It would reduce the size of the U.S.'s enormous trade deficit, providing an economic stimulus and a boost to employment. I believe there was an article by Krugman called "China's Water Pistol" on this subject.
2
@Ryan H
What would be the source of workers to boost employment with un-employment at record lows?
4
Ironically, devaluation of the yuǎn will make Chinese goods cheaper, which will offset a little of the tariff pain. Not much, but a little.
Much like tweeting the Federal Reserve into submission and getting the interest rate decrease he’s been pouting about, Trump is using all the leverage he has in many areas. But, as others have noted, Trump can only do so much without Congress, which is why with his tariff hammer, he sees every problem as a nail.
Trump can only impose tariffs (taxes) on his own people, mostly lower to middle income families are affected, as they spend a much greater part of their income on consumables. China is under no such constraints, as this currency move shows. The devaluation of China’s currency affects all their trading relationships, which make their goods cheaper in every market. This will keep many Chinese workers employed that would otherwise lose their jobs.
Dr. Krugman says China was a “major currency manipulator 7 or 8 years ago”. I went to China in 2007, and the yuǎn was 8 to 1 to the US dollar. When I went back in 2009, it was 6.2 to 1 and it never returned to its previous lows. So I would say the major currency manipulation ended around 10 or 11 years ago.
The currency manipulation was in service of stimulating double digit growth in a country where there was widespread poverty and unemployment in rural areas. As we are busy fighting endless wars and letting our infrastructure crumble, China is building their’s.
38
“if one of its major export markets suddenly slapped major tariffs on many of its goods. You’d surely expect to see that country’s currency depreciate, just as Britain’s has with the prospect of lost market access due to Brexit.” In addition, Chinese production has slowed down considerably during last couple of years, which may support idea that the yuan was overpriced relative to other currencies.
What complicates this picture is that industrial profits may be in recession in the most important economies in the world. But this recession is masked by low interest rates and the time lag between industrial slow down and its manifestations in the market (or the mediation that obscures this fact- the time that a loan takes to become a default).
3
The one line I liked and understood in this whole article with many complex ideas is: wait for a new president to clean the mess, if she can.
I just hope that the next President of US is a she - with the obvious choice - Maybe we should device a plan for that.
23
@RaVi Kiran K Why do you think because a president is a woman or LGBTIQ+ that decisions would be different? Do you think Theresa May, Margaret Thatcher, Angela Merkel, Christine Lagarde, Golda Meir, Indira Gandhi, Marine Le Pen, Sheryl Sandberg make decisions that are "better" than males? I would say that the context is the determiner, not gender. If you end up being the leader of a country or a CEO, then decisions have to be made and I would suggest that the same pressures or factors apply to both women and men and similar kinds of outcomes ensue. I think women should have the same rights as everyone else - the same rights to make decisions for a country or company or whatever - be they good or bad decisions.
1
When Trump imposed tariffs on China the market fell just as it has fallen the past week. It has happened about 5 times and each time the market bounced back. This evening, when Trump threatened China, futures dropped sharply, but they have since rebounded and a flat open is likely. So it appears that the crisis may have reached a bottom.
The market is always unpredictable. But, so far, the pattern of dropping sharply and bouncing back has been consistently repeated. The Times has predicted a sharp drop each time it fell. It has been wrong about five times. It’s now going for number six.
2
@michjas
Are you old enough to remember the crisis that followed when Long Term Capital Management blew up? An enormous hedge fund, founded by Nobel Prize winning economists, it was created specifically to profit from little "patterns" such as the one you think you have found.
With multiple math PhDs and state of the art computers, they scoured the world for patterns, which all kept repeating....... until they didn't.
If the market is always unpredictable, which you rightly say, why even mention patterns?
(But yes, the media always loves the "The Sky is Falling" headline. THAT is a consistent pattern, ha!)
@michjas finds that "the Times" has made six predictions. By "the Times" does s/he mean the Editorial Board? Mr. Brooks? Ms. Goldberg? Dr. Krugman?
In fact I can't find any such prediction by any one of these entities. Certainly this essay by Krugman doesn't make any prediction at all. ("So how does this all end? I have no idea.")
If I'm wrong, then michjas can prove me wrong by putting in six links to predictions by "the Times". If I'm right, we are faced with the question: Where does michjas get the misconception that "the Times" makes predictions?
@michjas
Beware the "dead cat bounce."
Like Krugman said, the impact of the tariffs is in the .1% of GDP range, while presumably it will cause American market oriented production chains to move out of China. There is full employment. It is irrelevant if this trade war is never "won"; what is being fought is a war for economic supremacy, not trade. The tariffs could stay in place for decades, it doesn´t matter. What matters is who is producing such and such tech, and the idea is to handicap China.
Too many people hate Trump so much that they won´t accept any of his actions as successful, even when they are.
4
@JVictor what actions of Trump have been "successful"?What advice by his economic advisers have been "successful"?
26
"what is being fought is a war for economic supremacy, not trade" - @JVictor
In a nutshell, the definition of a know nothing.
1
Being president for life, and being able to marshal the Chinese Communist Party and military to “impose” sacrifice on the Chinese people at will, Xi is in a much stronger position than Trump, particularly as 2020 approaches. Unlike our volatile and unstable leader who demands “instant gratification” in everything he does, from the stock market numbers, to the chants at his deplorable rallies, the Chinese are playing a sophisticated waiting game for the long term by building economic alliances in Africa and now South America.
Trade policy and Donald Trump are oxymorons. Even if we send him and the GOP packing in 2020, the US will be playing “catch up” for many years to come.
53
@Susan Xi's position is not that strong. He can probably marshall sacrifice as you say, but it would be very difficult for Xi to survive conceding to Trump's bellicosity. A crucial aspect of Trump's personalist is his desire to present results as macho victories, in which the other "guy" was humiliated and defeated - and Xi cannot allow that to happen.
7
Actually, growth in China has slowed while US growth has been steady. People repeatedly assume that because Trump is an oaf our economy must be suffering. But generally, the President has little influence on our GDP. FDR tried the hardest for the longest time. But the Depression didn’t end until we went to war.
"At this rate, we may have to wait for a new president to clean up this mess, if she can."
I believe China will wait as well for a new president, but that they won't sit by the sidelines while doing so. I am certain they will do what they can to meddle in the 2020 election to unseat Trump.
The sweet irony to me is that Trump and the Republicans have stalled any efforts to strengthen our elections against meddling. With China's efforts, it may be their undoing.
45
@Always Larry if you step back and look at it, you can see that Trump has systemmatically destroyed US' leadership in the world - economic, political and social. Why would China not want him to continue on this self-destructive path for the next four or sixteen years?
1
@Always Larry
Wouldn't that be a riot. Our election determined not by our own citizens, but by whether Xi or Putin wins next time. I am sure the Chinese hackers are every bit as skilled as the Russians.
@Always Larry, it is going to be an exciting "China v. Russia" election here in the USA. Will China win the US presidency? or will Russia continue to supply us with our president? The American people will watch this election with the greatest interest!
1
i worked in an economic institute in a Chinese University. I can say that, 1 year ago, many people might criticize CCP goverment for being not able to reach a deal with TRUMP and his fellows.
However, now more and more Chinese people, no matter rich businessmen ,white collar worker or university students, they just don't believe in a deal with TRUMP. they thought the best deal with TRUMP is no deal. TRUMP will break any deal any time as long as he is U.S. president.
So, no end for the trade war between China and USA, what a pity, but it is the best choice for China. and we could afford it , we just wondered if US people will tolerate it.
64
@Mike
A study published after WW II determined that Allied and German bombing campaigns counterintuitively hardened the will of populations against opponents. It was also shown that the more an entity bombed, and the more destructive the raid, the more angry and determined bombing victims became.
“Leaders” such as Donald Trump have no use for facts, studies, data and the experiential outcomes of shared reality. They care only for their ideology, regardless of little it represents the world. China has certainly made similar mistakes, and will likely do so again, but in this particular case Donald Trump is figurative in this failure of policy.
Trump would also benefit from reading and embracing Sun Tzu’s “Art of War.” He’s clearly in violation of many of its central lessons.
45
@John F McBride
You could have stopped at Trump would also benefit from reading".
2
@John F McBride
Trump would never understand Sun Tzu, that kind of thinking would be way over his head.
1
If the dems were any good at messaging they would be calling the tariffs "The Trump Tax"
But they're not good at messaging
160
@shrinking food, not only the Trump Tax, the Trump Tax Hikes. Remember when the GOP was against raising taxes? Where did all those foaming at the mouth anti-tax barking dogs go?
1
China has been making strategic alliances around the world while we set about alienating anyone we could.
Recently, in cooperation with the govt of Brazil, China completed a port facility that they will operate.
For all their trouble Brazil is an Agra powerhouse. That business is forever gone from our farmers.
The entire world is getting ready to do business around us rather than with us.
Is everyone ready for yet another GOP depression?
243
@shrinking food
this port project could turn out like Sri Lanka's Hambantota for Brazil, but that is the worst case scenario and least likely development. Brazil is not Sri Lanka.
What it definitely does is to give China easy access to the Atlantic. China will insist on using this port facility for their own purposes, with or without repossessing it.
12
@shrinking food-I too have been following China's moves. The country built or took ownership of at least 9 ports ringing Europe. Their strategic advances and long-range planning have put them in charge of much of the world's critical resources while our Republican leaders continue to dither, obstruct sensible Democratic legislation, and watch themselves on Fox Entertainment News. Our conservative-led Supreme Court, too, is showing itself to be a provincial body legislating yesterday's issues.
59
@Ann
We, as a country, are not ready for a head to head economic confrontation with China. China has economic tentacles all over the planet especially in Africa and Europe. China is sitting on so much money and our government is going broke thanks to the tax cut for the rich and corporations. How could we for even a moment think that Trump would be capable of handling the economy. He can’t even handle his own businesses with so many bankruptcies and business failures.
35
Much as I dislike Trump, I think this trade war is for the best.
- Open trade with China had gutted most of America's manufacturing capability. Some may be justified by their large labor pool, but a lot was just because China lacks the externalities that make America livable: pollution controls, wage and worker safely laws, human rights, etc. Tariffs are the primary tool for equalizing those imbalances, but the US has refused to impose them for decades.
- Additionally, China has built up a vast pool of bad will with its history of unfair trade practices: massive state-funding of resourse and manufacturing industries (mining, smelting, etc.); massive state-sponsored and even state-mandated theft of intellectual properly; decades of explicit trade promises broken over and over; and yes, over a decade of unrepentant currency manipulation until a few years ago. All of this bad will cannot and should not be forgotten.
Besides, what better time to address our under-tariffed borders then in the middle of an economic boom. Would you rather do it during the heart of a recession?
11
@John Its US companies that have moved jobs outside the country and american consumers who buy products made in china..
49
@John C
China took no jobs from the US. Those jobs were brought to China on a silver platter by those who in corporate control. The profits generated were cheered by the stock holders. The stock market went up and up and up.
Nobody had to give up proprietary technology. Nobody was required to do business with the Chinese.
But larger short term profits, and the fat executive bonuses that came with them, were just too good to pass up.
And before long the Chinese were eating our lunch.
70
@John C-Quoting another poster: "The US had a long term strategic plan for large global trade agreements that excluded the Chinese precisely for their disrespect for international agreements. By allowing efficient trade between good players the US could have seen an orderly and organic change in our supply chains away from China until China could change within. Trump (has sought) unilateral trade deals using bully tactics. The economic damage from this approach is starting to be realized."
Also see:
https://www.pbs.org/wgbh/frontline/article/chinese-hacking-steals-billions-u-s-businesses-turn-a-blind-eye/
5
Paul, I think I know exactly how this is going to end: with a much weaker US dollar. Trump wants to do to the US dollar what China did to the yuan, but even more so. By labeling China a currency manipulator, it gives his administration a reason to argue for policies aimed at weakening our currency. By devaluing the US dollar it will punish China as they currently hold over $1.1 Trillion in US Treasury securities.
17
@Mark
Such brilliance from you Mark. China holds $1.12 Trillion of US Treasury debt.
The US taxpayer through Social Security, state and local pension funds, and individual 401K retirement funds, I-bonds, etc. holds about $16 Trillion of the $23Trillion overall US Treasury debt.
Devaluing the dollar with a trade war/recession is like the man who holds a gun to his own head and says "Stop or I'll shoot."
The one way to bring balance and counteract China is to form partnerships around the region thus making the US an indispensable trade partner to all these countries. TPP was meant to do that as a longer term strategic vision. Recruiting allies from abroad.
Everyone will suffer from this trade war and it will not benefit a single person. Not even Trump.
60
@Tom Chng True, and when has Trump ever had a long term strategic vision?
@Tom Chng
I understand the strategic concept behind the TPP but let's not forget it had huge flaws as well, such as allowing multinational corporations to ignore laws in any country they found the laws inconvenient. And it was negotiated behind closed doors. What should have happened, and would have had we elected a sane president, was a renegotiation to take out the weak elements. Obama for all his many strengths was the worst negotiator (save for Trump of course) I have ever seen. Terrible with Congress, and terrible on the TPP. He was the conciliator in chief, and I do not mean that in a good way. I was absolutely all in for Obama, so this is from someone who wore rosy glasses in 2008 and clear ones in 2012. I don't regret my support for him either time, and am well aware of the opposition he faced from the Rethuglicans in Congress and the blue dogs in the Dem party, but he was not perfect.
At this moment when everyone is trying to sound wise about the double massacre weekend we’ve just gone through, Krugman gives us an interesting take on something that’s been going on in the meantime - and which could lead to something even worse. The trade war with China could very well be a precursor of many other horrors in the not so distant future. It looks as if nobody is talking about real causes and certainly nobody seems to have an idea about how it could end. Pretty scary when all the major players have so many weapons to play around with, something right up there with the danger of white supremicists armed with assault weapons.
38
Dr. K,
As you know better than anyone, in general trade wars are fundamentally unwinnable. With China, neither trade or military wars are winnable. Tariffs are a bad idea for any kind of trading issue. Just ask our farmers.
I have heard Mr. Trump's trade adviser say that tariffs are enforceable and therefore is the preferred "tool" for changing the behavior of a trading partner. I do not agree. That is what the W.T.O. (née GATT) is all about. The W.T.O. has many avenues for correcting unfair practice.
The U.S. has been doing well and so has China and it seems to me, as the income per capita improves in China, China can become an even better customer for U.S. products and services.
I understand there are sticky wickets like allowing Huawei Technologies Co. Ltd. to provide telecommunications equipment and their 5-g smartphones to the U.S. market. This according to our national security folks will open the U.S. to spying and using data to further capture U.S. customers. So Mr. Trump is correct to hold approval of Huawei until we know more and it is a great issue to gain the cooperation of China.
I also think this would be upsetting to South Korea and its Samsung equipment suppliers.
Finally, I strongly believe China, the U.S. and the other major industrial countries should go all out to replace fossil fuel as an energy source with non-fossil energy. If we join in this effort the costs of development will be much less for all of the Nation State economies.
24
The supreme leader for life verses a sketchy, temporary person with the power of the presidency of the United Sates, how will it end? It won't be pretty and there will be plenty of cleaning up to do.
38
@richard wiesner unfortunately, he ain’t temporary. He’s not going anywhere (he can’t as he’ll be convicted and he well knows that) and there is no mechanism to force him to leave. People need to start wrapping their mind around this reality. He controls congress, the courts, law enforcement and the military. He is a dictator.
After the Republicans won the White House, Trump and the Congressional Republicans set to the task of robbing the American middle class with the Tax Cuts and Jobs bill. Since then, they embarked on instituting Tariffs on foreign goods which are a consumer tax on us, and then proclaimed the trade wars as a way of making the Tariffs appear as weapons. You know the public loves weapons.
So the tariffs taxes are roughly equaling the increase in the deficit caused by the tax cuts. So the 99% of Americans now have the burden of paying the costs of our government and those that benefited from the tax cuts pay little to nothing for the services they receive.
But now the real story continues as the Trade war has now attained a goal of driving investors out of the stock market, and into; the treasury with all that money that will help offset the growing deficit the Republicans created.
"Yields on United States Treasuries, which fall as prices rise, dropped as investors sought safety in government-backed bonds. "
Did you understand the Republican scam and heist as I outlined it?
100
@PATRICK-Best summary yet. Also in the mix, are the billions for farmers (corporate farmers, that is) bailed out by Trump and the $40 billion Krugman mentioned that foreign investors reaped from the Trump-Republican tax reform bill. Even with your math, one quarter of the federal budget has to be made up with borrowed dollars from foreign sources. Probably higher in the future, as more U.S. companies figure out out to game the system and pay NO federal taxes at all.
11
@Ann
Hi Ann, respectfully, it's not the best summary yet. It's my original product of sleuthing and analysis. Now that a reliable outline is there, it should be investigated.
3
So we see Trump has an inability to learn from his mistakes. That would explain his multiple business failures and bankruptcies. But most unfortunately for us, this same person is now making decisions for our nation. It is our nightmare to be witnessing the bankruptcy of our nation.
Wow! Was that an endorsement for Elizabeth Warren: "...our next President ..... if she can?" Yeah! She would be the best one to fix a post Trump economy.
71
The White House is empty.
There is a man there who is overly attached to a policy that is clearly a failure,
a man still hoping that he will defeat China.
He cannot.
China will not submit to tariffs, no matter how high.
and because they are willing to endure more suffering
than we are,
in the end they will win the trade war.
I did not think that the man now in the Oval office
would be so obtuse
but he is,
not only in economics, but on moral issues,
and on basic knowledge of human beings.
And so we are leaderless at present,
with no compass to lead us into the future.
The White House empty,
and the nation bleeding.
134
@Oscar Valdes - "I did not think that the man now in the Oval office would be so obtuse" On what grounds? You had heard about the women, the bankrupcies, the hiring illegals, the ...?
I don’t think this problem will be so easily fixed by the next administration, assuming we can get rid of Trump in 2020. The Chinese are building bridges to other markets and are willing to endure some pain for long term benefits. Votes matter folks. Those who voted for Trump to shake things got their way. Now we’re going to live with the result.
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Professor Krugman states, "So how does this all end? I have no idea." I shudder at the thought of how Trump's ill conceived and easy to win Trade War will end. It's not just his trade war that is creating turmoil and uncertainty among our trading partners, it's the confluence of so many of Trump's trade actions and sanctions that scares the daylights out of me. His disdain and revisions to NAFTA, pulling the US out of the Trans Pacific Partnership (TPP) his tariffs on imported goods from Europe. Most disheartening is his total lack of leadership and lack of knowledge regarding trade that has me so worried. For instance, there's plenty of evidence that China has been flooding the world's markets with their exports. Trump could have fashioned a coalition of trading partners, that, behind closed doors advised China that it would be dropped from WTO if it continued dumping its exports on world markets. The US spent years negotiating the TPP. It would have been a great place to start on a unified policy of trade with our Asian Partners. The only reason Trump pulled the US out of the TPP is due to President Obama's finger prints on the title page. I'm worried about pulling our country out of the 1987 Intermediate-range Nuclear Forces treaty (INF) signed into law by President Reagan. And, to top it off, Trump stated that he would wipe out the deficit in eight years. Yet, he's heaping debt on the US economy at an unprecedented rate.
73
The Chinese government has been keeping its currency artificially strong since at least 2015, as seen by how the currency always trades at the weak end of the government’s band and how the government has put in strict capital controls. China allowing its currency to weaken brings it closer to its free market value. By declaring China a currency manipulator for this (as well as insisting on large government-directed agriculture purchases), our government shows that it is not committed to making China a free market economy but rather wants China to be a planned economy, just planned from Washington. This discredits Chinese reformers and kills any moral high ground we might have been able to claim.
21
What are we supposed to expect when we have a failed businessman running the country? I cannot understand why people voted for a man who showed his true colors long before he became a presidential candidate. He drove several of his businesses into bankruptcy. He had a reputation for refusing to pay his vendors. He took out full page ads in local newspapers about the Central Park 5 where he called for the death penalty. How could anyone consider a man who did these things presidential material?
He has indulged himself at our expense. The GOP has allowed this. They can carry out their agenda while Trump obscures it with his excessive twitter storms and racist statements designed to keep a subset of white Americans happy that they have a president who is willing to say what they want to hear. While he does that they'll cheer until they lose everything. Then they'll blame everyone but themselves.
Because of the GOP the recovery from the 2007-8 recession didn't reach many Americans. If we have another recession, and we will, far more of us will be in economic trouble. The fault will lie with Trump and the GOP for the tariffs and the tax overhaul. That overhaul left us without enough revenue coming in because the corporations and the richest are still not paying enough in taxes. And those tax cuts are permanent. The tax cuts for the rest are temporary.
Trump's policies are ensuring that we have a recession sooner rather than later.
8/5/2019 11:29pm
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@hen3ry
And in spite of all the things he has done he still has unwavering support of his base and Republican leadership. It’s a cult, except for Republican leaders who are willing to put up with anything to deliver tax cuts for the rich and penalize the poor.
6
If neither Great Leader is willing to back down, it will take some other mechanism to neutralize one of them.
Like an election...
25
Never has so much been so damaged by so few (one).
Luckily, every business this man operated has been nothing but a stellar success both financially, ethically and even aesthetically.
I am very confident this will play out to all of our benefits!
(Yes, the 7pm to Geneva. Window seats are fine.)
17
The problem that Krugman talks about is not about economics, the Dollar or the renminbi; it isn't about the DOW or about learning from past mistakes. It is not about rationality but PERSONALITY.
Stop at looking in the wrong direction for answers, and start realizing that the problem goes well beyond tariffs and is worse than any one would have believed possible. Then, the proper corrective action will become self-evident.
15
This administration's trade policy is bankrupting the middle and lower classes, who are paying twofold: (1) higher out-of-pocket prices on imported goods, and (2) taxes that subsidize the farmers, who can no longer sell produce to China. The farm subsidies are meant to buy the farmers' votes.
If the intention is to crush the USA, then it's working.
73
@Cynthia And paying through their 401Ks and any retirement investments in the stock market. And lower stock prices may mean layoffs to cut expenses. Sort of like, you know, the Great Depression.
36
@Cynthia
So, why hasn't the price of tofu gone down?
@VJBortolot
It depends on two things:
1) The amount of tofu made in the U.S. from U.S.-grown soybeans as a percentage of the total sales.
2) The U.S. tofu makers would need to increase their production and buy the soybeans, but if they see the soybean sales going back to China, they don't want to make the investment for such a short-term event.
It is a "wait-and-see" time right now.
The "China Shock" is the consequence of
"The China Syndrome
a very famous paper to economists.
One wonders why Mr. Krugman selected a title reminding economists on how wrong he was on the effect of globalization on American Workers.
Here's the paper:
"The China Syndrome: Local Labor Market Effects of Import
Competition in the United States"
David H. Autor ,David Dorn Gordnon H. Hanson
From the Abstract
We analyze the effect of rising Chinese import competition between 1990 and 2007 on local U.S. labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization while instrumenting for imports using changes in Chinese
imports by industry to other high-income countries. Rising exposure increases unemployment, lowers labor force participation, and reduces wages in local labor markets. "
http://economics.mit.edu/files/7723
That rising exposure increases unemployment, lowers labor force participation, and reduces wages in local labor markets was denied by Mr, Krugman throughout his career. As late as 2007, in "Trade and Wages Reconsidered" he denied all three effects.
But it is these three factors that resulted in the election of Trump.
And
https://www.nytimes.com/2015/09/07/opinion/paul-krugman-trump-is-right-on-economics.html
did not deter it, either.
4
@Woof Actually analysis of l 2016 voting patterns does not support your hypothesis. There is a difference between spinning plausible stories and providing evidence to support them.
5
@Craig Freedman
Hear! Hear!
1
@Woof
You fail to note that there were critics of Autor’s and Dorn’s “China Syndrome” work, centrally comments such as this being representative:
“Our so-called China problem isn’t really with the Chinese but rather our own multinational companies.”
And you omit observing that while Krugman does take Trump’s side against Jen Bush Krugman hardly can be said to be praising Trump:
“So am I saying that Mr. Trump is better and more serious than he’s given credit for being? Not at all — he is exactly the ignorant blowhard he seems to be.”
2
Illuminating article, very compelling.
And on a side note, how much of the trillion dollar deficit is actually financed by Chinese investors, tightening their grip on the global economy, little by little?
Trump the King of debt was barely able to run a casino, hence a trade war with China is clearly out of his league.
31
@Fred: Yes Trump is way out of his league in this game, and he does not even seem to know it, or admit it.
The government of China have been playing the long game. They have since the death of Mao. Trump only plays a short game, where everything revolves around him. If this administration wanted to reign in China would a multinational approach that isolated China be effective, a TPP perhaps? Of course this goes against any of Trump's notions that assistance is useful; he has to do it all on his own -- and he certainly is. Any obvious with Trump attempt to talk to more than one person (or group) at a time is way beyond his cogntive abilities.
36
What is going on ?
Currency wars have been under way for some time.
The recent lowering of the interest rate by the Federal Reserve was seen by most foreign monetary economists as an attempt to lower the value of the US currency.
As was the latest announcements of the ECB, seen by the WSJ as the opening shot of a currency war.
Low interest rate policy by competing Central Bank IS a currency war. And that , "Whatever it takes" has been gone on for some time. The trade war merely accelerated what was already under way .
References
https://www.economist.com/finance-and-economics/2019/06/22/low-interest-rates-and-sluggish-growth-may-lead-to-currency-wars
https://www.wsj.com/articles/the-undeclared-currency-war-how-the-ecb-is-forcing-the-feds-hand-11564490313
7
I do not believe the President would disagree with my characterization of him as a disruptive force. He is incredibly disruptive on so many levels. He has revealed weaknesses in our institutions that many of us didn't know existed. He has upended everything we assumed about foreign policy and who are friends and enemies are. The problem with disruption and chaos is that it is almost impossible to manage. Disruption and chaos will create more disruption and chaos. I suspect that ultimately, it will lead to a devastating war as it always has in the past. We grew up with a belief that we, as citizens, had some say in our government and its policies. But the Supreme Court disabused us of that notion and always knows best. It stole an election and gave it to Bush leading to a 9/11 overreaction, tax cuts and huge deficits and debt. It decided to change its long standing interpretation of the Second Amendment creating a new nearly absolute right to keep and bear arms and contributing to incredible gun violence the likes of which we have never seen. And it told the Congress that it could not regulate campaign contributions because corporations are people and money is speech selling the Republic to the highest bidder and increasing inequality. Between the Supreme Court and the disrupter in chief, the future of our beloved Republic may be very short.
532
@Todd
'He has revealed weaknesses in our institutions that many of us didn't know existed.'
trump: the ultimate stress test.
10
@Todd
All true. One thing you forgot to mention was the downside of all this malfeasants, there is none. Trump, could start a war with just about anyone, and his portrait would forever hang in the WH as the proud 45th President of the U.S. People, routinely hope for G.W. Bush to return the Presidency to it’s former honor, forgetting that pesky, "war on a lie." No one will pursue Trump after he leaves for any legal transgressions. It’s a club, and his replacement would not want to start a precedent of going after the former one because, who knows, they will likely be in the same situation.
3
@Todd
And unilaterally gutted the Voting Rights Act leading to massive disenfranchisement of non-Republican voters.
11
Xi is essentially president for life. Trump has an election coming up and is shooting himself in the foot by risking a global recession with his trade war. If the natives get restless Trump is history but Xi has enough power to keep things under control. Who do you think will win this one?
40
@PJ when do you think Trump will decide that to ‘level the playing fields, you Americans should also have a President for life? And generously offers to take on the burden?
He’s publicly fantasised about that before, you know.
3
@PJ
How could you doubt this "very stable genius" in the WH?
The king wannabe is going to make his foot look like Swiss cheese but unfortunately he will hurt the rest of the country, if not the world, in doing so.
@PJ
Also, China has more recent experience with hardship (I.e. the Cultural Revolution, the Maoist civil war, occupation by Japan including the rape of Nanking, the Boxer rebellion, the Opium War to name a few). Americans need emotional comfort animals just to go to the store.
2
Will the real Paul Krugman stand up?
At the end of last year he wrote "let’s be clear: China is not a good actor in the world economy. It engages in real misbehavior, especially with regard to intellectual property: The Chinese essentially rip off technology. So there is a case for toughening our stance on trade."
Then in March Krugman sneered at Trump the flim-flam man whose threats were bombast. He was going to cave in but declare victory anyway. He predicted that Trump's trade war with China would end "not with a bang but with empty bombast." [Unlike Krugman's full bombast, I suppose]. The deal would be a sham, but it would provide political cover for both countries' political leaderships. "The Trump administration will, of course, trumpet the deal as a triumph. In reality, however, it’s much ado about nothing much."
Wow, it doesn't get much wronger on that. China shredded the deal, and Trump doubled.
Notice that Krugman is evasive about what he thinks now. Has he backtracked? Should we throw in the towel? Well?
Krugman says that both Trump and Xi have now staked their reputations on hanging tough, and it will take the next president to come up with a solution. I think my 12-year would have figured that out (if I had one).
Xi won't kowtow to Trump (at least Trump 45), but whoever is the next president will probably have a stronger hand thanks to Trump's refusal to follow Krugman's script. Let's hope that Xi sees that a deal will be best for the world and China.
6
@Ian Maitland
Xi is contending with Hong Kong and Uigher persecution and is playing the long game. Mnuchin, Kudlow and Trump are playing out economic ideology and applying pressure at weak points while sacrificing market exuberance on a strong economy background. The rest of the world awash with liquidity is racing to zero interest rates bolstering bitcoin and the internet as an economic sovereign entity. Trump doesn't like Wall Street but needs a strong economy. He is pressuring the fed to lower interest rates. Trump is a master manipulator. What you think you know about him is probably not true. In the end it is about oligarchs and power mongering. The little people don't matter. They never have.
23
@Ian Maitland claims that "Krugman is evasive about what he thinks now".
In fact, Krugman says "So how does this all end? I have no idea." That's the exact opposite of being evasive, it's being very frank.
5
@Dan Styer
For that we pay him the big bucks?
He is candid about his prediction. He is evasive about his prescription.
1
PK says "So how does this all end? I have no idea. "
I think it is fair to guess that Trump will 'fold' the same way he folded to Nancy Pelosi at the start of this year and the same way he accepted the Supreme Court verdict for Census Form with the Citizenship question.
Trump understands that he has a window of few months only to try all these 'beatings of China'. After that, a recession would come. But he wants to enter the 2020 re-election by campaigning on 'improving economy' (America crawling back from a recession).
My guess - by Thanksgiving 2019; Trump will call 'truce' with Xi; China will grant him some 'off-ramp' and Donald will be back to his business of 'dividing America along racial lines'.
On the other hand if Trump does not find a compromise or facing saving formula by Nov 2019; he really risks losing in Nov 2020.
43
It's strange times when I would rather watch pundits pull their hair out about a trade/currency war between the world's two largest economies - rather than watch pundits pull out their hair about mass shootings - but nothing looks good right now.
38
@Michael Bloom. as horribly as this might offend some, I'd rather see Trump crash the economy and thus save our republic and many countless lives by losing the 2020 election.
@Michael Bloom It's a heck of a choice we have Mike.
1
"At this rate, we may have to wait for a new president to clean up this mess. If she can." One can hope. On both counts.
181
@beaupeyton
She = Kamala?
@beaupeyton Let it be so.
2
@normlebus - no Warren.
While Trump may be an oaf and his method for addressing this mess may be wrong, he should get some credit for at least addressing this issue. For whatever reason, it seems that previous administrations just sat there and watched while China flagrantly cheated on all its WTO commitments, devoured our industrial capacity, fought a reverse opium war against us with fentanyl, and helped hollow out our middle class. This was either a result of extreme corruption, extreme incompetence, or both. It's been so egregious there's simply no third option.
Many say that TPP would have been a magic cure for China's behavior. Well, if it was that simple, why hasn't it been done already? What were people waiting for?
Personally, I think China would've played the same game they've played before. Sign the agreement, give lots of promises, but cheat using loopholes to go on as before. I don't think China ever had any intention of opening its market to foreigners.
8
@John Chenango If you are looking to assign 'blame' it is NOT China but the corporate leaders and fluid capital holders. The US worker has lost jobs, income, etc to the Chinese worker supposedly for lower labor costs. BUT their products are only marginally cheaper - so the US public with much less income must buy only-slightly-cheaper Chines products. And the corp management takes home more $$ since the profits are higher.
32
@John Chenango TPP was viewed as a help because China was excluded. US was at the centre of it. It was US and many South American and Asian countries and was meant to be a counter to Chinese power and influence
31
@John Chenango - "Well, if it was that simple, why hasn't it been done already? What were people waiting for?"
Hmmm...perhaps because the primary catalyst for TTP to be successful...the USA...pulled OUT once Cadet Bonespurs was sworn in??
I do agree, however, that years of coddling China and looking the other way on their behavior was not sustainable.
16
The Red Chinese are digging their heels in the trade war with the hope that old Beijing Biden will capture the White House. The Chinese bought Biden long ago when they “invested” in his son’s “hedge fund.” Special counsel?
Trump is actually dealing with communist China’s abusive trade and currency practices. The S&P is still up 19% for the year. Much to the chagrin of Krugman with his histrionic doomsday predictions regarding “Trumponomics.”
3
19% for the year, you say? Oh wait, that was bottom from when big brain Trump threatened to shut down the government forever. The 52 week return on the S&P is currently 0.15%. But wait some more. The stable genius ain't done yet. I hope you're not invested in soy bean futures.
2
@Registered Repub funny how the authoritarian Chinese are "red" and so are the republicans. your thinking completely disregards the ineffectiveness of trump's tactics.... he has no strategy. you seem to recognize that the Chinese can just wait for the next president. shouldn't trump have thought of that?
2
The trade war with China for sure will do more harm to China than the US. China severe shortage of food, energy and technology are in no position to challenge US for global dominance. At least it'll dethrone the tyranny of Chinese Communist party dictatorship.
1
@George Surely you're kidding. The ruling class in this country have been waiting twenty years for that to happen.
15
@George
China is the second largest economy after US. I am not in Shanghai and certainly do not see the server shortages you described.
4
@George
Please quote your sources - you claim that China has food, energy and tech shortages. Well, let’s see - they are buying farm products from Russia, Brazil, Argentina and purchasing vast tracts of land in Africa. Price of pigs has gone up due to swine flu but food shortages? You’re dreaming.
Energy? They’re buying Iranian oil and if they want gas - both Russia and Canada can supply it. Tech? Seriously? Where do most tech companies have plants? Who has 80% of the rare metals required to build chips?
Check your news sources. Wishful thinking is not reality.
3
Yes, two tough guys playing with fire. The conventional wisdom is that the Dictator in China can inflict pain on his people without fear, whereas the President of the USA does not enjoy such impunity. Since Trump has broken every conventional political wisdom so far, it is possible that he might exploit this trade war to unite the country and get himself re-elcted, while Xi might be overthrown by the rich Chinese oligarchs. We shall see.
1
'...Xi might be overthrown by the rich Chinese oligarchs.'
And the chance of that, Jean Kolodner, is about the same as the chance of my being elected your next president - and there's a pretty slim chance of that, given that I'm not an American.
p.
Prof. Krugman implies that Pres. Trump's tariff and currency stuff relative to China is not "El Paso-related." I beg to differ. Pres. Trump keeps right on being racist when the topic becomes China. As in the case of "El Paso," he knows he'll get a lot of support in the U.S. when he does.
13
The president’s long term is a few weeks. China’s long term is a few hundred years.
You can’t win a trade war against China when it is willing to suffer rather than change its position.
It’s also a matter of face, a concept trump neither understands nor cares about. Xi gained face by devaluing the yuan in response to increased tariffs. The president lost face as soon as that happened.
Somebody will blink first and it won’t be Xi. The president will drag all of us citizens into the abyss.
294
@Steve Ell Doesn't China have to at least worry a little bit about the fact that a US slow down will impact their factories? I know they can suppress some discontent, but I assume they must worry about widespread dissatisfaction.
5
@Steve Ell Bingo!
6
@Michael Sullivan Nope, because we are no longer the only valuable market. We are but another cog in the global market (albeit large cog, getting smaller day by day as we throw sand in the workings).
8
I have been selling stock for the last 2 weeks. I did the same in the spring of 2008.
67
@Beth
I “pulled in my horns” in 2008 and am doing the same now- these are times to be cautious, it seems. While the crystal ball isn’t clear, things in general feel unsettled enough to be cautious about the economy.
16
How does it end? Trump will declare victory, of course, and then we'll move on to the next manipulated crisis. Maybe Iran? Or, Iraq? Nothing substantial, which will help the world in general, has come from this man. Nothing. I wouldn't be surprised is another war gets ginned up. Orwell was right- "War is not meant to be won. It is meant to be continuous".
328
@follow the money
Trump has prepared for a close election by teeing up a war with Iran. If the polls next summer look uncertain to him, expect a war.
15
@Keithofrpi
...a very very unpopular war.
I don't think we will get one because of Trump's electoral thinking....but he's a pathetically broken individual and easily led. If we get a war it's because Bolton wants one.
10
you might enjoy the new Spider-Man movie which definitely m o c k s a person who I lot of people think is accomplishing dot-dot-dot?
1
Actually, Xi knows how it ends. As president for life, he and the Chinese people only need to wait until 2021 or (if Putin can do it again) 2025. But sometime soon (in the grand scheme of things) Trump will be leaving office, whereas Xi has no such limit.
Moreover, I think the Chinese people are much more willing to endure a little national pain, a little shared sacrifice, than Americans are willing to pay higher prices at Walmart.
So China has a president without term limits, a populace willing to endure a little hardship to stick it to Goliath, while America has an already extremely unpopular president who won’t be in office much longer and a populace addicted to cheap Walmart tchotchkes.
I think it’s pretty clear who wins Trump’s trade war.
753
@Bill in Yokohama The oft repeating line about "soft Americans" not being able to endure pain is nonsense. What about 2008? You don't seen national strikes in the US when big corporations ride rough shod over people. The Americans will endure anything, and that has been proven time and again.
16
@Bill in Yokohama
The Chinese generation of 45+, with experience of poverty and the cultural revolution, is undoubtedly tough. The younger generation of mostly coddled single children? I'm not so sure.
11
We actually don't know how willing the Chinese people are to endure pain. In an authoritarian regime, people have no choice but to signal support of the regime; until they don't. We have no way of knowing the true preferences of the people in an authoritarian regime.
That said, we do know that Xi cannot back down lest he endanger his position within the regime. Xi changed the rules: Chinese elites can no longer expect to retire in peace. Xi knows that were he to lose his position, he'd quite possibly be tried for corruption as well. Xi will not move first.
25